Thursday, July 22, 2010


There are many factors that cause prices to rise. Apart from the known factors such as greed on the part of manufacturers, middle men, retailers, labourers (both industrial and agricultural) scarcity of goods or the components go into them and so on,there is one important factor that does not seem to have received adequate publicity. This is the factor of resistance to increase in prices.

Now, let us see what happens when prices increase. There is naturally a clamour against it. Nobody likes to pay more for the same quantity and quality of goods or to get lesser quantity and/or inferior quality of goods for the same amount as paid hitherto. Everyone feels that something should be done about it.

This "something" can take two alternative or simulltaneous routes. One is to make the government to control prices by legislation and implementation thereof. The other is the root of consumer resistance.

In the first case the legislature which consists of elected representatives who are supposed to voice the feelings of their electorates, passes certain legislations. This process costs some money, not much though. Then comes the implemention. The government has necessarily to recruit certain number of people and setup and maintain a price control administration right down to the level of a municipal war or to the level of a village. This costs money.

The traders have to keep their books in a certain way. This costs money. The comman man has to have ration cards or permits. Getting this and maintaining them also costs money. All this expenditure has to be born directly or indirectly by the consumer.

Long after the original reason for the price increase has disappeared, the price control administration continues to rule the roost. A number of vested intersts that have sprung up and the fears of the public see to it. I am ignoring the cost of corruption that would not have existed in the absence of controls but as a factor in perpetuating controls, it cannot be ignored.

The opposition parties mount a protest by way of rallies, strikes and bandhs. This results in loss of production, reduction in GDP and further increase in prices.

Thus, we see that people keep on paying more in a controlled and labourious way for their uncontrol fears or lack of understanding of the real causes of increase in prices.

In the next alternative, the one of consumer resistance , firstly it peters out after a time as no sustained effort is possible. Apaart from this, if people resist a price increase, tha additional cost to the trader on account of countering this resistane makes him either to take to some other trade or further jack up the prices at the first available opportunity. The trader too has his own fears! Even organising a consumer resistance movement and sustaining it, costs money.

We have thus seen any resistance to increase in prices only tends to further increase in prices. We have been resisting price increase ever since the second world war and look at the situation that it has led us to.

The law of price rise can, therefore, be stated as follows:

Price increases are directly propoortional to the amount of resistance offered to them and perpetuate long after the original real cost that led to them has disappeared.

What is then the remedy?

The remedy is very simple and apparently satirical, though realistic. It is this:

A. When a price increasse takes place, grumble (if you must) but do nothing, absolutely nothing about it.

B. If possible, prevent others from doing anything about it.

C. On no account allow those in authority i.e. the political class consisting of the ruling and the opposition parties and the bureaucratic class to know of the increse in prices. They have, you see, a notable weakness of doing "something" about it. The kind that "Denis the menace" does to "help" his mother. We all adore people in authority just as we adore Denis but that does not make Denis's help any more acceptable to his mother except as a means of occasionally relieving boredom.

D. One more thing. Kindly forget that you read this. As it is, T have already pushed up prices by the cost incurred in writing about them!

E. Believe the economists. Work harder, produce more (except babies), consume less, improve productivity and all that rot that we do not like to do.

If the above remedy is not acceptable and you would insted like to have a big holiday, then go on having a series of bandhs, bring about a collapse of the economy, allow coming up of an authoritarian or a fundamentalist Marxist government that forcibly makes you follow the E. part of the above remedy in a violent way. Follow the E. part voluntarily or compulsorily. The choice is yours!


By:- Ramesh N Desai
Students of Management are, these days, plagued by a lot of laws and principles, what with C.Northcote Parkinson, Dr. Lawrence Peter and others running riot. To confuse the picture further, I propose to add what I call Desai's dictum, which, in reality is merely an extension of the Peter's Principle.

Peter's principle states that one rises to one's level of incompetence. While fully agreeing with this principle, I would like to add that one rises to one's level of ego requirements. In Peter's principle, the basic assumption is that everyone wants to go up and each one gets stuck up at his level of incompetence. There are however many cases where competent people do not wish to go up.

In our country, there are many cases of notable people perfectly capable pf achieving a particular level but have not chosen to do so. Mahatma Gandhi could very easily have become the first Prime Minister of India, had he so chosen.He, however, preferred to be a Rishi venerated by Kings or a Bapu, a father figure, since those were his ego requirements.

Then again, it is not merely the extent of one's ego requirements but also the type of ego requirements that matters. For example, an industry tycoon's ego requirements are entirely different qualitatively from those of a cinema superstar, though quantitatively, they may be the same. This is perhaps why Amitabh Bachchan did not establish the Reliance empire and Dhirubhai Ambani did not don the make-up and join films. A hitherto unfulfilled ego requirement of Amitabh to follow in the footsteps of his celebrated father has perhaps impelled him to write a blog of his own to give vent to his talents in that direction.

The ego requirements provide the motivation without which competence is of no avail. For every Eliza Doolittle that becomes Mrs. Henry Higgins, there are thousands of flower girls who are perfectly content to be themselves. Not all are "sour grapes" cases.

Desai's Dictum could therefore be stated as follows:-

" One goes upto the level and type of one's ego requirements concommitant with his competence to fulfill them ".

