Join me and Milan Vaishnav for a conversation this Friday, April 24, 2026 at 10:00–11:30 AM ET / 7:30–9:00 PM IST where we will will answer and unpack these questions. Register here for the webinar.

Some interesting reading on the topic written by both of us.

My Explainer for the Indian Express on delimitation.

Milan Vaishnav and Jamie Hintson’s excellent article on this topic from 2019.

My long Substack post on delimitation from 2023 here.

It is available on all the podcast platforms. And complete transcript available here.

I learnt a lot about political economy problems from the point of view of policymakers. In the last few days since the podcast released I have received dozens of messages expressing surprise over his openness as a policymaker.

I was surprised by the surprised messages. Perhaps I have known him and his work for a long time, but I am not at all surprised by his openness to new ideas, challenges, and different points of view relevant for policymaking. I feel this is true of most of the bureaucrats and technocrats I meet in the Indian government. And I usually meet those who are working on economic policy and finance, and find they are very open to conversations and new ideas. How feasible they are and how quickly they are implemented depends on a host of other political variables.

But Dr. Nageswaran is perhaps rare even among the elite group of Indian technocrats, and not just for his openness and candor. To begin with, he reads widely, and he is an excellent writer. He has two university press books, had a long running column at Mint, and four very well written and accessible economic surveys during his tenure as CEA. He is also rare in his ability to think through pressing questions in real time. In particular, his ability to constantly update priors based on empirical evidence and approach policy questions accordingly. And also his willingness to speak with academics, entrepreneurs, policy nerds, and using their views and empirical evidence to build consensus in the policy community and government.

I really enjoyed this conversation, I hope you do too.

I lead the Indian economy program at the Mercatus Center, which, by some logic I have yet to fully trace, means I am now an AI policy person. People whose calendars are normally defended by three layers of staff want to know what I think. While flattering and bewildering, the real reason is that understanding where India is in the AI race requires learning about non-AI related policy bottlenecks. Investors evaluating challenges and opportunities, ignore the broader political economy gridlock at your own peril.

In the tradition of Indian policy ambition, this Substack will attempt to cover far more than is realistic, even as a long read.

But before that, a short primer on the Summit for those who have been living under a rock.

The AI Summit 2026

The label says AI impact, but the real centerpiece is commercial. India is courting AI businesses and unlocking massive investment, with virtually every major AI, big tech, and semiconductor CEO in attendance. Investment focus was also true of the Paris summit last year, and you can expect a lot of flashy investment announcements and curtain raisers.

This is not surprising once you know that the Government of India is hosting the summit under the IndiaAI Mission, with Ministry of Electronics and Information Technology (MeitY) in a central role. MeitY is unlike most Indian government departments, in that it is more an investment promoter than regulator. It rolls out schemes to incentivize semiconductor firms to invest, or woos Apple into setting up manufacturing in India, in addition to regulatory functions like the Information Technology Act or the Digital Personal Data Protection Act. Compare this to the Ministry of Information and Broadcasting, whose main goal is not promoting broadcasting technology or equipment or innovation. They regulate what can be broadcast, whether television shows and channels and advertisers have violated the code.

So, MeitY is more strongly indexed towards fostering an AI and AI-adjacent industry in India. This includes manufacturing chips, developing foundational models, driving adoption across sectors, supporting startups working on enterprise integration. So, their theme for this summit is not AI safety, like past summits, or regulation and equity. It is the ambition to be spoken of in the same breath as the US and China, if not today, then within a decade. More on this in the following sections.

Second, there’s the geopolitical play. India is positioning itself as the voice of the global south, this time through AI diplomacy, with around 20 heads of state and government showing up to confirm it. This is not new territory. India has led the global south across a range of issues, from helping various countries conduct fair elections (most recently Bhutan, I think), to vaccine diplomacy during Covid, to exporting India’s digital public infrastructure to African countries. AI is the latest space, and given India’s talent pool and large startup ecosystem, it has the natural advantage. Whether it is space programs, or vaccines, or elections or digital infrastructure, India has demonstrated the ability to innovate frugally, at scale, and for contexts suitable for developing countries (remember how mRNA vaccines needed cold storage and were unfeasible in countries without electrification).

And third, finally, there is the policy agenda proper, which reads like someone emptied the entire AI discourse into one schedule: indigenous foundation models, model safety, bias frameworks, data governance, ethics, adoption, biosecurity, and the full equity spectrum from AI-for-women to AI-for-reviving-extinct-languages to AI-for-the-specially-abled. I’ll begin with the last part first.

How is India thinking about AI Regulation?

India’s AI Governance Guidelines, released by MeitY and the Principal Scientific Adviser in November 2025, are the country’s attempt to answer a question every major economy is fumbling with. How do you govern a technology that changes faster than your committee can meet? The EU went first and went heavy, a binding cross-sector AI Act with tiered risk categories, compliance obligations, and a governance apparatus that could employ a small city. China took the authoritarian-efficiency route. Regulate fast, regulate specifically, and make sure the state retains control over what models can say and do. The US, characteristically, has been light touch at the federal level, leaving governance to a patchwork of executive orders, state laws, and vibes.

India, with these guidelines, has landed somewhere interesting, closer to the US in its instinct to avoid a standalone AI law, but far more deliberate in articulating why it is choosing not to regulate horizontally yet. The framework’s core bet is that India’s existing legal infrastructure (the IT Act, the Digital Personal Data Protection Act, sectoral regulators like the RBI and SEBI) can handle most AI risks if enforced properly and updated where needed.

But the November framework did not emerge from a vacuum. Three months before MeitY published its national guidelines, the Reserve Bank of India had already done much of the intellectual groundwork. The FREE-AI report, published in August 2025 by a committee constituted in December 2024, addressed AI governance specifically within the financial sector; banks, NBFCs, fintechs, insurers, payment system operators. It is narrower in scope than what followed, but it is also, in several respects, the template. The seven “sutras” that anchor the national framework (trust, people first, innovation over restraint, fairness, accountability, understandable by design, safety/resilience/sustainability) originated here. So did the structural move of organizing recommendations under parallel tracks for innovation enablement and risk mitigation. The national framework heavily borrowed the RBI’s architecture.

Underneath the sutras and pillars and the usual fog of government jargon, both documents are actually quite sensible and with an innovation-first approach. It is almost as if the experts on these committees had to hide their light-touch instincts underneath the rhetorical scaffolding that Indian policy documents require to be taken seriously. The operational logic in both is straightforward. Do not regulate the technology itself, govern its applications through the regulators who already understand those domains. Build incident databases so you learn from failures instead of pretending to prevent them through preemptive compliance theater. Use “techno-legal” mechanisms (standards, system-architecture-level controls, provenance tools) so that compliance scales without armies of auditors. Create sandboxes so regulators can see what actually goes wrong before writing rules. The explicit preference for “innovation over restraint,” listed as a core principle, rejecting the EU’s precautionary posture. Both committees looked at Brussels and decided that regulating AI the way you regulate pharmaceuticals, before you know what the side effects actually are, is a bad trade for a country where AI adoption is still nascent and unevenly distributed.

One feature of the RBI report stands out as consequential and absent from most global AI governance frameworks. The committee takes the “free” in FREE-AI rather seriously; it dedicates attention not just to freeing the financial sector from reckless AI risk, but to freeing it from the timidity of not adopting AI at all. Most frameworks spend their energy on the risks of deployment. This framework asks, what happens when institutions do not adopt AI and fall behind on fraud detection, cannot counter AI-enabled cyberattacks, and fail to reach the underserved populations that voice-enabled multilingual AI could bring into the formal financial system. The committee explicitly recommended that regulators lower compliance expectations for AI-driven financial inclusion use cases, treating affirmative action through AI as a policy priority rather than a risk to be managed. The liability framework it recommended is graded. The regulated entity remains liable to consumers for any losses, but first-time failures where the entity followed prescribed safeguards and reported promptly would not automatically trigger full supervisory penalties. A rigid liability regime that punishes every probabilistic error will cause institutions to constrain AI capabilities to the point of uselessness. The national framework proposed a hub-and-spoke institutional structure to make this sectoral model cohere.

Both documents converge on deepfakes as an urgent and tractable governance problem. The national framework recommended C2PA-style content provenance standards. The RBI report addressed deepfakes from the financial sector’s angle, noting deepfake audio and video being used to impersonate executives, bypass video KYC, and authorize fraudulent transactions. The national framework recommended watermarking, traceability, and provenance standards. Both argued that existing law, primarily the IT Act and the Bharatiya Nyaya Sanhita, was sufficient if enforced and adapted. Neither proposed new legislation.

Three months after the national framework, MeitY implemented what both documents had prescribed. The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2026, notified on February 10 and effective February 20, are the first concrete, legally binding output of the “techno-legal” philosophy. Rather than creating a standalone AI statute, the government amended the existing IT intermediary rules to define “Synthetically Generated Information,” mandate visible labeling and permanent provenance metadata on synthetic content to the extent technically feasible, require platforms to deploy automated detection tools, and compress takedown timelines to three hours for identified deepfakes and two hours for non-consensual intimate imagery. The enforcement mechanism is the one both frameworks had identified as already available. Fail the due diligence on labeling, metadata, or takedowns, and you lose immunity and the platform becomes liable under the Bharatiya Nyaya Sanhita. The carve-outs for routine editing, accessibility tools, and academic use suggest someone on the drafting team understood that overbroad definitions would catch every color-corrected photograph in the country.

Yet for all the talk of avoiding the EU model, the deepfake amendment is closer to Brussels than it appears at first brush. Mandatory labeling, provenance metadata, automated verification, loss of immunity for non-compliance. These are binding, cross-cutting obligations imposed on intermediaries with tight timelines and real penalties. The difference is that India arrived here through subordinate rule-making rather than a parliamentary statute, and it did so without the institutional infrastructure the EU has built to support enforcement. The silver lining is that these rules are easier to amend than legislation, and therefore nimbler and easier to adapt when the implementation roadblocks emerge.

