Handout for SSI Quiz on August 31, 2011

This with-us-or-against-us is the kind of line used in the Iraq war

In this Walk the Talk on NDTV 247, Nandan Nilekani, chairman of the Unique Identification Authority, tells The Indian Express editor-in-chief Shekhar Gupta what he would say to Anna Hazare if sent as mediator that one law and a tough inspector alone cannot weed out corruption
I am not standing near India Gate or Ramlila Maidan or Jantar Mantar or any of the places from where news comes now. I am standing at Nandan Nilekanis home in New Delhi. Nandan, you are in a good place, an outsider who came inside. Until the other day you were a civil society-wala and then you came to the dark side, but it is a safe place to be right now for you. Well, I am very happy because I have been in government now for two years and it has been a great experience for me, because I think we are looking at large-scale systemic reforms, the whole idea of giving identity, and all the other things that I am involved with. And I think thats the way really to solve what people talk about today. So when you see these faces, this anger, Anna T-shirts, caps, slogans, what does it tell you? Well, these are some of the things that, you know, I wrote about in my book and what Tom Friedman and I talked about in The Flat World... Also in a column, where you wrote that middle classes all over the world are angry right now. Thats right, you are in a hyper-connected world where you have access to everything and there is technology, aspirations unleashed. So I think some of that is playing out. Because, in your book also you said that aspirations are unleashed and unless you can answer those, you could have a problem. Yeah, I think we all know that this is demographic dividend but you need to meet the aspirations of the people. And I think its happening in a big way but its always a challenge to keep up. But are we now paying for not doing an adequate job of it? No, I think things are happening. I think, when you look at this whole issue of corruption, I would look at it in a far more holistic manner. I mean there are challenges of how to deal with natural resources, and procurement, and all that the government is dealing with. But to me the real challenge is how to deal with retail corruption or how, when people meet the state for a public service, you do that in a way which is not intimidatory... Tariff card corruption. Thats right. And a lot of the work the government has asked me to work on giving identity to the people who dont have identity, making sure they can open bank accounts without any hassles, making sure that when they get their pensions or scholarships they can go to any business correspondent and withdraw money theyre all fundamentally related to changing the relationship with the individual in terms of public delivery, and to me that is the kind of reform that we need today to really fix some of these larger issues. The difference between us and a poor person in a village is that, for example, if you are not happy with the service in a particular shop, you can go to another shop you are empowered by choice, so you can spend your money where you think you can get good service whereas if you are a person whos getting rations from the PDS, you can go to only one shop because every PDS will have 500 names and your name will be one of those 500. So you are now actually held hostage, because you cant go to any other shop if that particular shop is giving you bad service. Its closed all the time and he claims he has no supplies, he gives you underweight stuff, he adulterates it, you have no recourse at all and you cant say Ill go and file a case in court. Its not practical. And therefore, I think some of the things that I am working on and I am now coming out with a report on PDS reforms in the next two to three weeks will be how to create portability of PDS where, if I cant get it in one shop, then I can go to another shop. The moment you create empowered people with choice, then the bargaining power shifts to the individual and thats how services improve. So my point is to simply get to the bottom of how to use technology, process improvement, incentive design to empower people at the point of service. So how do you look at this widespread protest now, which is more about locking people up in jail? Is it going to work? No, I am not a great believer that if you pass a law, corruption will miraculously vanish. Nor do I think that creating a huge army of policemen is going to reduce corruption. You have to go back and look at the systems. I have spent 30-35 years working on how to make systems work and you have to fundamentally analyse and improve the systems themselves and make them much more streamlined, reduce interfaces, reduce discretion, make more technology interfaces. There are ways to do these things. This is just one of the many things that we need and I dont agree that this is the only way we should be doing it. Why do you think this will not work just one tough law