The Kalawati Model

 It’s all in your mind

Over the last few weeks, newspaper economists have complained about being confounded by the Government of India’s lack of direction in matters of economic policy. Many have bemoaned a complete lack of strategy and vision in the Government’s actions.

They are of course all wrong. Meaning they may be right, but they are looking at it all wrong. And someone famous once said that if you look at something wrong the right way, it will eventually turn out to be right (or thereabout).  For example, look at the completely empty glass as having the potential to hold a lot of water.

The other problem is that newspapers are dominated by economists who have studied economics. These people rely on outdated concepts like ‘markets’ and ‘investments’ that tend to get in the way of deciding policy while riding pillion on a bike through a dirt road in Uttar Pradesh.

All this however misses one important point: that economics is a bunch of nonsense anyway. And you can’t fashion State policy around nonsense. Not unless that nonsense is backed by the beliefs of a religious minority.

This is not to say that the Government does not have a plan. The Government always has a cunning plan. The people in charge are running the Country on the basis of a plan so simple that it makes an Anna Hazare speech look complex in comparison.

The Kalawati Model of Economics

Do you remember Kalawati? She is the reason India signed the civil nuclear co-operation agreement with the United States (well most of India anyway. Some political parties supported it because it was the secular thing to do). She is also the owner of an unlicensed bed and breakfast frequented by India’s most famous poverty tourists.   

It is clear from what we have seen that the Government follows the Kalawati Model of Economic Management (please suggest suitably catchy acronyms).  As with all things in India, it’s a minimalist model. If Kalawati doesn’t need/ care for it, the Government doesn’t address it or addresses it like it doesn’t care. For example, would Kalawati care about the distress in the Power sector in India? (Now remember that she comes from a village that doesn’t have electricity). It’s non-nuclear so naturally she wouldn’t.  Neither does the Government.  How about a new tax law? She doesn’t pay taxes. Labour law reform? She has NREGA. Dismantling the APMC? She has the Right to Food Act. How about the Microfinance Industry? Yes she cares and they fixed that. Just ask SKS Microfinance.

If you don’t like the Kalawati model, then you are a heartless economist. The kind that that suggests decontrol of Urea prices and believes in limiting fiscal deficits. Thankfully this bunch shall remain at the Planning Commission and never make it to the National Advisory Council (Not that the NAC needs help from economists. They might consider hiring a mathematician though).

It’s not us, it you  

The Kalawati Model would have worked perfectly and delivered the dream combination of poverty alleviation and social justice by now had it not been for the American subprime crisis and then the European Sovereign debt crisis. Naturally, subpar growth in India is caused by these external factors over which we have no control. Everything, including high food inflation and corruption is caused by the western world going through a cycle of deleveraging.

What doesn’t help is all this negativity by the business community and the media in India. The Prime Minister (not to be confused with the guy in charge) has addressed these issues by asking businesses to be positive and keep a stiff upper lip in the face of policy U turns and unpredictable Government action. The media has been asked not to sensationalize routine occurrences like notional losses and terrorist strikes. The social media problem has been addressed suitably and the only posts that will be allowed in the future will have to be about Bunnies and Kittens.

Lowered expectations

Any corporate consultant will tell you that the key to delivering extraordinary results is managing expectations. Yes, the concept of lowered expectations should help the Government just as much as it assists settling down in an arranged marriage. But the Finance Minister who conducts his business mostly from inside his white Ambassador couldn’t be bothered to do even that.

So while the Government sets the bar really high and doesn’t bother to show up for the jump (obviously its visiting Kalawati), Industry and citizenry have begun to lower expectations themselves. Setting aside hopes of reform, various sectors of Industry now just hope that the Government doesn’t turn its eye of Sauron towards them seeking legislated CSR spends and higher shares of profits. Citizens who have long looked forward to planned cities and better access to services now hope they are not the statistical 1% that cannot be saved from terrorist attacks. Everyone has adjusted to the ‘New Normal’ and has fallen in line with the new agenda of governance (surprisingly this buzzword which was coined to apply to the recessionary West now applies to India).   

So it has all eventually come together. Through a profound yet simple policy, the Government has created a process to bring Kalawati’s and the middle class’ living standard at par with each other. One way or another, one day we will all be equal.