And that gap between ambition and capacity is where the trouble starts. A three-hour takedown window, down from thirty-six, is aggressive by any global standard, and it applies upon receipt of a government order, not just a court order. For platforms operating at the scale of YouTube or Instagram, this compresses the window for review, legal assessment, and action to something close to automated compliance, which raises its own risks around over-removal.

The free speech implications are obvious. When the penalty for missing a government-issued deadline is losing safe harbor entirely, platforms will err on the side of removing content first and asking questions never. Government inaction compounds the problem. Much of the infrastructure that both frameworks said was prerequisite, the AI Safety Institute’s testing benchmarks, the national incident database, the content provenance standards ecosystem, is not yet operational. The rules are live before the institutional scaffolding is in place. The mandatory automated detection requirement assumes technology that reliably distinguishes synthetic from authentic content at scale, a capability that does not yet exist with the accuracy this regime demands. And here is a question that neither framework addresses.

If the concern is that government-issued takedown orders might be used selectively or politically, would it not be worth exploring whether the notices themselves could be generated or at least triaged by an algorithmic system operating under transparent criteria? If India is serious about fairness and techno-legal solutions, letting an AI flag the deepfakes and issue standardized government notices to platforms would at least reduce the surface area for discretionary bureaucratic and political overreach. It would be a fitting irony; using the technology you are trying to govern to keep the governors honest.

Yet when you step back and look at the full sequence, there is a coherence that should not be understated. The RBI built the conceptual architecture in August 2025. MeitY generalized it in November. The February 2026 deepfake amendment demonstrated that the “existing laws plus targeted amendments” model could produce binding obligations quickly when political will existed. Premature regulation in a country where most sectors are still figuring out basic digitization risks locking in rules that are either unenforceable or counterproductive. The smarter move, which this sequence attempts, is to build institutions first, regulate iteratively based on what actually goes wrong, and use standards rather than statutes as the primary compliance mechanism.

In a paper Alex Tabarrok and I wrote on premature imitation, we argued that developing countries should not import regulatory frameworks before the harm is understood or the capacity to enforce exists. In a pleasant surprise, I was informed that the paper was sent for reading to some committee members. We have been making this argument about Indian economic policy for years, and while it has not always fallen on deaf ears, I have rarely seen the principle stated this plainly in an official document. That the idea may have landed most clearly in AI governance, of all places, is the kind of plot twist I did not see coming. Then again, AI may be the one domain where the case against premature regulation does not need an economist to make it. The technology moves fast enough to make the point on its own.

The most pressing problem will be AI agents. Both reports discuss it, but the RBI report does the real work. It states that entities deploying AI systems should be accountable for the decisions of those systems regardless of the level of autonomy. You deployed it, you own the outcome. More importantly, it thinks through what agent autonomy actually looks like in finance. It names the emerging Model Context Protocol and Agent-to-Agent communication frameworks and imagines AI agents representing borrowers negotiating with AI-enabled lenders across interoperable systems. It flags the risk of autonomous AI collusion, where agents in high-frequency trading or dynamic pricing environments optimize toward supra-competitive prices without any human directing them to do so, potentially breaching market conduct rules written for humans. Its recommendation for comprehensive governance across the full AI model lifecycle includes human oversight specifically for autonomous and high-risk applications. And its graded liability framework, which tempers penalties for first-time failures where safeguards were followed and reporting was prompt, matters precisely because without that concession no regulated entity will deploy an autonomous system that can surprise it.

The national framework is thinner on this question. It acknowledges that AI is now “probabilistic, generative, agentic, and adaptive.” It defines agentic AI in its glossary. It lists loss of control as a risk category. But its liability treatment applies identically to a chatbot answering customer queries and an agent independently executing trades. It does not distinguish between AI that assists human decisions and AI that acts on its own. The RBI report does. For financial institutions, individual regulators like RBI, SEBI, and IRDAI will each have to confront and fine-tune this question.

No jurisdiction has settled who pays when an AI agent causes harm. The EU distributes obligations across the value chain, with providers bearing the heaviest burden and deployers responsible for human oversight and incident reporting, but the proposed AI Liability Directive that would have created civil liability rules was withdrawn in October 2025. The revised Product Liability Directive classifies AI systems as products subject to strict liability, though it was not designed with autonomous agents in mind. The United States has no federal AI liability framework. Liability runs through existing tort law applied state by state, with courts only beginning to explore agency-law principles for AI.

India sits between the two. Indian courts are not run by agentic AI and are legendary for their decades-long human delays. Like the EU, these reports assign obligations before harm occurs rather than relying on post-hoc litigation. Like the US, India has chosen soft law over binding regulation. But the RBI’s position is more concentrated than either, and will set the tone for other regulators. The deploying entity is accountable, period. No role-shifting, no provider-deployer split, no complex allocation question. Strict liability here is the more sensible bright-line rule, reminiscent of Epstein’s Simple Rules for a Complex World or Rizzo’s Law Amid Flux frameworks, and will allow firms to price and adjust their exposure. I will have more to say on bright-line rules and AI agent liability later, like what happens if the entity that deployed the agents can’t be traced etc. But for now, government reports recommending simplicity is a feature when the technology is moving fast and the institutions enforcing the rules are still being built. Indian regulators still manage to botch things up with outrageous penalties, but hopefully good sense prevails.

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Does India have Foundational models?

In June 2023, Sam Altman visited New Delhi and was asked whether an Indian startup with $10 million could build a foundational AI model. He said it was “totally hopeless” to compete with OpenAI on training foundation models. At that point, frontier models cost hundreds of millions to train. Ten million wouldn’t get you close. But the remark landed broader than intended. It became shorthand for a prevailing assumption: foundational AI was a game for a few well-capitalized American companies, and if you weren’t one of them, you were a consumer, not a builder. India’s IT minister pushed back. Others conceded the point quietly. India hadn’t built a global operating system, a browser, or cloud infrastructure. The gap in compute, capital, and talent was not a talking point. It was a fact. Altman later clarified he’d meant the $10 million budget specifically. But the underlying assumption had been stated plainly enough to stick.

That assumption cracked in January 2025. China’s DeepSeek released a reasoning model that, on some counts, matched or exceeded OpenAI’s o1 on key benchmarks at a reported training cost of under $6 million, using Nvidia chips that US export controls were supposed to have rendered insufficient. DeepSeek showed that algorithmic innovation, mixture-of-experts architecture, inference-time compute, could substitute for brute-force spending. The idea that only billion-dollar American labs could build frontier models became harder to defend overnight.

France had already been moving. Mistral AI, founded in Paris in 2023 by former DeepMind and Meta researchers, released open-weight models that were not frontier-competitive on every benchmark. They didn’t need to be. They gave European governments something they could run locally, fine-tune for their own languages, and audit. The French government and private sector backed Mistral and attracted data center investment from the UAE. Macron called it the “third way.” Not American, not Chinese. The point was never to beat GPT. It was to avoid permanent dependence on it.

Then everybody wanted one. South Korea picked five teams to build a national foundation model by 2027. Saudi Arabia created HUMAIN, a state effort to build Arabic multimodal models. The UAE partnered with Microsoft and OpenAI and declared it would become the world’s first AI-native government by 2027. Singapore and Japan started open-sourcing local-language models. The logic was the same everywhere. If your government runs on someone else’s AI, your government runs at someone else’s discretion.

Now back to India. Sarvam AI was founded in 2023 by Vivek Raghavan and Pratyush Kumar. The Indian government selected it under the IndiaAI Mission to build the country’s first sovereign large language model. In mid-2025, Sarvam released its first language model which was a fine-tuned version of Mistral Small. For a company backed by tens of millions in government funding, this was underwhelming. The criticism was sharp. The online ridicule was extensive.

By February 2026, the story changed. Not because Sarvam built a better chatbot. It didn’t try to. It built task-specific models for India’s messy, multilingual, paper-heavy reality.

The standout is Sarvam Vision, a 3-billion-parameter model built for document intelligence. On the benchmarks Sarvam reports, olmOCR-Bench, it scored 84.3 percent accuracy. Google Gemini 3 Pro scored 82.0. OpenAI’s GPT 5.2 scored 69.8. On documents with complex layouts and non-Latin scripts the gap widened. On OmniDocBench v1.5 Sarvam scored 93.28 percent, handling scanned pages, tables, and mathematical expressions better than models many times its size. In speech recognition, Saaras V3 hit a word error rate of 19.3 percent on IndicVoices, a benchmark covering the ten most spoken Indian languages. That beat Gemini 3 Pro, GPT-4o Transcribe, Deepgram Nova-3, and ElevenLabs Scribe v2. In text-to-speech, Bulbul V3 produces natural-sounding output across 11 Indian languages with over 35 voice options.

But these results need framing. Sarvam’s models are trained narrowly on documents and Indian languages. On general reasoning, coding, and world knowledge, ChatGPT and Gemini still outperform it comfortably. A technology publication tested Sarvam on translation and found factual errors in a Telugu news paragraph that ChatGPT and Gemini handled without trouble. Sarvam is very good at what it does. What it does is not what most people mean when they say AI.

Sarvam does not sit in the same category as GPT, Gemini, or Claude. It was never designed to. In OCR, document parsing, and Indic speech it is ahead, sometimes by wide margins. Everywhere else it is not in the conversation. The earlier criticism has faded, but the fundamental question remains open. The company’s next move is a 120-billion-parameter sovereign model trained on over 17 trillion tokens, with 17 to 20 percent Indian data. That model, not the specialized tools, is the real test.

What counts as foundational is decided by users and markets, not by researchers or ministers or even Twitter trolls. Until an Indian model is adopted globally and competes across general-purpose benchmarks, it will not be considered in the same league. That is not a judgment about Indian talent. It is how technology markets work. Nobody cares where a model was trained. They care whether it works. Sarvam’s success is real. But it is success in a niche. And niches, however valuable, do not rewrite the hierarchy of global AI.

That said, it is very early. India has a pattern of showing up in domains where it was written off. It produced vaccines at scale, and exported them to the global south, when Western pharmaceutical companies said it couldn’t be done and struggled with their own distribution channels in developed countries. India’s space program reached Mars for less than the production budget of a Hollywood film about Mars. Constraints force ingenuity. Small budgets force focus. And a large domestic market with high cell phone penetration and an indigenous tech stack, means Indian firms don’t need the world to validate their product before it becomes viable.

