The Indian Economy Blog

March 7, 2006

More Bang For The Government Buck?

Filed under: Business,Fiscal policy,Politics — Neelakantan @ 7:13 pm

Here’s a fantastic piece about Walmart efficiencies. Titled, Wal-Mart’s Shelf-Correcting System Is Model for Government, argues that the government (of USA) does two things well.

…Anyone who’s ever filed a tax return or visited the Department of Motor Vehicles understands that government does two things well: spends our money and wastes our time…

The piece goes on to describe, how during Katrina, the government was flat footed in response and sent millions of dollars down the drain in wasted efforts.

…As Sen. Susan Collins (R-Maine) explained, the waste happened because the government took a “pay first, ask questions later” approach

But there was another institution that did not fail.

...It would be better to look toward an institution that didn’t fail during Katrina: Wal-Mart.

The world’s largest retailer had 171 facilities in the path of the storm. But as Jason Jackson, the company’s director of business continuity, told a Senate committee, “We were able to recover and reopen 83 percent of our facilities in the Gulf area within six days.” One key reason for Wal-Mart’s success, Jackson said, is “associates who are dedicated to their communities.” That local connection helped it deliver goods when government failed. As investor’s Business Daily reported in September, “While local and federal groups suffered communications problems and bickered over who was in charge, Wal-Mart sprang into action.”…

Wal-Mart does what government intervention can’t: It drives down prices and makes life better…

Anybody who read the recent budget of India will agree with this.

We reap what we sow. We are the makers of our own fate. The wind is blowing; those vessels whose sails are unfurled catch it, and go forward on their way, but those which have their sails furled do not the wind. Is that the fault of the wind?……We make our own destiny.

The budget key features document opens with this quote by Swami Vivekananda. A quick glance at the above document leaves us with these figures.

Totally, INR 18,696 crores to be provided to the Bharat Nirmaan programme (last year it was INR 12,160 crores). For eight flagship programmes allocation to increase to INR 50,015 crore (last year it was INR 34,927 crore). This money is for the basics – water, health, electricity etc.

Just to break the monotony of numbers (and there is a lot of it in the budget), the point is, the pay first ask questions later means that a lot of good money is going down the drain with no accountability. What happens if targets are not met (as is seen in most programmes in the above report?). I doubt if the sky will fall, much less, if even a heartbeat will be skipped.

Why not rope in companies to do this work? I couldn’t cite an example like Wal-mart for the purpose of comparison, but used a corporate social responsiblity scheme for comparison. ITCs e-choupal scheme (from its website) today looks like this…

…Launched in June 2000, ‘e-Choupal’, has already become the largest initiative among all Internet-based interventions in rural India. ‘e-Choupal’ services today reach out to more than 3.5 million farmers growing a range of crops – soyabean, coffee, wheat, rice, pulses, shrimp – in over 31,000 villages through 5372 kiosks across seven states (Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra, Rajasthan and Kerala).

From the ITC chairman’s speech on the ITC website:

… Despite daunting implementation challenges, this (e-choupal) initiative now comprises about 5200 installations covering nearly 31,000 villages and serving over 3 million farmers. Over the next 7-10 years it is your Company’s vision to create a network of 20,000 e-Choupals and over 700 Choupal Sagars entailing investments of nearly INR 5000 crores, thereby extending coverage to 100,000 villages – representing one sixth of rural India.

INR 5000 crores for 1/6th of rural India in 5 odd yearts, INR 30,000 crores for a networked India?

And 50 plus years after independence many of our villages struggle for electricity, water and food – the basics. That (successive) government(s) have not delivered is an understatement. Indeed has any government program achieved as much as ITCs e-choupal has? Remember Rajiv Gandhis famous observation that out of a rupee spent by the government only 15 paise reaches the poor because implementation is so poor. Why not engage companies (such as ITC or others) in such programmes and ensure greater accountability in implementing development programmes instead of pouring more and more money into leaky buckets?

10 Comments »

  1. For those interested about E-choupal and such like initiatives I highly recommend reading C.K. Prahlad whose has written some fabulous books on energizing development.

    The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits by C.K. Prahlad is a good starter.

    Comment by Sameer Mehta — March 7, 2006 @ 10:01 pm

  2. The government response (at all levels) to Katrina left a lot to be desired, but the Wal-Mart comparison falls a lttle flat. While a fine thing, keeping a few hundred stores open is a problem of much more limited scope than that which our government faced.

    Comment by walker — March 8, 2006 @ 9:25 am

  3. E-choupal is fine but ITC makes money from smoking. Corporate Social Responsibility is total marketing crap. Just look at the article by milton friedman.
    http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

    Comment by noname — March 8, 2006 @ 11:33 am

  4. I agree with Walker. Milton Friedman’s article also clearly elucidates that, unless the company sees some financial prospectives, it will be discouraged from being “socially responsible” by the various controlling forces.

    ITC has major intentions of growing its business actively in the rural areas. The ulterior motive of E-choupal is to create awareness about the company and brand in a tangible manner, in rural India. I am not denouncing ITC’s motive or initiatives, in fact, I want to encourage organisations that adopt a more “socially resposible” marketing methods like E-choupal.

    Thoughts?

    Comment by Karthik — March 8, 2006 @ 9:57 pm

  5. Agree.

    It goes like this – would you have
    a) incremental and fragmented social development as a spin-off effect of a private commerical initiative, or

    b) incremental and fragmented social development (?) from the sediment left behind from the bureaucracy’s kleptocratic filteration?

    At least in (a) the govt sees some recyclying in the form of taxes.

    Comment by pey — March 9, 2006 @ 11:09 am

  6. God forbid… But i would rather like to see people die of poverty as opposed to cancer and other smoking related diseases.

    Comment by Sabarish Sasidharan — March 13, 2006 @ 7:05 am


  7. God forbid… But i would rather like to see people die of poverty as opposed to cancer and other smoking related diseases.

    Thats an ironic statement.
    People should be capable of knowing the causes of cancer and for that they should get out of poverty. They should be able to have time to spend to know about things rather than working their ass off trying to find something to eat!

    ITC’s efforts only will help improve the economy and citizens in an improved economy will, in general have time for things other than basic needs which they are likely to use to accumulate knowledge and make informed decisions.

    Comment by Kedar — March 17, 2006 @ 11:10 pm

  8. Good article. I liked it. I was thinking about what you said about the leaky bucket. You know, it’d be great if the government was forced to reveal where every paisa that it spends is going. I would agree to exclude national defense but everything else should be perfectly transparent to the public. I’d like to see a big spreadsheet and piecharts showing such-and-such department ate this much money.

    Comment by Jayakumar — March 19, 2006 @ 4:05 pm

  9. Probably, the Government should resort to a ‘TALLY PACKAGE’to bring forth accountablity..

    Comment by Sweta Ram — May 23, 2006 @ 8:03 am

  10. i would not see ITC’s e-choupal model is not “socially responsinle” marketing..its just an innovative business model which aims to cash in on the opportunities that exist at the bottom of the pyramid in a developing country like india.(refer C.K prahlad)
    CSR is about how one does business and revolves around “playing by the rules of the game”(milton friedman) and in the context of being ethical in running a company and also keeping in mind the various stakeholders of a business(customers,employees,environment,government,shareholders,community )

    there does exist a business case for CSR…but when we have inefficient govts like ours..we must encourage companies to open up their coffers and do some good for the communities they thrive on…

    Comment by vids — March 17, 2007 @ 5:44 am

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