and having one tough uncle at the top who will watch everybody and punish people? There are multiple challenges with it. First of course is the idea of concentrating so much power in one individual, but more importantly you are creating a huge army of people who are all going to do inspection. You cant fix problems by creating more layers of inspection. You fix problems by actually looking at the root cause of why it was. Ill go back to the PDS. One of the big problems is that the price at which goods move is much less than the market price. So everybody in the system has an economic incentive to divert it. There is a huge arbitrage. Exactly. So you have to fix that arbitrage by making sure that it moves at the market price to the last point of delivery, and when the beneficiary comes and claims it, only then do you give the benefit. That automatically will reduce the diversions. Those are systemic things that one has to do. Or look at bank accounts, why is it that people in this country cant open bank accounts? Because they dont have an ID paper. If you dont have a bank account, you cant save your money. So how do you solve that problem? Because if somebody doesnt have an ID paper, does he or she get a UID? For example, the Aadhar. We have already issued 25 million Aadhars and we are finding a large number of Indians who dont have an ID paper at all. We have a concept called introducer. So an introducer is a person who is designated to introduce people who dont have documents and the minute they say I know this person this is his name, this is his date of birth... So if somebody has a maidservant or a servant at home who doesnt have an identity, then the employer can just take that person to a UID centre? No, he has to bring him to an introducer. Because introducers are named people, everybody cant be an introducer. But we have a system and I get this request everyday in Delhi my driver, my maid, my cook and all that. Through introducers you can get IDs and we also now have a regulation with the PMLA that Aadhar is a KYC Know Your Customer for all kinds of financial products.

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PMLA is Prevention of Money Laundering Act. Right. The RBI has also notified that Aadhar is a KYC to open small-value accounts. So if you have an Aadhar number, you can automatically open an account. So in a sense, what you are saying is that the answer to large-scale corruption is not just one more policing mechanism. Absolutely not. You have to do it through looking at the interface points between the individual and the state, reduce arbitrage. And get the state out of the way as much as possible. One of the things that we are working on, in which I am being directed by the Prime Minister and the Finance Minister, is electronic payments. What we are working on is, along with these Aadhar numbers, we are going to give bank accounts to everyone and we will have thousands of business correspondents around the country, which the banks are opening. What will happen then is lets say you are giving pension payment to an old person in a village. Today, the person has to go and get it from an official and so forth and it has all the consequences of that. Tomorrow, electronically, the government can send money into his bank account. Just send him a text message saying your money has come. He can walk into any business correspondent in his village and withdraw his money. He doesnt have to meet anyone. Thats the way you reduce the arbitrage. So the touchy-feely sort of element of corruption goes out. Absolutely. So what has happened in the last 10 years is that we have significantly increased our spending on public welfare. Today, if you look at direct payments of the Government of India to individuals, it is 150,000 crore. And another 150,000 crore is the spending through subsidies. So 300,000 crore is the money government spends in giving benefits to the individuals. Its two-and-a-half times thedefence budget. But the pipe to reach the people doesnt exist. What we are, and we have absolute support from the government, is about these pipes, giving people this online identity called Aadhar, opening bank accounts with them, building business correspondent networks and getting money to reach those accounts. So what are you telling all these boys and girls who are now coming out on the streets at the call of Anna Hazare with one slogan, Jan Lokpal Bill? I think that fixing the challenge, making the state much more streamlined with much less corruption, is a complex mosaic of activities. It includes other things the government is doing like auctioning natural resources, but also fixing things through technology. I fully endorse the fact that they want to address the problem of corruption but I think they should look at it in a much more strategic and holistic manner and not by just passing some one law. So this is unidimensional? Absolutely unidimensional. Are there dangers in it? Or do you think its okay, let this also happen? No. My view is