The $2.7 Billion Boondoggle to come

Edward's post yesterday Rural Connectivity in India on the report India Plans $2.7 billion IT investment left me with a sense of despair. Since he wondered what the RISC team would feel about it, I thought it appropriate to respond even though I do not speak for Reuben or Rajesh (the other two RISC people on this blog.)

For a country to develop, resources dirtected to investment -- as opposed to consumption -- is good because it builds productive capacity and helps increase productivity. With increased productivity, a greater amount of stuff gets produced produced using the same amount of labor. Given more stuff, the average amount of stuff available per person is higher and that can be allocated to further investment and some even for greater consumption. My stating of the obvious is merely to underline the distinction between investment and consumption although they are both subsumed under the heading 'spending.' How much is the $2.7 billion spending spree is going to be investment and how much consumption is a matter of concern.

How much to allocate to investment and how much to consumption depends on the objective function of the policymakers. The private objective function of the policymakers may be quite different from the publicly stated objective function, however. After all, the Indian Government did not declare sometime after independence that their objective function was to strangle the economy and retard growth so as to extract as much rent as they could from a small set of large business houses by instituting a licence-permit-quota regime. What they said was that their objective function was to maximize growth, the eradication of poverty, the development of rural areas, the emancipation of women, the removal of caste barriers, et cetera. In short, their stated goal was little short of unleashing peace and prosperity for all and sundry, all done through the benevolence of the babus that were at the helm of affairs intent on climbing the commanding heights of the economy.

I get a feeling of impending doom every time I see yet another utopian objective function being declared and mega billions of rupees allocated for reaching that stated objective. Yet once more we will be spending huge amounts of public money. How much of it will actually be investment and how much of it will be consumption is the question. How much of it will be effectively used by the intended receipients and how much will leak out, is another question. Development is the stated goal but whose development is the critical question.

It is easy to spend $2.7 billion. Here is a break-up:

500,000 PCs (with power supplies etc.) at $1500 for a total of $750 million
MS Windows for 500,000 PCs at $300 for a total of $150 million
1 million Voice based info technology device at $500 for total of $500 million
Infrastructure for 500,000 kiosks at $2000 for a total of $1 billion
For high flying executives, for McKinsey to write fancy reports, for governemnt kickbacks
for the awarding of contracts, for old fashioned bribery, etc only $300,000,000 ($300 million).

There you have it. $2.7 already "invested" in IT to bridge the digital divide. I put invested in quote because I don't believe that it does anything for the 700 million people it is supposed to benefit. The actual beneficiaries are Microsoft (software), HP (Hardware), some local companies making the "voice based technology device" (which probably will be as useful as the mythical Simputer), McKinsey with their highly paid consultants, government bureaucrats, and politicians. It will be a party. All, except the poor, will be invited.

About 10 years P. Sainath wrote a book with the catchy title "Everybody Loves a Good Drought". He was traveling with poor migrant farm labor for some time trying to understand how they live and wrote dispatches for the Times of India. These migrant labor are the poorest of the poor. Government programs exist to help these people out -- on paper of course. Monies are spent when a district is declared hit with drought. Everybody loves it -- because the whole administrative structure can feed at the public trough. Everybody, that is, wit h the exception of the poor migrant laborers. They starve.

I think it is time to write one with the title "Everybody Loves a Good Digital Divide". I don't believe that there is a digital divide in India. Then why is it such a big hit in India? Perhaps if there is no digital divide, it is necessary to invent one so that resources can be mobilized to bridge it. And once spending is authorized, who the heck cares how much is really invested and how much is consumed.