The Rural Budget: 7/10

Did I like Arun Jaitley’s Budget? Ummmm…Yyes, is my overall assessment. The “ummmm” preceding the Yes and that extra Y indicate that Econ Mommy is not quite convinced there. Hmmmm, and yet, readers will note that I have not said Nno. I have said a Yyes…so let me qualify.

What is a Budget as an intrinsic instrument supposed to do? Well, it is supposed to spur growth. Now, in the reduced growth trajectory of India, if you try to analyze the rogue fundamental that is contributing to lower growth, it is private sector investment. One of the chief reasons for the investments not picking up has been the presence of the huge excess capacities built across major sectors (think automobile, cement, steel, IT). Whilst this is indeed a systemic issue, the other one (comin’ up!) is not. The second major reason as to why the growth rates have been down and out is demonetization, the lagged effects of which have taken their own sweet time to move through the system.

Well, till such a time as the investments do not pick up, the GOI is supposed to be the driver of the very growth it diminished with that demo move. And yet, if it spends too unwisely, it risks creating a fiscal deficit, the presence of which forces banks to lend to the public sector, leaving the private sector starved for funds. (Crowding out) Now, hence, whilst the Government spends, it cannot spend beyond limits.

And this is where I like the Budget. Fiscal prudence as a theme was not really majorly abused; sticking to the 3.5% overall fiscal deficit target is good. This implies that the Government is serious about allowing space to the private sector to grow out. It also implies that Urjit will not be under major pressure to control the deficit induced inflation- the poor man is already shivering under the impending oil price hikes.

Having said that about prudence, let us examine the quality of spending of the Government. Almost everyone from my neighbour Mrs. Joshi to Arnab have been talking about the rural focus of the Budget (Mrs. Joshi snootily, because she doesn’t understand it and Arnab loudly, because it is just one more thing to yell about). And sure, it was a rural budget. Does that mean it was an election budget?

Frankly, I do not think so (Except for that ridiculous target of doubling farmer income by 2022). I mean, it is time that we seriously learnt to focus on the farmers. I have been staking out in rural areas too much. Too much, if you ask me. According to Hubby, I now have the dubious distinction of visiting all the romantic hotspots of Maharashtra: Beed (extremely unfortunately, the suicide capital of Maharashtra), Latur (Acute water stress and trains laden with water), Malegaon (abject poverty and religion dynamics), Osmanabad (all of the above). I have been trying to analyze what drives farmers to the edge, what brings suicides culturally into Marathwada. And I have reached four solutions, if you want to keep your farmer away from suicide.

1.      Get him water

2.      Get him cash-flow

3.      Get him better prices for his produce

4.      Sabse important, get him INSURANCE

Water is the soul of rural dynamics. If you do water conservation or Jalasandharan in a planned way at a watershed level, there are lives to be gained. (Planning a blog on this soon, since we have worked actively with Jal Biradari)

Water brings about the options of supplementary occupations: Suddenly, it is possible to host a cow or two, sericulture is possible, small ruminants (goats) can be domesticated. And that gets the farmer a cash flow. He starts depositing milk in the local co-operative and gets paid for it. That is the key to survival. Those obsessed with doubling farm income should initially also start thinking about getting increased cash flows into the rural economy. Farmers, in my observation, are never unviable. They are only illiquid. That problem needs to be sorted.

Prices, in all of my observations so far, have been pricey. Governments till date (including Modi Sarkar) have all increased the Minimum Support Prices (MSPs), wanting to woo the farmer. But tell me, what is the use of declaring a minimum procurement price, when the procurement machinery is completely unprepared to procure? Decades after decades, prices have been announced and the FCI never comes a-calling into the Mandi. The farmer now does a distress sale at 20% of the MSP, and commits suicide, in absolute poverty and in virtual wealth.

When water is not available, cash flow is not available, procurements are not happening, there is only one thing that can keep the farmer alive. Insurance.

And this is where, the Budget, in my eyes, scores big. It has focussed on the Prime Minister Fasal Bima Yojana, increasing the outlay on the scheme by about 50%. That is great news in a country scarcely worried about its food-makers.

I am also personally thrilled about the other insurance I saw in the Budget: Health.