that there is a Bill, which is with the Standing Committee of Parliament. And I can tell you that I have dealt with this Standing Committee. I have the UIDAI or the NIDAI Bill, which is currently with the Standing Committee on Finance. Let me tell you, this is a very very rigorous process. I have been around the world. I have visited the UK Parliament, the French Parliament, US House, Indian Parliament, I have seen everything. I cant discuss whats discussed, because thats confidential. Because committee hearings in India are not public hearings. They know what they are asking. I have been subjected to the most rigorous cross-examination in these standing committees. I am very very impressed. So when there is a Bill which the government has placed in this Standing Committee, I have full confidence that they are the appropriate authority to discuss this Bill. I think we should respect them for the work that they do. And Annas team has gone to the Standing Committee. Absolutely. Thats the place to discuss it. These people do their homework. They have asked us tonnes of questions. They come well prepared. The answer to that is, look, we are proposing a bill that if implemented properly will see half of these MPs in jail. So why would they implement it? They will stall or they will dilute it or they will produce what they call is a Lokpal Bill. See, I have worked closely with these MPs. I am very impressed with them. They are extremely hardworking, very committed and come with all the right homework. I think we should let them do their job. And you as an outsider, as a civil society wala? Since you came under the tent, has your respect for the political class gone down or gone higher? It has gone up. Thats an interesting statement. Tell me how. One could argue that there are some elements in the political system who are beyond the ethical, but thats so in every business. But they are extremely hardworking, they are very well-informed, they care about issues, they have to deal with multiplicity of their constituencies, they have to deal with Parliament, they have to deal with the party, lawmaking. Its a tough job. And a Lok Sabha MP represents maybe 2 million people. I mean, he is my representative. But there is a strong anti-politician element flavour to this movement. I think its extremely dangerous and completely wrong. I think we must respect Parliament. Mera neta chor hai? I think thats absolutely wrong. I would certainly argue vehemently against that. We must give credit to them and let them make the law. I have complete faith, with the interaction with them, that they will come to the right decision. So, if Anna Hazare said to you, Nandan Nilekani, you are a nice guy, you are not a politician yet, you are not tainted, you are just in a funny place, so come under my tent for a couple of months and advise me on what to do, what will you advise? Because my intentions are right and I want to fight corruption. People are fed up. My advice will be twofold, that specifically on this Lokpal Bill, please make all your arguments to the Standing Committee, which is the appropriate authority for this. Let them debate in Parliament and let them come up with a law and abide by the law, specifically on the Bill. And my broader thing would be, if you really want to address the issue of corruption, it is a very multidimensional mosaic of things. Come out with a plan that covers all these things, and when you look at all these issues, youll find that the Lokpal Bill is just five per cent of the problem. And 95 per cent is about governance?

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Its governance and there are multiple things. Obviously, on the big ticket side, its about natural resources, allocations through auction, procurement procedure, about discretionary powers. So are you privy to some of that? No, I am not really part of that. I am focusing more on the IT-based transformation. Also widening the pipeline. Widening the pipeline and making it electronic and automatic, so that a person gets his benefits without meeting anyone. So which other areas are you going make a difference in, besides PDS? Electronic, financial inclusion... Actually there is a corollary to that. If you are able to use a electronic way to make money reach people, then the next step would be mobile payments, which again is happening and it will take off in another two, three years. Once you have mobile payments, then more and more money will go through electronic channels. It will no longer be cash. So reducing the cash in the economy is an important part of what we have to do, so that, again, the electronification of money movement will play a big role in reducing the hold of corruption. You showed some concern about having one more policing system. What fundamental problems do you see with that? You have to fix the problem at the root of delivery. You cannot fix it by creating more inspectors. See the quality revolution which happened in Japan. Deming went to Japan in the early 50s... you