Is it possible that building highly specific, linguistically grounded, cost-efficient models turns out to be the smarter long-term strategy? India has the scale, the data, and the market to sustain that bet. Whether it pays off is a question the next two years will answer. But despite the fanfare and the launches at the Summit, Indian models are not there yet.

The Chip Subsidy Nobody Can Claim

Last year, Tata Electronics discovered that the soil at its semiconductor fab site in Dholera, Gujarat, was too soft. The ₹91,000 crore ($10.11 billion) facility, the first large-scale chip fabrication plant under the flagship of the India Semiconductor Mission, had to be redesigned from the foundations up. The land was reclaimed. The soil was clay-heavy, saline, silty. It could not support a precision manufacturing facility that requires near-zero vibration. Tata brought in Fugro and two other geotechnical firms. Construction on the revised design began months late.

Why Dholera? Gujarat was the first state to announce a dedicated semiconductor policy, with generous subsidies on land and power. It promised reliable electricity and water. These are real advantages. But Gujarat is also the Prime Minister’s home state, and nearly every major semiconductor investment approved under the India Semiconductor Mission has landed there, in what many in the industry believe was a top-down decision. Tata, to its credit, chose Dholera in part for these practical reasons like the electricity subsidy. But a semiconductor fab is not a warehouse. It requires geological stability, ultra-pure water systems, and chemical supply chains that do not yet exist in Dholera. When political incentives determine where factories go, instead of engineers and entrepreneurs, you get buildings on soil that cannot hold them.

This is not a story about bad luck. It is a story about what actually constrains India’s AI ambitions. Not the things the policy conversation focuses on, chips import policy, model safety, bias frameworks, data governance, regulatory architecture, but the physical, institutional, and political economy problems that determine whether anything gets built at all.

The PLI scheme is India’s marquee industrial policy instrument. The government has budgeted ₹1.97 lakh crore ($21.89 billion) across fourteen sectors, offering production-linked incentives to manufacturers who meet investment and output targets. For semiconductors, the India Semiconductor Mission covers up to 50 percent of project cost for fabs and assembly facilities. On paper, this is generous. In practice, the money is not reaching firms. Through September 2025, actual disbursements stood at ₹23,946 crore ($2.66 billion), 12 percent of the total budgeted outlay. Some reports suggest that only 37 percent of production targets had been met by October 2024. Samsung waited years to receive ₹500 crore ($55.56 million) for FY2021 because of documentation discrepancies. By July 2025, the government stated that 72 startups had been approved, and that 23 firms/startups were sanctioned financial support under the Design Linked Incentive scheme, where again, details are murky and it seems only part of the funds have been disbursed.

The problem is not that firms do not want the subsidies. It is that the compliance machinery required to claim them is itself the barrier. Disbursements require quarterly review reports, project certifications, No-Lien Account management, and inter-departmental coordination that frequently breaks down. Even Samsung got tangled in the paperwork. MSMEs and startups have little chance. The government identifies a problem, creates an incentive, and then wraps it in procedural requirements so heavy that firms cannot access it. Raising the budget does nothing if the bottleneck is the application form.

The technical constraints go deeper. TSMC, which fabricates leading-edge AI chips, declined India’s invitation to build a fab. Dholera, even once the soil is sorted, will produce chips at 28nm to 110nm process nodes. These are mature nodes, useful for automotive and IoT but irrelevant to frontier AI, which runs on 3nm and 5nm silicon. India has no facility planned, announced, or remotely plausible for the chips that actually train large language models. The target for first commercial wafers has shifted to what company executives now describe as mid-2027 for trial production. Gartner analysts assess the fab is unlikely to reach full capacity by 2030.

The broader ecosystem is simply absent. Cutting-edge fabs need EUV lithography machines from ASML, which are subject to controls, specialized chemical supply chains, and thousands of process engineers with tacit knowledge built over a decade. The new PLI for electronic components, ₹22,919 crore ($2.55 billion) raised to ₹40,000 crore ($4.44 billion) in Budget 2026, targets PCBs, capacitors, and resistors. The lowest tier of the value chain.

So what should India actually do? Start with the binding constraints. Reliable electricity, industrial-grade water, and rational and certain tax policy, low friction land markets, are not AI and semiconductor problems. They are problems that affect every manufacturing sector in India, and they have been problems for decades. No amount of subsidy engineering will produce a manufacturing ecosystem on top of broken infrastructure. These are reforms that benefit every sector, which is precisely why they should come first. It’s a lesson for MeitY, there is only so much it can do alone, without coordinating with other ministries at the union level, and encouraging state level permitting reforms.

And then there is the thing India should be doing right now, with urgency, because it already has the advantage. India has 20 percent of the world’s semiconductor design engineers. AMD, NXP, Qualcomm, and Intel all maintain design centers here. This is not a marginal position. It is an enormous comparative advantage, and India is doing remarkably little with it. Thirty-two startups reached by the Design Linked Incentive scheme is not a rounding error in a country with this much talent; it is a policy failure.

India should be building partnerships that connect its design base to global fabrication capacity, creating commercial pathways for Indian chip design firms to tape out at TSMC, Samsung, and GlobalFoundries, and making it trivially easy for startups working on RISC-V architectures, AI accelerators, and edge computing chips to access capital and fab time. Design is where Indian engineers already operate at the frontier. The goal should be to turn that into Indian companies at the frontier, not wait a decade for a fab that produces chips three generations behind.

Can India Power Its AI Ambitions?

If there is a single domain where India’s AI ambitions will succeed or fail, it is energy. And energy in India is not a technology problem. It is a political economy problem, arguably the most intractable one the country faces.

India’s peak electricity demand hit 250 GW in May 2024, up from 143 GW a decade earlier. The IEA forecasts 6.3 percent annual growth through 2027, faster than any major economy. Cooling demand alone could reach 140 GW of peak load by 2030. One number captures the trajectory. For each incremental degree in daily average temperature, peak demand now rises by more than 7 GW. In 2019 the figure was half that. India is getting hotter, richer, and more electricity-hungry simultaneously.

State-controlled distribution companies have accumulated $83.7 billion in debt because energy prices have been politically distorted for decades. Over 50 GW of renewable capacity sits underutilized. About 60 GW is stranded behind inadequate transmission. The shortage is financial and infrastructural, not resource-based. Without reforming distribution pricing, governance, and grid investment ($50 billion estimated by 2035), new renewable capacity will not become reliable electricity. It will become another line item on a DISCOM balance sheet no one wants to read.

India’s electricity reaches consumers through 72 distribution companies, 44 of them state-owned, collectively the most financially distressed utilities in the world. Accumulated losses stood at ₹6.92 trillion ($76.89 billion) as of March 2024, rising every year despite five government bailouts since 2002.

Three reasons, each reinforcing the others.

The first is political subsidies. State governments compete to offer free or cheap electricity to farmers and households. This is not a policy quirk. It is how elections are won. Of 26 states with subsidy programs, only 16 disbursed the full amount in 2023-24. The rest left DISCOMs to absorb the gap. Nominally independent state regulatory commissions routinely defer to state governments on price. When New Delhi pushes cost-reflective pricing and a state promises free power, free power wins. Some states have gone years without a tariff revision. The distribution deficit widened to ₹79,000 crore ($8.78 billion) in FY2023, nearly double the year before. The result is that electricity, when available, powers the least productive sector and depletes groundwater.

The next distortion comes with cross-subsidization. Industrial and commercial consumers pay well above cost of supply. The surplus subsidizes agriculture and households. NITI Aayog has found that in many states, cross-subsidies exceed the policy limit of ±20 percent of average cost. The customers who consume the most and pay the most per unit, exactly the category that includes data centers, face the highest price per unit, and have the strongest incentive to leave the DISCOM system entirely.

And finally, theft. Aggregate technical and commercial losses run 15 to 17 percent nationally against a global average of 8 percent. In Bihar, Jharkhand, and Uttar Pradesh, losses exceed 25 percent. Theft alone costs ₹1.32 lakh crore ($14.67 billion) annually, the highest in the world. In Punjab, 92 percent of agricultural consumers are unmetered. DISCOMs classify stolen electricity as “agricultural consumption” because without meters, nobody can prove otherwise.

Now add the demand from new data centers. Installed capacity is expected to grow from 1.5 GW in 2025 to 8 or 9 GW by 2030. Each gigawatt-scale facility consumes as much as an aluminum smelter and requires 99.99 percent uptime, a standard India’s grid has never been built to meet.

Data center operators have two alternatives to DISCOM supply. Open access means buying from third-party generators and wheeling power through the network. Captive power means building your own generation.

Open access should work in theory. Solar prices are among the world’s lowest, frequently below ₹3 ($0.03) per kilowatt-hour. A Mumbai data center could contract with a Rajasthan solar developer and wheel the power over. In practice, DISCOMs charge cross-subsidy surcharges on open-access consumers to recoup lost revenue. These were supposed to decline. They have increased. Transaction volumes have fallen relative to total generation despite growing participation. The policy meant to enable competition has been captured by the entities it was meant to discipline.

Captive power has become the escape route. About 70 percent of industrial exits from DISCOM supply go captive because Section 42(2) of the Electricity Act, upheld by the Supreme Court, exempts them from cross-subsidy surcharges. Captive runs roughly 30 percent cheaper. But each user must hold at least 26 percent equity in the generating plant, land near data center clusters is scarce, and rules differ by state.

For hyperscale facilities needing 200 to 500 MW of uninterrupted power, none of these paths is clean. DISCOMs have been insolvent for decades. Open access is surcharge-laden. Captive requires equity and land that may not exist nearby. Reliance’s Jamnagar campus plans to run on renewable hydrogen to bypass the entire system. Most operators do not have Reliance’s resources.