Tuesday, July 20, 2010


Can West Bengal perform to its potential ?
Or Is West Bengal a perpetual loser?
A SWOT Analysis
Ramesh N. Desai

In the recent debate about Tatas’ pull-out from Singur, it has been argued that if Mamta Bannerjee wins, W. Bengal will lose. Over the last 3 decades, the left has been winning and W. Bengal has been losing. What is the guarantee that after this problem is over, some Samata or Kamata or a Buddha or a Jawan will not insist on winning and thereby making W. Bengal lose once again.

It is perhaps necessary to go deeper in the matter. Is it only the ego of some or the other leader that comes in the way? Are the masses so gullible? Are they so easily led to satisfy the ego requirements of a set of leaders?

Before we blame the leaders alone, let us ask ourselves. Are the leaders exploiting the inherent weaknesses of the masses? We need to examine both the leaders and the masses from who they spring. A study in the mass psychology of the people of W. Bengal is necessary. I would propose a SWOT analysis of the people on a collective basis. SWOT analysis is an analysis of Strengths, Weaknesses, Opportunities and Threats facing the people.

Let us first deal with the S- part of the SWOT.

Strengths of the people of W. Bengal.

1. They are an intelligent people.
2. They are very proud of being Bengalis.
3. They respect and idolize achievers.
4. Individually, they are achievers in as diverse fields as Economics, Sports, Military, Science, Politics, Literature, Arts, Crafts, Philosophy, Religion and so on. There is hardly any field where a Bengali has not achieved eminence. The ambience in the state supports these individual achievements.

5. They are competitive in nature.
6. They love festivals, good food, Literature, Arts, Dance, Drama, Films etc.
7. They are extremely chivalrous. The status of their women is one of the highest in the whole of India.
8. Casteism has been more or less abolished, among them.
9. They are very conscious of their rights.
10. Rate of literacy is high.
11. On many of the parameters of Human Development Index, they rate quite high.
12. They love values.
13. They are an idealistic people.
14. They are highly imaginative.
15. They are highly creative when motivated.
16. Extremely good debaters. Difficult to win an argument with a Bengali. It is another matter that Bengalis win arguments and Bengal loses.
17. Highly emotional people. Emotions can lead them to making great efforts.

Next, we come to W. part of the SWOT analysis. W stands for Weakness. Their Weaknesses are:-

1. Common perception outside is that they do not like to work hard. This is not correct. They work very hard at making Festivals a success. They work very hard, making many sacrifices in the bargain, when demanding their rights. What can perhaps be conceded is their dislike of Productive work – especially manual work. They do not work as hard for creating wealth and generating capital.
2. Mothers are deified to a disproportionate extent.
3. Larger no. of males among them remain children in psychological terms. If males among the rest of Indians are children, Bengali males are pampered children. Self-reliance on the part of male children is not encouraged.
4. Negative feedback is not easily accepted. This results in non-correction of any deficiency.
5. A sense of injury, of injustice done to Bengalis individually and collectively that is passed on from generation to generation resulting in its being accepted as a fact.
6. They are extremely good at the blame game.
7. They love tripping up any one going beyond his “Aukat” (station in life) in their perception. It is because of this tendency that the achievers have to pass an “Agni Pariksha” (trial by fire) of sorts. But once, a person is acknowledged as an achiever, he / she can do no wrong. Any drop in his performance is due to others’ machinations or adverse excusable circumstances. Pleading Saurav Ganguly’s case by any and every one is an example. Even the Lok Sabha speaker spoke out. Subhash Bose can never die. Emotional insecurity lies behind this. They feel that their collective backing is required otherwise the big bad world outside would devour their precious gem. The achiever’s performance alone is not enough. In this behaviour they exhibit their over-protective parental ego that does not allow their child to become self-reliant enough to face the world on his own.
8. The pride in being a Bengali is carried to a disproportionate extent. Non-Bengalis are many times considered to be on par with barbarians.
9. They lack the entrepreneurial spirit. This lack can perhaps be traced to bringing up of the male child as a non-self reliant one.

