Happy Independence Day!

Independence Day is merely a celebration of British leaving this country. Unfortunately we are still far away from actually getting anywhere closer to the idea of freedom.

Freedom is not freedom from foreign rule. Freedom is the freedom of individuals just to be themselves without the government interfering in their personal lives.

Here is the list of freedoms that Indians don’t have :

  1. Freedom of Speech
    Indians are not allowed to speak anything that may hurt someone else’s sentiment even if what is being said is 100% true to work of fiction.
    Indians are not allowed to speak anything that the local police officer might think annoying.
    Indians are not allowed to critize or pass jokes on politicians.
  2. Freedom of Worship
    Hindu temples are controlled by government and all donations to Hindu temples would go to government where as all other religions are free to setup their own places of worship and run them whatever way they want.
  3. Selective Freedom. Some are more free than others.
    Some of us are less free than others. Based on the religion and caste you were born in the law treats you differently. If you belong to a majority community you can not build institutions that are free from government interference. Only minorities get that right.
  4. Freedom to build education institutions
    Indian government does not give you the freedom to setup any educational institute of your choice and impart education of your choice. Only non-profit organizations are allowed to setup institutions and closely follow dictats of UGC and State governments.
  5. Freedom to love
    Same sex couples loving each other is a crime in India.

The list would go on. But the key point is that we are very far from getting “free”.

Curing India’s education system

Prof. Arvind Panagariya writes about what is ailing Indian education system. Honestly, there is nothing new in that. It has been argued by several people that government control in general and UGC/AICTE/BCI (At 14 other regulators) are responsible for ensuring that mediocrity is the objective of Indian education.

Smriti Irani who herself does not know what exactly her own education qualification is, who mistakes certificate from Yale with degree from Yale. Degrees are mere certificates and competence is all that matters, but Smriti Irani has proved beyond reasonable doubt that she is not capable of handling MHRD.

Prof. Panagariya outlines various important points as how our MHRD and its regulations have converted the higher education space into a bog in which talent is sucked in and destroyed.

India lags behind comparator countries in both the quantity and quality of education. Gross enrollment ratio-the proportion of those enrolled in higher education to the total population in the age group 18 to 23 years-remains around 20 per cent compared to 28 per cent in China, 36 per cent in Brazil and 55 per cent in Japan. None of the Indian degree-granting institutions appears in the top 200 institutions worldwide in the Times Higher Education-QS World University Rankings. In contrast, each of Hong Kong, China, Singapore, South Korea and Japan has two or more institutions represented in these rankings.

None of the Indian institutions feature anywhere in the top 200 institutes in the world. Which means 1/6th of world’s population which was unfortunate enough to be born in India does not have access to world class education no matter how rich or smart a student be.

We always have our own reasons to dismiss why we cant feature in that list. Someone its is diversity or sometimes India has bigger problems to solve. But in reality it is the government control that alone is responsible for holding education back.

Post-1991 reforms have entirely bypassed higher education in India. Successive human resource development (HRD) ministers have either neglected reforms or tried to implement them, but failed. The essential governance structure in the sector has remained unchanged for more than five decades. The University Grants Commission (UGC), originally formed in 1952 and given statutory status through the UGC Act of 1956, stands at the apex of the system. It, along with its various councils such as the Medical Council of India (MCI), the Bar Council of India and the All India Council for Technical Education (AICTE) and the Central and state governments fully control different aspects of higher education such as the creation of universities, their internal governance and regulation.

There are only two avenues to the creation of universities in India whether they are in public or private sector. Under the first avenue, the Central or a state government must pass legislation; and under the second, the UGC deems an existing institution to be university. Degree-awarding institutions of national importance such as the Indian Institutes of Technology (IIT) and All-India Institutes of Medical Science (AIIMS) are created by central legislation and are outside the ambit of the UGC. Management institutes such as the Indian Institutes of Management (IIM) in the public sector and Indian School of Business in the private sector are also outside the UGC ambit because they award diplomas and not degrees. All degree-awarding colleges, whether owned by the Central or state governments or private entities, must be affiliated to a Central or state university. Private and deemed universities are unitary with no powers to affiliate colleges.

Both IITs and IIMs are outside the purview of UGC and they seem to have done much better than the other tinpot colleges. That should be the first lesson.

Most of the MBA colleges in India give PGDBA which is a diploma and are outside the purview of UGC. Not only these colleges have done well, they seem to do good to lot of smart non-engineering/non-medical students get much higher salaries than what they would have got with mere B.A. or B.Com.