Again, my experience with the urban grassroots is that health expenditure is the chief reason for families slipping into poverty. Give them insurance, and they will have a chance of staying slightly above the poverty line.

That huge expenditure the Centre will create (Rs.2000 crores) on the National Health Insurance Scheme, with another Rs.3000 crore coming in from the States, will create a total kitty of Rs. 5000 crores for paying the insurance premium. If we assume that Rs.1000 is the family premium for a cover of Rs.5 lakh per annum, that means that 5 crore families will be under the health plan in year 1 and another 5 crore families will come in next year.

There are issues about direct public health spends (creating hospitals and mobile X-ray clinics) being more productive than insurance spends, since the latter can potentially become profits for ICICI Pru and cronies. I have two thoughts here. One, the Budget has retained space under the National Health Program for direct spends, so it is not that we have done away with it altogether. Two, I don’t really have a problem with ICICI Pru or any of those delightful companies earning profits; after all, they are getting profits against potential risks. They also stand to lose all their money if the claims: premium ratio is greater than 1.

Well, so if I am so happy with the scenario, then why the extra Y?

Because as Jagdish Bhagwati, that wily old economist says, Tier I reforms have to PRECEDE Tier II reforms. Growth has to precede distribution- “If you do not have growth, what the hell do you think you will be distributing anyway?”

In Rowling’s terminology, there is a time and a place to sprout a distributionist mouth. Had Modi Sarkar given this emphasis on insurance before demonetization, no, even better, instead of demonetization, I would have given the Budget a resounding Yes.

Of course, I have a lot more to say on the Budget, but I am getting tired with all this typing. And hell, I reserve the right to write about the things closest to my heart and top of my mind. So there. I give it a 7 on 10. Yyes.
















Dear Reader,

Hi! This presentation was prepared to support my talk to MBA students on the Brexit. It contains the basics of what the Brexit is all about. I have attempted to give a quick historical background to the European Union and the Eurozone, and have then created slides on the pros and the cons of the Brexit.

It is possible that you feel a disconnect while browsing through the slides, because the connections are meant to be created through the talk. If such an issue arises at all, just write in, and I’ll take care of your query pronto!

Brexit June 2016

Econ Mom, a Goa vacation and the Tiebout model

Disclaimer 1: Econ Mom is an economist and hence has basic inherent rights to drool on and on about issues that may not be fun/ relevant/ interesting/ exciting/ amazing according to you.

Disclaimer 2: Unless you read all the serious boring stuff on public finance in the beginning of the blog, you anyways won’t understand what Econ Mom is thinking at the end of it.

Disclaimer 3: Yeah, sure! There’s wickedness coming your way, but you are going to have to plough through the basics for that. Lazy readers are advised not to read on.

Disclaimer 4: Econ Mom reserves rights to appear when she feels like in the blog. In the present one, she chooses to appear only in the end. What the hell, it’s MY blog! So here goes..

I have been reading up on fiscal federalism these days. It’s a part of my research interest.

Centre-State fiscal relations mainly span the collection of taxes and sharing of the same. While control over taxes is defined constitutionally under the “Union list” and the “State list”, the sharing of the same has been mostly formula-driven, again constitutionally. The Constitution has provisions for creation of the “Finance Commission”, which can then really decide how the Centre shares its taxes with states.

And then, there is also the Planning Commission, which willy-nilly, has played a part in Centre-State relationships. Well, even the Planning Commission has used some kind of a formula (the Gadgil-Mukherjee formula or some version of it) for tax sharing with states; however, not all tax shares are governed by formulae. Increasingly, in a reforms driven India, there is evidence that states received tax shares based not only on their economic fundamentals as encompassed in the “formulae”, but based on their political goodwill. Thus, states going to elections have received more tax shares, states that are politically more “aligned” with the Centre seem to have received higher tax shares.

Thus, a lot of modern empirical literature is into proving the existence of a political economy factor in determining Centre-State relationships. In my readings on the subject, I kind of went into the subject in a reverse timeline. I stumbled on a really interesting paper by Stuti Khemani (World Bank 2003) in which she spoke about how “political alignment” with the Centre has been a central idea in a 2001 paper on Swedish municipal councils. So I got reading that, which put me on an Avinash Dixit paper written in the 1980s on a game theoretic approach between two levels of Government. And well, since by now I already was neck deep into the subject, I decided to go backwards the whole way to the Big Bang, which happened in 1954.