10. Their love of values is such that one or the other value held dear by them comes in the way of progress. The reason perhaps is in not being able to prioritize their values. All values in life are not equally important at every stage in life. It some value is ignored or sacrificed to achieve the greater good of a much larger no. of people, it has to be done. Mother Nature does compensate at a later date an earlier sufferer. The left ignored this well established principle in pressing the demands of only one section of the people viz Urban labour to the detriment of not only the other stakeholders of Industry but also West Bengal as a whole. Priority should have been given to generation of wealth and capital before distribution of wealth to only one stakeholder. Even this should have been subject to and in proportion to the increase in productivity. This was not done. As a result thereof, de-industrialization started taking place. While they seem to have understood this after 4 decades, it is now the turn of Mamta Bannerjee to press the demands of 1200-1500 farmers to the detriment of not only the Nano plant but to the whole of W. Bengal whose industrial future is likely to be bleak. The worst part is that the Civil Society is unable to prevent such happenings and there is no guarantee that the future would be any different.
11. Whatever the slogans mouthed by the people, their mindset and behaviour are feudal in nature. Just as Zamindars exploit the tenant farmers, workers exploit Industry. Once a job is given, it becomes a sinecure one. Salary is treated like rent. For work, something extra is to be given. This behaviour is not only condoned but also sanctioned by powers that be The civil society also appears to be the view that such behaviour is justified. The Zamindari mindset is evident also in the fact that the govt. has acquired the land from the farmers and leased it out to Nano, thus creating a permanent source of income for the powers that be as well as a hold on Tatas. The same is the position in Haldia where Calcutta Port Trust had acquired the land and leased it out to the various industries including Public sector Undertakings. P.S.Us underwent the same sufferings as Tatas are doing now, though to a lesser extent. They have since stopped investing significantly in W. Bengal.
12. At the drop of a hat, work comes to a standstill. This is not as much due to the hold that the political parties have on the people as the desire for a paid holiday on the part of the people. For all the values espoused, the value of the work ethic is absent. People love holidays on one pretext or the other.
13. To rebel comes naturally. Half the population converted to Islam in rebellion to the Brahminical strait jacket. However when it came to politics, Bengal was hardly conquered by the Mughals, even though they were Islamists, as were the Nawabs of Bengal. The British might have begun the conquest of India from Bengal but Bengal was the first to rebel, however furtive and unsuccessful, the attempts were. The opposition to U.S.A. is more psychological than ideological. U.S.A. is today the dominant power in the world and also prosperous. They hate domination of others over them. The only domination acceptable is their own domination over others. The anti- Bengali riots in Assam is a case in point. Tolerance is not a virtue with them. Tolerance and improvement from within a given system gradually is neither acceptable nor possible for them. They must overthrow a system; allow creation of a new one, only to overthrow it yet again. Permanent feeling of hurt and injustice are their sources of motivation. The only discipline that is exhibited is when there is a mass indisciplined behaviour. They tend to gloat in miseries.
14. A highly politicized people. Politics does not remain confined to politics. Whether it is Corporates, social, religious or any organization, people love playing politics, the goals of the organization be damned.
15. Resistant to change. This is a normal human trait. It is however more accentuated here. While in other places, people grumble but try to adjust to the changes. Here; obstacles are first put in the path of the change. When that does not work, organized resistance starts. The principle that there is no gain without pain is simply not understood.

16. Given to exaggerating pain. Even Mahatma Gandhi had, in his partition days’ travels remarked that truth was difficult to get at in view of the exaggerated claims of atrocities by both the communities. Pain is perhaps exaggerated in expectation of sympathy – the trait of a child. Just as a child expects the parents to do everything for it, otherwise it would cry, throw a tantrum, and break a few things. The people expect the government / capitalists to do everything for them or else strikes, bandhs, bus burning, and damage to public property and so on. Poverty, it appears, gives the right to a person to steal, to rob, to damage things. This behaviour is condoned by even the educated. That poverty could be caused by idleness or not taking the opportunities available is not acceptable. It would be a blasphemy here to quote George Bernard Shaw who said “Poverty is a sin”. Instead, all virtues are associated with Poverty and all sins with affluence.

17. Being too imaginative, whenever any change is mooted, they imagine the worst and are only happy when their self-fulfilling prophecy comes true. They work hard to make their worst fears happen.
18. High Intelligence Quotient but low Emotional Quotient resulting in an eternally unbalanced behavior.
19. Not as conscious of their responsibilities as of their rights. Appear to be slaves in eternal search of emancipation. Not aware of what they are trying to free themselves of. Could it be their own attitudes and habits?

Let us now turn to the O part of the SWOT analysis. O stands for opportunities.

We have to scout for opportunities taking into account the collective traits of the people. These are:-

1. Service Industry like I.T., Banking, Financial Institutions, Advertising, Marketing, Human Resource Development, Business Process Outsourcing etc. where not much investment is required. Even for these, help of Venture Capital can be taken.

2. Research & Development. Their imaginativeness and creativity could be taken advantage of. Larger firms could sponsor research work done by small R&D establishments. Zamindari mindset would also motivate them to hold patents and earn royalties on them.

3. Entrepreneurship Development Institutes. If every Tehsil in every district has such Institutes. Job givers rather than Job seekers can be created. From the mass psychology point of view also entrepreneurship helps people to get over many of the weaknesses mentioned above. Dependence on Sarkar Mai – Baap can be drastically reduced. People would realize how difficult it is to build and how easy to destroy. This (Entrepreneurship) may not be considered to be an opportunity by some. To them I would only quote the off-repeated case of two Market Researchers being sent to an island to look for opportunities for selling footwear. One Co.’s representative reported that there was no market as no body in the island used any footwear. The other one however saw it as a tremendous opportunity since no one had as yet realized the benefits that footwear confers on people.

4. The idea that Capital is nothing but fruits of labour minus consumption (accumulated over a period) has to gain ground. The labour may be physical or mental. It may consist of sensing opportunities and seizing them. Once formed, Capital can create some more capital, if used imaginatively. Hatred of capital and capitalists would be converted to love for it and bask in its after glow, if the above idea gains ground. Productivity has to get the upper hand over demands for rights.

5. Risk-taking. Tremendous risks were taken by Mihir Sen or Arati Saha while crossing oceans or by Bachendri Pal in reaching Mount Everest. What is required is to learn how to take ordinary, calculated, small, day to day risks. Risks that might at the worst do some damage but not devastate one to such an extent that one never takes a risk again. This trait could help create entrepreneurs.

6. There is a lot of opportunity for the media. Like APJ Abdul Kalam said, the media should highlight achievements rather than glorify miseries. They can greatly help in reversing negative trends.