Control of the UGC, its councils and Central and state governments over governance of universities and colleges is near absolute. Central and state governments fully control the funding of the universities they own. They routinely intervene in the decision-making processes of these universities. Government appointees often sit on the governing bodies of the universities. Universities must seek government or UGC approval for starting new academic programmes and disciplines.

Faculty hiring is subject to interference from both the government and judiciary with the latter granting stay orders on university hiring decisions at the drop of a hat. The governments and UGC determine tuition and faculty salaries as well. Colleges require approval of the affiliating university for introducing any new courses and changing the subject matter of existing courses. No new degrees can be introduced without the approval of the UGC.

Often the law says that a teacher can not be paid more than secretary level IAS officers. As a result even if a college may get a Noble Laureate to teach, that person can not be paid a high salary because of some random law. There is hardly any incentive for good competent teachers to get job into educational institutes if their worth is more than the maximum salary permissible by law.

Indian government can do the most basic thing:

Begin with the entry of new universities. The requirement that legislation must be introduced to start a new university must end. A set of norms in terms of basic infrastructure, faculty, curriculum and endowment may be laid down. Any institution, whether public or private and whether for-profit or non-profit, that satisfies the norms should be granted approval as a university.

But that wont happen. Private players will make profit, private players will fool students, we will be told. It wont matter that government controlled colleges and universities have fooled a million and wasted uncountable amount of money provided by taxpayers while making lakhs of students unemployable.

Smriti Irani is not capable of doing this job. This job should have gone to someone much better.

MHRD’s assault on institutions of excellence

It is not very hard to see why those who loved Modi before elections are quickly disillusioned.

It is sad that both NDA and UPA governments found most incompetent people to be appointed as MHRD. First it was MM Joshi who tried to make Astrology a science. Then it was Arjun Singh with his reservations bomb. After it was Zero-Loss Sibbal with his RTE disaster.

Higher education in India is in an urgent need of reforms. Large regulatory bodies should be totally abolished or if that is not politically feasible at least their role in education needs to be reduced to minimum.

Not only private colleges should be freed from the clutches of Universities but even for-profit players should be allowed to make a business out of higher education.

Here is Mr. Arvind Panagariya talking about what is wrong with our Higher Education and what needs to be done.

And here is a piece of  Prof Swati Sarkar that tells us how Smriti Irani is playing with our Higher Education.

Now, either her inexperience or her limited regard for this core area is showing in her decisions. IISc had a prestigious FYUP operational since 2011. There was no report of student or faculty resentment. One fine morning, UGC (read HRD as UGC was fine so far and follows the diktats of the regime of the day) orders that it be scrapped. Growing up in a left regime, I have seen how higher education in Kolkata, which used to be a premier center of learning once upon a time, was decimated through such abject political interference from the left. I have also seen how academic freedom and lack of (or at worst limited) political interference has ensured that higher education in US is where it is. Thus, I am appalled by the fact that GoI is following the left on this core issue and in the process may well ensure that few academic institutes that India can be genuinely proud of bite the dust. To be fair, even the despicable Sonia regime did not actively undermine higher education in India, just didnt care about it.

I am willing to admit that government might get itself into creating a set of “bare minimum” standards that all institutions must adhere to till the time independent private organizations can come up with accreditation systems that are values by industry.

But there is absolutely no sense in trying to curtail those institutes which are exceeding those standards. If teachers and students are happy with a 4 year program I do not see why government should put its nose the affairs of the university.

Congratulations to Modi and Parrikar for refusing anti-Goan demand of “Special Status”

Some trouble mongers in Goa presented the demand of so called special status under which resident Goans will not be allowed to sell their property to anyone outside Goa. This is a blatant violation of private property rights of Individuals (which sadly aren’t as important in India as in more freerer countries).

More importantly this is a violation of private property rights of the Goans themselves. Why would any self respecting proud Goan would expect such horrible “special status” in first place ?

Firstly, there is a Church and other political groups who fear that inward migration will damage their political clout in Goa. Secondly, there are genuinely ignorant individuals who can see the problems with migrants and property buying spree but cant see the benefit that it brings.

Migrants are clearly creating a public nuisance in India by shitting in public spaces, crimes and so on. But at the same time they bring in the economic advantage of cheap labor which is not worth overlooking.

Also, the amount of money that outsiders are pouring in Goa to buy property and create apartments actually leads to better quality projects and much lesser costs. It is outright stupid to think that any major construction company will build the same quality of Apartments as now with lower price points in future just because of special status. On the contrary, we can look at Ruby Residency’s example as what kind of apartments we will get everywhere in Goa if investments from outside the state stop.