The Big Bang of Public Finance, so to say, was created by Brahma, Vishnu and Mahesh. They just have different names in our field, and are called Paul Samuelson, Richard Musgrave and Charles Tiebout. And then there are plenty of other deities such as W. E. Oates and James Buchanan, who lent their mental Vajras and other weapons to sharpen the arguments.

The entire discussion started with Paul (Brahma) Samuelson defining public goods; his argument was that since the consumption of public goods (such as a street light) is necessarily, well, public, no one will be willing to pay for the same and hence, the market by itself will underprovide for the provision of public goods. In other words, capitalism may be wonderful. But free markets do not provide optimally for public goods.

Vishnu aka Richard Musgrave took the discussion further and classified public goods to be “non-excludable” as well as “non-rival”.

Hmmm. Nice. But it is Maheshji’s job to provide the necessary churning to the world created by Brahma and Vishnu, right? So here goes.

Enters Charles Tiebout, with a radically different viewpoint from the one provided by Musgrave. Says, are public goods always “non-rival”? Nnnnaah! Not really! Especially, if we are looking at “local” public goods such as a public park. Sure, you can’t exclude anyone. So it definitely is non-excludable. But it’s not always “non-rival”. If there is too much crowding into the park, then there exists rivalry in consumption of the good.

So, this is what Tiebout says. He firstly puts forth an idea that we need to look at public good provision from the perspective of a “local Government”. He likens local Governments (like Municipalities) to suppliers of different baskets of public goods at different prices (taxes). If a household does not like either the basket of goods that is being provided or the price at which it is being provided, then it can “vote with its feet” i.e. it may well choose to migrate away from that locality to another wherein the supply of public goods and its price matches its utility. This solves the problem of preference revelation effectively, as people’s preferences and their utilities get revealed through their decision to migrate. It is exit, rather than voice, that helps to reveal consumer preference.

Local Governments can closely observe the utility profiles of the public and hence, would be able to tax the people more accurately. They also are able to gauge the optimal quantity of public goods that need to be provided in an area. Thus, provision of public goods ought to be done by local Governments, who can then also tax the public for the provision.

Thus, according to Tiebout, there does exist a solution to the problem posed by Paul Samuelson. Provision of public goods need not be always sub-optimal; you just need local governments to take care of the thingy! Let local governments compete and voila! Optimal public goods is what the public will get.

What an interesting theory! He is suggesting that there is effectively, a political solution to this rather economic failure of the market mechanism. Politics to solve economic problems! What a wonderful thought! Though extremely impracticable, as Econ Mommy realized on her vacation to Goa. Yup, Goa it was, this year.

Goa. Blue skies, endless lines of coconut palms, backwaters, mangroves and the sea! Simply marvellous! We felt our spirits turn distinctly salty (just joking, guys!) as we drove down to the sea from Pune. The drive down the quaint little villages was just the balm I needed for my tired body and soul.

“We three are just like the three friends from Dil Chahta Hain,” suddenly announced Lil One with a grin at us. “We’re driving to Goa and we are really cool! At least….I am!” he said uncertainly, looking at the not-so-cool parents. Sigh!

“So who is Aamir Khan?” I asked no one in particular and grinned to see all three hands raised in the car.

Lil One felt he was the truly wicked one and hence qualified to be Aamir Khan. I was Saif Ali Khan, since I was always getting teased by the other two and Dad, he said loyally, was the thinker. Akshay Khanna. Hmmm…

Hubby, on the other, said that it was far too much fun pulling Lil One’s leg and hence Lil One was Saif and he himself, the leg puller, was Aamir. “Mommy’s Akshay Khanna,” he said with a grin, “because she is the sentimental types. Cries on seeing that foul movie. Whatisit called..”

“Kabhi Khushi Kabhi Gam,” supplied Lil One helpfully and suddenly extremely high energy. “And Hum Saath Saath Hain..And Dad, do you know, she was crying watching Kuch Kuch Hota Hain yesterday!”

