Category Archives: Sustainability

Top 12 Challenges Facing India in the Decades Ahead – 07 – Education and Opportunity

If you remember our last post on poverty, you will note that we said that when India is compared to the 16 countries outside of sub-saharan Africa that are poorer than it, it doesn’t do well in any social indicator, with social indicators for Education being one of those indicators. In particular, it’s literacy rate among Afghanistan, Bangladesh, Burma, Cambodia, Haiti, Krygyzstan, Laos, Moldova, Nepal, Pakistan, Papua, New Guinea, Tajikistan, Uzbekistan, Vietnam, and Yemen ranks 9th for Males and 11th for Females (at 82.1% and 65.5%)! Not good. In comparison, the literacy rates in China (at 97.5% and 92.7%), Brazil (at 90.1% and 90.7%), and Russia (at 99.7% and 99.5%) are much higher in comparison, as are the literacy rates of most of its Asian neighbours.

But it’s educational challenges are not just limited to its literacy rate. The challenges also stem to the perception of the importance of education, especially at an early age, as a whole. In their newly published book, An Uncertain Glory, Dreze and Sen do a great job of outlining some of the significant challenges facing India in terms of education and literacy, challenges which start with the first five year plan created by the newly independent India back in 1951.

The first five year plan in 1951, even though sympathetic to the need for University education which it strongly supported, argued against regular schooling at the elementary level, favouring instead a so-called ‘basic education’ system, built on the hugely romantic and rather eccentric idea that children should lean through self-financing handcraft. It went on to say that ‘the tendency to open new primary schools should not be encouraged and, as far as possible, resources should be concentrated on basic education and the improvement and remodelling of existing primary schools on basic lines’. Other than an outright banning of education for the lower castes and Dalit, SI does not think one would find a better prescription for a return to the middle ages. (And what makes this especially sad is that India, in the 4th Century AD, more than 600 years before the first European University was founded in Bologna, had one of the first big Universities at Nalanda. This University, run by a Buddhist foundation and supported by Hindu kings, drew students from all over Asia, and, at its peak in the seventh century had over 10,000 students in its dormitories.)

But it’s not just the outlook on education that’s the problem, it’s the delivery. In a nation-wide school survey conducted by the PROBE (Public Report On Basic Education) team in 2006, only two thirds of the students were present on the day of the survey (according to the school registrars) and even fewer according to the field investigators’ direct observations. In addition, there was considerable absenteeism of teachers as well, in addition to widespread late arrival and early departure problems. Given that 12% of schools had only 1 appointed teacher at the time of the survey, any teacher absenteeism at all is a huge problem. Furthermore, on the day of the survey, 21% of the schools were operating as single teacher schools and, to make matters worse, half of the schools had no teaching activity at all at the time of the investigators’ unannounced visit! (Why? Due to the relatively high salaries accorded to appointed teachers, there is a reluctance to make appointments. In addition, appointed teachers typically have the equivalent of tenure and there is little oversight.)

Officially, there are supposed to be about 200 school days per year. But with a teacher absenteeism rate that was found to be about 20%, a pupil absenteeism rate of about 33%, the chance of both a pupil and a teacher being present on the same day is about 50%. Then there is the chronic problem of a lack of teaching activity and the fact that a given student only gets taught about half the time the student and teacher are both present on a teaching day. The net result is that the average student gets about 50 teaching days per year, or one fourth of what the student would get in a well-functioning school system!

For a considerable portion of the population, the words of Nobel Laureate Rabindranath Tagore (1913, Literature), spoken in an interview with Izvestia in 1930, still ring true. In my view the imposing tower of misery which today rests on the heart of India has its sole foundation in the absence of education. Because, as Dreze and Sen point out in their work, in a society, particularly in the modern world, where so much depends on the written medium, being illiterate is like being imprisoned, and school education opens a door through with people can escape incarceration.

This lack of education is a big contributor to the Unemployment problem in India. (After all, how can you even apply for any meaningful work in our modern economy if you can’t even read and write?) While the official unemployment rate is 9.9% (as per a press release from the Labour Bureau of the Government of India), the problem is much, much worse than that. (How can it not be when over two thirds of your population has to survive on less than $2 US dollars a day?) Consider the recent example of SBI, the nation’s biggest bank, who in April of last year decided they wanted to recruit 1,500 employees and received over 1,700,000 applications?

