There are clear benefits to blogging about events long after they occur. While I've love to claim this was deliberate strategy on my part to to offer some kind of meta-analysis, the truth is I was just a bit lazy with my posts. In any case, these were thoughts I shared with friends on email discussions, so I figured I might as well given them their due in this extended post.
And oh, Happy New Year!
Bihar Elections: Nitish Kumar led JD(U)-BJP coalition swept 206 out of 243 seats, the biggest margin of victory in a state often described as "lawless" and "ungovernable", but now basking in the glory of 11% economic growth.
1) As we all know, business likes certainty and hates risk. Such a decisive margin means that new entrants into the state know they don't have to funnel money towards political actors of different stripes to hedge against political risk. Make no mistake, there is still plenty of administrative red tape which kept 398 investment proposals from getting off the ground during the previous Nitish regime. Yet, this outcome, combined with the Nitish regime's strong record on law and order makes it more likely that new businesses will come into the state.
As an aside, the MoU of the year might be between Vijay Mallya owned United Breweries and Bihar, to produce wine from Muzaffarpur’s litchis. That is one wine I’m looking forward to!
2) On caste, I think this hails a second generation of caste-based politics, where it is not sufficient any longer to cobble together a caste coalition for the purpose of winning elections. The notion that Nitish had to resort to a broad development agenda because he hails from a demographically small caste does not have much evidence to back it up. As an old socialist, Nitish’s commitment to progressive policies predates the caste-driven electoral politics that started dominating Bihar in the late 1980s.
Even if his ideological leanings are discounted, it was sound politics, independent of caste calculations, for Nitish to emphasize development (building 6,800 km of roads, hiring teachers for rural schools, etc) simply to distinguish himself from his predecessor, Lalu, who while being one of the shrewdest political brains in India, presided over a destruction of the state infrastructure and government machinery.
Andhra Pradesh Microfinance Crisis: Responding to reports of microloan induced suicides, the AP government introduced an ordinance (now law) regulating interest rates on loans. Also, local politicians urged borrowers to stop making payments, nearly leading to a collapse of the microfinance industry in the state.
1) For a long time, light regulation has been necessary in the industry. While the AP regulations are pretty strange (no security be taken for loans…last I checked, no requirement of collateral was the USP of microfinance) and don’t achieve their rationale (interest capped at the size of principal amount…current interest rates are 20-30%, placing even atypical loans with 3 year repayment periods within the proposed cap), the need for an oversight body which enforces client protection, governance and portfolio management standards, cannot be denied.
2) India is not Andhra Pradesh. Even if the MFI industry is concentrated there. And even if the NYT calls the AP crisis a collapse of Indian microcredit. If anything, there is tremendous opportunity for growth in microfinance in other states but banks and MFIs have been geographically limited because of agglomeration effects and AP’s good governance. This crisis, and the resultant legislation, might have the unintended consequence of spreading MFIs to other states, a good outcome in the long run.
Wikileaks
Where do I even begin with this one? I'll say this much - I think secrecy has its benefits in the short-term. I have sat in off-the-record meetings with Chatham House rules and they are useful in that they allow public figures to thrash out ideas (good and bad) without defending each of them publicly. Diplomacy or indeed any policymaking requires the sort of college dorm kind of freedom which generates a proper debate before a policy is agreed upon.
But I would distinguish this defense of secrecy from secrecy around events in a conflict/insurgency/war. Wikileaks’ exposes of American soldiers’ callousness during Iraq war, the Afghan war logs and human rights violations in Kashmir are acceptable, indeed necessary, because they (could) force course corrections and policy changes for states, which are particularly prone to excesses. Importantly, these excesses have real, tangible consequences on human lives – I’m not so sure about the diploleaks, which only serve to embarrass people for expressing views on record which have been accounted for in the policy making process anyway.