“Oh, shut up,” I said. It’s their favourite topic these days. Tell me, is it so bad to cry on seeing a movie? Yeah, I mean, even I agree that those movies are complete nonsense, but God alone knows why, Karan Johar makes me want to wail real real loudly, the bugger. I have given this a lot of thought as to how this happens to me and this is my analysis. I think my defences are already lowered by the complete lack of any brain usage for around 50 minutes and then, when I see all these idiotic melodramatic situations, it causes me to cry.

Sorry! I come back to Goa. “Who runs a humor column? I do! That means I qualify to be Aamir Khan!” I said bossily causing Lil One and Hubby to make rude faces at me. “And in any case, only I can sing Tanhai…it’s way beyond your skillsets, got it, boys?” The boys looked sulky about it. Hubby looked positively alarmed at him being chosen to be Saif Ali Khan because he can do the “flap flap” dance, and Lil One happily hummed “Kaisi hain hain, ruta kii jisme”.

We stopped in a picturesque village lane for a small picnic. And sauntered out of the car after our meal, just looking at the pretty little houses with slanting rooftops. Every house has a small yard in the front, mostly hosting coconut palms, with the familiar pepper creepers running up them. How pretty! Hubby said with a real longing in his voice, “Manasi, I wish we could settle here. I could stay here forever!” He had said the same in Kerala. “Goa or Cochin?” I asked with a grin. “Well, both!”

It is such a tempting thought. If you think of what a life you can have in Goa versus the one you have in Pune, Goa takes the cake and eats it too, royally. Look at the basic infrastructure. The roads are so beautiful. I mean, if you can have those smooth kind of roads when you are simply swamped with monsoons, I wonder why Pune has to have road-shadow, even when we lie in the rain-shadow zone. That brings me to the second point.

Rains. Water. OMG. To see all that water and greenery in Goa, just across the border from Maharashtra, was such a slap in the face. I have recently been on the roads in drought prone zones in Maharashtra and we all know about the monsoon issues that Marathwada and Vidarbha are facing. And in Goa, there is simply no water problem at all.

Plus, its cheap. Oh no, not the hotel stay. But petrol at Rs. 59. Aaaargh! And the basic fruits and vegetables. Its so cheap! There were hawkers on both sides of the roads into Goa, hawking mangoes, coconuts, jackfruits, karmals, karvandas, bimlis, bananas. It was really too much for my poor vegetarian soul to see all these fruits being hawked so cheap. I took it personally and gorged so much on the fruits in Goa in the last one week that I think I have single-handedly caused the fruit prices to go up. That last wrinkle on Dr. Rajan’s already lined forehead (no, not that big one, that one was created by Subramaniam Swamy), yeah, that little one there, that’s the one I created with the inflation index going up one tiny little notch, all thanks to my gluttony.

There aren’t too many things I agree with Hubby on, but this one was really really tempting. Wah, to settle down here! But what about our careers. And Lil One’s schooling. And our friends. And family.

Households are not really that mobile, after all. Even if Municipal Corporations are service providers offering baskets of services, households don’t really move around freely. Their personal choices come first and hence, even with the most tardy of service offerings, people stick around with the Pune Municipal Corporation (PMC).

Thus, even with decentralization and creation of municipal corporations and gram panchayats competing with each other, we may not really find optimum provision of public goods taking place. And what that means is that people will keep flocking to the Tier 1 and Tier 2 cities, causing their municipal corporations to really crash under that huge migratory burden. Consequently, public goods provision will be bad.

But the so long as the losses on the public life are more than made up by gains on the personal front, people will be okay grumbling about it and life will go on, in a most un-Tieboutish manner. The Tiebout model goes wrong, because it makes the most impractical of assumptions, such as assuming perfectly mobile households.

Oh, why is it that the most interesting ideas are the ones that are mostly impractical?


I came out from the waters and walked to Hubby, who was lounging in the sand, enjoying himself. He was singing. How romantic! I thought. May be he’s singing, “Sagar jaisi aakhon waali…”

Hmmm. He looked into my (sagar jaisi) eyes and sang, “Ye kahaan aa gaye hum, yoo hi saath saath chalte!”

Aaaargh! Why is it that the most interesting ideas are the ones that are mostly impractical?