Some states have crafted targeted fixes. Karnataka offers industrial prices for data centers sourcing 30 percent renewables. Tamil Nadu exempts electricity duties on captive consumption for five years. Haryana exempts them for twenty. Maharashtra allows green energy distribution licenses within data center parks. But their very existence illustrates the problem. The binding constraint is not at the central policy level, where the 21-year tax holiday lives, but at the state level, where tariffs, surcharges, and grid connections are determined. A national AI infrastructure ambition that depends on 28 separate state electricity commissions, each reflecting different political pressures, is a system where what binds changes at every state border.

The 2026 Budget’s 21-year tax holiday is the most aggressive fiscal incentive in the global data center market, a real reform. But it does not fix DISCOM balance sheets, eliminate cross-subsidy surcharges, or build the transmission corridor from Rajasthan’s solar parks to Mumbai’s data centers. It lowers the cost of successful operation without changing the probability that 500 megawatts of reliable power can be delivered. Even in the West, where chronic shortages do not exist, communities are protesting data centers driving up electricity prices. In India, rationalizing electricity prices does not mean a letter to the editor. It means another farmers’ protest.

Can India Go Nuclear?

The answer should be nuclear energy. India has pursued civil nuclear power since the historic Manmohan Singh-George Bush deal. But a botched liability regime, public fear of nuclear accidents, and India’s lack of state capacity to regulate have kept it marginal. The tide may be turning.

The SHANTI Act, passed December 18, 2025, with Presidential assent two days later, is probably the most important single reform in India’s AI infrastructure story. It will take a decade to prove it.

The backstory matters. India’s nuclear sector had been a state monopoly since independence. Only NPCIL could build and operate commercial reactors. More critically, the Civil Liability for Nuclear Damage Act of 2010, enacted after the US-India nuclear deal, allowed operators to seek recourse against equipment suppliers. India was the only country in the world with this provision. It was born of legitimate post-Bhopal anxiety about industrial disasters. Its practical effect was to make India uninvestable for every major reactor vendor on earth. EDF’s six-reactor Jaitapur project stalled. GE stalled. Westinghouse stalled. For fifteen years, supplier liability was the binding constraint on Indian nuclear energy. Everything else, site preparation, fuel sourcing, grid planning, was moot because no foreign company would sell India a reactor.

The SHANTI Act removed this constraint entirely. It eliminates supplier liability. It replaces the flat ₹1,500 crore ($166.67 million) operator liability cap with a graded framework linked to reactor size, up to ₹3,000 crore ($333.33 million) for large reactors. It permits private companies to participate in plant operations and equipment manufacturing. It gives statutory independence to the Atomic Energy Regulatory Board. Six major industrial groups, Hindalco, Jindal, Tata Power, Reliance, JSW, and Adani, have responded to NPCIL’s first-ever Request for Proposals for private nuclear construction. A ₹20,000 crore ($2.22 billion) Nuclear Energy Mission funds small modular reactor R&D.

Nuclear matters for AI because it is the only proven source of firm, round-the-clock, zero-carbon baseload power at the scale data centers need. India’s current nuclear capacity is 8.8 GW from 24 reactors. The target is 100 GW by 2047.

The problem is what comes after the legislation. India’s nuclear execution record is among the worst of any nuclear nation. Construction of the Prototype Fast Breeder Reactor at Kalpakkam began in 2004 with a 2010 completion target. It began fuel loading in October 2025, fifteen years late. Construction timelines routinely double. Scaling from 8 GW to 100 GW means building 4 to 5 GW per year, a pace India has never sustained. The AERB, now tasked with regulating private nuclear operators, has spent its entire history as a modest intra-governmental body. Whether it can oversee multiple private companies deploying new reactor designs at unprecedented speed is genuinely unknown.

The SHANTI Act solved the constraint that had been binding for fifteen years. The moment it did, the next one appeared. Execution speed and regulatory capacity. This is what reforms do. They remove one set of constraints and you discover the next binding constraint.

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India’s Startup Ecosystem

India has one of the highest‑funded tech startup ecosystems globally (ranked third in 2025 by equity funding). I know this firsthand through my work with Emergent Ventures. I supported space tech and deep tech startups five years ago, before it became fashionable and part of any government scheme or agenda. Those space startups emerged not because the government launched a new scheme but because it got out of the way and liberalized the sector to allow private entry in 2020. Startups want early investment that is quick, flexible, and unbureaucratic. Drown them in paperwork to get a grant, and you do more harm than good.

For startups, the entities that in every other major AI ecosystem do the most consequential foundational model work, India’s constraints go beyond talent. They are capital, compute, and a tax regime that punishes the upside for investors. Private capital and venture funding had driven the AI agenda, but in India, uncertainty looms large.

In January 2026, the Supreme Court ruled that Tiger Global’s $1.6 billion stake sale from selling its Flipkart stake to Walmart in 2018 was taxable in India. Tiger Global had routed the investment through Mauritius-based entities, as virtually every major foreign fund investing in Indian startups had done for two decades. The India-Mauritius Double Taxation Avoidance Agreement had historically exempted such gains. An amendment removed the exemption going forward from April 1, 2017, but grandfathered earlier deals. Tiger Global’s Flipkart shares were acquired before the cutoff. The Delhi High Court agreed in August 2024 that the gains were exempt. The Supreme Court reversed. It found that Tiger Global’s Mauritius entities lacked genuine economic substance, that real decision-making rested with individuals in the United States, not nominal directors in Mauritius, and invoked India’s General Anti-Avoidance Rules (GAAR) to hold that a valid Tax Residency Certificate is necessary but not sufficient to claim treaty benefits.

The legal reasoning is thinly defensible. Tiger Global’s Mauritius entities were flimsy structures. Substance-over-form is a legitimate principle in tax law. But the government did not simply close a loophole for the future. It taxed enormous gains made in good faith under rules that existed when the investment was made. In fact, it knowingly went after a very profitable firm that completed the sale within the grandfathered period. And it did not stop with Tiger Global. Within weeks, the Income Tax Department issued notices to at least seven other foreign VC and PE firms, seeking detailed information about their Mauritius and Singapore operations. The ruling could set a precedent for tax probes on high-frequency trading firms as well. Every major foreign fund now faces increased scrutiny on offshore holding structures and must demonstrate commercial substance beyond documentation.

Tiger Global was not a marginal player. It backed Flipkart as early as 2009, and between 2013 and 2021 it invested in Razorpay, Dream11, Groww, Meesho, ShareChat, and dozens of other Indian startups. As of late 2025, it held stakes in 20 to 30 active Indian companies valued at an estimated $2 to $4 billion. Mauritius share of FDI equity inflows to India between Jan 2000–Dec 2024 is 24.85 percent!

This is the pattern that now constitutes a known risk factor. One arm of the Indian government woos foreign investors. The headlines say India has changed, there is money to be made, there is ease of business, opportunity. The whole Prime Ministerial roadshow and trade machinery runs on this pitch. But the moment a fund or investor makes serious money in India, the tax department comes after the profits. If it goes to litigation, the courts apply what is legally defensible rather than what is economically sensible. By then a decade has passed and no one in government connects the court ruling to the original headline that brought the capital in. Except it has now happened often enough that everyone outside India can connect it.

It is the number one question I am asked about India by foreign investors.

The retrospective tax amendment of 2012 targeted Vodafone’s acquisition of Hutchison’s Indian telecom assets, imposing capital gains tax on a transaction that predated the law. It took nearly a decade, an international arbitration loss, and a 2021 legislative reversal to undo the damage. The angel tax, Section 56(2)(viib) of the Income Tax Act, also introduced in 2012 to combat money laundering, taxed startups on the difference between capital raised and the government’s assessment of fair market value. In 2023, the government extended it to foreign investors, hitting the ecosystem during the worst funding winter in a decade. It was finally abolished in Budget 2024, effective FY 2025-26. Each episode reinforces the same signal. India’s tax regime is unpredictable, and gains that appear exempt today may be taxed tomorrow.

Private venture capital built OpenAI, Anthropic, Mistral, and every other frontier AI company. That capital becomes harder to attract when the tax treatment of exits is uncertain. Indian startup funding fell to $10.5 billion in 2025, down 17 percent from the year before. The funding winter that began in 2022 has not fully thawed. Foreign funds that once wrote large checks into Indian AI companies now price in regulatory and tax risk that their competitors in the US, UK, and France do not face. The result is that Indian AI startups increasingly depend on the government for what private capital would otherwise provide.

The Indian government has built a two-channel public-capital stack. The first channel is the Startup India Fund of Funds 2.0, ₹10,000 crore ($1.11 billion) approved by the Union Cabinet as of mid-February 2026 to mobilize venture capital and support deep tech, tech-driven manufacturing, and early-growth startups. This sits under the Ministry of Commerce and Industry, not MeitY.

The second channel is MeitY’s own targeted programs. SAMRIDH, a co-funding model routed through accelerators that matches funding to startups up to ₹40 lakh ($44,444), is meant to de-risk early commercialization and make startups more legible to private investors. GENESIS is oriented toward scaling technology startups beyond metro hubs. The Electronics Development Fund (EDF), the most VC-native MeitY pathway, invests through venture funds rather than picking startups directly and has deployed capital across multiple funds supporting startups in AI, robotics, cybersecurity, and drones.

Beyond this, the IndiaAI Mission offers subsidies of 40 percent for general AI workloads and 100 percent compute for certain foundational model development. The GPU cluster has exceeded 38,000 units, available at ₹65 ($0.72) per hour, a fraction of commercial cloud rates. Initially four startups, Sarvam AI, Soket AI, Gnani AI, and Gan AI, were selected from 67 applicants (out of 506 proposals submitted) to build foundational models. Sarvam received 4,096 NVIDIA H100 GPUs and a compute subsidy of ₹98.68 crore ($10.96 million). By Feb 2026, the number of startups selected increased from four to twelve.

These are real resources. But the terms reveal the difference between government and private capital.

The IndiaAI Mission’s funding is structured as compute-for-equity, with a central government body taking an equity stake in Sarvam AI in exchange for compute resources. The model was initially not going to be open-sourced, raising the obvious question of whether public funds should produce proprietary technology, until public pressure from founders and open-source advocates forced a reversal. Access to the compute portal requires registration through government identity systems (DigiLocker, Parichay, ePramaan), submission of a project proposal to a Project Management Evaluation Committee, and approval based on criteria including “projects of national importance.” The Takshashila report warned that few projects would qualify and that bureaucratic friction would leave compute capacity underutilized.