7. Ditto for politicians. Here, they are not leaders but they are the led. If they are leaders, they would explain the peoples’ weaknesses to them and help them to get over them, open their eyes to the opportunities available, and encourage them to grab their opportunities. Instead of leading the people to positive and affirmative action, the leaders are led by the negative traits of the people and accentuate them to their common detriment. There is a vast opportunity to reverse this trend and lead Bengal to a positive and balanced behaviour where both the leaders and Bengal win. Before independence there were leaders. Now they are the led – followers of the people. Contrast Vivekanand with Mamta. Subhash Bose had said “Give me blood and I will give you Independence”. Had he been alive, he would have said today “Give me productivity, patience and tolerance and I shall give you prosperity.” As against this today’s leaders say “Stop everything.” They encourage the hedonistic tendencies which are anti-productivity.

8. There is a lot of intellectual capital in W. Bengal. There is no reason why it cannot be monetized or converted to capital in money terms. We have the example of Bangalore where Infosys, Wipro, Satyam and so on have already done it.

9. On the agriculture front, ancillary activities like dairying, horticulture, pisciculture, poultry etc. could be developed in an organized co-orperative manner, on the lines of Amul and other dairies in Gujarat.

10. Given their dislike for hard work as also their imaginativeness, creativity and intelligence, there is a vast opportunity for inventing labour saving devices.

11. The desire for changing others has to give way to changing oneself. After all, it is much easier to change oneself than change others. If it is true that what Bengal thinks to-day, India does to-morrow, then the future of India is bleak. Before independence, when revolt against a foreign power was relevant, Bengali penchant for rebellious thought was relevant. Now the time has come to gird our loins and develop on our own. For a change pride has to be swallowed and lead given by more developed states of India, followed. Marxism is passe’. Let us look ahead, not behind.
12. Dance, drama, music troupes on the lines of the late Uday Shankar or the “Unforgettables” tour of Amitabh Bachhan can go about in India and abroad to cater to the Indian diaspora and the Indophiles.
13. More emigration. When the N.R.B.s ( Non-Resident Bengalis ) come back eventually, they would bring back with them money, ideas and most importantly the zeal to transform Bengal.

Let us now look at the threats – the T part of SWOT Analysis.

Threats are of 2 kinds. One internal and the other external. The internal threats mainly arise from the inherent weaknesses described above. They are more menacing than external ones in the case of Bengal. The threats faced by W. Bengal are:-

1. If leftism is continued to be followed in the form practiced in the last three decades, capital would shy away forever. For left to succeed, the people have to work hard, create wealth, postpone consumption and generate their own capital. (Outside capital comes with its own conditions.)These are not ‘W. Bengal peoples’ strong points. Even where one succeeds by the leftist path, there comes a stage when one has to change over to a free enterprise system, as seen in the Soviet Union as mass motivation levels decrease at some stage and stagnancy results. China has been following the free enterprise path in the field of Economics, even if politically they are leftists. I am of the opinion that at some stage, even politically the Chinese will abandon leftism. The reason is that Mother Nature is a big democracy where free enterprise is rampant. It has a habit of restoring balance whenever it becomes necessary. Just as dinosaurs perished on account of over eating and becoming over sized, any excesses caused by man-made theories and consequent physical and social engineering are bound to find retribution sooner or later.
Leftists are Neo-Brahmins – as doctrinaire as ever. Brahmins caused Mughal and British invasions by their doctrinaire approach. The left will do no better. Both tend to ignore nature. For people who are prepared to work hard, postpone consumption, generate their own capital, are amenable to changes, rapid changes, as may be required, leftism can be advocated. In the case of W. Bengal, it simply would not work.

2. Threat of the left deciding on postponing industrial progress in W. Bengal till such a time as the whole of India becomes leftist.

3. Threat of a 2nd de-industrialization after a 2nd re-industrialization following Buddhadev Bhattacharya’s policies. Looking to the CPM’s censure of the W. Bengal Chief Minister’s remarks on futility of Bandhs and strikes, this seems a real possibility even if the left succeeds in hoodwinking the capitalists to re-invest in W. Bengal.

4. A bigger threat than leftism is that of a tug-of-war between the left and others, leading to zero-sum games being played. This is a phenomenon in which a lot of activity takes place but it is of such conflicting nature that in the end no progress takes place. This tug-of-war may induce the left to postpone progress in W. Bengal till they overthrow the prevailing order at the centre and in other states so that they are then free to liquidate the class enemies.

5. Maoist revolution in Nepal could travel to contiguous areas in Bihar and W. Bengal and till the dust settles down, there would be no progress. Already the Kosi calamity has prepared a fertile ground for this to happen. The left’s plans to over run the cow belt may take precedence over W. Bengal’s progress.

Threat of Secession from India. The example of Bangladesh is there. Once again, if this happens, till the dust settles down, there would be no progress.
Bangladesh was once known as the international bread basket. Does W. Bengal want to become the national bread basket? Carrying on as at present, could lead to that.

Given the above SWOT analysis the people of West Bengal need to decide on a strategy for progress that will suit their genius. This SWOT analysis is merely an attempt by an outsider with experience of trying to put up an industry in W, Bengal – not even his own! It is now for the people of W. Bengal to decide whether it is prosperity or ego satjsfaction that is more important to them. No outsider should even suggest the course of action to them, given their exclusivity and touch – me – not stance.
At the end I would like to mention that the weaknesses in this SWOT Analysis are exaggerated with a view to spur some action to remedy them. The strengths merely help one self to pat one’s own back and can lead to complacence. If this article hurts Bengali pride so much that to prove me wrong, if not for any other reason, they make a collective effort to make Bengal prosperous, I shall be only too happy to be proved wrong.

