Cities and the Swachh Bharat Mission

Arunima Rajan interviewed me recently for an article in Healthcare Executive, on what ails India’s cities, and whether the Government of India’s Swachh Bharat Mission can tackle these ailments. Here is the full text of the interview:

Q1. Can clean cities lead to healthier cities?

Pavan: Absolutely. Cities are prosperous because they promote proximity – allowing large numbers of people to live and work close to each other. Serendipity and the ease of meeting diverse people are what make cities innovative.

However, when lots of people start living close together, managing waste and pollution of various forms becomes challenging. In Indian cities, it is unclean water, surroundings and air that contribute to a majority of the communicable disease burden.

If less solid waste can be managed, sewage can be processed and drinking water kept clean – diseases like Dengue, chikungunya, cholera, diarrhoea and others would drastically come down.

Q2. Has Swachh Bharat provided a good framework to address public health problems? Do you think the policy has been successfully implemented?

Pavan: The Swachh Bharat programme has correctly identified that human behaviour is a key reason why our cities and villages are not clean. Changing people’s behaviour is critical to having high hygiene standards, enabling segregation at source, ensuring toilet use, and more. By making ‘Swachchata’ a moral cry — the mission has become the biggest political attempt against open defecation and for public cleanliness since Gandhi’s efforts.

In India, we often talk about good policies that are unable to be enforced properly. No new policies can be implemented if say 90% of the people violate it. What makes policies work is having 90% of the people follow the new rules on day one, with enforcement only playing a role with the 10% who don’t. Thus, Swachh Bharat with its focus on changing behaviour has a good chance of success and making India cleaner.

However, Swachh Bharat may work better in villages, where public systems and infrastructure are less relevant. Swachh Bharat has not adequately considered how to put better municipal systems in place, and fund better infrastructure.

Q3. Does the policy draw the links between public health, sanitation and solid waste management to an effective manner?

Pavan: The idea of ‘Swachhata’ is powerful because it can be used to mean various things from personal hygiene to public cleanliness to toilet use. However, this ambiguity is a double-edged sword. In some places, it could promote solid waste management but ignore sanitation. Or, act against littering but ignore the state of public toilets. The mission may also fall a victim of its ambition — toilet use, avoiding littering and waste segregation are all independently difficult to promote even with focused action, and the mission seeks to do it all.

Q4. Do you think Swatch Bharat can be successfully implemented by inter-ministry/inter-government collaboration? Can top-down approach help in successful implementation of the initiative?

Pavan: Swachh Bharat mission’s best chance of working is to provide an umbrella framework that encourages independent action by states, cities, localities and leaders. While the union government may be successful in getting the Indian railways to clean up trains and stations, it cannot dictate what states and cities can do.

For example, the MLA and the citizens of Malleswaram in Bangalore have started an initiative called ‘Smart Swachh Malleswaram’ — where they want to make their locality cleaner using technology and data, as well as citizen action.

While the goal of Swachhata remains the same, the activities, the ideas, the management — all remain locally driven. Such a style of the Swachh Bharat mission is most likely to work in India’s many cities, rather than a purely top-down bureaucratic exercise that is thrust on cities and localities.

Read the full article on Healthcare Executive.

(Disclaimer – Takshashila’s Centre for Smart City Governance is a training partner for the Smart Swachh Malleswaram initiative.)

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Smart Cities and Thoughts for Karnataka

Karnataka held its annual global investors meet last week. On its sidelines, Rajya Sabha MP Dr Rajeev Gowda launched Resurgent Karnataka, a publication by Raintree Media. I shared my thoughts on smart cities and urban governance with them. Full text below.

Q1. How, why and when will Indian businesses invest in making cities smart? What policies should the government adopt to facilitate the creation of the right investment climate for private investment in building smart cities? What are the business models being used to monetise investments and what is the customer value proposition? How will Return on Investment be measured and will a holistic approach being taken to measure value creation?

Pavan: Indian businesses will invest in making cities smart when the government provides public goods, ensures the rule of law and is faithful to contracts. Often, contracts signed by Indian municipal authorities are not upheld, and government authorities change their mind at will, making it exceedingly hard for businesses to work alongside governments with integrity. City governments should also modernise land titles, property tax records and make it easy for private entities to do business in the city – reducing the time it takes to get electricity and water connections, construction permits and more. When the private sector finds that cities do not add to business uncertainties and could actually lower them, then the investment will flow into the cities steadily.

