Too Many Wise Men?

How many men does it take to run the economy? Numerous, going by the number of experts voicing their opinion in Delhi.

The multiple lines of economic command have been visible for some time now. If there were ever any doubts, one had to only tune into the babble of eco-speak emanating from Delhi soon after the wholesale price index numbers for February were announced. There was understandable panic because the inflation rate was nudging the treacherous double-digit mark. But, going by the comments made, it would seem that there were many more people out there in Delhi who knew what the Reserve Bank should be doing and when it should be timing its next action. And, then came the unexpected RBI rate hike to quell some of the inflationary flames. But, instead of diminishing, the decibel level actually went up by a few notches with the experts now holding forth that RBI needed to implement another rate hike.

But, what has been described above is only a symptom of a larger trend in economic policy management. Over the past few years, the number of ecocrats has multiplied and with it have the number the divergent views and conflicting opinions. All this is, of course, great grist for the electronic media.

Here’s a look at the chief policy manager and the various people in the economic management team.

· Prime minister Manmohan Singh: An established economist with pucca Oxbridge cred. Gained respect worldwide for having pulled the Indian economy back from the brink of bankruptcy and then steering it out of the stifling, controlled regime to a new liberal and competitive framework.
· C Rangarajan: Another well regarded economist. The former RBI governor is currently the Chairman of the Prime Minister’s Economic Advisory Committee. Obviously, knows his monetary onions well and makes them public as well.
· Montek Singh Ahluwalia: Another Oxbridge-World Bank alum who gained fame as an economic advisor during Rajiv Gandhi’s time. Was Chief Economic Advisor in finance ministry when Manmohan Singh was finance minister. Is currently Deputy Chairman of the Planning Commission. A favourite with the sound-bite hunters on all topics – from the state of the monsoons to the interest rate structure.
· Kaushik Basu: A vociferous champion of free economy, this former don – he taught at Delhi School of Economics and Cornell University – has been recently appointed as Chief Economic Advisor to the finance minister. He is the hunting pack's new quarry.
· Pronab Sen: Chief Statistician, Sen is currently trying to overhaul the way data is collected, tossed and diced, and then the manner in which the decision-making apparatus interprets it. He has also been vocal with his views on inflation and interest rates.
· Raghuram Rajan: Occupant of tenured chair at University of Chicago and a former Chief Economist at IMF, this man has been quietly advising the PM on a number of issues, including financial sector reforms. The super regulator proposed in Budget 2010 – which is expected to supercede all the other financial sector regulators in the country, such as RBI, SEBI, IRDA -- was suggested by the panel headed by him.
· Pranab Mukherjee: The man who, as finance minister, is in the thick of it but does not speak much at all, except to voice the government’s overall concern from time to time over inflation, interest rates and their impact on credit growth and the general well-being in the economy.
· D Subbarao: Governor at RBI, who played an impressive role in launching the fire-fighting operations in close coordination with the fiscal authorities soon after Lehman Brothers went belly up. He is also trying to improve some of RBI’s traditional ways (such as, communication), but unfortunately that is seen as a weakness and he is considered fair game by everyone in Delhi. So, almost every ecocrat has a word of advice for him.

There is nothing wrong in having such a large and high-calibre team of economists in charge of policy management. But, policy direction starts sounding out of whack when all of them speak in different and contradictory tongues.

Why Is A Housing Regulator Absolutely Necessary

Every economic activity which generates substantial revenue, has a competitive playing field and enjoys an extensive interface with customers needs a regulator. It is necessary to have a regulator to ensure that buyers get a fair deal, that there is reasonable competition in the industry and that sellers do not form cartels so that they can extract exorbitant prices from buyers. People commonly mistake a regulator for a government-appointed administrator who will take some arbitrary decisions, mostly on behalf of the powerful and the rich. Therefore, two issues are very critical for imparting some degree of credibility to the regulator: the process chosen for appointing a regulator and the decision of who gets to be the regulator’s boss, or in other words who pays the regulator’s salary.

Many important economic activities in India continue to thrive without a regulator. Housing construction is one such industry, if it can be called an industry at all. The sector is rampant with malpractices and the rules are heavily loaded against the consumer. Sure, there is always the option of seeking recourse in the courts, but the prospect is a deterrent in itself.

