Combined Synopses of the Guest Lecture Series (January 2014) featuring Nirmala Sitharaman , V K Bhanumurthy , Bibek Debroy .

[Economics Club IIT Delhi]

The series started with the lecture from Mrs. Nirmala Sitharaman on 20th January , monday as she spoke on Economic Crisis and its Impact on us.Nirmala Sitharaman's lecture was a lesson in microeconomics and policy-making . The usual repartee and good-humor apart , she raised some very fine points regarding the plague of India and nuances of policy making.She began with talking about the ambitious and much hailed MNREGA program of the central government which eponymously espouses the Gandhian philosophy of keeping Gram Swaraj in high esteem but is turning out to be a dole program that had rather been a last resort . One of the apparent disadvantages is the resultant distortion in the labor market as even the semi-skilled labor instead of being provided proper opportunity for the trades of their expertise flock to jobs of inferior skill requirement ultimately affecting agricultural value addition markets.

Mrs. Sitharaman chronologically picked India's sorrows and delineated the solutions that were executed or what could have been done.On how agriculture began to bear the brunt of globalization in the first place , she explained that in the 60s and 70s , there were local extension workers who evaluated a specific region , interacting with the locals and hence there was a back-and-forth trickling of information based on which  the government provided fertilizers and pesticides etc. After the 90s the status quo has been such that any international producer can approach the locals with lucrative (in short term) offers .In the long run , input costs kept rising , output kept declining , lands were damaged . Consequence is the sate of agriculture as it is today!

She exemplified the importance of incorporation of local bodies in administration process by citing the model implemented in Chattisgarh to deal with corruption in ration systems and hoarding.Hoarding is a necessary evil as far as current situation goes. Farmers don't have sufficient storage infrastructure of their own . Government programs do not always assure instant cash disbursement , so they flock to the private individuals- with the infrastructure to store the produce- to get immediate cash for his produce. In Chattisgarh , to deal with corruption . the control of rationing systems has been handed over to the women self-help-groups and aptly informing them . Enabling the locals to access their rations at any of the shops has helped to preserve labor mobility .

In response to a question raised by one of the listeners regarding problem with AADHAR - she pointed out that without parliamentary acceptance , the project has been executed to such deep levels in spite of the existence such loopholes as the easy availability of the AADHAR even when there are major citizenship issues in border regions . 

Next in line was the lecture by V K Bhanumurthy the honourable economics professor of Delhi School of Economics on  21st Jan , Tuesday.V K Bhanumurthy's lecture was basically an awesome classroom experience (by an equally awesome lecturer) in macroeconomics. The honorable speaker has a veritable litany of research work behind himself which he generously shared with his listeners. He cited the precise data form the housing sector of USA in early 2000s that augured the clues leading to the fiasco of later 2000s that had been right there in front of us in the form of the unprecedented hike in housing prices . The consumpton function was so skewed that some mismanagement could be clearly read from the surface.

He began explaining the detail of the genesis of this devil that became a bubble and burst finally flinging the whole world into a crisis from which it is still recovering.The inception of the intermediate instrument comprising of Real Estate agents , Mortgage lenders , Rating agencies that came into being in the first place eliminating the most vital element of the credit system - information as now the bank officials or the borrowers didn't interact directly . They were brought in to eliminate the element of risk in the act of lending by the baks by mediating between the banks and the borrowers but ended up forming a secret syndicate manipulating the system over time extracting immense profits from the fraudulent system. They altogether created an illusion of a win-win situation whose reality spelt nothing but doom. The borrower - in spite of not being capable of repaying the debt easily procured debt (which he could avail much easily now on account of the new system). But in the long run , he would fall to distressed reselling at smaller prices to the same housing agents who sold these to them to begin with.Now these differential profits 

integrated over 78 months (-sic) to staggeringly huge amounts.

The importance of information in market is unparallel to its completeness. Over the course of this vicious cycle , complete information became obscured even from the banks from where it all started in the first place . So bad money was filling the system and spreading into all other sectors . So that finally when Housing collapsed , no other field was spared! There was a universalisation of risk i.e. all had to bear the brunt of it . What is needed is that only the deserving should pay the cost (Democratisation of risk).

He returned to the following question that he had asked at the very start - Where did the trillions of money go?? Mr. Bhanumurthy said that money flows from one bubble to another .He pointed out some authentic research .After the subsidence of the housing bubble , Bhanumurthy voiced his concern over the abnormal behavior of rice 

prices in Thailand and a nexus with the huge commodity sink in the China Olympics.

Bibek Debroy's lecture on 27th January , monday was a singular experience in itself - partly because of the radical views expressed and in part because of very interesting quirks of Mr. Debroy's own style. "Ask the Right Questions" was the first lesson of the day. That's the key to reaching to the solution to the problems as he said.

Mr. Debroy - as he himself mentioned - has done ground-level research in Gujarat and Jharkhand so very authentic examples of exemplary administration as well as pathetic policy paralyses featured frequently in his speech. He said that the government should not confuse its goal of ensuring universal education with building schools - i.e. not to confuse ends with means . Such realization has often led to excellent ingenuous collaboration between the government facilities and private sector enterprises with desirable results . An interesting example that he retold , "a true story , not concocted "(-sic) was one about Pratham NGO from Mumbai . It visited a government operating near a slum school where students seldom came . On investigation it turned out that the kids were sent to the water supply to fetch water for their families around 11. Pratham suggested to change the school timing to after 11 and shifting it close to the water supply area.The previous school infrastructure was made available to Pratham for its school.Similar cases was those of Chiranjeevi Health Yojana in Gujarat in healthcare facilities.

Mr. Debroy advocated the urge of devolution of finance from center to state . Implicit in this was the view of the irrelevance of the Planning Commission and its replacement with a decentralized body. A case in point is The PMGSY that enables the state to construct roads only from center - given funds but not bridges. So a fiscally starved state like Jharkhand finds itself paralyzed while making roads in excluded regions while state like Gujarat can leverage its fiscal latitude to build its bridges on its own.

The final bullet of the discussion was the importance of competition as the only check against corruption . A simple example of telecom sector then and now (pre-liberalization and post-liberalization) suffices to corroborate the point. This is the need in several other fields as well. "Anything you do in the name of the poor benefits me and you , not the poor ". That's what he said and reasonably so . Citing the amount of corruption in the welfare programs run by the public sector alone , he suggested the infusion of competition in these fields too.

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