Q2. Apart from private investment, are there other innovative financial instruments that could be adopted in funding a city’s transition to smartness? What is the value and the source of funding for the smart city projects? What business structures may have to be established e.g. PPP, JVs?

Pavan: It is a myth that Indian municipalities are poor. All Indian municipalities have numerous assets at their disposal – including land and properties that are at various stages of development. Municipal corporations do not do accrual-based accounting and have asset registers of differing qualities. Most municipal budgets are not even audited regularly. Thus, they have a weak understanding of the assets at their disposal and liabilities they have to manage.

A smart city is one that professionalises its accounts, and uses innovative means to extract sustainable incomes from their assets. For example, if a 2-storey government building sits on prime land, a smart city government is one that gets a 15 storey building built and leases out the other 13 floors of real estate. A smart city is one that professionally manages its advertisement and property tax revenues by using technology and intelligent contracting.

A smart city is also one that pursues economic development explicitly, works towards attracting businesses and job creators with dedicated staff to do so. While this is not a financial instrument per se, it certainly can be an innovative way to increase city finances.

Q3. Do cities in India have a vision, clear objectives and quantifiable targets (KPIs)? More importantly, how will citizens get ‘smart’ in adopting technology? When and what will prompt this behavioural change and how long will this process take? What is the role of traditional and social media in promoting smartliving?

Pavan: We often say that cities are the nation’s engines of economic growth. However, in India have no idea how well these engines are doing – what their horsepower is, how many pistons they have, how efficiently they run, and more. To truly understand how well our cities are doing, India needs to start measuring city or metropolitan-level GDP. Cities are also natural units of economic activity, and with some effort India can start measuring GDP yearly for all million-plus cities. All high income countries – including China and other Southeast Asian countries today measure city GDPs.

In order for India to sustain an 8 percent GDP growth, Indian city GDPs need to be growing at 20 percent or more per year. By understanding how well each of our cities do year on year, policymakers and the public will get a better handle on how our cities are doing, and what public and private inputs are transforming into meaningful outcomes. Measuring GDP along with other standard parameters like municipal finances and service delivery levels are vital to the health and development of India’s cities.

Citizens will become ‘smart’ in adopting technology the moment it makes sense for them to do so. While governments might complain that citizens are not using technology efficiently to communicate with government, the reality is that citizens have rapidly adapted to shopping online on e-commerce stores, using mobile payments and e-wallets for transactions, taxi-aggregators for transport and more. If governments start delivering better services through tech and mobile-enabled means, then citizens will start using them quickly.

Q4. How can medium-sized cities in Karnataka (Shimoga, Belgaum, Mangalore, Davangere, Hubli) achieve ‘smartness’ in the areas of Governance, Economy, Mobility, Environment and Living? What smart city services will be developed? What are the proposed benefits resulting from the services?

Pavan: Medium-sized cities in Karnataka have a great opportunity in avoiding many of the problems that a megapolis like Bangalore already suffers from. ‘Smart’ ideas can be more readily implemented in medium-sized cities – be it developing a complete digital ‘road history’ of all works that take place above and below city roads; or a professional GIS-linked property-tax system; a forward-looking FSI or building height-restriction policy and more.

Karnataka has performed poorly compared to its neighbours Tamil Nadu, Maharashtra and Andhra Pradesh when it comes to developing multiple centres for urban growth. After Bangalore, other Karnataka cities are still around 1 million people or less in population. The development of industries that create thousands of jobs is vital to developing new centres of growth – rather than focusing primarily on IT.

Q5. What were the regulatory market conditions in Europe (international best practices) that fuelled innovation, technology transfer and largely promoted indigenous manufacturing of affordable smart technology? What are the key legal and regulatory policies that have had a material impact (positive/negative) on the development of pilot projects? Can these be replicated in India under P.M Modi’s ‘Make in India’ initiative? What is the future for smart ICT? How can Indian companies successfully navigate the ‘valley of death’ phenomenon /seed funding constraints?

Pavan: India’s smart cities mission should look to the Charter cities concept that has been championed by the economist Paul Romer. The idea of charter cities is to create a ‘policy window’ for select charter cities – where they can experiment with local rules and laws that are not encumbered by complex regulation that usually exists in other parts of the state or the country. Karnataka’s urban governance laws require significant reform – from allowing private buses to formally recognising the role of taxi aggregators to having functional ward committees and more. Such reform can take a long time, and partial reforms can often show limited outcomes. Charter cities are like the opposite of SEZs – where instead of a tax break, these areas get a break from some of the laws that can pose an impediment to the development of smart cities. And thus they get a chance to develop new laws and rules and test them out.