A balanced budget which meets expectations

Dear Reader,

Hi! This is my immediate reaction to the budget, as told to Sakaal Times. You may want to see the interview at


How do we rate a budget?  We have to ask ourselves the question: What is the main objective of fiscal policy? Fiscal policy has to create growth as a first priority; it also should create conditions for macroeconomic stability in the medium term and as well as help in redistribution of income and resources. How does the budget perform on all the three priorities? As it happens, it performs fairly well.

The budget has put in big ticket expenditures into the rural areas. Two years of bad monsoons have created a huge slack in rural demand; with the agricultural growth rate at only 1.1%, demand for everything from FMCG to tractors and two-wheelers slowed down massively. By increasing the outlay on roads under PMGSY, supporting irrigation as well as MNREGA, the budget seeks to dovetail demand creation with supply, which is a good move.

But perhaps the biggest positive of the budget comes from anchoring the fiscal deficit at 3.5% of GDP. This, combined with the soft oil prices, now truly gives room for monetary easing, which could be a precursor for an investment pick up. Further, the budget creates only 2.5% revenue deficit, which is an indicator of better quality of spending, with lesser spending happening on the revenue account.

The tax-subsidy balances have been admittedly Robinhood-esque, with some market players going so far as to call them socialistic. Call it the Piketty effect or whatever, but with tax rebates being offered to those who do not own a home and exemptions for companies that are smaller, the budget does try its hand at correcting the inequality quotient rather well.

Rs.25000 crores is not enough for bank recapitalization; sharper reductions should have come through on corporate income tax, but after giving off Rs. 2.25 lakh crores to roads and rails, I guess there is not enough left for any other journey. All in all, a good budget.



My interview at Sakaal Times On Budget Expectations

Even as Union Budget is presented on February 29, Manasi Phadke, a consultant economist, tells Namrata Devikar about the current state of the Indian economy.

What should the government do to tackle problems like inflation and price rise?
Well, technically, inflation has been soft in the last one year as compared to before, a gain that has primarily come in from the oil price reductions. However, food prices continue to be high, which is a cause of concern for the policy makers because it is these prices that are the most closely linked to welfare of the disadvantaged sections. Government needs to do more in food management. Food subsidies can be delivered much more effectively through the DBT mode and more coverage under DBT will be crucial as we go ahead.

How would you view the Indian economy at present?
Indian economy could well be described to be in ‘snooze-mode’. While it has clearly snapped out of the political logjam and economic stagflation, it is somehow yet to rise to the occasion. The growth has shown a revival at 7.6 per cent for 2015-16. However, this creates a GDP level that is nonetheless much lower than the potential output we can produce. The economic survey of 2015-16 has hinted at a long-term potential growth rate of 8-10 per cent and so there are clearly issues. As I see it, there are certain issues that are created externally and certain others, which are rather structurally and culturally Indian. The former includes a slowly growing global GDP, which affects export outlook, climate changes and monsoon vagaries, volatility in perceptions connected to emerging markets, etc. These do create problems, but it is the latter structural and cultural factors that are really tricky.

Structural factors pertain to the woeful levels of infrastructure and farm investments that have been witnessed in India. It takes time to cure such neglect. Again, the slowdown in revenues that was witnessed in India from 2011 onwards has contributed to a corporate sector that is by now debt-burdened. Even if revenue growth happens now, companies divert their earnings towards debt servicing, as a result of which investments suffer. The toughest to change however, would be the cultural factors. Everyone talks about the steep pendency rates in judiciary. However, our bureaucratic pendency is equally steep and creates a slower movement down the line from policy to implementation. While the Government has been changing things through a policy platform, structural and cultural roadblocks take time to clear and that is perhaps the greatest challenge right now. Given the political mandate that the government enjoys, it does seem to be a now or never time for these issues to be resolved and I am hopeful that they will stand resolved soon.

