IndiaSpend ResearchWire - August 28
In the third edition of ResearchWire by IndiaSpend, we discuss the tricky relationship between growth and corruption, how artisans set prices, how microenterprises fared during the lockdown, new population estimates for India, and a little story from India’s history that continues to have lessons for policymakers today.
If you’ve missed the earlier editions, you can read them here.
You needn’t eliminate corruption, just do it right
My first recommendation for the fortnight is this fascinating podcast with University of Michigan professor Yuen Yuen Ang about how it is not the level of corruption, but the nature of corruption that determines its impact on a country’s growth.
She says that when measured on a perception index, both China and India have the same absolute levels of corruption. But because China’s corruption is one of “access” and not one of “speed”—i.e. you pay a bribe to get access to productive resources and not to get your work done (faster)—it stimulates investment. Politicians can share in this growth and everyone benefits.
In India, on the other hand, corruption is mainly petty or speed money, which impedes growth. Local political economy does not allow the bureaucrat/ politician to ensure their stake in the success of a business and blocking progress is more lucrative.
It isn’t as if developed countries don’t have corruption—they do, but it is more sophisticated, and legal.
This is very interesting work and builds on Prof. Mushtaq Khan’s lectures I attended as a student at SOAS. You can watch him speak here on why governance reform (or reducing corruption) is not a pre-requisite for growth. Read this by Sabyasachi Kar and others for the application of similar ideas to the Indian context. They argue that deals between Indian businesses and politicians are often the unproductive kind and "as long as the business environment in India is characterised by these types of deals, ... ‘Make in India’ programme is unlikely to succeed.”
More people, lots more people
New data from Government of India show that India’s population is expected to grow by 25% (from 2011) to 1.52 billion by 2036. India will overtake China as the world’s most populous country around 2031. A Lancet study has said this will happen by 2100. The UN believes it'll happen a lot faster, by 2022.
So, you can be sure that it will happen at some point.
As much as 54% of the growth will come from 5 states, with UP and Bihar leading with growth rates of 30% and 42% respectively.
If UP and Bihar were a country, they’d be the third most populated country in the world by 2036.
The southern states have had replacement fertility rates for some time now and are expected to grow at about 9%. They face a different problem—that of a higher share of senior citizens in their populations.
While on population, see below a chart that blew my mind. This is the world divided into 4 regions with the same population.
This one made me a little sad
Have you ever wondered whether craft sellers at Dilli Haat give you a once-over and accordingly offer a price? Stanford professor Aruna Ranganathan’s research shows that this is almost exactly right. Artisans do assess you, determine whether you’re a “discerning” buyer or not, and quote you a price. But that doesn’t mean they ask for more if you look rich. In fact, because the artisans feel a deep connection to their product, they’d prefer to sell it to you—even at the risk of earning less—if you look like someone who would value it and give it pride of place in your home.
Even people like you and me, who otherwise have a higher ability to pay, will end up paying a lower price—if we come across as appreciative and discerning.
Foreigners who ooh and aah for long enough are much more likely to get a discount than to get fleeced.
The paper suggests that merely increasing tourism to artisanal towns will not increase the craftspersons’ income, as is often believed. We need a more sophisticated model—one that goes beyond pure financial interests—to identify ways to increase the income of India’s many craftsmen and craftswomen.
For more on the sector, know that the Centre has scrapped the Handloom Board; what leading handicraft & handloom advocate Laila Tyabji sees as a silver lining in these times; how Delhi-based Craft Village is using ‘cement fabric’ to make PPE suits and how street performers are going online to prepare for a post-COVID world.
Learn from the nawab
I came across what may be one of the earliest examples of a public works programme anywhere in the world. Following an unprecedented famine in Awadh in 1784, Nawab Asaf-ud-Daulah was faced with an urgent need to provide relief. He commissioned the construction of a massive building, asking people to work as labour and get food as wages.
While most people joined in, the aristocracy wouldn’t deign to do physical labour. The nawab invited them to come after dark and damage bits of the day’s construction. They were given their share of food for this ‘work’, and the construction went on for a while—ensuring food for as long as people needed it. The building stands even today, and you know it as Lucknow’s Bara Imambara.
Source: Wikimedia Commons
Clearly in agreement with the nawab, labour economists Radhicka Kapoor and Nomaan Majid argue that an effective way to boost demand (and re-start the economy) is to ensure a decent minimum wage for those who are the bottom—the casual labour. This will, in turn, improve wages for others engaged in low-paid work, including informal workers. They identify agriculture, construction and MGNREGA workers as the places to start.
More broadly on jobs, see this on how salaried jobs in July 2020 have dropped 22% from last year. While these are not lost easily, once lost they are far more difficult to get back. Note that a little over 2% of India’s total labour force is in regular wage jobs with written contracts and social security benefits.
A microscope to the microenterprises
Early results from an ongoing survey of over 1,400 Indian microenterprises are out, with lots of data on sentiment, impact and strategies for recovery. While most of the microenterprises remained closed during the lockdown, 81% are confident of a recovery (more women than men). The ‘how’ of this recovery isn’t very clear though—46% of the survey respondents said they do not have any coping strategy, and 57% do not have any cash reserves.
40% of the surveyed micro-enterprises said they took a loan during the lockdown, but only 14% took one from a formal source of credit.
Why we didn’t see this coming
Read economist Tim Harford on why we fail to prepare for disasters. Even with all our advances in science and medicine and policy-making, why was the world not ready for COVID-19? This is an insightful, albeit long-ish read. Lots to chew on, excellent writing. A rare example of a technical expert talking in a way that everyone can understand.
Contributing Editor, IndiaSpend
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