The smell test for such rules is asking yourself whether the state would be better off if the laws in the charter cities were to be universalised across the state.

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Why can’t India attract research talent?

A few Takshashila alumni and friends Kunal Singh, Varun Goel & Aravind Ilamaran have started a new opinion-analysis portal called Policy Wonks.

I write about how there’s an oversupply of PhDs and research talent in the US and elsewhere, but not enough of them have come knocking on India’s doors just yet:

American academia has been in trouble for the better part of the past decade. Till the advent of MOOCs, productivity has not changed much in higher education for about a century. As a result, university education has seen a high amount of inflation. To keep costs low, universities started supplying ever higher number of PhD students – who can be cheap research and teaching labour as RAs and TAs respectively. Thanks to this oversupply, you have hundreds of talented people applying for each tenure-track position in the sciences, for example. As Ajit Balakrishnan points out in Business Standard, this has led to the creation of a lot of “adjunct” temporary faculty positions in a space considered to be dominated by tenure.

Unfortunately, India has been poorly positioned to take advantage in this acute oversupply of talented PhDs and post doctoral researchers. This is especially surprising given that a significant number of them are Indian or of Indian origin. With the salient exception of a few people and a few Indian institutions, most researchers prefer to eke out a modest living on uncertain terms rather than come back and work in Indian academia.

We witnessed a smaller version of something similar happening when NASA started getting budget cuts in the last two decades, thereby being forced to lay off good aerospace talent – again with a lot of them being of Indian origin. India’s space agency ISRO benefited little by maintaining an insular hiring policy. Quite unfortunate for an organisation whose second director – Dr UR Rao – was wooed back to India by a visionary Vikram Sarabhai well before India had a dedicated space agency.

[Read the full piece over at Policy Wonks]

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Arranging a market for lemons

My fellow blogger Karthik Shashidhar (and his wife Priyanka Bharadwaj) started an interesting conversation on his personal blog on the grand old market in India: arranged marriage. They assert that the arranged marriage market has become increasingly illiquid, and hence unattractive.

Both Priyanka and Karthik raise an important point that can look obvious in hindsight – that as people exit the arranged marriage market in India, the market becomes smaller, more “illiquid”, and as people are unable to find suitable partners there – they continue to exit. Almost all markets have positive network effects too – the more the number of “buyers” and “sellers”, the healthier a market usually is. However, in a society divided by caste, class and religion, marriage markets were always small and illiquid, and it requires greater evidence to establish that arranged marriage markets today are necessarily less liquid than markets of previous generations.

Marriage is a curious contract that is both a labour union and a union of capital, which usually ends up creating a larger labour pool over time. ‘Arranging’ the marriages of suitable men and women has been the done thing for centuries if not millennia among large numbers of people. Finding a spouse involves heavy search costs no matter how you go about it and failed relationships constitute a significant sunk cost too. (Though apparently, people can learn from their failures. As Douglas Adams said it, “You live and you learn. At any rate, you live.”) There’s also significant information asymmetry involved – marriage is a serious affair after all, and you need to know a good amount of details any potential spouse before entering into such a contract. Further, in large families, it wasn’t just two individuals who got married, but two households.

“Arrangements” were an ideal solution to the marriage market, and it can be argued that arranged marriages provided better outcomes. Extended families and networks solved the search cost challenge, and the same networks could also solve the information asymmetry challenge – of whether the spouses were well off, were from “good families” and more.

I would argue that in the marriage market in India today, two things have happened: one, that the nature of information asymmetry has significantly changed; and two, that the arranged marriage market has become a market for lemons.

The nature of information asymmetry has changed because people look for different things in spouses – for shared interests, temperaments, greater personal compatibility and more. While financial and familial backgrounds may still matter, the asymmetry in that information is usually more readily solved. Traditional arranged marriage market mechanisms and networks fail to provide symmetry in the new kinds of information, and this makes the arranged market start failing. Also, this is happening in parallel with dating and other competing mechanisms that are making new marriage markets.

