It Made Sense – 3; Nandan and the Unique ID*

A small piece of plastic with a number and biometric signature for every resident of India; the national Unique Id project has been announced by Government of India. This will be the first experiment in the world to issue a biometric based id for a population of one billion. A journey that ‘no man has ever made before’. A small card for every resident; but a ‘giant leap for India’ even for the mankind?

It makes sense in a number of ways…

Financial Sense

Once I am given a unique id card, it saves enormous cost and avoids a lot of headache of multiple identity verifications every time I enroll myself for services where I have to prove that ‘I am who I am’; from opening bank account to investing in mutual funds, when I want to get a driving license, apply for my insurance and even for my BPL card if I turn pauper:-)

This saving itself will justify every rupee spent on this project.

There will be no need for the Income tax department to issue Unique Transaction Number (UTN) for every transaction in the withholding tax (TDS) return for those poor taxpayers who don’t have a PAN. He can now quote this unique id.

This can also help in fraud detection and reduction; Organizations like CIBIL who track credit history of individuals has now a key to uniquely identify every individual.

Moral Sense

Ensuring that the various benefits that the government doles out goes to the intended person will become easier and I am sure that this can act as moderating factor in the subsidy budget of government of India.

We may also be able to track who is enjoying the multiple benefits that he is not entitled to.

Security Sense

When I walk in to a hotel to check-in covering my face with a dark glass and a black backpack, officer who will assist me to check-in may be able to verify my UID from a central system. He can then feel a little less tensed.

Biometric mapping will surely help in preventing multiple ids for same human being. I will find it difficult to be Koshy and Anand. I have to decide who I want to me

Opportunities are far reaching. As Nandan may point out, it will help in ‘Imagining India’ better:-)

Governance Sense

The decision to make Nandan Nilekani (Co-Chairman and
Cofounder of Infosys) to head this project with the rank of a Cabinet Minister also makes enormous sense and demonstrates the seriousness the government attaches to this project.

Lucky for us, we now have a professional with the right experience in technology and institution building (that too enormously successfully) to head this technically complex project instead of empire building bureaucrats or politicians (I don’t consider that all bureaucrats and politicians are only interested in empire building empire building is not good). I hope he is given the freedom to percolate this commitment to professionalism down the line to build a team that can deliver.

I am sure with such vast experience that he possesses he will not attempt to do this project like the way a ‘tambram’ would cook ‘Thairu Sadam’ (curd rice) mixing the electoral database with the PDS database and the BPL database with little regard to the sanctity of the identify verification (KYC) at the time of enrollment with a hope that it will get cleaned by along the way. I was happy to see his interview in which he appears to say that he doesn’t claim to posses any magic for issuing one billion card in two years and be ready to for his next ‘political assignment’. Let us give him time so that he can do a good job and not a great idea in paper.

Tailpiece: I am indebted to the classic ‘Charlie and the Chocolate Factory’ to have inspired in me the title of this article which is about an idea that is too good to be true.

Hidden Agenda Holds the Key..

Transformational projects that attempt to bring about revolutionary changes in processes, structure, technology or strategy are both exciting and frustrating. It germinates from visionary leadership and will succeed only with patience and perseverance.

When we embark on such a project for an industry or a large cross section of society the challenges becomes manifold. Three essential ingredients for such projects to succeed are (i) design of right incentive structure for the participants, (II) building awareness, interest and demand among the users and (iii) identification of and safeguarding against the conflicting agendas and incentives.

Normally the first two get significantly more attention than the last because it is hidden behind a veil of apparent co-operation or hidden in the garb of protection of the weak. Failure to unearth these agendas often is the reason for failure of many projects. We see that many protests against reform measures in capital markets come in the name of the ‘small investors’, protests against taxation reforms comes in the name of ‘small taxpayers’ or protests against agricultural reforms comes in the name of ‘small farmer’. Critical analysis of the issues often reveals that the problem lies elsewhere.

In this article I attempt to share some examples of our experience in this count. The intention is to highlight the importance of such issues and the need to make strategies to address these agendas an important component of the design plan.

1. Conflict of interest at industry level

Sometimes the reform measures have negative impact on the prospect of the industry. Therefore no individual firm would be willing to co-operate of participate and seldom the industry association take a collective view. In such cases compliance can be ensured only by regulatory intervention.

For example strict KYC verification is required to be undertaken in case of investments in capital markets, mutual funds and even bank accounts to restrict social evils like tax evasion, money laundering. As far as the industry is concerned such measures will dampen attractiveness of these investment options and without regulatory compulsion nobody would be interested to ensure compliance.

