Saturday, 22 February 2014

McKinsey Essay Competition On "Reimagining India" - My Entry

In December last year, the consulting company McKinsey and Co announced an essay contest around the theme "Reimagining India". Winners would be selected in each of three subjects:

1. What is the best metric for measuring India’s progress?
2. What are the biggest challenges facing Indian companies as they seek success in the global marketplace?
3. How can “innovation capitalism” drive India’s technological and economic development?

I discussed this with my friend Seshadri Kumar, and we both chose to compete. He was interested in the third topic. I chose to compete in the first, and my essay is reproduced below. To my disappointment, I didn't win the prize. The prize in that category (the best metric for measuring India's progress) went to Dr Richard Oliver. You can get his essay here. However, on comparing my essay with Dr Oliver's, I have to admit that his essay was easier to read, made its point early on in the piece, and provided both an exciting challenge ("Global Share of Brains", or GSB) and a positive vision for India's future (world leadership through the highest GSB). My essay was more focused on an immediate task (creating a more federal polity) but perhaps did not spell out the benefits of this more tangibly. Seshadri Kumar pointed out that I made my argument only at the very end of the essay, and that it wasn't enough to state it in just the title. His feedback came too late. I had already submitted the essay, and probably that was one of the reasons why I didn't win.

[Seshadri Kumar didn't win in his category either, although his essay was extremely good. He has put it up on his blog, and you can compare it to the winner in that category.]

In any case, my essay is reproduced here for your reading pleasure (?):

The Federal Republic of India - A Virtue and a Necessity

The subtle nature of the Indian state

In a way redolent of the six blind men of Hindostan who attempted in vain to describe an elephant, great minds throughout history have grappled with the challenge of describing Hindostan (India) itself.

India's apparent contradictions have mystified the most astute of foreign observers. It does not exhibit the readily defined national characteristics they expect to see.

"India is merely a geographical expression. It is no more a single country than the Equator." - Winston Churchill

"India is a functioning anarchy." - John Kenneth Galbraith

"India is not a real country. Instead it is thirty-two separate nations that happen to be arrayed along the British rail line." - Lee Kuan Yew

Indian thinkers do a lot better at piercing the veil, because what they know of India is what they have felt in their bones.

"India is a geographical and economic entity, a cultural unity amidst diversity, a bundle of contradictions held together by strong but invisible threads. [...] She is a myth and an idea, a dream and a vision, and yet very real and present and pervasive." - Jawaharlal Nehru

"India has historically been a strong society with a weak state." - Gurcharan Das, CEO and author

The reference to ideas, culture and society in the latter quotes rather than to the outward trappings of a nation-state holds the key to understanding India. This is the understanding that is denied to foreigners -- the felt presence of an underlying civilisational unity that is not imposed from the outside or from above in any tangible form. The conventional metrics used to evaluate other countries are therefore less applicable in India's case.

Playing to India's strengths

India is a vast agglomeration of people divided by language, religion, caste and class. In political terms, the country can potentially fracture along any or all of these fault-lines. That it has not is a testament to a fundamental governing wisdom that has played to India's inherent strengths instead of going against its grain.

The creation of linguistic states and the avoidance of a single official "national language" have eased the stresses along India's linguistic fault-line. India's founding fathers also consciously refrained from anointing a state religion, leaving citizens free to practise any religion of their choice (including none at all), thus giving them all an equal sense of belonging to the neutral secular state. Caste has posed a harder challenge, because caste divisions are inherently hierarchical, and an approach of separate development would have been apartheid. A combination of affirmative action, universal suffrage, urbanisation and the growing influence of the English language have slowly chipped away at the caste inequalities in Indian society. Finally, the class divide was sought to be tackled, initially by socialistic central planning, and lately through trickle-down market mechanisms.

Save for central planning and caste-based affirmative action, none of these changes in Indian society has been imposed from above. India's non-autocratic governance framework has been a facilitator, nudging the country into an administratively looser, yet more secure union where people are increasingly comfortable with the contract they have with their society.

Keeping a billion diverse people together without significant strife is an unparalleled achievement. Autonomy is the secret behind India's peaceful progress.

"Chains do not hold a marriage together. It is threads, hundreds of tiny threads which sew people together through the years." - Simone Signoret, French actor

The measure of the nation

The outcome metrics by which India should be evaluated as a country are the same as for any other - GDP, the Gini coefficient, sex ratios, literacy, mortality, etc.

Most experts would therefore emphasise policy metrics that measure how well the government is performing in bringing about those outcomes. Liberalisation of investment and labour laws, soundness of fiscal and monetary policy, decisions on public/private partnership, etc., are common areas for discussion.

The need for liberalisation and more rational policies is beyond debate. This essay is arguing for something much more fundamental, given the importance of autonomy to India's progress. The argument is that the degree and pace of reforms should be decided independently in the various state capitals in accordance with the needs of the local population, and not in a one-size-fits-all style in the national capital.

The first step towards enabling decisions in tune with local requirements is to ensure that the states themselves are not unwieldy units but optimally reflective of local demographics. Going by the demands that have been publicly expressed, India probably needs about 50 states of manageable size. (Maparticle)

However, smaller states will not automatically mean more autonomy as long as the central government makes most policy. True autonomy will require policy independence in many more areas than are available to states today. Taxation, investment and labour laws are three such areas that need to be devolved to the states.

People must hold their state governments accountable for improving their living standards. Implicit in this model is that states must compete for investment, for skilled labour, for tourism, etc., and they must have the policy tools with which to compete. This federal model will bring about greater efficiency and greater transparency in the way public and private funds are used.

There are encouraging signs that India will willy-nilly move in this direction. Hung parliaments and coalition governments have been a feature of the political landscape since 1989. The so-called national parties have proportionately less sway than ever before, and regional parties have gained disproportionate power as kingmakers. It is likely that these parties will demand new states or more autonomy for their existing ones.

Hindostan is not an elephant after all. It is 50 different animals that demand individualised treatment. The overarching metric for India's progress is therefore its degree of federalism.

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