dont fix cars by having more guys to inspect cars; you fix cars by making the carmaking of high quality, by removing defects in the process. The same thing applies to public governance. If you are going to be giving millions of people food or money or healthcare, you have to make the point of interaction between the individual and the state as empowering as possible for the individual. Thats hard work, roll-up-your-sleeves kind of work. And take out all discretion. Take out all discretion and bring in automation, have multiple points of delivery . There are a lot of techniques. Ill tell you of a small reform this year, the income tax refunds being paid before March 31. Scrutiny will happen when it happens. All returns came without anybody having to ask for it, 35,000 crore. If you look at 20 per cent as possible arbitrage on this, which normally a tax officer or somebody would have taken to give this refund to you, Rs 7,000 crore of arbitrage has been taken away from the system. Absolutely. The important thing is that the income tax reform in this country using technology is one of the huge untold stories. Implementation like this, tax information network, TDS at source, reconciliation... AIR... Then AIR. So in the last decade, when GDP was growing at 8 per cent, when inflation was at 7 per cent, that meant 15 per cent was our nominal GDP growth, and the tax rate collection was growing at 40 per cent, that was happening because you had built better systems. And now the same thing is going to happen in GST. Thats a very interesting thing thats happening. I met Sushil Modi [Bihar Finance Minister, heading the GST panel] last week... I am also heading the group that looks at the IT infrastructure of GST. Here again, its moving very well and one of the things is that the PAN number will be the common tax identifier for all taxes in India. For the first time in Independent India, your income tax, your customs, your excise, your service tax and your sales VAT tax will all use the same ID. Can you imagine the reduction in tax evasion that it can help... So you see, you cant claim one thing in your tax return and something else in your VAT returns. So everything that you are trying to do, from PDS to tax returns to taxation, is to basically take these spectres out of our life? Yes. It builds systems through automation, builds systems where your contact is through what you file something on the Internet or a PC or a mobile phone and streamline and create accountability and transparency, create portals where you can share data. Thats how youre going to fix this problem. The problem with all this is that, its not sexy enough. Not the kind of thing for whichj you would go with flags and sit on a dharna or a fast because you too have suffered so much because of corruption outside that you would want more and more crooks in jail, and preferably canned in front of you. I certainly think this is not the way to do it. Approach the problem systemically. Do you know any members of the Anna Hazare committee? Well I dont know him personally but yes, Ive met some of them, at least two-three of them. Like Arvind? Kiran? Arvind I have met, Kiran I have met. So whats your interaction with them been like? Well I met them before all this, so... They are nice people... I think nobody is going to argue that we should not fix the problem of corruption and I think thats not anybodys argument. But my only jpoint is twofold, One is, lets not do it through creating more and more complex laws and creating parallel bureaucracies, a super powerful guy, and expect him to be honest and create thousands of inspectors. And unleash another inspector raj. Its crazy. Also, I dont think that its some magic bullet that's going to solve the problem. You have to get into how we fundamentally deliver services to the people and the poor. You used the expression magic bullet. The Prime Minister says magic wand. Whatever. There is no quick fix. This is hard work and slogging, its a slog over, getting into details and figuring it out. If I may correct you, because you got your cricketing metaphor wrong: slog overs is when you do things quickly, and this is the first hour of the Test match. I dont watch cricket. Thats the problem. Thats the only thing on which I can speak knowledgeably, in spite of how low I feel. Somehow I thought it was the other way round. So the thing is like that . See today, we have issued 25 million Aadhars. In another year or so, we will have crossed 200 million Aadjhars. And then along with it we are opening bank accounts for these people... We are working with 64 banks to open their accounts; and for every 2,000 accounts the banks open, we are opening a business correspondent. So India is building a very radically new way to deliver electronic payments to people. That has serious benefits to everybody. And then the whole GST thing. So, when I look at whats happening, I see an unprecedentedj number of initiatives which are transformational in nature. And to me thats the big story.