2. Conflict of interest at the firm level

In some cases the investments made by the individual firms or the strategic interests of the related firms my work against the transformation.

Ideally the establishment of the securities depository was in Indian capital market should be welcomed by any custodian or fund manager on account of the reduction in risk and improvement in efficiency. However when NSDL was set up in 1996, there were some custodians who found this to be a matter of inconvenience at least in the short term. This is because these custodians had, in the immediate past, established infrastructure to handle physical securities and were able to charge premium rates for this and depository would have removed this strategic advantage. While they did not obstruct overtly and in fact had joined as the depository participants they quietly advised their FII clients of the need for ‘wait and watch’.

In this case we had to also work directly with the end clients (the fund managers) who could evaluate the option without such biases.

3. Conflict of interest at individual level

Some time there could be conflict between the interest of the individual officers and the interest of the organization. The resistance of some of the officers who were handling the share transfer department on account of the loss in importance and financial power resulting from dematerialization of share certificates is a good example for this.

We managed to address this issue to quite an extent by means of direct dialogue with the senior management of such firms.

4. Conflict of interest of the regulating / enforcement authority

Most of the transformational projects in the area of governance lead to transparency and reduce rent seeking opportunities which may not be liked by some who profit from the inefficiency.

On the other hand some of the officers may attempt short cuts without the larger interest of the project in mind for their personal credit; especially because they want to show some magic results during their tenure. Such short-termism could lead to the failure/ delay of the project.

While both are corruption in some ways, the latter is more difficult to manage and this is the most difficult problem to crack in case of PPP projects.

Tailpiece: In any project we need develop an eye to hidden agendas and have strategies to address these. The solution to all such hidden agendas cannot be regulatory fiats as it will be impractical to ensure compliance. We should learn to address these more by managing incentives or by identifying countervailing forces.

Adding Value to Demographic Dividend

Many counties saw rapid rise in their fortunes on account out discovery of valuable natural resources under its landmass. The most dramatic of them was the discovery of oil. 

In today’s world of knowledge and service economy there is a similar raw material. Human Capital! Like all the treasure underground is valuable only when it is extracted and then refined even the human capital also become valuable when it is educated, equipped, enlightened and provided employment opportunities. In the jargon of oil industry, the basic education can be equated to extraction and higher education to refining. One big difference between these two assets is that the human capital is perishable unlike the natural resources underground and if we don’t use this resource in time it is wasted.

By coincidence of a number of historical facts, in this aging world we in India has a predominantly large share of youngsters in abundance about 550 million belong to age 25 or less. This is what Nandan Nilekani has referred to as the demographic dividend in his book ‘Imagining India’

Therefore the pressing need of our country is a world class education system. But the standard of our educational institutions is patchy. Of course we have IITs, IIMs, AIMS, IISs, IBS and many more that turn out brilliant scholars and are world brands. But look a bit deeper. How many such institutes we have for a billion population? How good are these institutions in attracting the best talents to teach and bring out research papers, patents or PhDs? More importantly how many good institutions were set up after the few during the Nehru regime? How have we nurtured the ones we have over the years to greater heights?

We all can agree that the outstanding quality of the graduates is more on account of the brand name, limitation of seats and the rigorous screening program which ensures that the these institutes together select only few thousands of students from top of a stock of few lac aspirants. Most of the brighter among them who want to pursue higher education migrate to foreign universities limiting the quality of research in all these institutions.

Going back into the history, in the first millennium, India had some of the greatest universities in the world. Nalanda was the most renowned among them which at its peak had about 10,000 students from various parts the world and 2000 scholars as teachers and researchers. This centre of learning had schools for Buddhist religion, Hindu Philosophy, religious studies, medicine, science, mathematics, politics and even handicrafts. The admission to this educational campus was strictly on merit. Strangers were not admitted to this campus unless they could satisfy the interview by erudite gatekeepers! 

Nalanda University reigned supreme for about seven centuries in spite of if being destroyed twice in between by invading marauders; once by Huns and once by Gaudas. Both times the prevailing kings restored the university to better heights. Nalanda was not an exception. We had many more institutions of higher learning like Kasi, Kanchi and Taxila.

Why then our country with such prestigious history in the field of education is in this state of mediocrity? The new education minister Kapil Sibal has succinctly observed in a recent interview. “At the moment, we have statutory constraints along with government control to set up institutions” (He is a polite gentleman in his expressions). The culprit appears to the government policies that restrict and often strangle balanced growth both in basic education and in higher education. 