There are scores of irate customers who, after having paid good money to builders upfront, are still awaiting possession of their dream homes. Most of these errant builders take money from prospective buyers, start the construction process, divert the money elsewhere (more on this later) and then come back to the customer with a plea that costs have escalated and the customer needs to pay more money so that the builder can finish his construction and the buyer can take possession of his property. Having already coughed up a substantial amount, the customer has no option but to pay up. There are many property buyers in Mumbai who have been waiting for over three years to get that all-important, and elusive, piece of document called “occupation certificate”.

Many builders delay construction when they see property prices rising in the neighbourhood. Having initially lost out, they then delay construction and squeeze out the additional margin from the hapless customers. There are also many builders who divert funds to their other businesses.

Then there is this ambiguous practice of measurement. Mumbai builders charge customers on the built-up area but Kolkata builders still charge for the super built-up. There is no uniformity in the rules. Plus, there are the usual stories of promises reneged, the half-truths about measurements and amenities, the failure to hand over the building to society members, the illegal sale of parking lots.

One can argue that the local municipal laws apply to builders and, by that token, the local corporations can be considered as the regulators. But, going by the track record of the municipal corporations, this would be a grave mistake. Most corporations are over-staffed, inefficient and excessively corrupt. Their duty to the citizenry ends with collecting stamp duty for registering the property, and then wheedling out property tax from these same house-owners every year.

There have been sporadic discussions about the need to for a housing regulator in the past. Maharashtra’s minister of state for housing, Sachin Ahir (NCP, MLA from Worli) had promised in November 2009 that the government would give priority to the proposed housing regulatory authority – the Maharashtra Housing Regulatory Commission Bill has been in pause mode for over a year. But, the micro-structure of the Bill needs to be debated – there has been very little discussion about the Bill in the media and by civil society. For instance, one provision in the Bill seeks to direct every builder to keep aside a percentage of apartments for the middle and lower income groups in every project. We have already seen how builders have subverted this rule (by selling two-three contiguous flats to the same buyer) in the past.

And, why have only a regulator for only Maharashtra? The industry needs a national regulator. It can be argued legitimately that since Maharashtra’s problems are different from the rest of the country, it needs a separate regulator. True. But, by that same logic, Mumbai’s housing problems are very different from Pune, which are very different from Nashik, which are completely unlike those in Nagpur. In addition, a local regulator is kind of beholden to the local politicians, who tend to be closer to the local builders. As mentioned in the first paragraph, if the formula for appointing a regulator and finalizing his reporting structure is water-tight, we might still see some good coming out of the housing industry.

The Gun Barrel And Bengal...

Captured Maoist Deepak (aka Venkateshwara Reddy) is apparently singing. Like a canary. This is what the controlled leaks would have us believe. And, what's interesting, the Indian Express flyer on Page One this morning (read here), has an exclusive line into what he's revealed to interrogators. He has apparently hinted at a power struggle between him and the Maoist leader Kishenji. The story also tries to plant the seeds of future discord (rather insidiously too, but in quite an amatuerish sort of way): apparently, the tip-off to the Kolkata Police seems to have been a "deliberate" leak from someone in the Maoist party.

Now, now...this is such an old and shop-worn trick. The Brits did it during the Independence struggle; so did many others, including Kolkata Police while trying to flush out Naxalites in the 1970s.

But, the story then takes another interesting turn. Deepak has re-confirmed what Kishenji had said in a May 2009 interview to Mint newspaper: that Trinamool did play a critical role in the Nandigram agitation. Kishenji, aka Koteshwar Rao, had also made another stunning revelation then which went largely unnoticed: Trinamool, it turns out, had brought to the table a cache of arms that was substantially large than what the Maoists possessed. An earlier Mocha posting (Time For Another Spring Thunder?) also had a take on it.

I was expressing my disgust and shock about this to a Kolkata resident recently and he seemed to be quite blase about the development. He felt all was fair in this battle to get the CPI(M) out of Writer's Building. Fair enough. The CPI(M) has ruled over West Bengal for 33 years and that is a recipe for disaster anywhere in the democratic world. But, the question that arises then is: will Trinamool give up its hoard of arms once it assumes power? Or, will TMC use them to return the favour to all CPI(M) members who have pursued and persecuted Mamata all these years?

The gun barrel will continue to cast its ugly shadow over Bengal for some more time.