Mistral raised €385 million in a Series A without a government committee evaluating whether its project served national importance. Anthropic raised $450 million Series C led by Spark Capital with Google without surrendering equity to a federal agency. These companies could do this because private capital markets in the US and Europe function with tax certainty. Investors know how exits will be taxed, treaty structures are respected, and gains are not retrospectively reclassified.

Startups will take grant money. Of course they will. But a ₹40 lakh ($44,444) SAMRIDH match or a compute subsidy does not shape a business. A venture fund does not require quarterly compliance reports or project proposals evaluated by committee. It does not take equity in exchange for cloud credits. It does not impose conditions about which datasets must be used or whether models must serve “national importance.” It writes a check, takes a board seat, and helps, or at the very least, lets the founders build. In a field where the technology changes every six months, the flexibility differential between government and private funding is the binding constraint.

Grants also quietly turn founders into part-time bureaucrats. The Financial Times reported companies spending up to 3,000 hours per application to access the EU Innovation Fund. The U.S. Government Accountability Office has warned that paperwork burdens redirect resources away from productive activity, especially for small businesses that lack spare staff to absorb compliance. The constraint is not ideas but attention. Worse, grant incentives push startups toward measurable proxies that committees can score, such as patents, certifications, and milestone narratives written for evaluators rather than customers.

India’s own startup schemes are a case in point. DPIIT recognition, state startup cells, and various MeitY programs all incentivize patent filing through fee rebates, expedited examination, and reimbursement of filing costs. The result is predictable. Startups file patents to satisfy grant criteria and then abandon them, because the patents were never meant to protect a product. They were meant to check a box.

A 2024 study of a Chinese tax incentive tied to “high-tech enterprise” certification found the same pattern, evidence of strategic patenting behavior around certification events, filings rising because filings were rewarded. Recent Harvard Business School research on the U.S. Small Business Innovation Research program emphasizes that SBIR-backed businesses pursue fundamentally different strategies than venture-backed firms, reflecting that the programs are designed around different frictions.

That difference can be fine for public goals like spillovers and national needs. But it means founders chasing grants drift into a parallel universe where the customer is the application reviewer. Grants are optimized for accountability to the state, not accountability to the market. The paperwork is the price, and the patent-chasing is the predictable gaming of whatever metrics the bureaucracy can count.

What shapes a business is talent, market, and certainty that when money is made it will not be expropriated. No grant program, however well designed, substitutes for the $50 million Series B that lets a foundational model company hire the researchers and buy the compute to actually compete. That money comes from private venture capital. And private venture capital requires something the Indian government has repeatedly failed to provide, which is predictability. Not low taxes, necessarily. Just the confidence that the rules in place when an investment is made will still be the rules when the returns come in.

India’s Got Talent

None of this means India lacks the talent. The opposite is true, and the advantage is more specific than people realize.

Indian IT services companies and engineers have not just built outsourcing operations. They have built globally competitive IT and SaaS businesses and, more importantly, they have spent decades doing the work that most AI commentary treats as an afterthought. Enterprise software integration. Connecting legacy systems, handling edge cases, building middleware, managing the messy plumbing between what a product does in a demo and what it does inside a bank or a hospital or a supply chain. This is the bread and butter of Indian engineering, and it is about to become the bottleneck for AI everywhere.

The pattern is now familiar. A new foundational model appears, benchmarks improve, commentators declare that everything will change. And then the model has to be deployed inside an actual enterprise, with actual liability exposure, actual regulatory constraints, actual legacy databases, and thousands of special cases that no training run anticipated. Deploying AI in the real world will require a vast amount of integration work, sandboxing for liability, niche customization, and human-in-the-loop oversight. And it is true that a lot of the integration will be code that humans write using AI models, we are not yet at a stage where AI writes the code for the product, and integrate it seamlessly, and troubleshoot. Every large company adopting AI will need people who can do this. India has more of those people, with more relevant experience, than any other country at comparable cost. This is not glamorous work. It rarely makes headlines. But it is the layer where most of the economic value of AI will actually be captured.

India is also exceptionally good at adoption. The digital public infrastructure story demonstrated this. When UPI, Aadhaar, and the India Stack went live, the Indian startup ecosystem did not wait for a government directive. It immediately started building on top of it, in service of it, and using it to reach hundreds of millions of users. There is no reason to believe the same is not happening with AI.

I see applications for Emergent Ventures that confirm this constantly. If anything, there are too many AI-application startups applying for a grant with the promise of transforming niche sectors. Not all of them will make money. Many are chasing the same narrow use cases. But the sheer volume and speed of experimentation is itself a signal. The talent is there. The startup ecosystem is there. The instinct to build on top of new infrastructure the moment it becomes available is there. This is what is missing in most other developing countries, and it is not something a government program can manufacture. It comes from having a deep bench of engineers who have spent years shipping production software for global clients, combined with a domestic market large enough and digitally literate enough to absorb new products fast.

A little less conversation, a little more action, please

For most developing countries trying to become AI powers, the binding constraint is obvious. They lack the talent, or the capital, or the market. India has all three. What it lacks is the ability to convert them into operating infrastructure, and that problem predates AI by decades.

Every section of this essay follows the same pattern. The government identifies a genuine need, commits real money and political capital, and the project stalls somewhere unglamorous that nobody in Delhi was paying attention to. The soil under the fab. The compliance process around the subsidy. The balance sheet of the electricity distributor. The tax ruling that arrives ten years after the investment. These are not AI problems. They are the problems India has been deferring across every sector, stunting its manufacturing and structural transformation, now converging on the one sector where speed matters most.

India’s AI regulatory framework is, against considerable precedent, sensible. Its talent pool is globally significant. Sarvam has shown that narrowly trained models built for Indian languages and documents can beat the frontier labs on specific tasks that matter most to Indians. The Summit this week will produce headline investment numbers and photo-ops with CEOs and commitments of capital. None of that is fake. The ambition is real, the money is increasingly real, and the government’s instinct to avoid premature regulation is worth more than most people in the AI governance world appreciate.

But ambition has never been India’s problem. The gap between announcement and implementation is the malady. Whether India becomes an AI power will not be decided by most of the discussions at the Summit. It will be decided by whether someone in a state capital fixes the electricity pricing structure that makes data center power uneconomical, whether the PLI compliance architecture gets simplified enough for firms to actually claim the subsidy, whether the next generation of researchers stays or leaves, whether foreign venture capital is welcomed. Boring, iterative, state-level, ministry-by-ministry reform. The kind that never makes the curtain raiser.

India’s most pressing policy problems today aren’t playing out in New Delhi. They’re in state legislatures, district offices, and local courts. Land use conversion laws impede industrialization. Energy pricing schemes cause shortages. Building codes shackle urbanization. Licensing barriers strangle small businesses before they can begin. Entrepreneurship and abundance are still punished, not by ideology, but by outdated regulation.

Solving these problems requires a specific kind of person. Someone who can generate ideas for reform, understand the mechanics of implementation, and has the tenacity to see the effort through. These people exist. They’re working as policy analysts in Guwahati, lawyers in Chennai, researchers in Hyderabad. But they’re often isolated, under-resourced, and disconnected from the networks that could amplify their work.

Following the spirit of Emergent Ventures, this fellowship identifies high-agency individuals early in their careers and backs their work on state-level reform. Fellows choose their own state and policy area. They develop signature projects with real potential for traction.

We’re interested in projects that advance real reforms: simplifying labor laws, streamlining property rights and land use, reforming building bylaws and environmental policy, reducing licensing barriers, improving urban planning. The more specific the proposal, the better. We’re open to structurally ambitious ideas, not just incremental fixes, but applicants should demonstrate a credible path toward traction over the three-year fellowship. We’re less interested in pure analysis or advocacy that floats free of implementation. Show us you understand how change actually happens in your chosen state.

How the Fellowship Works

The fellowship runs for three years. The fellowship requires a full-time commitment across all three years. Fellows should not take on separate employment during this period. Fellows work on their chosen policy area, conducting research, writing policy briefs and public-facing pieces, building relationships with state-level officials and civil society, advocating their ideas, and piloting reforms where possible. The work is largely self-directed, though structured around quarterly milestones. Fellows should expect to spend significant time in their chosen state, meeting with bureaucrats, attending legislative sessions, and understanding ground-level implementation challenges.

In the first year, we will choose a maximum of ten fellows. Fellows will receive a stipend of up to $25,000 and participate in structured programming in public policy, writing, and communication. They attend monthly workshops and present their progress quarterly.

In the second year, the cohort narrows to up to seven fellows based on intellectual rigor and project impact. Continuing fellows receive up to $30,000 along with individualized mentorship and exposure through India-based workshops.

At this stage, fellows may attach themselves to think tanks, government bodies, or advocacy institutions of their choice that align with their policy work. These placements function as apprenticeships or incubation spaces where fellows can deepen their learning and maximize their impact.

In the third year, funding increases to up to $35,000. Fellows continue piloting reforms, working with governments, and launching advocacy platforms. The program concludes with a policy showcase and network building to support continued impact.

In Years 2 and 3, institutional affiliations that serve the fellowship work are encouraged, but the fellowship remains the primary obligation, and fellows remain accountable to it.

The stipend is intended as living support, allowing fellows to work full-time on their projects. It increases in the second and third year to provide flexibility for the travel and other project related expenses encountered by the fellows. Mercatus covers all programming, workshops, and conferences it requires fellows to attend. Fellows are expected to relocate to or near the state they are working on; reasonable relocation and travel expenses related to fellowship work can be discussed.

Throughout, fellows receive facilitated introductions to bureaucrats, journalists, and think tanks who can turn good ideas into real change.

Who Should Apply

This fellowship is for people whose goal is to work full-time on state-level policy but who lack the experience, networks, or institutional home to do so. Perhaps you have ideas but no platform. Perhaps you’ve been working adjacent to policy but haven’t found a space that will incubate your work while paying you to learn and deepen your networks. This fellowship provides that: funding, training, and the networks and flexibility to build a career in liberal economic reform.