So this means that a “good” partner is unable to differentiate themselves from a “bad” partner in an arranged marriage market – and the lack of differentiation results in an overall devaluation of the “goodness” of a partner or a match. As the more high-value partners and people start moving out of the arranged marriage market to others, you are increasingly left with people who continue in the arranged marriage market because of poor choice – with them being adversely selected. Thus arranged marriage markets can become markets for lemons.

This is not to say that it’s impossible to have a happy arranged marriage these days. Nor is it inconceivable that both technology and society can evolve new ways of disrupting markets for lemons. The classic lemon market, that of second-hand cars in the US, is now a thriving one where information asymmetry is a thing of the past.

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Internet as a public good: A case for net neutrality

The internet has public good characteristics, and telecom liberalisation will not be sufficient to keep the internet healthy and growing.

Classic OPTE Project Map of the Internet 2005

Classic OPTE Project Map of the Internet 2005: Flickr

Knowledge is the currency of power today. Land, capital and unskilled labour will not matter as much as knowledge as ‘factors of production’ beyond a point in achieving growth and prosperity.

The internet is both the manifestation of the power of knowledge, and has allowed knowledge to have so much value by interlinking vast amounts of it. In the net neutrality debate, a lot of analogies have been drawn about what the internet is, on why you should either enforce neutrality or stick to market competition. People have compared the internet to highways, to cable TV, to milk cartons, to electricity grids and to many more things. Rather than improving clarity, metaphors are distracting here – as the internet is only very poorly comparable to most other things.

A basic notion about the internet is that it is a networked good, which means that its value increases with its size. As my colleagues Karthik Shashidhar and Saurabh Chandra have pointed out, the utility of a network increases as the square of the number of nodes on it. Any barriers in this network will fragment it, and reduce the overall value of the network. It can however be argued if the size of the network needs to increase, then there needs to be sufficient private gain for the network provider. Enforcing something like net neutrality, they argue, could come against that. This logic is certainly used in many other networks including that for cable TV.

The internet is all but a public good – which means that the marginal social benefit of consuming internet services is much larger than the private benefit of doing so. Human civilisation as a whole is better off when it is more interconnected, more radically networked, and capable of doing things previously unimaginable. In that context, the internet defies comparison to any other network previously built by humanity. After proto humans manage to walk upright, the quest for knowledge has been central to their progress. Since the invention of language and of writing, the internet might be the biggest radical jump in making the quest for knowledge easier.

It is true that the internet was not always open (remember AOLnet?) and that it took a series of accidents to get us where we are today. It is also true that future networks could be even more radical and we must not constrain our imagination to what is presently possible with the internet. Many argue that sufficient competition in the network provider space can ensure network health – that regulations enforcing net neutrality are both unnecessary and counter productive. My colleague Nitin Pai in fact bats for net neutrality because the ISP market is uncompetitive in India, with high entry barriers and intense regulation.

However, if  the internet is a public good – will competition ever be sufficient to ensure the vibrancy of the network? Will competition be sufficient to improve the effective network size? I would argue that it might fall short of the mark. Thus, regulations that enforce net neutrality may be necessary to prevent ‘walled gardens’ from springing up. Competition must certainly be encouraged, but restrictions must be placed both on differential pricing of data from different sources, and of content providers from directly paying for the data their consumers use. While this will lead to a few inefficiencies, it is a necessary trade-off to keep the internet as open and flat as possible.

PS. Read the takes of Pranay Kotasthane, Gautam John, Anupam Manur, Varun Ramachandra and Devika Kher on the net neutrality debate.

PPS. Also read Deepak Shenoy on how telcos aren’t really hurting and Nikhil Pahwa‘s useful definition of net neutrality.

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Reading between the Budget lines

Five broad ideas to read the budget commentary better.

The first full budget of the NDA union government was presented in the parliament yesterday by Arun Jaitley, and today’s newspapers and news sites are replete with analysis of the budget and various sections therein. You will be reading more of them in the coming days and weeks, with praises and brickbats thrown at the numbers, with surprise, outrage and resignation at their implications.

Here is a quick guide to reading the expenditure budget with five broad ideas, and questions to ask yourselves as you continue to read the commentary.