I think Mr. Parrikar has shown a great political acumen in smartly shelving off the Special Status demand and for that he needs to be congratulated.

Interestingly when Late Shri Mathani Saldana passed away the church was quick to prompt his wife’s name as a possible candidate leaving BJP no choice but to field her. It was clear that this lady was probably a remote controlled MLA of different religious-political groups.

 

 

The origins of the word Hindu and Hindu religion

A new trend among the internet Hindus is to refer to Hindu religion as “Sanatan Dharma” claiming that is the original name of the Hinduism. Nothing can be farther from truth. I believe this new trend is a defense for the typical Christian and Islamic criticism of Hinduism is that Hinduism is not a religion but just a phrase given by Arabs to the people living beyond the Sindhu river.

It is a partial truth that the word “Hindu” is derived from “Sindhu” and was widely used by Arabs than the Hindus themselves. However this is not a criticism of Hinduism in any sense. Replace “Hindu” with “Banana loving cow worshippers” or  “Omega 5721″ and that doesn’t really change much.

The reality is that people who living beyond the river Sindhu were different from Arabs. The people themselves had figured this out and used the phrase “Mlenccha” for the Arabs and others.

The fundamental difference between Hinduism and monotheistic religions is that the so called “Hinduism” or whatever else you might wish to call it is free from dogma, prophetism and mindless conformance to some centuries old book.

This is not a disadvantage or a bad thing, in fact the strength of Hindu religion.

The kind of politics that wins 44 seats

Narendra Modi’s government is so far is not very much distinguishable from UPA-2. The same socialist, leftist policies being followed.

Government of India maintained a neutral stand on Israel/Gaza conflict in Parliament but voted against Israel at UNHRC.

India also lost huge territory to Bangladesh recently in UN court.

Giving important to such Kangaroo courts is idiotic. Tomorrow Pakistan might want a UN commission of inquiry against Gujarat riots, what will GoI do in that case ?

Opportunity Cost

Opportunity cost is something that people and politicians often ignore and make incorrect decisions.

How much is education from 1st to 10th worth ?

A lot of people will calculate the fees paid, money spent by student and government on books, teacher infrastructure and come up with a figure of say Rs 5 L.

This might be the money spent on that education but the opportunity cost is the cost of second option which was mutually exclusive to the option 1.

If government had freed education from its clutches and independent and unaffiliated, unregulated institutions were allowed to give primary and secondary education. A lot of above average students could have gone to these schools and completed their 10th standard in say 8 years instead of 10.

This basically means those students would have started earning 2 years ahead of everyone else and would have retired two years late. So the additional money they would have earned by staying in that job would been 2 years of salary while retirement. Which could be anywhere from Rs 1 crore to Rs 50 lakhs.

So the opportunity cost of the government controlled education to students with above average IQ is few lakh rupees and not just Rs 5 Lakh.

 

Note: This is a reflective post. I am just trying to learn.

Is public education worth it ?

Everyone believes that all children should go to school. Even in the remotest villages and even for the most disinterested student, parents and teachers argue that S.S.C. is the bare minimum that someone should aspire for. We are told that education is the key to future.

Education is not a good thing in itself. It is not essential for human welfare by default. For example my great great grandfather did not go to school or college, he was fairly well off and well respected in society. So was everyone else’s great great grandfather.

In last 100 years human productivity has improved by a huge factor. This gain in productivity has come from human creativity and intellect. Just the way our ancestors had to learn basic skills like hunting to stay alive, in a modern world a human being is required to achieve certain level of productivity to survive. This productivity is what is essential and education happens to be the only way to achieve this. The mistake people make however is to equate this sort of productivity enhancing education with “school education” which is totally controlled by government. Indian students for example have absolutely no choice but to go to a government controlled school.

What makes education a good choice is the fact that in the absence of Education a person can be productive only by doing physical work. Physical work means a person burns his calories to produce some output (say a porter on train station). The amount of energy generated by burning a liter of Petrol is several times higher than the kind of energy human body can produce as a result there is not much demand for physical labor in our society and people for whom physical labor is the only option to be productive do not earn enough than those who use their mind to be productive.

Like all things human, education is not a predictable process. Different people have a different rate of learning and hence the kind of productivity they would acquire post formal education is different. It will depend on the kind of education they get, the kind of environment they would learn, quality of teachers and the intellect of the student himself.