We’re looking for people with high agency and a demonstrated commitment to classical liberal economic policy. This fellowship is for early-career professionals: policy analysts, lawyers, economists, researchers, students. We value demonstrated initiative over formal credentials. College dropouts, self-taught policy professionals, and those with unconventional paths are welcome. We define early career broadly. You might be finishing a degree, a few years into your first policy role, or shifting focus mid-career. What matters is capacity to execute ambitious work and a long-term commitment to state-level policy.

This fellowship is driven by the fellow. You come with your ideas. You decide what you work on. You decide which institutions to partner with. You decide where to go after the fellowship ends. Mercatus will not micromanage your path. That means this fellowship is best suited for individuals with high ambition, high agency, strong implementation skills, hustle, problem-solving ability, and the self-direction to chart their own course.

The fellowship is based in India. Ideally, fellows will be based in the state they are working on.

The application includes short questions about policy problems you find underappreciated, how you’d move reform forward, and your own journey. Applicants must include a writing sample in English or any major Indian language.

What Happens After

Most fellows continue working in policy at the state level, either within institutions or as independent experts. You’ll join a network of reformers and maintain connections with Mercatus and other fellows. Mercatus does not offer job placement; fellows chart their own paths forward.

Timeline

Applications opened January 15, 2026, and close February 28, 2026. Selections are finalized by early summer. The fellowship launches in July 2026.

The liberalizers of 1991 understood something important. Ideas matter, but so does execution. They knew how to navigate institutions, build coalitions, and move policy from paper to practice. We need more people like that today: not those who merely analyze what’s wrong, but those who can actually fix it.

If you have actionable ideas for state-level deregulation and are looking for support to advance them, we want to hear from you. If you know someone who fits this description, please share this with them.

Learn more and apply here.

Questions? Email indiaprogram@mercatus.gmu.edu

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Science and Scientism

One goal I had at the year’s start was to read more about science. I haven’t studied physics past tenth grade, and while economics has mathematics, it’s purely instrumental. So that’s where I started.

It began with Once Upon a Prime by Sarah Hart. A mathematician who loves literature, she describes everything from geometric patterns in Moby Dick to combinatorial constraints in Sanskrit poetry before Fibonacci in the combinations of laghu and guru in Virahanka (600–800 CE), Gopala (before 1135 CE), and Hemachandra (around 1150 CE), even Pingala (around 300 BCE). Learning the mathematical references in my favorites like Gulliver’s Travels and the constraints in Shakespeare’s sonnets made me return to the originals. The most joyous read this year.

It also led me to Mathematica by David Bessis. He makes a deceptively simple claim. Mathematical thinking is not symbolic manipulation, but the disciplined refinement of intuition. Proofs come last, after the hard cognitive work of seeing why something must be true. As an economist from the Austrian tradition, this immediately appealed and confirmed every prior. Like when Bessis references visuals, draws “pictures,” and talks about how difficult it is to define elephants. But even a two-year-old knows and forms a visual the moment they hear the word. He shows how logical formalism is a foreign language for humans. Intuition is natural. Troubles begin when formalism suppresses intuition. But he offers a way out. Rigor is not intuition’s opposite, but its quality control.

Initially I just wanted to learn more about physics. Carlo Rovelli came highly recommended. One economist friend called him “the Tim Harford of Physics.” I started with Seven Brief Lessons on Physics, pocket-sized, I read it in one sitting. I got basic intuition behind relativity, quantum mechanics, quantum gravity, the notion of time. He treats physics as successive conceptual revolutions rather than accumulated well established theories and facts. I quickly ordered all his books.

The Order of Time came next. That “time” does not exist in some absolute sense but is a relational web of events was illuminating. To an economist, even when other constraints are lifted through technology and growth, time remains the single absolute constraint. That physics treats it differently was humbling. If I am being honest, I still don’t completely get time. I continued my Rovelli rabbit hole with Helgoland.

But my favorite Rovelli book was Anaximander: And the Birth of Science. I thought I was starting a biography of a pre-Socratic philosopher, with pupils like Pythagoras, the one who suggested the Earth floats freely in space. Instead, I found a quiet book about how science progresses.

Rovelli’s central idea is disarmingly simple. Science starts when explanations stop being things you inherit and protect and become things you can question. Anaximander matters not because he was “right,” but because he dared to replace myth with an explanation that could be discussed, criticized, improved. The Earth floating in space is important less as a claim than as an attitude, an answer offered to the world, not a story guarded by authority.

Around the same time, I started reading David Deutsch, long on my list but moved up after hearing him on Dwarkesh Patel’s podcast. In The Beginning of Infinity, he argues that knowledge grows through conjecture and error correction, with no inherent limit to progress except the suppression of criticism and explanation. More echoes of what Rovelli explained through Anaximander and Bessis in Mathematica. But what jumped was that he was Popperian.

Almost fifteen years ago, my graduate mentors Mario Rizzo and Peter Boettke made sure I read all of Karl Popper and Michael Polanyi and FA Hayek, and it came rushing back. Reading Rovelli’s description of Anaximander, Karl Popper’s work feels like a modern restatement of the same move. In The Logic of Scientific Discovery and Conjectures and Refutations, Popper insists science advances not by collecting confirmations but by making bold guesses and exposing them to being wrong. A theory earns its place not because it feels secure but because it survives criticism longer than rivals. What Rovelli shows through Anaximander breaking from inherited stories, Popper turns into a rule for modern scholars. Bessis offers another version: intuition comes first, formal methods can, at best, help verify or falsify.

Progress depends on ideas that can be attacked. David Deutsch may push this furthest. In The Fabric of Reality (which I haven’t yet finished) and The Beginning of Infinity, he argues progress is driven not by accumulation but by correction. Explanations grow by being exposed to criticism, discarded when they fail, replaced by better ones. What matters is not prediction alone but creating explanations that fall apart if you change any piece of them—explanations where every part does real work.

Michael Polanyi helps explain why none of this can be reduced to a recipe. In Personal Knowledge and The Tacit Dimension, he reminds us that knowing is always done by people, not methods alone. We learn what counts as a good question, what makes an objection serious, which results matter, through practice and apprenticeship. Science can be both tradition-bound and open to revolution. You need shared standards to criticize meaningfully, but those standards must themselves remain open to revision.

In The Counter-Revolution of Science, Hayek’s target is what he calls “scientism” - the habit of borrowing the style and authority of physics or mathematics for questions where that style does not fit. Especially a misfit for economics, where the relevant knowledge is scattered across many minds, shaped by interpretation, and tangled up with human purpose. I always read this as a warning to economists not to imitate physicists. But reading Rovelli and Bessis, I realized the warning applies to the natural sciences too. The problem is not the methods of physics but the false confidence that comes from treating any method as beyond question.

Reading Rovelli after Popper, Polanyi, and Hayek made the book feel less like ancient history and more like a mirror. Science at its best is not a machine for producing certainty. It is a fragile practice built around a simple rule: explanations must be allowed to fail. Once shielded from criticism, progress slows, sometimes stops. What Anaximander discovered, and what these thinkers keep rediscovering, is that knowledge grows not by being defended but by being exposed.

Deutsch makes explicit what is often implicit in Popper. This process is fragile. It depends on a culture that allows criticism to go wherever it leads, not just in science but in politics, economics, morals. The birth of science is not a one-time historical event. It must be continuously defended.

One last strand fits this theme naturally, at least to my mind. Deirdre McCloskey and Matt Ridley both stress that this dance of guess, criticism, and correction only works inside genuine classical liberalism, a culture that tolerates disagreement. In Bourgeois Dignity (I think, but definitely the Bourgeois series), McCloskey argues modern progress took off when societies granted dignity to people who argued, experimented, contradicted their betters. And when persuasion replaced status as the way ideas won. Innovation followed not because people became smarter but because they became freer to say, “I think this is wrong.” Ridley makes a related point in The Rational Optimist. Trial, error, and improvement require open exchange. Ideas bump into each other, fail, recombine, try again. That process breaks down wherever beliefs are untouchable, criticism punished, or authority decides truth in advance.

Perhaps you will find different connections. Please share them with me if you think I am overreading or making too many connections where none exist. My training in the Austrian tradition led me here. But I strongly recommend Bessis, Rovelli, and Deutsch to social scientists and economists, and perhaps rereading Popper, Hayek, and Polanyi, as I did this year.

Biographies and Memoirs

Before I get to the Indian biographies and biographers, the most incredible biography and autobiography I discovered this year was of Oleg Gordievsky. They say truth is stranger than fiction and Oleg Gordievsky’s life as a KGB officer and an agent for MI6 is one of the best examples. If someone wrote it as a fiction novel, we would criticize it as too far-fetched. The Spy and the Traitor by Ben Macintyre is an absolute page turner. I am surprised no one has turned it into a mini-series. Gordievsky died in March 2025, and that prompted me to read his autobiography Next Stop Execution, which is not as good as Macintyre’s telling. I don’t want to give much away, so just read the book. And while less glamorous a save than Stanislav Petrov, Gordievsky also saved the world from nuclear war by helping deescalate tensions while playing both sides. An extraordinary life.

Another unexpected treat was John & Paul: A Love Story in Songs by Ian Leslie. It’s the biography of a relationship. Leslie deconstructs the Lennon vs. McCartney binary, arguing that their genius lay in a true love story and a creative rivalry. Opposites attract and their unresolved tension gave us some of the greatest music in the modern world.

Another set of memoirs that don’t fit in a neat category were Fierce Attachments: A Memoir and The Odd Woman and the City: A Memoir by Vivian Gornick. The first is an uncomfortably intimate peek into her mother-daughter relationship as a structure of mutual imprisonment. The second is about the relationship with a city, or rather a city full of strangers that make it possible to have a solitary life in a crowd.

A Grief Observed by C.S. Lewis is also deeply personal. I am not even sure memoir is the right word for it. It is journal entries about desolation and grief after his wife dies. A little too intimate, hard to read, absolutely gutting.