While the Indian economy did create approximately 60 Million jobs between 2000 and 2005, during the forefront of the outsourcing craze, it did not create more than 2.8 Million between 2005 and 2010 (as per the Institute of Applied Manpower [IAM]). And while the loss of jobs in the agricultural sector was absorbed in the construction sector, the IAM estimates that 5 Million construction jobs were lost between 2005 and 2010. In addition, 93% of the Indian workforce is interim or informal and receive no health insurance, retirement pension, or basic benefits. As a result, the real unemployment statistic is estimated by experts (Source: WorldCrunch) to be around 20% and doesn’t include the interim or informal workers, especially in rural areas or employed in season sectors, who are underemployed.

And the problem is likely to get even worse. The population in India is still increasing, and in order to maintain the current levels of employment, India needs to add about one million jobs a month, but only managed to add about 50,000 a month between 2005 and 2010, one twentieth of the required number! An educated population could at least try to seek work elsewhere, or, like the services sector, compete to bring more work in. An uneducated population, on the other hand … well, ask South Sudan, Afghanistan, or Niger how an utter lack of literacy is working out for them! (Or even Belize, Bangladesh, or Syria — with slightly higher literacy rates, but still quite low with respect to the developed world.)

Top 12 Challenges Facing India in the Decades Ahead – 08 – Poverty

As per our last post, India is poor. Really poor. By far the poorest of the BRICs with 2/3rds of the population poor by any reasonable definition of poverty. Just how poor is India? In just about any ranking that matters, it’s not well off. When it is compared to the 16 countries outside of sub-saharan Africa that are poorer than it, India is in the lower half of the rankings at best, and near, or at, the bottom in a few cases.

For example, let’s start with some of the leading social indicators (Source: An Uncertain Glory, p 49):

  • Life Expectancy at Birth: 9th
  • Infant and Under-5 Mortality Rates: 10th
  • Access to Improved Sanitation: 13th
  • Mean Years of Schooling: 11th
  • Literacy Rate: 9th for Males, 11th for Females
  • Proportion of Children Under 5 Undernourished: 15th

And this list includes Afghanistan, Bangladesh, Burma, Cambodia, Haiti, Krygyzstan, Laos, Moldova, Nepal, Pakistan, Papua, New Guinea, Tajikistan, Uzbekistan, Vietnam, and Yemen!

Consider the sanitation metric in particular. In Bangladesh, which is considerably poorer than India, only 8.4% of the households practice open defecation. However, in India, 55% of households practice open defecation. How can you become a first world country if you can’t even provide your citizens with toilets? (Or even outhouses?)

The metrics are even worse when you compare it to the BRICs. Worst life expectancy. Worst mortality rates. Least access to sanitation. Worst literacy rates. Most undernourishment. In addition, it has the lowest immunization rates and the lowest health care expenditures as a percentage of GDP.

With respect to health care, India did launch the National Rural Health Mission in 2005-2006, but allocated it a measly RS 10,000 crores per year for the fist five years. Given that almost 70% of India’s population is still rural, if two-thirds are poor and likely in need of the program, that’s about 560 Million people who could use help from the program. If you do the math, that’s less than 1 rupee per five people! Plus, it seems to be going down a road of privatization, relying on private institutions and private insurance, with public transfers for the poor who make the BPL (Below Poverty Line) cutoff and qualify, and this is a direction that has yet to work successfully for any major country. In almost every country with good health care, a good public system preceded a good private system.

SI could go on, but you get the point. While India is increasing its GDP at a relatively rapid rate, it is still poor (and the poorest of the BRICs) and the average person is really poor and needs a lot of social assistance to even reach the same standard of life that poor people have in China, Brazil, and Russia. With about 800 Billion people who could use some form of government assistance, this is a huge burden in a country that collects, on average, 1 US dollar for every 3 citizens in tax revenue.

