By Raghav Bahl
After four years of Modi Rule, India’s digital economy is disheartened. That strikes a hammer blow at the Prime Minister’s core promises – Young India, Digital India, and Make in India (Smart Cities, anybody?). No wonder the panic at the Prime Minister’s Office is rising.
Two of my recent articles/videos went viral and touched a raw nerve with readers and policymakers. In the first one, I coined a catchy acronym – DACOIT, i.e. Digital America/China Colonising and Obliterating Indian Tech – in the hard-hitting style patented by Modi. It punched through India’s flawed, discriminatory policies that were forcing our first-generation entrepreneurs to capitulate, making our digital economy a vassal/colony of America and China (Times of India asked for permission to republish it in their main editorial slot).
I immediately got the following text from one of the Prime Minister’s key aides:
Cabinet Official: Just saw your tape titled DACOIT. Rather ominous. I would love to discuss it with you when you have the time.
A few weeks later, when Walmart acquired Flipkart, it vindicated my DACOIT-y assertion. I then published a second piece/video: Walmart-Flipkart: Young Entrepreneurs’ Pride, Government’s Shame. This illustrated how we had outlawed Flipkart’s founders, making them an easy (and rather cheap) prey for a global giant. This time, another of Prime Minister Modi’s high profile advisors SMS-ed:
PM’s Advisor: This is with reference to your article. Please give a call on Monday. Will prefer to have a discussion with you so that my team can interact (sic).
Unfortunately, neither conversation has progressed beyond these initial text messages, even as I have enthusiastically offered to engage. But here is another interesting WhatsApp exchange with a highly acclaimed first-gen founder of a digital startup (not Flipkart, let me hasten to add):
The first-gen Founder: Loved the DACOIT-y article and video. Have been saying similar stuff but this government is not a good listener.
Me: Yeah, they are sleeping at the wheel while we are being colonized.
First-gen Founder: Aptly called out, Raghav. It’s really tough. The irony is that they keep saying they want a Google and an Alibaba to come out of India!!! I’ve said this to the face of everyone including the PM (politely) but they don’t get it because the obsession is FDI in the short term.
Prime Minister Narendra Modi meets Google co-founder Larry Page, and CEO Sundar Pichai, at the Google-Alphabet campus, in Silicon Valley, California on September 27, 2015. (Photograph: PIB)
For obvious reasons, I shall not disclose the identity of this bright young man!
But This IAS Guy Gets It!
Now here’s another substantial WhatsApp conversation with one of the most enterprising IAS officers, who are digitally savvy and quite a man about town (about two-and-a-half-decades of service, I reckon).
Of course, I shall not tell you who he is, but here’s the exchange recorded at about 7 am one fine morning:
IAS Officer: Read your very nice piece. Agree with large parts of it. Not all. And you forget Arun Shourie’s famous line – you need to first get elected before becoming a reformer. No party can alienate the traders with 12 mn establishments. Thus it will also be salami tactics, slow poison. Not a direct confrontation. BTW this PMO has been seized of the issues you mentioned and has been working on it. Albeit slowly. You should see positive changes soon. Problem is Flipkart and others have not played it well. They have hired wrong lobbyists, highlighted wrong issues. Do you have something deeper written on each issue and solution which you can share with me?
Me: You don’t need very deep, complicated guidelines. Those become rent-seeking problems, which force people to act in strange, illegal ways. Set people free. Trust the markets.
IAS Officer: Agree. But there is a political economy angle. And some of the things you mention, there is a valid alternative view too.
Me: The policymakers should stop micromanaging, trying to control winners and losers. Their job should be to ensure fair competition, not become the arbiters of who can do what under which rules!
But unlike you, other IAS officers are deeply suspicious of freedoms. And politicians couldn’t care less. That’s the core problem.
IAS Officer: I agree with you. Problem is in many cases, not all, they are unable to ensure fair competition either!
Me: Then leave it to the brutality of markets. Far better than creating rent seekers.
IAS Officer: Give me 3 months… (after this, he meandered into specific details which I cannot anonymize, so I shall lop it off here. But you get the drift.)
Modi Is Scrambling An Elite IAS Unit To Digitally De-Colonise India
Unfortunately, Prime Minister Modi is again making the fatal error that has dogged four years of his reign. He is trusting the Indian Administrative Service to deliver a modern, market-friendly policy architecture. (Before the formidable IAS lobby swats me down, let me say that “I am an IAS kid”. My father belonged to the 1957 Batch (Rajasthan Cadre), and whatever I have achieved in life, I must give a considerable amount of credit for it to the IAS fraternity.)
Alas, just as I would fail to administer a district, IAS officers usually fail to understand the power of competitive markets.
Prime Minister Narendra Modi addresses IAS officers, on ‘Civil Services Day’, April 21, 2018. (Photograph: PIB)
Of course, there are honorable exceptions, but they just prove the rule. IAS officers are easily the brightest, most intelligent talent that this country has to offer. But their cradle-to-grave security ring-fences them from volatile success and failure. Their monetary rewards are completely unhinged from merit or achievement. Whether you are a fast-tracker or a laggard, you move in the same slow lane. This stalemate often creates an aversion to taking risks; it nurtures a deep suspicion about free markets. Hence the urge to micro-manage and ‘create provisos’.
How PM Modi’s Clear Instructions Will Become Un-Implementable
I can almost forecast how this Battle to Digitally De-Colonise India will play out. As soon as the PMO gives a clear instruction to “empower India’s entrepreneurs equal to or more than their global competitors”, doubting whispers shall begin to cloud the policy framework:
Mr. Statistically-Suspicious IAS Officer: Sir, we must ensure that a startup does not become a proxy/front for large foreign or domestic shareholders. Therefore, we should stipulate “that no single shareholder shall invest more than 10 percent in the equity capital”.
Mr. Structurally-Suspicious IAS Officer: But sir, you know how these large corporations can create layers of ownership behind a corporate veil. So we should add ‘directly or indirectly’ in the definition of a ‘single shareholder’. (Gosh, by inserting just this ‘innocuous provision’, our do-gooder officer has made it virtually impossible to certify the ‘parentage’ of an investor. This poor fellow will have to file a bunch of biographies, whose authenticities will need to be security checked, from Sacramento to Sitamarhi!)
Mr. Small-Fetish IAS Officer: And sir, can we really call the second venture launched by Flipkart’s founders a ‘startup’? After all, they are dollar billionaires now. So we should add a ‘second proviso’ that these benefits will be available “only to the first venture of a first-gen entrepreneur”. (Now go figure this one out – who is ‘first gen’ and what is his/her ‘second venture after a successful first exit’. As you can see, by now the policy has become utterly un-implementable.)
Mr. Final-Nail-in-the-Coffin IAS Officer: Sir, we must distinguish between startups which add to the tech/innovation ecosphere, as opposed to somebody setting up a ‘pakoda’ (fried potatoes) shop. So, sir, these concessions should be made available only to those startups which are duly certified by the Inter-Ministerial Board set up under DIPP to identify an ‘innovative business operation’.
Union Finance Minister Arun Jaitley addresses the opening session at the launch of Startup India in New Delhi, on January 16, 2016. (Photograph: PIB)
There you go again! Even before the ink has dried on Prime Minister Modi’s instruction to create a “21st century paradigm to equip Indian entrepreneurs to take on the world”, his elite IAS brigade has created devilish rent-seeking powers in the hands of the Station House Officer (SHO) of Sitamarhi, Bihar (and perhaps also at the Precinct of Sacramento, but we can’t be sure about that).
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