Before my trip to Kenya, I read the prescribed syllabus for Americans, Out of Africa, the memoir by Danish author Karen Blixen under the pen name Isak Dinesen. It covers her relationship and experiences with Kenya and Kenyans in the interwar years. Not sure it helped me for the trip, but it’s a poignant book.

The year of biographies started as I was prepping for Rajmohan Gandhi’s two-part interview for the podcast. In one sense I have been preparing my whole life. I have read a lot of his books but I had to reread them. It started with the full-length biographies of the founding fathers. We even did an episode on them.

Mohandas: A True Story of a Man, His People, and an Empire succeeds by keeping Gandhi at human scale while never forgetting he operated at mass scale. But for me the Gandhi book I enjoyed even more is The Good Boatman: A Portrait of Gandhi, a compact moral portrait emphasizing method over myth. The book is strongest on Gandhi’s internal deliberation process. He is also the biographer for his maternal grandfather. Rajaji: A Life portrays C. Rajagopalachari as the republic’s most principled and perhaps most prescient and therefore most frustrating figure.

Patel: A Life shows the state-builder who actually consolidated India after independence. Rajmohan Gandhi presents him as the republic’s Bismarck. This is perhaps my favorite on the list. Patel has been appropriated by so many groups more recently, and it is useful to read this biography, with its meticulous archival work, on who Patel really was and his preference for unity.

Eight Lives: A Study of the Hindu-Muslim Encounter, subsequently retitled Understanding the Muslim Mind for later editions, was also a reread this year. Short biographies that provide an incredible lens into the founding fathers of the subcontinent, not just India, and also the diversity in Muslim thought. Ghaffar Khan: Nonviolent Badshah of the Pakhtuns is the most illuminating, not just because Ghaffar Khan is both underrated and extraordinary, but because it presents nonviolence as a disciplined political strategy among people trained for violence.

Understanding the Founding Fathers is a lovely bookend to this series of biographies. He compares and contrasts these extraordinary individuals, working alongside but often clashing. We’ll return to Rajmohan Gandhi’s other books, but first let me get through the other biographies.

Another lovely memoir, well written, nostalgic, and gentle, is The Undying Light by Gopalkrishna Gandhi, who is incidentally Rajmohan Gandhi’s younger brother. A civic memoir from an extraordinary public servant about ideas, ideals, and aspirations met with pragmatism and modern reality.

Abhishek Choudhary might be the best biographer in modern India with his two volumes on Atal Bihari Vajpayee. The first volume, Vajpayee: The Ascent of the Hindu Right, 1924–1977, is about the making of Vajpayee as a political figure, a staunch Hindu nationalist, and the simultaneous making of a political movement consolidating the Hindu right in India. In the second book, Vajpayee: The Believer’s Dilemma, Choudhary goes beyond biographical details. He shows us what happens when Vajpayee must lead and balance his ideological compatriots with governance in a constitutional democracy. I have lived through some of this time, and it was less illuminating than the first volume, but very much worth reading together.

Another book of ten short biographies was Speaking with Nature: The Origins of Indian Environmentalism by Ramachandra Guha, who is lesser known as an environmentalist. It recovers an indigenous Indian environmental tradition that predates both colonial conservation and postcolonial modernism. The unsurprising names were Rabindranath Tagore, JC Kumarappa, M. Krishnan, and Verrier Elwin (on whom Guha authored a full biography titled Savaging the Civilized: Verrier Elwin, His Tribals, and India). But Patrick Geddes, K.M. Munshi, and especially Radhakamal Mukerjee, the Elinor Ostrom before Elinor Ostrom, surprised me the most. To prepare for the episode I also read The Unquiet Woodsand This Fissured Land, which he coauthored with Madhav Gadgil. Another Guha book I read this year was The Cooking of Books, about his correspondence with his longtime editor Rukun Advani. A charming read.

History, especially regional histories, also made my favorites list. Returning to Rajmohan Gandhi, Punjab: A History from Aurangzeb to Mountbatten is a long-run political and social history of how plural societies die slowly and then all at once, and the much-needed context for Partition. Modern South India: A History from the 17th Century to Our Times makes the southern states come alive and provides context for its modern successes, because it was a laboratory. An economic history, Kerala: 1956 to the Present by Tirthankar Roy and K. Ravi Raman, is a corrective to both Kerala-worship and Kerala-dismissal. It explains why high human development coexisted with anemic growth and how remittances papered over structural problems.

Another grand history of a region and its people is The Gujaratis: A Portrait of a Community by Salil Tripathi, who covers everything from trading and networks to politics, culture, and modern business without hagiography. Hustle can produce the best kind of entrepreneurs and the worst kind of politicians.

Understanding India Better

There were a number of books that are hard to classify. Let’s call them books that help me piece together the jigsaw puzzle that is India. This includes political economy, history, and law.

Oddly, my favorite Rajmohan Gandhi book isn’t any of the biographies but Revenge and Reconciliation: Understanding South Asian History. He embodies revenge through Ashwatthama, one of the immortals from the Mahabharata, and reconciliation through Buddha. The question is whether revenge or reconciliation will win in the long arc of the subcontinent. If there is one book you read on India’s pluralism and conflict, this should be it.

Its historical companion would be India, 5,000 Years of History on the Subcontinent by Audrey Truschke, which I have started but not yet finished. Detailed and complex without cartoon heroes and villains from Mughal and colonial times.

Analytically a different approach but on the same theme, for the podcast with Christopher Coyne, I read How to Run Wars: A Confidential Playbook for the National Security Elite and In Search of Monsters to Destroy: The Folly of American Empire and the Paths to Peace. Not set in the subcontinent but on the same theme of conflict and peace. I also discovered Conflict and Defense: A General Theory by Kenneth Boulding, a really excellent book treating conflict, war, and defense as analyzable systems rather than moral anomalies or irrational outlier events.

On the broader theme of India’s pluralism, civic life, secularism, conflict, and peace are some quick reads by Rajmohan Gandhi. Fraternity: Constitutional Norm and Human Need. India After 1947: Reflections and Recollections. And Why Gandhi Still Matters: An Appraisal of the Mahatma’s Legacy, which separates the transferable method from the historical Gandhi. The book’s best contribution is showing how Gandhi’s approach to conflict, making your own side bear the costs rather than imposing them on others, remains analytically useful even if you reject the metaphysics behind it.

Tareekh Pe Justice: Reforms for India’s District Courts by Prashant Reddy T. and Chitrakshi Jain illuminates the incentives and institutions that cause the dysfunction in India’s district courts. What the normal litigant encounters in India, how delays are endemic and not exceptional, and how and why district court judges are the lowest within a colonial caste system of the judiciary. A must read.

Another aspect affecting every citizen and future citizen of India is its dysfunctional education system where learning is often the lowest priority. In Lessons in State Capacity from Delhi’s Schools, Yamini Aiyar gives us hope by outlining an experiment in Delhi, where implementation is the real site of reforms, and the negotiation happens not just by bureaucrats but also by parents, politicians, teachers, and the frontline workers of India’s education system.

Scamlands: Inside the Asian Empire of Fraud That Preys on the World by Snigdha Poonam uncovers the scam-industrial complex, its underlying economic and sociological reasons, and illuminates the nature of everything from phishing to pig butchering scams from Jharkhand to Cambodia.

Understanding Other Countries Better

Abundance by Ezra Klein and Derek Thompson recontextualizes a well-established truth for modern American progressive politics. Economic growth should be a bigger priority than redistribution, and if not, you end up in a politics where you get neither growth nor redistribution, just stalling. Not much new in terms of economic insight but a great exercise in persuasion.

Focus: The ASML Way by Marc Hijink was a very fun read about engineering culture, the differences between German and Dutch and American companies, the contrast between technical versus business CEOs, and industrial policy done right.

It’s hard to understand continents like India and China. There is no one book, no easy way to enter that world. I like biographies, or books about a particular firm or food or music, and fiction. And this year an excellent book that became my entry point into China was Apple in China by Patrick McGee. The foreground is how Apple scaled in and as a consequence increased its dependency on China, but the background is full of detail on the entrepreneurship and building culture that led the prosperity revolution starting in Shenzhen and eventually spreading to all of China.

Almost the opposite end of the spectrum in simplicity is Breakneck: China’s Quest to Engineer the Future by Dan Wang. The book is almost too binary in setting up the engineering versus the lawyer state to contrast China from the US. But perhaps it is the lack of complexity that makes it a useful entry point to understanding the Chinese state (to me a complete blackbox) as outsiders.

One of the more frustrating books I read this year was In Praise of Floods by James C. Scott. I have long admired Scott and read all his books. Seeing Like a State, Against the Grain, and The Art of Not Being Governed are my favorites, in that order. But In Praise of Floods was not as cohesive, in some parts not even fully comprehensible to me, though in other parts the genius of Scott shines through when he talks about rivers and their meandering and the fragility of systems when they interact with top-down human intervention. Perhaps because it was published posthumously and edited by others. But even a disappointing Scott book is better than most books.

Fiction

I didn’t read much fiction this year. But I started the year with Days at the Morisaki Bookshop and then More Days at the Morisaki Bookshop by Satoshi Yagisawa. There is something architecturally serene about the Morisaki Bookshop, which serves as a refuge of paper and dust. Here, the passive act of sleeping among the clutter of books and history allows a stalled life to finally find its rhythm again. Minimalist in its writing. Japanese books about bookshops and book towns might be my favorite new sub-genre.

The most surprising find this year was Flatland: A Romance of Many Dimensions by Edwin A. Abbott. I found the reference in Sarah Hart’s Once Upon a Prime. Abbott uses geometry to dismantle Victorian arrogance, showing that when a mind is truly closed, a new perspective (dimension) looks indistinguishable from madness.

The Death of Ivan Ilyich by Leo Tolstoy was another surprise. The high-court judge facing his own mortality, and walking us through the pettiness of middle-class values and status and the meaninglessness of life. I thought it would be more depressing, but it was surprisingly clarifying.