What should be the thrust and focus of the budget and why?
Clearly, agriculture has to be the focus point for the budget. It not only is a huge source of employment, but also can swing the price stability balance fairly sharply. Monsoon vagaries this year too have contributed to low production and high food prices. Add to that a burgeoning middle class with higher demand for protein foods, and you have a recipe for food inflation. The budget will have to allocate funds towards micro-irrigation systems, cold storages, crop insurance and financial inclusion. More allocations towards smart cities, education programmes, women and child programmes, re-capitalisation of banks will all be equally important. These allocations can only be supported provided the tax collection increases. Tax reforms should also be a thrust area, else we risk moving away from the fiscal consolidation path, with consequences for interest rates, exchange rates and inflation. Econometric results suggest that fiscal deficits can promote growth in the short run, which is tempting, but tend to be inimical for growth in the longer term perspective. Hence, another thrust area for the budget is to make sure that fiscal discipline is maintained.


The reader may view the interview directly at


Econ Mom meets the State Election Commissioner

Gokhale Institute of Politics and Economics is doing a research project with the State Election Commission on Maharashtra. The idea is to create some academic understanding of the dynamics of local elections that happen under the Panchayati Raj Institutions. Given my political economy leanings, I have been working on this closely. The entire team has been on it, reading, researching, talking to stake holders, meeting with political scientists. We are yet to go on field though, for the survey.

So when we received a call from the Election Commission for a meeting in Mumbai, the agenda of which was to finalize the survey proceedings, I was really excited. Excited, that finally the survey can start. My experience so far tells me that 2 days on the field are worth 2 weeks spent in literature review; any survey is a huge growth curve for any economist and I came home from work, happy and excited.

Lil One met me at the door with a worried face. “It’s unit tests next week. And I have English and Civics on Monday,” he declared, glum at the prospect of studying over the weekend. I stared at him in horror. “Monday?”I said. “I have to go to Mumbai on Monday!”

“Mom, please teach me Civics over the weekend. I hate it and I really don’t understand it!”

Gawd! Ohk, so I browsed through his textbook and was amused to find that he was to write an exam on Democracy and Elections on Monday, the same day when I was to meet the Election Commissioner.

“Okay, fill in the blanks,” I said in a crisp teaching tone. “Holding ……and …….. elections in India is a corner stone of Indian democracy.”

“Ummm….political and five-yearly?”

Startled, I said with gritted teeth, “Free and fair. We need free elections; anyone can contest and any citizen can vote. Also, they should be fair. Your teacher is definitely going to ask this in fill in the blanks. Free and fair, okay?”

Lil One said, “Okay, chill! I don’t understand why that RIT helps in controlling corruption.”

“Okay, firstly, that’s RTI. Right to Information. So if we pay taxes for building a road and the road is built poorly, then I have a right to information. I can ask our corporator which company constructed this road. Why did you give my tax money to people who are not experts in construction? Why was my tax money wasted on this excuse for a road?” I said, my voice steadily climbing as I glared at a cupboard, imagining it to be our corporator.

Lil One was impressed. “Did you really ask him that?”

God! Corporator vanished, leaving behind the wooden cupboard and me, with an equally wooden expression. “I am only giving you an example. I didn’t ask him, but I can. And the fact that people can, scares corporators into behaving.”

We ploughed through the election process over the weekend, both of us preparing for our respective tests on Monday.

Monday arrived. I left early morning for Mumbai, before Lil One was up. At 7:30 a.m. my phone rang. It was Lil One. “I have to go to school in 5 minutes. I just saw this one and I don’t know the answer. Answer in one sentence. What are the roles and duties of the Election Commission?” he wailed into the phone.

“Ask Dad,” I was tempted to yell back from my end. Control!

“Ok, that’s simple, right? Holding free and fair elections every 5 years is the duty of the Election Commission!”

“Oh! Is that it? Brilliant! Thanks, Mom! You are the best!” Lil One hung up happily to climb into his school bus on time, courtesy Hubby, who can be tough competition to any politician in making promises he cannot deliver on, but seemed to have done his bit Monday morning.

Well, at the State Election Commission’s office, we ploughed through and struggled through the details of the survey. Which talukas, how many districts to be surveyed. We argued about the type of methodology that would be followed; these arguments and detailing with the client often helps us to fine tune our research proposals.

Finally, once we had sufficiently detailed the proposal, it was time to meet with the Commissioner to report the latest and take his comments too on the upcoming survey work.

The Commissioner, as always, was very positive. “I have only two major instructions to give as you begin the field work,” he said.