Acc. to an old Sanskrit saying, ‘Yathaa raja, tathaa prajaa” ( As is the king, so are the people ). Today people are the rulers in a democracy. The saying therefore becomes “Yathaa prajaa, tathaa raja” ( As are the people, so are the rulers ) This is in consonance with an English adage “The people get the government they deserve” As a corollary,
“Yathaa prajaa, tathaa raajya” ( As are the peope, so is the governance )
Yathaa prajaa, tathaa Vikaas” ( As are the people, so is the development )
Yathaa prajaa, tathaa aatank” ( As are the people, so is the terrorism ) of the Al qaida, L.E.T. or the J.E.M. kind or the bus burning, road-blocking, public property destroying variety.


The cost of corruption

By:- Ramesh. N. Desai

India is considered to be a very highly corrupt country by foreigners. Indians themselves also think likewise. While foreigners are appalled by this phenomenon, we Indians take it in a more matter of fact manner. Our easy acceptance of corruption is also one of the main causes of its existence.

Corruption can be classified as wholesale and retail. Wholesale corruption occurs when large amounts are involved and VIPs or even middle level functionaries are involved. Such cases get highly publicized and a lot of furore takes place. The cases are long drawn out and only when public memory weakens do they fade out. The truth in the matter is never known to the common man. When the next corruption scandal breaks out, it is time for the preceding one to start disappearing from peoples’ minds. In fact, powers that be appear to use this technique repeatedly without most people noticing it,

The retail corruption, on the other hand, is something that the common man faces day in and day out, at every step in his life while dealing with the authorities, however petty they may be. Be it a traffic constable, be it a railway booking clerk, a thanedar or a clerk of revenue, sales tax, income tax and so on. The ‘inspector raj’ may have reduced after economic reforms but that affects business people who take into account the money to be lost if they take a principled stand and not pay the speed money.

The money involved in retail corruption may be small but its consequences are very costly. Firstly, the whole society accepts it as a way of life. The corruption does not stop at only the governmental lackeys. Each and every person who thinks that he is in a position of giving goods and/or services, thinks that he has to get in return, something over and above the normal cost. This is on the same lines as speed money which is paid in addition to the salary. In course of time the whole society gets corrupted. Black marketing, hoarding and many other social evils can also be traced to this mindset. I have noticed in some parts t of the country, a usual question asked of the prospective bridegroom. Does he deal with the public in the course of his work? If so, what is the amount of ‘ooperki aamdani’ (speed money) that he makes. The answer to these questions helps to determine the amount of dowry that could be paid.

Secondly, as putting obstacles in the path of the common man yields rich dividends, a tendency to put in place more and more obstacles in the form of newer and newer rules and regulations gets a fillip. More rules, more laws, more the avenues of corruption. The Neta-babu nexus then takes over. This quite naturally reduces productivity. Cost of production rises. Inflation is the result.

The short term scarcities and the resultant anxieties of the masses are exploited to impose a regulatory system in place which works to perpetuate the scarcity rather than attack the causes of the scarcity. A rationing mentality takes over and it creates its own vested interests which see to it that a solution of the real problem is never found. Food
rationing had been imposed in the wake of the food scarcity during the second world war.

Immediately after independence, Mahatma Gandhi had advocated removal of rationing but it took a long time for us to do so. Food is now in plenty as we focused our attention on the green revolution instead of wasting our energies and scarce resources on rationing. Let me hasten to add that this year’s drought is an exception but here too, thanks to the economic reforms, we have a sizable foreign exchange reserve to enable us to import the shortfall to tide over the emergency. Thankfully, we have not gone back to rationing, even if we have not resorted to large scale imports of food grains. Imposition of rationing would have been a longer lasting inflationary step than inaction which has resulted in a shorter term inflation till the next good monsoon.

When socialism was the buzzword, cars and scooters were not available except at a premium and / or after a waiting period of a few years. Cement, iron and many other articles were controlled. Even newsprint was not spared. .After economic reforms, they are available in plenty as the focus shifted to more production rather than on rationing. Uncalled for regulatory activity is an avoidable unproductive expenditure. The old adage “Least government is the best government” still holds true. Under socialism, the government was the biggest contributor to inflation. However nobody dared say it. The media could lose their quota of newsprint, if they tried.!

Thirdly, the cost to the society in terms of loss of productivity is sizable. In developed countries, the retail corruption does not exist, leading to a certainty of outcomes. Here, in our country, one never knows when and where the work has stopped. The amount of follow-up and the cost involved in it, not to speak of the speed money, is stupendous. Once upon a time, New Delhi and the various state capitals were teeming with a species called liaison officers who mediated between government departments and the applicants. After economic reforms their population has gone down. Every government office even now, has its retinue of touts – middle men. Unless you go through them you may find a myriad of obstacles. These are however, a part of the retail corruption gang unlike the liaison officers of pre-economic reforms days who were part of the wholesale corruption gang. In our country, perhaps the government is not of the people, by the people, for the people but of the dalals, by the dalals and for the dalals. We might as well rename India as “Dalalistan”! Costs of production, naturally go up as one has to negotiate through a variety of obstacles and a variety of middle men.. This leads to inflation and we get into the wage-price spiral which only goes up and up.