The first idea is to think beyond budget estimates. The budget estimates for the new fiscal year tell you a lot about the government outlays and priorities for the coming year, but a lot can be learnt by looking back as well. Each budget document provides the budget estimate for the coming year (2015-16 here), the revised estimate for the previous year (2014-15) and the actual expenditures for the year before last (2013-14). Understanding where the government shaved off or reduced expenses between the budget estimate and the revised estimate (and the actuals) can reveal many government priorities that remain hidden in the budget announcement. Attributing the cause for these changes can be tricky – from changing priorities, to lack of capacity, to overestimated revenues, to many other reasons. However, understanding the pattern is a necessary first step. For example, I had found in 2013 that the Indian army finances show a consistent shift from capital to revenue expenses between budget announcements and actual expenses. A healthy and reliable budgetary process is one where the budget estimates tally closely with the revised estimates and actuals.

The second idea is to compare like with like. An article in Economic Times on science and tech funding is illustrative of a lot of misleading figures (HT: Anand Ranganathan.) To begin with, the headline claims that the entire budget allocation of 7,288 crores is a “boost” to the sector, never mind that quite a bit is allocated each year. Then it goes on to claim that there is an increase of Rs 1,793 crore over the 2014-15 budget. Turns out that this is misleading as well. The 2015-16 budget estimate is 1,793 crores larger than the 2014-15 revised estimate, an apparent increase of 32.6 percent (!) and whereas the increase over the previous budget estimate is a more modest 8.4 percent.

The third idea is to think beyond nominal increases in allocations and include inflation. Even when you compare carefully and find that there is a 10% increase in some allocation, know that most of that gets eaten up by inflation. Till this year, one had to discount about 8 to 12 percent of increases towards inflation, and it’s great that this discount has become smaller thanks reducing inflation rates. However, inflation is not constant across sectors and activities, and both wage inflation and inflation in the prices of certain goods & services can be far higher than the overall figure. In healthcare and education, for example, we often see wage inflation at consistently higher rates because productivity increase is usually slower than the rest of the economy.

Thus an 8.4 percent increase in the science & tech research budget might barely be able to stay the same in real terms, and it is certain that the budget of ISRO will actually decline after accounting for inflation.

The fourth idea is to think beyond outlays. It isn’t just the size of the budget available for a certain activity, but how that money is deployed. As Jessica Seddon explains, the budget is where the union government can reshape the State and its role in the economy, society and polity. Also – outputs and outcomes are never tracked in the budget, which only showcases outlays. Thus union ministries had started publishing ‘outcome budgets‘ from a few years ago, but unfortunately the exercise remains largely ceremonial.

Budgets can and do actually shape policymaking beyond the hard sizes of numbers, and this year’s budget is a great example of it. Accepting the 14th Finance Commission’s recommendation, the union government has agreed to devolve 42 percent of union taxes instead of 32 per cent, as an untied, unconditional award to states. Note that this is largely in lieu of “tied” grants from the union government in the form of centrally sponsored schemes. So it isn’t that the state governments have suddenly gotten a lot richer, but that they have far greater control over the deployment of resources.

This change in devolution of funds to states has made budget analysis a lot more complicated this year. There is outrage brewing that union allocations on ‘social sectors’ has reduced significantly, including how the education allocation has gone down by about 17 percent. However, sectors like health and education come under state or concurrent lists, where the implementation has always been done by states and local governments. With the greater tax devolution, state governments will be expected to allocate their own funds towards health and education, and modify schemes and policies according to their likes. This is a welcome change, even if it makes the lives of analysts a little harder.

The fifth and final idea is to ignore the artificial divide between plan and non-plan expenditures. With the dissolution of the planning commission, expectations were high that the differentiation in expenditures (and a false, implied priority for ‘plan’ expenses) would come to an end. While the 2015-16 budget fails to do this, it is no reason for people to continue paying attention to the difference. Add the numbers up and count them as one.

The more relevant distinction is between capital and revenue expenses, where the former is towards productive assets that will provide value beyond the fiscal year, and the latter towards salaries and expenses that are consumed within the year.

These five broad ideas should make for a better analysis of all expenditure budgets.

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In The Hindu: Medicines in India, For India

I write in The Hindu on what it takes to get a drug from the lab to the market. Here is the full piece along with hyperlinked references.

January marked an important breakthrough in the fight against tropical diseases. Researchers at the International Centre for Genetic Engineering and Biotechnology (ICGEB) in Delhi found a drug candidate that prevented the TB and Malaria pathogens from infecting human blood cells.