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Well, that story is unfolding, Nandan, and it will keep on unfolding. But tell me in conclusion again, if you were sent out as a mediator by the government to talk to Anna because you are a trusted person, you are not tainted by politics, you are not tainted by a kind of corporate life what will you tell them as a mediator? I would say first, lets prepare a holistic action plan, which covers some 10 different areas. Lets make it a really comprehensive plan to fix these problems in the next five years. And two, there is a Parliament, a distinguished set of people in the Standingj Committee who are completely seized of this Bill, let them do their job. Do you trust them? Absolutely. And if they say, but well go there and theyll never listen to any of our arguments? I think thats completely unfair. My interactions with the Standing Committee... its a very bipartisan group. Thats the justification for not making it public. Because the moment you make it public, then everybody will stick with party positions. I have complete faith in the Standing Committee. You are not just saying it because you are inside the system now? No. Look, Ive been in this system for two years. I have kept my peace but at some point I have to stand up and say good things the system is doing. This is the time. Or the good things that the system is capable of delivering. So, in a sense, you are saying your concerns are justified, your anger is justified, your methods and your goals are not? The methods and the goals are not. A method of agitation when Parliament is seized of the issue is not correct and the goal of the Lokpal Bill is one of the 20 things I would do to really fix this problem. And that too a Lokpal Bill done from outside Parliament? Oh yes. Simply untenable. Simply untenable and dont see it happening... I mean, look, my representative is my MP and I want him to take decisions on my behalf. So tell me, as a Bangalore-wala in Delhi, its your first experience of a Delhi sort of street commotion. Yes, I guess. Its only two years. What does it make you feel, although Bangalore is not much quieter either these days? Does it tell you something, that now I know whats wrong with Delhi, whats wrong with India, the way the country is run? No, actually, it doesnt bother me at all. India is a great democracy with all these diversities. I have enjoyed and I really enjoy being a part of this change in Delhi. I think you have to get back to basics and fix things. So you will tell Annas people to go home, work on a larger agenda, for governance reform, and youll be happy, you said. No, I have spent 35 years changing systems, spent my life in the private sector as well as in the public sector. And I have done it at a level by actually getting into stuff. So I think I have a broadband view. Ill be happy to sit down and say these are the 10 or 15 things we can do. So youll be happy to sit down with them as well? Oh, yes. Look, if I can help in fixing problems, I am happy to do that. But lets have a strategic approach to all this. Not a silver bullet. This is not the way of going about it. But Nandan, Ill tell you something. Its courageous to say these things these days... To question what is now becoming a popular establishment notion is very dangerous, you know. I committed the indiscretion of pointing out what I saw as dozens of some serious flaws in the new Lokpal Bill, Jan Lokpal Bill, which I thought ushers in a dictatorship, which is neither possible constitutionally nor required in India. And for the first time in my life, I faced a question that I thought Ill never face: Mr Shekhar Gupta, are you procorrupt? Certainly, thats absolutely uncalled for this whole Are you with us? If you are not with us then you are against me the kind of argument used in the Iraq war. By George Bush. Yes. That to me is demagoguery. I am as much against corruption as anybody else. In fact, I spent my time, all my time. I gave up my job, to be here and fundamentally see how I can contribute. And I think there is a way to do it. So, I dont buy this argument that just because you have proposed a different path, that means you are against us and therefore you are pro-corruption. You know, you are breaking one more corporate stereotype, that corporates have no spine. Well, I am like an ex-corporate. Once a corporate, always a corporate. And you, in some sense, I really think, its time to stand up. And I am quite sure my view will be highly unpopular with the television cognoscenti. But you know you have to stand up for what you believe in. Well, television cognoscenti is going to watch this show as well. And sometimes its necessary to nuance a debate because there is no debate if its all going in one direction. Right. I would advise, lets all work together and come out with a holistic, strategic, comprehensive plan. There will be about 15 different lists and Ill be happy to contribute to that list, and lets all work on that. And youll be happy to work with Annas team members. Anyone. I am happy to work withanyone. Youll sit with them and work on an agenda of 10-15 points Yes, on what is the wholesale issue, retail corruption, how to fix tax evasion, how to use systems, how to use technologies, how to make the interface for the poor better. I am glad you are saying this now, Nandan, because no one can take you lightly. One learns always while having great conversations with you. And before I go away, congratulations; your daughter has decided to get married. Thats right. Thank you so much. So join the crowd of happy in-laws. Ill look forward to that.