Fourthly, government jobs become attractive on account of the power , perks as well as speed money ( incentive for saying ‘no’ to everything ) not to speak of lack of accountability. There are no goals , no dead lines, excuses galore for non-performance. What more do you want in a job? There is therefore a clamour for more and more government jobs. Being a democracy, public demand has to be satisfied for vote
gathering .Thus the society is burdened with an increased unproductive expenditure. Every society has three types of human resources 1) those engaged in production, 2) those engaged in services enabling production and 3) those engaged in regulatory srervices.
A good economic society gives maximum returns ( economic and others ) to people in production, lesser to those in services enabling production and least to those in regulatory services. Our brahminical mind set does the reverse. Brahmin, the regulator – highest, Kshatriya, the destroyer, next higher, Vaishya, the sevice provider, next higher and Shudra, the producer, the lowest of the low. No wonder, we do not understand dignity of labour. Each of these categories is important in its own function but we have to spend least money on regulation. Self- regulation is the best but its spread depends on the maturity of the society. We have already made a beginning in this direction after economic reforms. We have to carry it forward. Unproductive regulatory expenditure has to be minimized. By eradicating retail corruption we can make regulatory jobs less attractive and thereby reduce the pressure on more creation of regulatory jobs. It will doubly help in improving productivity. Less government servants, less corruption, less obstruction, more productivity. I do not claim to be an economist, nor do I have statistics to prove but my common sense tells me that the country can increase its G.D.P. by a per cent or two if we can emasculate if not completely eradicate this monster of retail corruption.

There are complaints about dumping of cheap Chinese goods in our country. Their cost of production is lower than ours. Their GDP growth is consistently higher than ours. They are perhaps able to do this because of lack of retail corruption in their country. If we have to compete with them, we must take the bull of retail corruption by the horns apart from improving productivity and reducing marketing and distribution costs..

Let us now look at wholesale corruption. It has to be tackled too but the priority has to be on retail corruption. The common perception is that the wholesale corruption is a bigger evil and must be eradicated first. In our households, mice play a bigger havoc by chewing up our papers, clothes, wooden articles etc than cats who might occasionally polish off milk and other dairy products left outside cupboards. The annual damage done by rats is much more than that done by the cat. Despite this, when we watch the Tom and Jerry cartoons, we all have a sympathy for the mouse and applaud him when he makes a fool of the cat.

We always favour the perceived underdog. The same is the case with the petty thievery indulged in by the retail corruption. Just as we see the cat as a bigger menace, we see the wholesale corruption as a bigger menace. However from the society’s point of view, it is not really so. The money made by wholesale corruption is either invested or stashed away in safe deposit vaults as consuming such large amounts is not possible. If invested, it is put to a productive use and if stashed away, it reduces inflationary pressure by taking that much cash out of circulation. The money generated in wholesale corruption is more of a transfer from one account to another without unduly affecting the economy. The money generated in retail corruption is however spent in current consumption. It is done in a wasteful manner as the beneficiary is in a hurry to dispose of his ill-gotten wealth.

The common perception is that unless wholesale corruption ( a bigger evil) is eradicated, retail corruption (a smaller evil) can not be done away with.. As we have seen above, it is the eradication of the mice rather than the cat which should be our priority, being more harmful to the household.. The common excuse of the lower level corrupt people is that they have to pass on a substantial part of their booty to higher ups. We readily gulp this as we have already decided (without adequate proof) that the rot is from top to bottom.

This is not to argue that wholesale corruption should be allowed to continue unabated. All I am saying is that the bigger evil is the retail corruption and its eradication is our first priority, if we mean what we say about wanting to benefit the ‘aam aadmi’. That is where the shoe is actually pinching him. Winning a test match, sending a mission to the moon, having a compatriot as a Nobel prize winner. All these events make us proud. Similarly, a Lalu or a Koda or Bofors scandals give us a high. They are necessary to keep up our spirits. They are however not so important to the common man as getting his ‘daal – roti’ cheaper than before or getting the street on which he lives to well paved and clean or a good well-run hospital or school in his area. Similarly swift and impartial punishment to a perpetrator of wholesale corruption gives him some satisfaction. Of course this does not happen, but if it did, even then, it does not fill his belly. Removal of petty or retail corruption in his own sphere of activity will give him a much greater satisfaction. He would much rather see that no differentiation is made between him and his rich and influential neighbour in the matter of either availability of public services or of punishment in case of any transgressions.

All the well intentioned policies of the government do not get actually implemented, largely because of this factor. There is the famous remark of the late Rajiv Gandhi about only 15 paise reaching the common man out of every rupee spent by the government. Unfortunately, he met with an untimely death.

Under alien rule, petty corruption was a method of controlling the population. Under democracy, it is the biggest hindrance to governance. Under alien rule, controlling the subjects was the main aim. Retail corruption was then, a tool for governance. Today, development is the main aim. Retail corruption is today, a major hindrance to governance. The control mindset however continues.

The powers that be who want to govern by back seat driving, would like this perception of the common man ( that the real evil is wholesale corruption ) to continue. It helps them to carry on with the retail corruption. They however want it to continue as it helps them to to do their string pulling act. They can keep blackmailing the rulers to get them to toe their line. Government is all about power and control. If you can control people who wield power, why bother about doing the dirty work yourself? These are the people who keep alive the myth of wholesale corruption being much more in quantity and quality than what it actually is. Beyond making a big song and dance ( with media helping them ), nothing happens. On the other hand, by keeping alive retail corruption, they are able to exercise control on lower level bureaucracy. They are thus able to control both the top and the bottom.

