Slides on Politics, Governance and Entrepreneurship that I shared at IIM Indore last month

1. Politics, Governance
and Entrepreneurship
Shantanu Bhagwat
IIM-Indore, 1st Sept ‘11
Satyameva-Jayate.org

2. Not to be distributed without prior consent © Shantanu Bhagwat
Why Good Governance matters
Starting up in India…
Costs more
Cumbersome laws and regulations
Poor infrastructure
…and takes up more time…
In most advanced economies, the process takes less
than a week and costs less than $100
Guess how long does it take in India…
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Why Good Governance matters
Satyameva-Jayate.org Source: http://blogs.vccircle.com/500/start-ups-in-india-must-tackle-hidden-costs/ 3

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The Politics of Poverty…
Digging Holes vs. Imparting Skills
How about helping entrepreneurs set up
businesses to create jobs instead of
guaranteeing employment?
How about investing in productive assets
rather than digging the same spot again and
again?
How about setting up a chain of vocational
schools instead?
Satyameva-Jayate.org 4

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The Politics of Poverty…
NREGA provided employment to 2.57 crore people
in ‘10-’11
But…as many as 1 crore people have been
pushed below the poverty line
as a result of food price inflation* in the six months from
Jun-Dec ‘10
Satyameva-Jayate.org Source: http://www.firstpost.com/business/why-nrega-is-turning-out-to-be-an-expensive-boondoggle-28155.html 5

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The Politics of Poverty…
Expectations of continued hand-outs
A Mai-Baap Sarkar
…and people who tend to depend rather
than become self-reliant
BUT…
No country ever become great by
encouraging & glorifying a culture of hand-
outs & entitlements
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The License-Quota Raj
First, you get a "No Objection" certificate from the Fire Department
…followed by a Health license from the Municipal Corporation
Then you need three different police clearances
one from the police station in the area where the restaurant is located
next from the police station in the area where the restaurant manager lives
..then another one from the police licensing department
Next, you apply for Tourism & Excise licenses
The Excise license is issued only after approval from the Tourism
department
Inspectors check out the premises and paste a notice at the restaurant
inviting objections from the neighborhood
This is accompanied by the beating of drums – literally
…and the process can only start once the restaurant is ready to
open
Satyameva-Jayate.org Source: http://online.wsj.com/article/SB123451653488482115.html 7

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The License-Quota Raj
..the opening of the Four Seasons (in
Mumbai) was delayed by at least 2 years
The hotel needed 165 government
permits
including a special licence for the vegetable
weighing scale in the kitchen
and one for each of the bathroom scales put
in guest rooms
Satyameva-Jayate.org Source: http://www.rediff.com/money/2008/may/07mumbai.htm 8

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The License-Quota Raj
“Entrepreneurs can expect to go through 11
steps to launch a business
…over 89 days on average
…at a cost equal to 49.5% of gross national
income per capita”
This process takes 2 days in Australia..
..and 8 days in Singapore
Satyameva-Jayate.org Source: http://indiauncut.com/iublog/article/mommy-daddy-go-away/ 9

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Corruption vs. Freedom
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Systemic Corruption…
Framing of bidding rules such that only a
very small number of firms - sometimes
only one - is eligible
One way is to tweak the eligibility criteria
by defining the norms in suspiciously precise
terms…
…or by being bafflingly vague*
Satyameva-Jayate.org * Source: http://economictimes.indiatimes.com/quickiearticleshow/8002952.cms 11

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Systemic Corruption…
Change of cut-off dates at a whim
After all the bids were in, the government
retrospectively advanced the cutoff dates…
…to ensure that only its eight favoured
companies were ultimately eligible, since
they were the ones to put in their bids before
the 'real', rather than the official closing date*
Satyameva-Jayate.org Source: http://economictimes.indiatimes.com/quickiearticleshow/8002952.cms 12

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Questions, Comments...
Jai Hind, Jai Bharat!
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