The political interventions in this sector have been mostly whimsical. Instead of ensuring access by building capacity and quality focus often gets distorted to populism of quotas, permits and even intervention in course content (even to the extent of re writing history). Examples of such interventions are many. Sudden decision of reserving 90% admission in Maharashtra for SSC, poll promise to banish English education, harassment of the director of an IIT for having constructed a better hostel using money collected from Alumnus, intervention in selection of staff and heads of institutions are few examples that come to mind. Recently I got a chance to listen to the woes of the dean of a director about the restrictive intervention in his day to day administration of the institute. The worst of these interventions are in the area of quality of the education they provide in terms of dilution of selection process, course content and even the exams conducted. As Narayana Moorthi pointed out, in India we have a tendency to design our standards based on the worst performers and demotivate outstanding performers.

We see a ray of hope with the government decision to significantly increase the allocation for education and anointment as the Human Resource Minister Kapil Sibal who has demonstrated capacity for performance in the previous ministries he headed. In a recent interview with Business Standard he has observed that we need to re-energize education system by attracting investments without diluting excellence and equity.

As a means for stimulating some discussion I have placed below a menu of policy considerations. Some of these are my thoughts and many are suggestions I have heard and read and impressed me. I leave these as a menu for discussion and don’t claim to have fully thought through the implications.

1. Move Away from License Raj: As we have moved away from the license raj in industrialization we need to move away from the same in education. (We have already witnessed how we were suffocated by bureaucratic and political controls in the field of industry and how relaxation of such controls has shown that we can perform to world standards. Less than 10 years ago India had only one company in Fortune 500 and by 2008 we had 10)

2. Creation of Capacity: Government should allow sufficient capacities to be built even by private capital from within or abroad so that there is no need to build elaborate rationing systems for admissions.

3. Let them run their business: We should allow educational institutions autonomy. To choose the course, facility, students, to fix the fee and fix remuneration for the teachers so that they can attract good quality teachers from within or abroad.

4. Proper Regulatory Infrastructure: The governmental intervention should be primarily restricted to policy making and policy administration and not micro management. The government can set up proper regulatory framework and infrastructure. These regulators can decide on the standards the various boards (whether state or central board) and universities to keep. It is important that these regulatory bodies are manned with experts in the fields of education and not with politicians/ bureaucrats or their cousins and they are given freedom to decide.

Let there be comprehensive exams at class 12 and graduation level like SAT, GRE or GMAT or GATE which will form say 50% of weight  for admission with the remaining left to the respective institutions so that they can choose to have the kind of profile of students. The regulating body can ensure that the institutions administer these transparently. This will ensure that the minimum standards are kept by the respective schools and colleges. The common man is intelligent enough to recognize the quality of the schools and colleges. A good example is the preference for even un-recognized English medium schools by the poorer segment of the society against the government run schools which are free. (A recent study has shown that although only 10 % of primary schools are in the private sector almost 30% of students study in these private schools)

5. Enable Competition. educational institutions (whether college of school) could be categorized on the basis of specified and transparent criteria on the basis of the quality of management and infrastructure and given freedom to run their institutions on the basis of these categories. Institutions of highest standards may even have the freedom to design their courses, conduct exam and award degree. 

The respective boards or universities should be made accountable for the minimum standards and infrastructure available at the schools and colleges attached to them.

We should encourage system of rating of schools and colleges on transparent parameters and international benchmarks and widely publish them to stimulate an incentive to perform.

6. Focussed help to the poor and needy: Government can arrange for directed scholarship and or loans to poorer section of society and not carpet boming of subsidies. This will be better than running sub-standard schools and colleges which bring out substandard graduates or managing quotas.

We all abhor child labor. Many families don’t send the kids to schools and instead send them for work or to beg in the streets. Can we think about school that teach, give the kids decent meals and give them opportunities for some work they can handle for couple of hours a day which will pay them an income, give them education and teach them a skill? May be during summer holidays the work hours can be more. Even kids from very developed countries do summer job and part time jobs.  I am sure this will help improve enrolment rate reduce drop.

If we don’t ensure more debate and more action in this critical sector we will end up squandering this economic dividend like some countries which squandered their riches from oil and other natural resources.

It made Sense - 2

The front page news in Hindustan Time says “Prime Minister Manmohan Singh has laid down the ground rules for his ministers.” The three page letter he sent to his cabinet colleagues addresses a variety of management issues like delivery on promises, good governance, coordination with fellow ministers, delegation of responsibilities to junior ministers etc etc.


The Deccan herald had similar news “The prime minister has asked the finance ministry to ensure that the next Union Budget adequately and appropriately reflects the priorities and programmes outlined in the President’s address to the joint session of Parliament.” This directive by PM was put in public domain too.