Top 12 Challenges Facing India in the Decades Ahead – 09 – Taxation

India has a lot of challenges ahead of it whose solution requires capital. Lots of capital. This capital is going to have to come from taxes. But in this regards, India also has a lot of challenges. The most significant of which are:

  • Poverty
    Despite rapid economic growth in recent years, India is still one of the poorest countries in the world as only 15 countries have a lower gross national income per capita. Officially, 30% of the population is below the poverty line as defined by the Tendulkar Committee Report (2009) which clarified the official poverty estimation methodology and set the poverty line at Rs 32 per person per day in urban areas and Rs 26 per person per day in rural areas at 2011 prices, which is approximately 52 US cents in Urban areas and 46 US cents in Rural areas at the end of 2013. This line is so low that it is actually a destitution line that does not ensure anything above bare subsistence. If we use the international poverty line of $1.25 US per day as defined by the World Bank, then almost 33% of the population is below the poverty line and if we define the poverty line at $2.00 US per day, which is barely above subsistence levels in many of the bigger urban areas, then almost 69% of the population is poor!
  • Unequal Wealth Distribution
    The top 1% own 16% of the country’s wealth, and the top 10% own 53%. India has three of the 100 richest men in the world, and the richest man in India is worth almost 22B, while the second and third richest men are worth about 17B and over 11B, respectively. This says the three richest men are worth about 50B in a country with only 1.8 Trillion in GDP and that they alone represent a net worth that is about 2.8% of the overall economy.
  • Import Duties
    India does not charge, or often forgives, import duties on certain types of materials and products that could provide a considerable contribution to the economy, even if the duties were kept low with respect to the rest of the world, and it does a poor job of collecting import duties on some categories that it has stated it will make an effort to collect import duties on. For example, the annual “Revenue Foregone” statement released by the Finance Ministry estimates that India lost RS 529,432 crore (97 Billion) in 2011-2012, or more than 5% of India’s GDP and nearly 67% of total tax collections in India in 2011-2012! (Source: IndiaSpend) This included almost Rs 66,000 crores of customs duties foregone on “diamonds and gold” alone. Any one, or any business, that can afford to buy diamonds and gold can certainly afford to pay a small import duty! And the duty is small — in India, the import duty on gold is a mere 2%! (In the US, the duty and taxes for gold jewelry can be up to 5.5%.)

In other words, India has the situation where:

  • Approximately 2/3rds of its population cannot afford to pay tax.
  • Almost 1/3rd of the remaining population that can afford to pay tax is extremely wealthy, influential, and able to influence the government that sets the tax rates.
  • The government, unwilling to deal with intense complaints or publicity when it tries to collect, or raise, import duties is giving up over 40% of its potential current tax base.

For a country that can’t even address the basic needs of its population, how is it ever going to address its infrastructure, energy, and global economic challenges if it doesn’t stand up and collect taxes where taxes are due?

Top 12 Challenges Facing India in the Decades Ahead – 10 – China

China is currently everything India is not. While India is the land of contradictions, China is the land of conformity. While India is an infrastructure nightmare, China, which is already decades ahead of India in infrastructure, is investing heavily, building rapidly, and getting even further ahead. While India is in a perpetual state of energy crisis, the energy sector in China, where the government can effectively control the 11 companies that used to compose the State Power Corporation (SPC), is stable and increasing energy production year over year to meet the needs of its population which make it the world’s second largest electricity consumer after the United States. (In 2011, annual power generation was 4693 TWh, which was over five times the power generation in India that peaked at about 877 MWh.)

But it’s not just infrastructure and energy that China has the lead on. It’s just about everything else too. As per a recent NYT (New York Times) article on Why India Trails China, India has an even bigger problem. In particular, it’s the ever-increasing gap between India and China in the provision of essential public services. And while inequality is high in China (as the 1% control 70% of the country’s wealth, compared to the US where the 1% only control 35% of the country’s wealth), China has done far more than India to raise life expectancy, expand general education, and secure basic health care for its people. Plus, literacy in China significantly exceeds literacy in India at 95% vs 74% in India. While India has elite schools of varying degrees of excellence for the privileged, among all Indians 7 or older, nearly one in every five males and one in every three females are illiterate. And while China devotes 2.7% of its GDP to government spending on health care, India allots a mere 1.2%. (That’s probably why China has a much lower child mortality rate that is less than one third of India’s. See A View from the East.)

In terms of business, China is ahead of India in many respects. China exports goods almost twice as fast, registers property more than twice as fast, and business start-up times are almost 33% faster! (See: IndianEconomy.org) Despite being a democracy, India is less politically stable and more corrupt. (See: Interlink India) And the proof is in the GDP pudding. In 1995, when India represented only 3% of world GDP, China represented 6% of world GDP, and in 2010 when India was still only at 5% of world GDP, China was at 14%. (See: The India Site) And while India is expected to increase its GDP by a mere 4.4% next year, China is still on track to increase its GDP by 7%.