This cutting edge research took place not just in India, but for Indian challenges — whose solutions have global implications. Further, Anand Ranganathan and his colleagues did not just find this drug candidate, but also helped develop processes to develop these drug leads. It also happened thanks to a combination of a UN facility set up decades ago, attracting top global research talent to come back to India and work here. And the research was funded not just through international sources, but also a ‘Grand Challenge Programme’ on vaccines set up by the Department of Biotechnology, Government of India. Much of this success is a delayed fruit of a biotechnology push in India that started in the mid 1980s, which has gained in strength over time.

However, the discovery of the drug candidate ‘M5 synthetic peptide’ is the beginning of a long road and not the end. The process of drug discovery here is not yet complete, and has to be succeeded by more research and a host of clinical trials. Here is a plausible set of intermediate steps before a new TB or Malaria drug enters the market from the work of Ranganathan and others.

The ICGEB researchers have attempted ‘rational drug design’, where they have not only found a drug candidate, but have done so while identifying what protein target it interacts with in the body, and the mechanism it uses to prevent disease. The first steps forward for all interested researchers in the field will likely be to study further how the peptide drug candidate works, what its structure is, what the key biochemical interactions are, and how its target proteins behave.

While the drug candidate might work well in a test tube or an agar plate, its efficacy in the human body is an entirely different story. At this stage, whether the peptide can be easily absorbed by the body or be happy in blood, whether it finds the right targets, has no side effects or toxicity, are all unknown. Researchers, including those in private pharmaceuticals, can start developing variants of the M5 peptide that might have more desirable properties and have higher efficacy, and a good number of promising drug candidates might be patented by public sector researchers or pharmaceutical companies, depending on who discovers their utility.

It is after this that pre-clinical trials start on promising compounds, from tests in mammals to finally humans. Phase I clinical trials are typically about testing safety among healthy people, moving to phase II which are small trials of efficacy among patients. The last and the most expensive — Phase III, involves large, double-blind tests to determine both safety and efficacy among large groups of people.

The entire process of drug development is one of attrition, where a hundred lead compounds might trickle down to one or two medicines. It can take a decade or more, and cost in the order of a billion dollars, or 6000+ crore rupees.

Science is often described in popular retelling in a triumphalist manner, when in reality research involves many misses by researchers, incremental progress, and the eventual success of someone who stands on the shoulders of many giants.

For this process to happen, you need to have a robust research ecosystem, adequate funding, and good pipelines that ensure minimum friction in the development of drug candidates and lead compounds into medicine that you can buy at the corner shop.

The challenge in India is that tropical diseases have often been neglected by big pharmaceuticals because the size of the drug market is lower, with people having lower incomes in tropical countries. Further, companies are uncertain about intellectual property rights on essential drugs, unsure about whether they can recover high sunk costs in this inherently risky proposition. It is no surprise that big Indian corporations have stayed away from pharmaceutical R&D, finding more secure avenues for a return on their investment.

Policymakers in India will need to strike the right balance between public funding, and the role and return on private investment on drug development. Greater clarity on India’s eminent domain and compulsory licensing positions could make foreign-patented drugs more costly for India, but might spur R&D on tropical and endemic diseases in the long run.

Further, the unwritten compact in developed countries on drug development is that a thick layer of public funds pay for the basic research up to and including drug candidate discovery. It is over and above this that private pharmaceuticals come in, patent drugs and develop them.

Indian funding on basic research and drug discovery remains minuscule in comparison, with the entire Department of Biotechnology budget being lesser than 1500 crore rupees in 2014-15, or about 250 million dollars. The Government of India’s spending on drug development is broadly of the same order of magnitude of what is spent by the Gates Foundation and others on drugs for tropical diseases, and both the quality and quantity of public spending has to dramatically improve if we want more drug candidates against TB, Malaria, Dengue, Cholera and other diseases.

One way to increase the funding is to redirect extensive funds that go towards large healthcare subsidies, so that future drugs can be both better and cheaper.

India also has the opportunity to re-examine how clinical trials are governed. While we want ethical and safe practices in clinical testing, American or European regulations have accumulated some extra bureaucracy and regulations along the way. India can also set new standards on transparency so that new research is easy to discover, verify and build on.

Getting 21st century medical solutions to India’s health concerns is a long slog. The new potential cure for TB and malaria gives us a chance to think through how to develop medicines in India, and for India.

Hindu_Feb14_PavanSrinath_MedicinesFromLabtoMarketRead the article in The Hindu on their website.


