Archive | May, 2014

Markets and Maamis

What I learnt about the state of markets in India from a conversation with my grandmother.

My maternal grandmother belongs to a rarified subset of people: she falls at the intersection of all who have read the Valmiki Ramayana in Sanskrit, and the Lord of the Rings in English. I always learn something new when I talk to her, given the five odd decades of difference in our perspectives. A recent conversation with her sparked a few thoughts on how markets work in India when I spoke to her about cotton wicks.

My grandma makes her own cotton wicks for lighting lamps. She takes a tuft of cotton, twirls it around her fingers and keeps adding cotton till there is a bushy tuft at the base and a stiff stem of cotton leading up top from it. This can be easily lowered into a variety of different lamps, doused with oil and lit aflame. With age and with softening hands, she uses a dab of water to retain her grip on the cotton.

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This sounds like a very natural thing for grandmothers to do, if you asked the average Indian grandchild. But it would also seem rather odd to an observer who has no context – why would a well-to-do old woman spend so much of her time labouring over something as simple as cotton wicks? Why would she not just buy them in the market instead? It is easy to dismiss such behaviour as the pedantry of the old, but there are often better explanations.

When asked why, my grandmother explains. Apparently the cotton wicks that are available in the market are too ‘loose’, where the wick is not tightly wound and is liable to get droopy and annoying to deal with. They also are often too thick, containing far too much cotton in the wick, leaving residues upon burning. What she makes remains far superior to what is commercially available, and she prefers to stick to that. She even goes far as lamenting how a couple of her daughters are forced to buy the inferior ones from the market.

What this actually means is that the market is not yet mature enough for cotton wicks. If the supply of cotton wicks were more sophisticated, someone would have figured out that tightly wound cotton wicks can perhaps be sold at a higher price to the discerning grandmotherly customers. It means that while the market is currently flooded by generic cotton wicks, there is the potential for the market to attract new buyers if they do two things: increase quality; and through signalling differentiate the two products. While this is true, there is also a lack of maturity on the demand side. A mature set of conumers will acknowledge that quality often demands a premium and are willing to pay for it.

This little nugget illustrates a lot of what people in India are going through while dealing with markets. Till the 90s, the Indian economy had not opened up and we used to highly regulate most markets. Incomes were also lower, whereby most families figured out how to produce a large variety of small goods that they consumed themselves. At best, they would be barters from a kind grandmother to some of her children.

As markets slowly developed, many people developed a disdain for goods that were commercially available, preferring the quality of home-crafted goods, romanticising the notion at the same time. Along with the disdain came a distrust of what the market could offer. This also means that the most discerning consumers retreated from the market, thereby making markets mature a lot slower. The notion of paying higher for better quality is being discovered rather slowly, with cost-saving being the primary reason for engaging with the market.

Forget cotton wicks, this explains the state of Indian markets in most goods – from agricultural produce to home food, Indian households prefer to consume a lot of things that they produce themselves. This retreat from markets denies people the opportunity to specialise, and reduces the amount of welfare one can gain by engaging markets.

Even my grandma readily admits that she’s much happier using clean cotton today compared to the seed-ridden, dirty cotton from a decade ago. She does not have to clean the cotton and she is happy to pay the premium for it. Here’s to hoping that Indian markets mature soon to deliver the kind of cotton wicks she wants, and more.

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Wordlens and an Indian babel fish

Varun Ramakrishna pens a guest post on what it would take to get an Indian babel fish. 

Wordlens is a company that makes an impressive translation app that was recently acquired by Google. A good step towards Douglas Adams’ fantastical Babel fish, the app lets you point your smartphone at a street sign in another language, and a translation appears on your phone’s screen, superimposed on the sign, as if the sign was always in the translated language. Currently, the app only allows translations between a few European languages.

In a nation as diverse as India where so many languages are spoken and written, often in their own unique scripts, we cannot fail to ask the question: what would it take for us to get a Wordlens for Indian languages?

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The computer vision algorithms used in Wordlens are mostly well understood and fairly straightforward. The real technical achievement is that they have managed to get these algorithms to run in real-time on the phone’s processor. The processing involves detecting the region of the image that corresponds to text, unwarping it followed by binarizing the text image to normalize for color, background and illumination and separating out each character.