Infrastructure. Public Well Being. GDP. While just a few measures of global influence, they are a few important measures and China is leading on every single one. That’s why China is projected to have almost a quarter of the Global GDP in 2025 (by The Conference Board), more than triple what it had in 2000, while India is projected to have a mere 8%, only double what it had in 2000. If India wants to achieve its destiny of being the second most prosperous and influential country on the planet, it will have to at least keep up with China instead of losing ground every day.

Top 12 Challenges Facing India in the Decades Ahead – 11 – Energy

On July 30, 2012 a power blackout temporarily obliterated electricity from half of the country and wreaked havoc on the lives of over 620 Million people in 22 of the northern and northeastern states. (Source: Wikipedia) This was the worst power outage since the last major grid collapse in 2001. This wouldn’t be so bad if it wasn’t for the fact that major outages are not a rare occurrence. As per this recent Bloomberg article, the nation suffers from frequent power outages that last 10 hours. Persistent power failures, known as ‘load shedding’, are organized day in, day out in a great many places across the country by the power providers in an attempt to keep power production, and the grid, up. (Source: An Uncertain Glory) Nor would it be so bad if those 620 Million people who were affected had electricity. A third of the population in those regions, living in poverty (or, more accurately, squalor), never had power to begin with.

As it stands, peak supply, which was approximately 205,000 megawatts in 2012, fell short of demand by about 9%, and the situation is only getting worse. And it’s not being helped by the shift from predominantly a government-owned system towards one based on market principles, as this does nothing to insure that anyone who isn’t a large corporation or extremely wealthy or influential individual gets reliable power. As per the IEA’s (International Energy Agency’s) Understanding Energy Challenges in India, the huge blackouts that occurred in northern India in July 2012 could be seen as a consequence within the framework of incomplete market liberalization. Simply put, The goal of providing energy access to the entire population led to well-meaning policies designed to protect the poor, but resulted in a system of untargeted producer and consumer subsidies that prevent a more thorough implementation of a well-functioning and financially-sound energy sector.

And getting to a sound and reliable energy sector is no easy task. First of all, the six issues addressed in the IEA’s report need to be dealt with:

  • The core (production) capacities of the energy companies need to be improved in a financially viable way.
  • Pricing mechanisms must ensure commercial viability (but not price energy out of the range of the low-end consumer).
  • Significant investment is required to meet the growing energy demand and provide access to all citizens — and it must come from the government.
  • The effective implementation of policies is required and this must lead to the timely, on-budget, completion of energy projects.
  • The energy policy must be integrated and consistent as multiple objectives will undermine the policy and its implementation.
  • Strong political will is required as effective policy implementation will never materialize without it.

And then India will have to deal with:

  • Getting energy theft and transmission loss under control. It is estimated that 27% of energy generated is lost in transmission or stolen. This is intolerable considering the country can’t even meet demand at peak capacity.
  • Getting electronic payment and transfer mechanisms set up and in place. Money will need to flow from the federal government through the states to the districts who will have to then distribute the money to the private companies expanding the infrastructure. Considering that corruption is still rampant in India and administrative fees often at the discretion of the local officials, unless all money allocated to the energy infrastructure is electronically transferred and tracked, and the records made public, it can be assumed that at least 2% of this money will disappear due to corruption, which has cost India at least 345 Billion over the last decade. (Source: India Express)
  • Getting the population educated on safe and sustainable energy use. First of all, the country will need to invest in renewable options, which could be expensive when compared to, say, dirty coal. Secondly, the population and their government, which may want to spend the money elsewhere, will need to agree to the appropriate expenditure. Thirdly, they will make sure they are pugged into the grid safely and securely using modern, approved, legal technology. Otherwise, they may find that their meter bursts into flames when their power consumption is at its peak or their houses catch on fire because of unsafe, illegal hookups. (Unfortunately, neither of these situations is a rare occurrence in India.)

This is a tall order for a country that is faced with many serious problems, financial needs, and political divides, which are likely to get worse before they get better. If India can’t get its energy crisis under control, how will it continue to play effectively in global supply chains?