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In Mint: Let India’s urban poor pay for good water

I write in Mint this week on how thinking along the lines of micro finance principles can change how we approach water pricing. Instead of an ideological stand on keeping water free, it’s better to ask how we can make clean water cheaper and more affordable for urban India’s most deprived.

In microfinance, people also acknowledge that it costs more to lend to the poor. When most people have to take a big loan from a bank, they have a steady income to show. They have a credit history. They also have assets they can pledge as surety, in case they default on the loan. The poorest of the poor don’t have salaries to showcase. They don’t have assets to pledge. The risk of defaulting on a loan is higher, and it is humane that they be allowed to default when the circumstances are dire. By allowing microfinance institutions to charge higher interest rates, the policies allow them to service these needs.

Similarly, the costs of supplying water for a city’s poor can be high. People often don’t have address proofs or any proofs of legal residence, making installing water connections harder. Getting even basic piping to reach the heart of a slum is not always cheap, given that there is hardly any road space to dig up. Maintaining pipes is even tougher. Installing and maintaining water meters is difficult, thereby making bill collection costlier.

It is highly disingenuous to ignore all these real issues and shout for a right to free water.The better approach is to ask, “how can we make water cheaper for the poorest?” And that line of thinking can birth an entirely new range of solutions.

Read the full article at Live Mint, February 13, 2015.

Live Mint e-Paper - Mint - 14 Feb 2015 - Page #11 Pavan Srinath


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India’s unusual trade pattern with the United States

Richard Rossow (via Milan Vaishnav) shared the latest US-India trade in goods data updated by the US Census Bureau.

India has a running trade deficit in goods: where it imports more goods than its exports. It is wrong to simplistically judge whether a trade deficit is good or bad – however, India does do ‘better’ when it comes to its services.

However, today this blogger learnt that the trade relationship that India has with the United States of America is quite different from that with many other big trading partners. India’s large software and services exports to the US are well-known, but India exports more goods to the US as well. Little wonder that American businesses lobby hard in Washington to be able to trade more and operate more in India.

In 2014, for the first time since 2006, India’s exports to the US are more than double its imports. It is currently unclear as to what to attribute this towards and pass judgement on whether this is a good or a bad thing. The broad trends in the two economies in the last 4 years has been one of revival and renewed growth in the United States, and faltering growth and investment in India.

India-US Trade1The timeline of imports and exports from the 1980s onwards has a few points of interest from recent years. The most prominent of these is the dip in 2009 of both Indian exports and imports, with the former affected far more than the latter. This was preceded by a sharp rise in 2007 in Indian goods imports from the US.

While Indian exports to the US bounced back since 2010, Indian goods imports plateaued in 2011 and have dropped a little in real terms since then.

The USTR website on India-US trade relations says that India’s largest goods exports to the US are precious stones (diamonds), pharmaceuticals, mineral fuel, organic chemicals and others. India’s largest goods imports are again precious stones (diamonds and gold), aircraft, machinery and optical and medical instruments.

A closer examination of export and import trends in types of goods (using the US Census Bureau’s “end use” dataset) provides the following:

1. Since 2009, the largest growth in highly traded Indian goods exports to the US as of 2013 are:
– Petroleum products, other
– Tobacco, waxes, etc
– Fish and shellfish
– Fuel oil

2. Since 2009, the largest growth in highly traded Indian goods imports from the US as of 2013 are:
– Complete military aircraft
– Gem diamonds
– Nonmonetary gold
– Newsprint
– Parts for military-type goods

3. Since 2009, the largest fall in highly traded Indian goods imports from the US as of 2013 are:
– Civilian aircraft, engines, equipment, and parts
– Chemicals-fertilizers
– Steelmaking materials
– Computers
– Drilling and oilfield equipment

I encourage readers to comment on the significance of some of these observed changes.

There’s a lot more information waiting to be unearthed from these datasets, including information on when Indian defence imports of US equipment really increased and to what extents. The defence angle is particularly interesting as the Indian ministry of defence is quite opaque in defence spending and is known to defer capital payments while making large announcements.

Readers are welcome to use the full rich XLS spreadsheet that I have compiled on all the data from the US Census Bureau relevant to the last couple of decades of India-US trade.

Addendum: The US$-Indian Rupee exchange rate has been steadily rising, making imports from the US less competitive. This could perhaps explain a part of the slump in US goods imports by India.

PS. All years used in this post are calendar years and not financial years.

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