Once the text has been reduced to a standard form, what remains is to use an OCR (Optical Character Recognition) engine. The OCR engine does exactly what it says – it examines a pattern and identifies any language characters that are present. An answer on the website stack-overflow by a wordlens engineer seems to suggest they use an OCR engine they developed in-house rather than a commericially available or open source implementation. This is probably because commercial and open source engines have been designed and trained to work on documents which are usually imaged in controlled conditions, while for OCR to work “in the wild” (such as reading signboards on the fly) it would probably require some modification.

With the multitude of Indian languages and scripts, it seems like an app like this would find lots of users in India. So can this be done for Indian languages?

In principle, yes. The processing required is common across all languages except for the OCR. While OCR has been around for a while and commercial OCR engines have pretty high accuracies for latin languages, there seem to be strikingly few good OCR engines for Indic languages. The gold standard open source OCR engine Tesseract originally developed at HP labs but now under Google’s patronage (they use a version on the Google Books project), supports 34 languages but no Indian language. Although there are many academic publications on indic OCR, without a robust usable implementation it is unlikely that it will reach the masses.

Our best hope at this point is probably Google. If they do decide to extend their Google Books project to Indian language books, they will need to invest in improving indic OCR, which should be easily ported to an app like wordlens.

Varun Ramakrishna is a graduate student in the Robotics Institute at Carnegie Mellon University working on making computers see. He believes that high technology can transform societies. [Email]

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Do cash transfers make people spend more on alcohol?

The most oft-cited reason in favour of in-kind subsidies against cash transfers is that the latter will make people waste the money on alcohol or other “temptation goods”. It turns out that all the evidence we have today debunks this as a myth. 

Rohit Pradhan shares a new research paper from the world bank, ‘Cash Transfers and Temptation Goods: A Review of Global Evidence‘ by David K Evans and Anna Popova. In this short paper, the authors review all empirical research on the topic to date. Since the success of Bolsa Familia and other experiments, conditional cash transfers have become an increasingly successful reform measure in welfare policy, moving away from an old idea of the state providing in-kind private goods to those considered deserving.

Cash transfers have also been slowly but unsteadily making their inroads into Indian welfare policies – with a Direct Benefits Transfer programme that was launched in January 2013. Linked to the Aadhar unique-ID system, the DBT if well implemented could bring about a welfare policy that is both more targeted and has lower delivery costs. That said, the parliament during the same UPA regime also passed a massive National Food Security Act that legislated the provision of food grains to two-thirds of India’s households. This schizophrenia awaits resolution with a new cabinet soon to be sworn in, and this paper could not have come at a better time to quash the last remaining refrain against cash transfers.

Perhaps the most persistent criticism of cash transfers is the misuse of transferred money by the beneficiaries who may spend it instead on alcohol or tobacco. These “temptation goods” could range from the frivolous to the obnoxious. The notion is that cash transfers would allow a callous husband to waste more money on booze that is meant instead for the wellbeing of a household. As the authors explain, past reports have been replete with anecdotes about the same. Without doubt, alcoholism (especially in adult men) and an iniquitous household structure have huge social costs on poor families. This cannot be dismissed or made light of. But it is also not something you can fix through lazy welfare policies, the problems are far beyond their scope.

What the authors show is that alcohol and tobacco consumption are agnostic to cash transfers – things are no better and no worse with other kinds of policies. Whether the state provides a kilogram of grain or the amount of money to buy one, it makes no difference to the household. People will continue to spend as they have, and what all transfers do is augment the income of the household. It is this aggregate effect of all cash and kind transfers that matters most. If the consumption pattern does change, it’s because of an ‘income effect‘ rather than anything else.

In-kind welfare policies for those in need are patronising, brimming with the arrogant assumption that the State knows best as to what a person or a household needs and what they should spend their money on. Now there is sound evidence to show that not only are in-kind welfare policies normatively problematic, but also hold no advantage over cash transfers, and several damning disadvantages.

You can read the full working paper here.

David K. Evans, Anna Popova ‘Cash transfers and temptation goods : a review of global evidence.’ Policy Research working paper; no. WPS 6886 (2014).

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