In a way it is surprising to see that when the CEO of the country asks his division heads to perform it is headline news! Isn’t it expected of them? But such result orientation was not priority for governance in our country most often. For quite some time the electoral math ensured that the PM could hardly demand performance. The only thing he could ask for often was co-operation and support so that the ministry didn’t fall.


It is after a long time that we have a PM who expects professional management from his ministers and who can almost ask for it.


Let us hope that this is just a beginning. Now that we got so much I am feeling greedier. Can we hope for our ministers to declare clearly their targets for the oncoming years, the benchmark performance that we can expect, the objectives that they are working for and announce a set of measures by which we can measure the performance?


Can we go one step forward? Can we have such measures for the officers who man the ministries too? To the extent of public is aware, it is very seldom that the bureaucrats are accountable for specific sets of outcome or results. The best we can often expect is performance on ‘good effort basis’ with no commitment. Sometime it is just pushing personal agenda and not what is good for the system. I don't meant that all bureaucrats behave in this fashion. We have many wonderful officers who give their heart, soul and everything to make a difference. Unfortunately they are becoming a vanishing tribe.


Once we have such measures in place, the people who elected them and the people who fund them by paying taxes will be able to judge whether their choice was right.


The government also should put in place a mechanism by which such performance can be monitored on a continuous real-time basis and made available easily without one resorting to RTI act.


Can we put in place a mechanism by which the citizen can over the net search and find out the status and the funding relating to the development project in his vicinity? If we put such a mechanism in place and the pressure come from the ground, then the demand of performance by PM will have more teeth.


I believe we have the technology and the institutional capability in our country for this. What we need is the will to enable them.


With the help of the young, tech savvy MPs and Ministers if PM enables such a public monitoring mechanism I am sure that we can expect and enforce better performance.

Election Results – Goldilocks’ Choice

The elections are over and Mr. Singh has anointed his council of ministers. The council can claim of many capable hands and the process of selection was more on merit than on horse-trading. This was possible only because one single thing; the majority that Congress got which was neither too big nor too small. ‘Just right’, as Goldilocks would murmur.

If the majority for Congress was a sweeping majority like the one Rajiv Gandhi got the hubris of many within and the complete inability of the opposition would have been too risky.

If the majority was like the last time or less, a government would have been possible only by pandering to the extremely limiting demands of many small groups and progress would have let even a snail to feel superior.

These thoughts came to my mind immediately after the results were declared. Before I called this ‘Just Right’ I decided to wait till the process of ministry formation was complete and the credibility of the process has given me the confidence to think aloud.

This election has also thrown up many surprises. The urban intellectuals had concluded that we are going to have a hung parliament. They have been so taken aback at this surprise and I could hear the conspiracy theorists asserting that the electronic voting machines were rigged.

But then, weren’t we all surprised in the last election too. Many were almost sure that the ‘India Shining’ would bring back the incumbent BJP.

Even Indira Gandhi’s coterie thought so about the election during the emergency time.

Then the other pet theory is the theory of anti-incumbency wave. Yes we have seen that in many elections. Kerala witnesses this at every alternate election.

Many of such theories seem to be oversimplification and results from the compulsion to look smart with one-line summaries.

But our electorate (in spite of the abdication of the educated middle class) seems to come with more rational choices again and again.

It showed this power when it defeated the Congress all around the country at the time of emergency. At the same time the outstanding performance of the C Achutamenon ministry in Kerala before and during the emergency ensured a total win for this coalition when the Congress was taking a hit in rest of the country.

Sheila Dixit in Delhi has been able to repeatedly overcome the so called anti-incumbency wave.

The popularity enjoyed by Nitish Kumar in Bihar and Patnaik in Orissa and Modi in Gujarat is on account of only one reason. They seem to be faring better than most when it comes to their performance in governance.

If we look at a little deep, the current election results, was supported by not just the better performance of Dr. Singh, but also by the performance issues of many state governments. Kerala, West Bengal, UP etc are some live examples.

All this goes to show that if any government demonstrates that it can perform and perform for the benefit of many and not just few, the democratic process that brings about the wisdom of the crowds will facilitate a better outcome. That is also my reason for the continuous optimism in spite of the filth, the muck, the corruption that we mostly see around.

Dr Singh has also taken a position that his focus will be on performance and results.
It is here that I repeat my call to my fellow educated middle class brethren who are happy to retire to an armchair with glass of single malt, xxx or even a lassi to give free advices to get in and participate. No need to stand for election. Even if you have not voted it doesn’t matter. You can play an active role in the process of opinion building, whistle blowing or supporting those who take active role and a lot more. Even Face book and LinkedIn are good enough tools.