There is a hierarchy of control. The civilian controls the uniformed people by either brainwashing or by making them morally or financially corrupt. The uniformed people, in turn, control others by coercive means. Both of them together control the corrupt politician. The politician is their safety valve. They can pass on all the blame to the political class. This was ok during the alien rule. It is not so now. However in some parts of India it is almost impossible to climb the political ladder unless there is a vigilance file against the person concerned. The impression sown in peoples’ minds is that the Neta controls the Babu whereas the reverse is actually true in most parts of India.

People are made to believe that because the Neta is corrupt, poor Babu has no alternative but to be so. The reality is the other way round. In states where the Babu has been set right and is not effectively in control of the Neta, things have been better. The Neta is changeable. He can be thrown out after 5 years. It is in peoples’ hands. The Babu on the other hand is a permanent fixture. People have no control over him. .This is one more reason for the higher priority for eradication of retail corruption in preference to wholesale corruption. There can be no real democracy till every limb of the government is transparently accountable to the common man.

Let us look at W. Bengal. It has been ruled by the left front for three decades now. There have not been any major scams of wholesale corruption there. Recently, one of their own leaders complained about retail corruption. We all know how static the growth has been over there. Apart from the ideological backwardness of their leaders and choice of a wrong path, retail corruption has also been one of the reasons for the state’s present condition. Clearly, lack of wholesale corruption alone does not guarantee that the common man will become happy. What is really more important is to eradicate retail corruption. Wholesale corruption’s eradication can follow.
Are the developed countries developed because there is no retail corruption there or because they are developed, there is no retail corruption there? Well, wholesale corruption takes place there too. Media are full of such stories but the wrath of the common man there is such that visible and effective punishments result in swift retribution. Their wrath is in contrast with easy acceptance of the same in India. In fact, wholesale corruption is used as a pretext for continuing with retail corruption. We, alas, are a lot more tolerant of things that should be intolerable and a lot more intolerant of things requiring understanding and tolerance.
In the end, I would say that mere absence of wholesale corruption does not guarantee going forward in growth. Also, existence of only wholesale corruption ( unaccompanied by retail corruption ) does not deter growth unduly as we have seen in developed countries. But presence of retail corruption deters growth and its absence promotes growth. Let us therefore concentrate on eradication of retail corruption as our first priority. Eradication of wholesale corruption can follow the eradication of retail corruption. Let us not put the cart before the horse! In any case, we have been trying to do this for a long, long time without success. Let us, for a change, free the common man from having to pay ‘chai-pani or ‘dasturi’ or whatever name under which speed money is known. Once freed from this shackle, he will be a lot more intolerant of wholesale corruption and nothing is more effective than the righteous anger of the common man!



When prices go up, all of us grumble at first, then complain to people known to us and finally shout at anyone who would care to listen. The sellers of goods and services listen, so long as we are still buying at the higher prices that they are selling. We sometimes write letters to newspaper editors complaining about inflation. We feel happy when some political party (usually the opposition) starts an agitation. Some of us who feel strongly, even go to the extent of joining such agitations and feel proud that we did our duty as a responsible citizen of a democratic nation. Some time later, the government declares its intention to control inflation. Again, we feel happy, forgetting that successive governments, whether British, Congress, BJP, NDA, UPA or the Left Front have always said so. As a matter of record, sugar price has progressively and steadily gone up from 40 paise a kilo under the British to 40 rupees a kilo under the present dispensation. The same is more or less the situation for most goods and services. To be fair to all these governments, we must concede that they all have tried and failed except perhaps for short spells of time.

The question that arises is why does this happen? To arrive at an answer to this question, we must revise our elementary Economics. Prices are governed by the law of supply and demand. When demand exceeds supply, prices go up. When supply exceeds demand, the reverse takes place and prices go down. If we can always keep the supply slightly in excess of demand at any given time, we can have a zero inflation. If the supply is too much in excess of demand, deflation, the reverse of inflation takes place. If such a situation persists for a long time, it can lead to a recession , similar to the one that the Western countries are facing now. The trick lies in maintaining a balance between demand and supply. The market forces normally do it. Sometimes however, the market fails and the government, in its role as a regulator has to step in to restore the balance. It is one of the reasons for the government’s existence apart from its normal duty of maintaining law and order.

Now, we know that demand is always increasing because of increasing population and increasing prosperity ( at least for some ) among other reasons. We should therefore be producing more and more goods and services to keep pace with the increasing demand. We should also increase productivity i.e. produce the same quantity of goods and services using lesser resources or produce more goods and services using the same quantity of resources. This can actually help in even reducing prices. If we look back, we find that prices of electronic goods have progressively gone down. They are an exception. Why is it so? The main reason is that newer technology has increased productivity progressively and thereby cut costs. Even though the cost of obsolescence of electronic goods is high, it is more than offset by the advance in technology and miniaturization. Higher productivity has reduced prices. It may be noted that the government has not done this. It is the producers of electronic goods who have done it. Similarly, our biggest exports-IT software and BPOs were not created by the government. One might even say that perhaps, it was inspite of the governing classes. Perhaps you have heard the likes of Deve Gowda speaking with a venom while referring to the likes of Narayan Murty. The former types hate the guts of the latter types perhaps because they negate the self-assumed omnipotence of the former.