Can it be the case in certain cases a student is better off not going to school altogether ? Can we apply some economic analysis to answer this question ?

Actually it is not very hard to do that. Please note that when I say “schoo” I am referring to government controlled formal schools teaching government prescribed material.

Assume that the cost of putting a student through school from 1st to 10th std is Rs 5 Lakh inclusive of all direct and indirect costs (salaries of teachers to money spent on books).

Assuming that the student pursues no further education, his going to school was worth it IF AND ONLY IF that education has made him productive enough to earn and save Rs 5 Lakh in next 10 years. ( For simplicity I have ignored inflation and RoI. With RoI of 10% this could very well go up to say Rs 10 Lakh.)

If the answer to this question is NO then it was a wiser choice not to send that child to school at all and instead saving Rs 5 Lakh in the beginning. Which basically means by the time he is of the age of S.S.C. he would already have Rs 5 Lakh in bank + saved 10 years.

The argument might look absurd to many people. It looks absurd because we see a lot of people around us who got just S.S.C. and improved their quality of life while those who did not go to school continue to languish in poverty.

There are two parts to this observation. Part 1 is that; for most of the students Rs 5 Lakh have been spent by someone else. That is the government; which is in turn you and me (taxpayers). So when a SSC pass student earns Rs 4 Lakh over 10 years, it is a net + 4 Lakh for him where as for a society it is a net loss of Rs 1 Lakh. Ordinary people are not trained to see the opportunity cost.

Imagine if that same student was given Rs 5 Lakh in cash before entering the school and he/she had just put it in the bank, he/she would have got richer by Rs 20 Lakh or so after 20 years. So when you factor in this opportunity cost, the student appears far worse despite saving Rs 4 Lakh over a period of 10 years after getting an economically inefficient education than have say Rs 20 Lakh without going to school (10%.  RoI).

Part 2 here is that a good number of students manage to go beyond S.S.C. or are intelligent enough or responsible enough to ensure that they get productive enough “despite the obstacles placed by the school”. This productivity might come from other investments that parents might make such as tutions, other books, training programs etc.

Because of the government control

I suspect that our entire education system remains mostly economically inefficient. I say entire and mostly because all our schools are controlled by government to lowest possible levels which means if one of the school is proven economically inefficient it makes sense to say all of them are inefficient.

Not just high schools but even same might be true for Engineering colleges such as IIT. Too few IITs means the competition of admission is very high and hence more money gets spent on IIT Coaching every year than the money government spends on running these IITs.

Our students will be far better off in life is government simply shuts down each and every school, fires each and every teacher and all educational officers, sells of real estate where schools exist and instead gives a monthly cheque to all children of school going age we might be far far better off than what we are now.

Does that mean our population would remain illiterate ?

If government simply gets out of education, either gives cash vouchers to kids of school going age, it would mean that our kids will not waste their time in a meaningless unproductive activity called government sponsored education.

It will then be up-to parents, kids and rest of the society to figure out how to use this money and the extra time. Very likely parents will come up with better ways to make productive use of their child’s time. Entrepreneurs will come up with far better educational institutions which will give better, more personalized education in a profitable way.

The current educational system controlled by government is just not dysfunctional but also evil because it wastes 10 years of a child’s most important life.

Does it still make sense ?

Parents have actually figured this out. Entrepreneurs have figured this out. That is why good teachers prefer to run tuition centers instead of teaching in a worthless school system and make far more money than school teachers.

Parents overwhelmingly send their kids to coaching classes by paying hefty amounts. The coaching classes are not greedy, in fact they are doing a great social service to the society. The reason why parents pay huge amount for coaching classes because they know that the possible returns on that investment are very high.

What about the poor ?

If government gets out school system how will poor educate themselves ? That is a a valid question but we see that poor people can afford mobile phones, shampoos, cold drinks and DTH sets. Almost every sector of our economy where government has not put its dirty nose has made things remarkably cheaper for our poor people.

If a poor student is intelligent and can achieve productivity level of X+ if expenditure on his/her education is X, it makes sense for any financial institution to lend him/her that money and make a reasonable profit after his/her education is complete.

This incentive for profit will also drive institutions to be as productive as possible, give monetizable skills starting from a very early age.

But it wont happen !

 

 

 

 

 

 

 

Agricultural Labor and Human productivity

Why are farmers and agricultural laborers poor ?