“The first is that we want to be involved into this work on a daily basis. So please stay in touch with our team here. If some Government officials refuse to co-operate, just call us and it will be handled.”

“Secondly and most importantly, there are laws that create the framework for Panchayati elections. But sometimes, the law is silent on things. That is where I have to frame rules or pass administrative orders so that proper action can be taken. If you come across any such instance, I want to know directly about it.”

He could read from our faces that the second point had not been understood properly.

“Let me give you an example. There is a law that states that every candidate must do asset declaration at the time of filing nomination papers. We later extended this to 6 months. So an elected Panchayat member has to file his papers within 6 months of getting elected. This is what the law says. The law tells us what should or what ought to happen. But there was an instance in which this gentleman refused to submit the documents even after 6 months. Now can he be removed from his position? The law is silent. It is here that the role of the Election Commission is important. I cannot create laws; that is a function of the Government. But if a law is silent on something harming the spirit of democracy and elections, the Commission has been given powers to pass an administrative order and the Government HAS to obey it.”

“There’s another interesting example. According to the Panchayat Act, every member filing nomination has to have a toilet in his home and has to be a user of the facility. Only the Gram Sabha can give verification of this. However, there is a village where the Gram Sabha did not meet at all before the election! So who verifies this fact? The law is again silent on what to do if the Gram Sabha does not meet. So we passed an order mandating that Gram Sabhas meet before elections.”

“So, the Election Commission’s role stretches into anything that helps the process of democracy along.” We sat there, taking notes, listening carefully, appreciating the wisdom that higher Government officials have.

And then the Commissioner said something that jerked me out completely from my quiet thought zone. “My role is not to hold just elections,” he suddenly said aggressively.

“WHAT?” I thought, thinking madly about the survey, economics, research methodology, toilet blocks, Gram Sabhas and incredibly, Lil One, all at the same time.

Looking at my disturbed countenance, he said with a serious tone, “My role is to hold free and fair elections in this state. And hold it, I will. Whatever it takes, will be done.”

I smiled quietly at the way he emphasized the words to me, pretty much like I had emphasized them to Lil One over the weekend. My mind was buzzing. What an incredibly complicated role the Commission plays, I was thinking.

After the meeting was over, I told him that Lil One is studying the role of the Election Commission, but doesn’t quite believe that I know the Commissioner. Would the Commissioner agree to a photograph?

The entire Commission broke into laughter and joined me for a wonderful photo-shoot post-meeting.

I left for Pune in the afternoon. My mind was still mulling over the things I’d learnt in the morning. The processes, the laws, the Government creating laws to create a Commission, which can then create machinery that controls the Government.

How does one put into one simple sentence all of the machinery that these folks have created and upheld in order to protect the election processes in Maharashtra, and in India too? Just then, my cell phone buzzed. It was Lil One, back from school.

“I am getting full marks in Civics, Mom. They had asked us such simple things in the paper,” he said pompously. “Answer in one sentence. What are the duties of the Election Commission? Hmph. So simple.”

“What did you write?” I squawked suddenly into the phone, conscious that this is one thing that cannot possibly be put into one sentence.

“I wrote that holding free and fair elections in India to uphold the true spirit of democracy is the duty of the Election Commission. Correct, Ma?”

Full points on that one. Even the Commissioner would agree.


The photograph on the blog is the one post-meeting. From R to L, that’s Deepak Negi from Association for Democratic Reforms, Hemant Wasekar from Yashada, Mr. Saharia, State Election Commissioner, me representing the Gokhale Institute of Politics and Economics, Mr. Pradeep Vyas, Secretary, Election Commission, Ms. Chaitra Redkar from SNDT, Mr. Surya Krishnamurty, Assistant Commissioner and Sanjay Patil, Political Science Department, Mumbai University.


Econ Mom on Orchids and Fiscal Consolidation

After experimenting with almost all the regulars (coriander, lemons, spinach, chillies, roses, pansies, radishes, mustard) one can grow in a terrace garden, we are now proud parents to a couple of beautiful orchids. And these babies are fussy.

When we got our first orchid home, there was a lot of excitement as we tried to figure out the optimal place for it. Place it too much in light and the leaves turn light green. Too less light and the leaves turn dark green.

