Indian economy is slipping away and the blame game has started. Indian PM has admitted that Indian economy is in bad shape and partially domestic factors are responsible. “Opposition parties, too, are responsible for the current economic mess”, he said. Whoa! FM is frustrated and the RBI governor is confident of steps he took to keep Indian economy on track. Today, August 30, 2013, The Economic Times, a leading newspaper on economy in India, has a front news item that FM and RBI governor do seem to have trust deficit: it is not about fiscal deficit or CA deficit. In my 101 economics class, I was taught that economics is the science of coordination. Professor Nash came to the conclusion, through his research-game theory, that coordination helps superior outcomes. Decisions based on asymmetric information are not efficient. Lo and behold that seems to be proven from the real world facts: coordination failure and trust deficit between RBI governor and the government have brought rupee to its knees.
Let us dig down a bit in the fiscal policy and monetary policy of our country. One of the indicators of the economic health is fiscal deficit. Is it out of control? Not really. Fiscal deficit has come down from 5.8% to 4.9%. However, current account deficit is on the increase. Currently foreign reserves do seem to be decreasing but not bottoming out. Problem certainly needs to be attended to immediately. But, let us not panic: it only adds to the strength of the monster we face. So, what do we do now? First thing first: Babus, Babas, and the Bhai Sahibs of this country must understand that it is in the larger interest and their own self long term interest that they reduce, if not totally eliminate, “asymmetric information” they spread out of design or out of ignorance. If it is out of design, it is extremely dangerous and inconsistent with democratic processes; and if it is out of ignorance, outcome is equally dangerous.
The fact of the matter is that main street people have little understanding of complex and dynamic constructions of modern world as against simple and straight economic systems of the pastoral and agrarian societies of ancient times. It is precisely the reason they fall prey to the designs of the Babus, Babas, and the Bhai Sahibs of India. Everybody deserves a fair share and a fair shot in the community. In a democratic framework, in principle, governance is for the people by the people. However, in practice, governance is by the few for the few seem to have prevailed in our country. For example, 75% of Indian citizens live a life of fewer than two dollars a day and 36% live a life of under dollar a day earnings. Do they have the ability to participate in the political processes meaningfully; can they go to the Supreme Court to fight for justice? Wealth, in India, is concentrated in a few hands. In such a scenario, it would be of interest to have a debate on the subject from a perspective of asymmetric information. It seems some Indian citizens are more equal. I have picked up the words commonly used in Indian parlance: Babus are the bureaucrats that include all services like IAS, IPS, Group A services, and all other equivalent services; Babas are the religious heads that includes Deras and self-proclaimed god men; and Bhai Sahibs are the political masters. It is not uncommon to hear that “Babus have ruined the country”. Other such main street sayings are: “Babus work in nexus with Bhai sahibs”; “Babas, the illiterates, have good time and exploit the common man”; “corruption, corruption, and corruption all around”; “what’s going on, why the heck we can’t manage our own affairs”?
The question is: why main street people jump into the jaws of social predators? Literature on economics tells us that humans are rational. How come then, rationality evaporates into thin air when it comes to raise their voice against the unreal and unscientific happenings around us? Why Babas seem to be protected by the Bhai Sahibs: Babas largely teach and preach unscientific ways of living and still get a high place in our society. There is something rotten here in the modern world of ours. We got to come out of the Stone Age. We have IITs; we have AIIMS; we have IIMs: and we do have bright young officers like Durga Shakti; and to top it all we have “A” class judiciary. We do have well-meaning leaders like Man Mohan Singh Ji. Then why the heck, people are still hungry amidst surplus food grains in India? There is certainly something wrong with governance. We got to admit it; we got to sort it out; we got to remove asymmetric information; we got to build democratic institutions where Bhai Sahibs have little role to play and Babas are taboo. This can be accomplished only by way of participation of main street people fighting away asymmetric information: Babas are just human beings (god man is unreal); Babus are paid to follow rules; and Bhai Sahibs got to be replaced with parliamentarians. In the long term, however, solution lies in our schools and universities where professors can help people to know the knowable and not to know the unreal that Babas preach; Bhai Sahibs practice; and Babus succumb. India is the only one country, which has scientific temper enshrined into its constitution and it is the one country where state actors promote Babas who preach discourse inconsistent with scientific reasoning. Isn’t it ironic?