A bank clerk earned a salary of Rs 750 per month 30 years ago. The same clerk assuming no promotions etc. easily fetched Rs 30000 today. That is approximately 40 times more. The same clerk however continues to work for 8 hours a day 6 days a week. (Ignoring Saturday special cases).

A lot of people do not realize why the exact same amount of work invites more money today than 30 years ago. It is not that inflation increased over period and hence bank increased the pay to ensure its employees are able to survive. There is more than what meets the eye.

30 years ago, banks were few, branches were even fewer. They maintained accounts in paper registers which had to be meticulously verified every now and than. Every-time a person wanted to withdraw money he had to walk into a local branch, the clerks had to look at his account and carefully do the math.

Each clerk could handle 30-40 transactions at max a day. Today with computerized systems, a clerk is just a human face to the computer screen. Transactions like withdrawal happen through ATMs. Overall it is reasonable to say that a bank like SBI probably does 10,000 transactions per clerk per day.

Technology has enabled clerks to be around 250 times more productive than 30 years ago and hence banks too have managed to survive despite increasing the salaries of the clerks by 40 times.

Imagine a scenario where there were no computers, yet the banking needs had scaled to what they are today. In such cases banks would have required to hire a huge number of clerks to meet the daily transaction demands. If they had to pay Rs 30, 000 to each of those, the per transaction cost would have hit the roof and banking would have been un-viable for consumers and banks. Imagine you withdrawing Rs 1000 and paying Rs 250 as transaction fee.

Computer systems helped clerks improve their productivity by 250x and salaries by 40x. But there is a key thing about productivity. Why salaries did not increase by 250x ? That is a valid question to ask.

The moment computer started doing most of the work, the need to have an intelligent clerk also diminished. There was no need for the bank to hire First Class M.Com. graduate. They could simply do with second class B.Com. graduate. Clearly these people were willing to work for a lesser salary.

If we somehow manage to invent even better computer systems Banks could even do with a 10th standard pass person. ATMs are already manned by semi literate watchmen in India.

What happened to M.Com. graduates ? They probably did MBA, got into higher positions and probably earned even more money than what they would have earned as clerks.

The key lesson here is that as technology advances, the same job can be done by less smarter individuals. (Smartness == skill level).

So why agricultural laborers are poor ?

With technology human beings are achieving more things with little intelligence. Which basically means average “smartness” of a person in a certain skill is going down. For example, average smartness of bank clerks has gone down, average smartness of school teacher, bus driver, electrician has gone down because technology has helped less smart people achieve same results as a smart person. Smart people on the other hand moved to better professions.

When everyone is climbing the ladder, there is always a vacuum that will get created at the bottom. Agriculture happens to be at the bottom. Agriculture labor is the least productive occupation. One literally burns his bodily calories to produce something of higher calorific value.

The only people left into menial labor are those who could not find any other better occupation.

In a state like Goa which has got very good literacy levels, better economic opportunities and faster adoption of technology people will continue to move up the social ladder faster and faster creating a serious crunch of human labor in least productive occupations.

Note: I am taking an online Economics 101 course. This is a blog was inspired from the first lecture.

Looks like BJP developed cold feet now

I don’t know why Mr. Modi overlooked Dr. Arun Shourie for the post of finance minister. Whatever might be the reasons, his choice of FM Arun Jaitley was terrible and now the recent budget has demonstrated that.

I am not an expert and hence cant understand the technicalities but broadly looking at the schemes and announcements Narendra Modi/Arun Jaitley have miserably failed to show that he is committed to more market friendly India.

It is the same usual Congress-Chaap socialist budget where they announce more funds for IITs, IIMs, Girl Education and Madarassas.

Narendra Modi got elected on the plank of “minimum government” but the budget looks like more of a micro-managing government where they have separate tax rate for LCD tvs less than 19 inch than the larger once.

This budget probably is just Congress budget with a promise “we would do it better than them”.

There has not been any talks of introducing more private participation in education or letting for-profit companies to enter education. Breaking up coal India, getting rid of sick PSUs, simplifying tax code, more uniform taxation policies and so on.

Hard to see why Indian farmers are still not required to pay taxes. They could have kept the same type of slabs that would have easily exempted poor farmers from the ta burden.

Wasting public funds on IITs and IIMs is again a mistake. You do not need an IIT in each state. A good institution also requires proximity to industry and other facilities. Government could have simply given more funding to the existing IITs to either open more campuses or increase the intake.

For-profit companies must be allowed to run universities. Longer this takes, farther we are going to lag behind the world.

This budget was disappointing and I regret staying up for the same.