After the first week, our baby orchid had only two leaves, one dark green and one light green. “Typical!” I said, totally frustrated with what the orchid is trying to tell me. Lil One’s eyes were already lighting up wickedly as he realized how bothered I am about this. “I totally like this plant,” he said grinning evilly at me. “It so belongs to the family. Totally weird and crazy. Orchid Phadke.”

Orchid Phadke…nice! The name stuck. We’ve also had Tomato Phadke, who grew out of what we were told are capsicum seeds. Ggggrrrrrr! And then, it wouldn’t bear fruit quickly. Lil One wickedly told me that I need to express my love for the plant more profusely than just watering and fertilizing it. So I added singing to my care routine, much to the delight of Lil One. Well, still no fruit, prompting Lil One to make rude remarks about my singing prowess. Finally, one day, in great exasperation, I actually sang a Yo-Yo Honey Singh routine to Tomato Phadke and voila! Next day, we got some pretty little buds. Aaaaaargh! The damn thing likes Yo Yo Honey Singh….Insufferable! Lil One, who lustily sings the Yo Yo songs just to get on my nerves, immediately put his stamp of approval and the plant was duly christened Tomato Phadke. Grrr!

Well, so to get back to pretty Ms. Orchid Phadke, she’s a little phalaenopsis with beautiful yellow flowers. She gave some gorgeous blooms on two flower spikes, but by now the flowers have fallen off. Now, what to do with the flower spikes after an orchid has finished flowering is a matter of great debate with orchidists. Even Milton Friedman didn’t fight Keynes that viciously.

Some believe that you can cut the spike partially, “forcing” the plant into bloom again. But then, there are others who tell you that the plant needs rest and hence if we cut the spike off completely, we’ll get new spikes and gorgeous big new blooms in the next cycle.

The Phadkes, known for their argumentative skills, got into the debate with great gusto. Oh, we read pages and pages on it and saw videos and spoke to experts. Hubby favoured giving the plant a break whilst I wanted to experiment and see whether a second spike can actually flower.

Whilst bickering over dinner as to what should be done, Lil One (I suspect with some bribing from Daddy dearest) made a surprisingly mature observation. “Well, I feel its okay not to have flowers this year if there’ll be flowers forever later. I support Dad. Let’s give Orchid Phadke a break, Mom.”

Econ Mom started. No flowers for a year, so that we can enjoy blooms for a lifetime. Accept lower performance in the short run, so that there’s more robust numbers in the long run. That’s precisely the game in the Finance Ministry currently.

It’s been playing on the news channels and on my mind too, for the past couple of days. Even as the FM crafts out the Union Budget, he’ll stick to the fiscal deficit target of 3.9% for FY16. But what should the target be for FY17? Some economists, notably Arvind Subramaniam and Mahendra Dev, have opined that the fiscal consolidation target can be softened for the next year. So, for FY17, we can actually do a fiscal deficit of 4.2% or something like that.

Now, a bigger fiscal deficit is bad news because it creates inflation and interest rate pressures in the system. Normally, the RBI would raise eyebrows right into the oily Indian hairline with such possibilities, but with oil prices smooth, the crucial link between fiscal deficit and inflation does seem to have become weaker.

Further, if we look carefully at the numbers, we find that the entire growth this fiscal is led by the Government spending. So, if the Government gets unduly fussy about spending next year, our growth rate will go down.

Add to this the fact that private investment normally follows Government spending with a lag, and you’ve got a good argument for continuing the spending by the Government. We economists sometimes get too hung up about fiscal deficits. So much so, that we miss the larger picture at times.

So, next year, we may have a higher FD. Moody’s and Fitch are bound to react with threatening sounds. Let them. FIIs may behave more treacherously than usual. Let them. We may look a bit more vulnerable on paper. That’s okay. No blooms in the next year, so that you’ve a healthy plant in the future.

I cut off the flower spike completely. I feel a bit bad when I look at the plant minus its spike, but then, that’s that. And, as Lil One informed me cheerfully, “Oh, we’ll get the blooms back, Ma. And if nothing else works, there’s always Yo Yo Honey Singh!” I wonder if the FM also hums Yo Yo songs…