Friday, April 18, 2014

Indian Elections: The subtle difference between naivety, ignorance and being outright dishonest

I have been meaning to write a post about my view on the ongoing Lok Sabha elections in India. We are in the middle of more than a month long process, so I hoped to give out my thoughts not as a justification of what happened or didn't happen but more about the process of it.

I got compelled to write this post because of many posts by my friends on Facebook/Google+ and various new articles/comments I have been reading. As I figured everyone (including me) has such a strong opinion that arguments didn't really go anywhere, discussions quickly turned in to flamewars and enimity arouse. One of my friend felt so compelled to support his views that on not liking his views he choose to un-friend me. Well good for you.

A quick background on the problem/situation.(skip this and next para if you already know) There is a new party in India called "Aam Admi Party" /AAP (translation: Common man's party) which performed suprizingly well in the State election for state of Delhi, coming out second highest in number and decimating one of the biggest part "Congress" to very low numbers. BJP is the third party which was likely the favorite and did come out to be the largest number party but didn't get enough numbers to form government. So AAP formed the government with help of Congress. This government lasted 49 days after which the Chief Minister Mr. Arvind Kejirwal gave his resignation.

He and his party then started working for a bigger challenge and impact i.e the National elections. Until all this happened it was almost clear that BJP would pretty much win the National elections with big margin because Congress government has done pretty bad over the last few years. Many Indians were looking forward to have Mr. Narendra Modi as the Prime Minister and now with AAP coming into the scene and directly competing against BJP there is a strong rivalry in the supporters of the two party.

Now the disclaimer: Everything I mentioned till now and most things mentioned below will try to factual and not really try to support one party or another but just try to clarify what I feel is wrong information spread by people in the name of intellectual opinions.

Okay, so what is the problem?

As usual many people are expressing their wise thoughts about why Mr. Narendra Modi won't be a good fit. Some of the reasons given:
1) "He favours the rich, gave out cheap land to industrialist etc."
2) "He took land from farmers by force and gave it to industrialist etc."

There are many other reasons but I choose these as they relates to matters which I have done quite a bit of studies our last 2-3 years and feel that they are very complex matters which people seem to have very simple answers to. Just like how every Indian watching a cricket match always knows how each ball should have been played by every player.

People seem to have a very noble notion of helping the poor and common man. When asked for a plan its usually, well these Rich people are so rich why don't we take away some of their money and give it to the poor. Why don't we just tax the rich more. Sell them things (Land/Inputs etc.) at much higher price to make all the money. Seeing these arguments makes me wonder if people are just naive/ignorance or outright dishonest.

Any one who has done some basic studies in economics (some may even just get it from common sense) will understand that things are not as easy as said above. Rich people/companies around the world have many many places they can invest their wealth and governments/countries have to compete for these investments by providing incentives in return for hope of boosting local economy by jobs and infrastructure development which brings money to area through taxes and other indirect measures. If government was to just sell the land to people the only money that could be earned was the current cost of land and some possible interest on that amount. So yes if you just want to give away all the land to poor people to build houses that will not take you too far.

The argument of taxing the rich more is similar, if you tax them too high they move else-where, what is better 40% of nothing or 30% of 1 Billion ? So the tax can't just be arbitrary just as the pricing can't be arbitrary or the production goes offshore and you are left with less revenues and less jobs.

I am all for a state that cares about the poor and provides welfare to people in need, but these things need government to have money to provide them, the revenues come from developing resources/infrastructure and getting investments rather than by scaring the people who can invest into your economy.

One thing people need to understand is that when the economy will grow rich will get richer, that shouldn't be a problem as long as people at all levels are ultimately getting the benefit. It won't happen right away but it will happen if the policies are developed properly. Claiming a policy/state/person to be bad because it/he/she helped rich become richer without seeing overall effects of it is again sign of being naive or being dishonest.


  1. But not everyone says take from rich and give to poor. Some of us also think.

    Here’s how. In a country which has limited land, wonderful natural heritage and unlimited population, we have to relook at how land is treated. I for one, like many economist friends of mine, have begun to think that land should not be treated as an investment vehicle. It should be solely used for living, working, agriculture or forest.

    Once that happens, then the millions of apartments being sold to investors will be available to really home buyers, people who buy to live in them, and prices too will come down. The investors, with their surplus money which can’t be locked into land, will be forced to invest in real companies/vehicles that provide a flush of capital, spurring entrepreneurship.

    As for the tribals and farmers, they should be empowered and trained to improve yield. One doesn’t rely need GM seeds if these ,ill ions of small scale farmers are taught how to utilise native seeds, species and means to grow. You would be surprised to know that there are native seed species for most of our food crops that can sustain in various kinds of soil and climate conditions.

    There should also be enthusiastic promotions for many kinds of locally grown and available foods like Jowar, Bajra, Ragi etc which have high nutrition values and low input demands. A lot can be done if we WANT to do it.

    Cutting forests and building 6 lane highways is not the long term answer. These are short term money making fixes.

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  3. Sorry Saumya for very late response, I typed one earlier but didn't get posted because of login issues.

    Anyway I don't completely agree with your assessment about how land should be used. We can't just use all our land for providing housing to people, turns out people will still need the money they make by working to pay for everything other than rent of the house.

    So land should be available for industries/job providing activities too, now its a tricky balance to meet.

    Regarding housing speculation, that is pure economics that is hard to beat. People like something because others like it. That makes the prices go up. Its hard to avoid that for any limited resources, land is one of them.

    You can't make arbitrary rules like each person can only have this much land/housing space without encouraging an entitlement society where people will get the right to land without working for it. Even if you make such rules there will be ample black markets for the people who are willing to pay.

    In general I think government should limit its job to making sure efficient markets can work and properly rights are in place and honoured. Its not government's job to punish the rich for being rich although providing for the needy is very much an obligation too.

    The cutting forests and building 6 lane highways part is debatable, if we never cut forests we probably won't have cities where we live right now. Sometimes economic activities need relocation of forests/trees, all you can insure is that overall balance is maintained.

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