When we address the government for reducing inflation, we are actually barking up the wrong tree. I shall explain what I mean. In any society there are mainly four types of people. The first category belongs to those engaged in the production of agricultural and maufactured goods . The next category of people are those engaged in services that help in production such as supply of raw materials, providing financial and other services. This category also includes housewives who provide services to their menfolk to enable them to engage in productive activities. The third category of people are those who provide regulatory services i.e. government servants. The first two categories are economically an asset to the society as they help in reducing inflation. The third category viz. government servants do not contribute directly to production. To that extent, they are a burden on the society. They are however required as good regulation also enables smoother production. This fact seems to be the origin of the saying “The government, even if thought to be an evil is actually a necessary evil. Least government is however, the best government”. The fourth category of people are children, the aged, the handicapped. This is a category that cannot be considered to be contributing to production. There is however a difference. The children are an investment for the future. The aged are compensated for their past contribution. The handicapped are a collective social responsibility till such time as they are made self-reliant.

Now, I shall explain what I mean, when I say that we are barking up the wrong tree when we approach the government for reducing inflation. For carrying out their regulatory work, they have to necessarily to put some obstacles in the path of production. Good governments put as few as possible, cussed ones put as many as possible. For governance, they have to raise taxes in the form of excise and customs duties income tax and other taxes. So they not only do not contribute to production; they also raise its cost by imposing taxes. The bigger , the government in size, the bigger are the taxes. The governments, irrespective of the country they govern, are a social cost and add to inflationary pressures. The only way, they can help in reducing inflation is by lowering taxes and reducing money supply i.e. by fiscal and monetary policy changes. There are limits to what this can achieve as we have seen every time an inflation takes place and the government makes furtive efforts to reduce it. The real, permanent and effective action that governments can take is to reduce their size to the minimum, keep the laws and regulations also to the minimum and to help rather than hinder the production process. Most governments believe that all the wealth produced is actually theirs as they are the rulers and it is out of their generosity that they allow the citizenry to spend some of the wealth that they, the citizens produce. They know it is not politic to say so. They would therefore deny it vehemently but this is largely how they perceive things in their minds.

As we saw earlier, the only way to control inflation is produce slightly higher than the demand and to continuously improve productivity and cut costs of production. The government’s core competence lies in regulatory activities which as we saw earlier results in adding costs. It is not in increasing production and productivity. Under socialism, producers were actually punished for producing more than their licensed capacity. Thankfully such patently inflationary practices are no more in vogue. The core competence of the producers and their enablers is in reducing inflation due to their capability to produce more goods and services as well as to improve productivity. It is to them that we should be looking up to. Additionally it is in their own interest to do so. The least that the government can do is to make the path of the producers smoother. In the present scenario, the government could have allowed businesses to import foodgrains as the drought had reduced the supply. The Liberalization, Privatisation and Globalization have made enough foreign exchange available for this purpose unlike in the old socialist days when we had to bail ourselves out by pawning our gold reserves even for our minimal reqirements of foreign exchange. For some inscrutable reasons, the import of foodgrains was not done. The main cause of inflation in undeveloped as well as developing economies is shortage of foodgrains and other edible articles. For India, the real trick in controlling inflation lies in controlling food prices. Increase agricultural productivity as a long term measure and import food as a short term measure. The role of the middle men in agricultural marketing has to be severely curtailed but when the government is of the dalals, by the dalals and for the dalals; what else can you expect? If the dalals are controlled and returns to the farmers are increased without raising the prices to the end consumer, most of our problems can be solved. The government’s public distribution system has been a huge failure except perhaps in Kerala. Malls can however be encouraged to step in , be the only intermediary between the farmers and other producers on one hand and end consumers on the other hand, the aim of increasing the return to the producer without raising the price paid by the consumer can be achieved. It will be a win-win situation. The curtailment of the role of the multi-layered dalals, is admittedly a slow process but it has to be relentlessly pursued. Some sort of rehabilitation for them has to be thought of on the lines of the farmers dispossessed of their lands for public purposes. The best course would be to make them a partner in the process of their own extinction or near extinction!

Although it is high hopes to believe that the powers that be, would on their own, reduce their size and make government service less attractive, thereby reducing pressure on creating more government jobs: yet, pressure has to be mounted on them to do so. It is in the peoples’ hands to reduce inflation by increasing production and improving productivity.

One funny thing is that the opposition which is really a regulators’ regulator, make a big song and dance of fighting inflation calling for rallies and bandhs. They end up by only increasing the inflation by their actions. Strikes and Bandhs are only a drag on productivity. Was nature telling the leader of an opposition party something when he fainted during an anti-inflation rally? May be it was, at the very least, telling him to reduce first the inflation of his own paunch! If in the process, the opposition is able to hoodwink the voters and come to power, they would do exactly the same thing that the present government is doing but by putting a different spin on it. We, the people, need to awake, arise and stop not till the inflation is controlled. In this process, we have to accept the government as a constraint. The more mature a society, the less the need for outside regulation. A self regulatory society can aim for the least government or in other words, the best government. This is possible in a mature democracy, albeit as fast as the government would allow its maturation!

The society needs both the market forces and the government. Both have their uses. Normally, the market forces should predominate, with the government playing the role of a facilitator. In recessionary times, however, the government has to be temporarily in the driving seat. But, the moment, the recession is over, the driving seat is restored to the market forces. In a mature society this takes place automatically. The civil society is bigger than both the market forces and the government. When, oh when, shall we mature?