I read Terry Pratchett’s Discworld novel Small Gods and it was a lot of fun. The first two pages are so fantastic, I was hooked, adn read it out of order. My first of the Discworld novels, and I will definitely read more over the next few years. I also read Fragile Things by Neil Gaiman, a short story collection, and it wasn’t as interesting as expected. My only real commitment to poetry this year was Jonathan Swift: Complete Poems. A must read, funny and humane and insightful as only Swift can be.

I started reading Middlemarch. Partly because it seems to be back on everyone’s list, partly because it was one of the classic books referenced in Sarah Hart’s Once Upon a Prime that I hadn’t yet read. But I’m afraid I haven’t made much of a dent there. So hopefully this one carries forward into next year’s list.

Picture Books

For my birthday I got the lovely coffee table book Paper Jewels: Postcards from the Raj by Omar Khan. It’s a book of Indian postcards in colonial times, as a new technology, art, and communication. My love for postcards aside, it is fantastically curated and a different glimpse into how the empire was shaped, one postcard at a time.

My other love, elephants, came alive as I read some books to prepare for my trip to Kenya. Remembering Elephants is a collection that uses photography as a way to finance conservation. The photographs are staggering. Another incredible book is Elephant Reflections by Dale Peterson and Karl Ammann. And before my Ghana trip I discovered The African Gaze: Photography and African Visual Culture by Amy Sall, an incredibly powerful set of photographs of Africans by African photographers.

Books I Am Currently Reading

Assembling India’s Constitution: A New Democratic History by Rohit De and Ornit Shani is everything I expected from both of them. India’s founding is described in two starkly different ways in the literature. One side suggests that the constitution, India’s democracy, and its institutions were all an elite project. The other, led by both De in A People’s Constitution and Shani’s How India Became Democratic, democratizes the scholarship and shows through detailed archival research how regular Indians embraced the ideas of democracy and voting and constitutions and courts. This is a new step in that literature, talking about the assembling of India’s constitution outside the Constituent Assembly.

The Roots of Rhythm by Joe Boyd is a fantastic journey of music across decades, continents, and genres with Boyd as the reliable witness to changes in culture. It’s massive, and I can’t and don’t want to read it fast. The kind of book I will read over years and maybe never finish start to finish. But an absolute joy.

Trilegal: The Making of a Modern Indian Law Firm by Akshay Jaitly is at first glance the story of the growth of one of India’s largest law firms, but in the background are major changes in India because of liberalization, sectoral reforms, the growth of the regulatory state, and increase in foreign investment. To me the most interesting part is the interaction between the growing size of the market and good institutional design.

Democracy, An American Novel by Henry Adams might be the perfect satire, sometimes seeming like non-fiction, to someone like me living in Washington DC in current times.

A Sixth of Humanity: Independent India’s Development Odyssey by Devesh Kapur and Arvind Subramanian is an absolutely magisterial treatment of Indian political economy over the last 75 years. I have just started the book over the holidays. It will take me a while and I will have a lot more to say about it.

But now we, and they, are finding out that the background matters more than anyone thought. Try starting a company that depends on global supply chains when trade wars flare up overnight. Try convincing the best machine learning researchers in the world to join you when immigration policies make it nearly impossible for them to get visas. Try raising a billion-dollar round when investors can’t predict what the government will do next week about taxes, tariffs, or regulations. Suddenly, the things they assumed were fixed, like the rule of law, fairness, and open markets, look less like constants and more like fragile variables.

“How did this happen?” they ask. “We were just building our business.”

What happened is that they confused the game with the rules of the game. The game was building their business. The rules were the scaffolding of ideas - like you can trade freely across borders, hire the best people regardless of where they’re born, expect contracts to be enforced, not determine commercial practices on the whim of a dictator, and get clear regulatory guidance.

This worked for many decades, especially between the 1980s and the global 2008 financial crisis. Global trade expanded. Immigration, at least for skilled workers, got easier. Most industries could grow without much regulatory interference. If you wanted to build something ambitious, the biggest constraint was usually your own capability, not external barriers, and in the US, it was rarely regime or regulatory uncertainty.

The prosperity the western world enjoyed for decades was the result of ideas, specifically classical liberal ideas about free trade, individual rights, limited government, and rule of law. They created the conditions under which innovation flourished in the US. But ideas are like infrastructure. If you don’t maintain them, they decay.

It’s worth remembering just how urgent and contested the intellectual climate was post WWII. In the 1950s and 1960s, communism seemed not just plausible but ascendant: the Soviet Union launched Sputnik, promised full employment, and exported a coherent ideological alternative, often dubbed utopian. By the 1970s, Western democracies were reeling from stagflation, oil shocks, and industrial decline. Long lines at gas stations in America, with inflation spiraling into double digits. Britain’s “Winter of Discontent,” when strikes and uncollected trash piled up in London streets. All these individually and cumulatively created a visceral sense that markets and liberal institutions might be failing. But a small group of business leaders and philanthropists were committed to classical liberal institutions.

They funded programs that supported classical liberal scholarship and built an ecosystem that nurtured Milton Friedman, Friedrich Hayek, and the Chicago school. These funds and institutions enabled scholars to not just indulge in abstract theory. These intellectuals were answering a deep civilizational challenge: how to show that free exchange, open societies, and the rule of law were not just morally defensible but practically superior in an era when entire publics were flirting with socialism or outright state planning. That clarity gave their investments the force of survival, not mere preference.

Today, once again, the faith in the broader liberal order is under threat. It was battered by crises that made entire communities feel abandoned. Former industrial hubs in the Midwest and North of England, places that once believed in upward mobility through steady work, saw factories shuttered through the nineties and never return, leaving workers facing long-term unemployment or precarious service jobs. The 2008 financial collapse was not just about banks. It hollowed out entire towns as foreclosures ripped through neighborhoods, pensions evaporated, and trust in institutions collapsed. The COVID-19 pandemic then reinforced the sense that globalization’s promise was brittle, as supply chains broke down and even basics like protective equipment or housing materials became scarce.

For younger generations, the market increasingly looks like a machine that drives housing costs out of reach in cities where they want to build startups or pursue the arts, while offering them gig work instead of careers. Each shock accumulates, making what was once an implicit background faith in markets look instead like a gamble stacked against them.

But as a community and a country, we underinvested in understanding the changes that led to some of these crises while preserving and improving the global liberal order. Without a loud and clear call to protect the institutions required for markets to function, even the best ideas shrivel. For decades, the people who cared about progress poured their energy into their own pet causes: clean energy, AI, biotech, rockets. They gave generously to foundations, research labs, and startups. But they neglected the soil all of those things grow in: individuals working on a broad, classical liberal order that protects property rights, enforces contracts, limits arbitrary government action, and keeps borders and markets open.

While business leaders were building companies, the intellectual foundations supporting free markets were weakening. Universities moved away from classical liberal values. Think tanks got caught up in partisan warfare. The case for free trade, which seemed obvious in 2000, started seeming less obvious to people who hadn’t lived through the alternative.

Meanwhile, the beneficiaries of this system didn’t invest in maintaining the ideas that made their success possible. They assumed someone else was handling that. This was like assuming someone else would maintain the roads while you work on a better gearbox.

When business leaders finally recognized that political ideas and politics mattered, many made the problem worse. Their instinct was to dive straight into politics. But they did it the way they approach startups: fast, improvisational, tactical.

They jumped into political battles without understanding the deeper issues. The result was predictable. Instead of shaping the environment that progress depends on, they got swept into the churn of partisan politics. They ended up chasing personalities, reacting to news cycles, or funding causes that looked useful in the moment but did nothing to secure the long-term conditions for innovation.

What they didn’t do was build the deeper foundation: a network of thinkers they trusted, a policy space that could generate liberal ideas and correct illiberal ones, or even a clear understanding of the principles they were supposed to be defending.

You can see this in how policy gets discussed now. Trade policy becomes supply chain optimization for the “high priority” sectors. Climate regulation becomes technological disruption management. When it is a singular problem for a singular firm, it can be resolved by gaining exceptions for their “critical” infrastructure. Immigration becomes a talent acquisition problem. They mistook firefighting for a long-term fireproofing.

These framings aren’t wrong, but they miss the point. A smarter algorithm might make moderation fairer and reduce censorship on X. But no code can stop people from censoring themselves when the government is punishing dissent or regulators are swinging too wide. Software can fix a feed, but it cannot create the conditions for free speech.

There is a deeper reason business leaders failed to invest in ideas, and it reveals something about how success can create blindness. The same period that saw this institutional decay also saw a data revolution. Companies got much better at measuring everything. Marketing became attribution driven. Operations became metrics focused. Strategic decisions got tied to KPIs and ROI calculations.

This data-driven approach worked brilliantly for business operations. But it created a mental model that everything worth doing should be measurable and attributable. When business leaders started thinking about philanthropy and civic engagement, they naturally applied the same framework.

They funded causes that fit their measurement mindset. Medical research with clear outcomes. Educational programs with test score improvements. Environmental initiatives with quantifiable impact. These were good causes, but they shared one characteristic: you could track results. When they were failing, you could pivot and hack the problems. They prioritized projects, not principles.

Supporting the intellectual infrastructure of liberal democracy doesn’t work this way. You can’t draw a straight line from funding a political philosopher to protecting property rights. You can’t measure the ROI of supporting a think tank that develops policy frameworks. The benefits are real but diffuse, long-term, and hard to attribute.

American business leaders have underinvested in unmeasurable but crucial infrastructure. They funded research laboratories but not policy institutes. They supported STEM education but not political economy. They donated to hospitals but not to the institutions that maintain the ideas underlying free markets that ensure the integrity of scientific research.

This created a dangerous asymmetry. While business leaders were applying venture capital thinking to their civic engagement and looking for scalable, measurable impact, their opponents, especially those steeped in politics and culture, were playing a different game entirely. They were investing in ideology, talent identification, narrative, and long-term cultural change. Things that are hard to measure but ultimately more powerful.

The result is that when policy crises hit, there weren’t enough people who understood both the practical requirements of business and the intellectual foundations of free markets. The think tanks were either too academic or too partisan. The academics didn’t understand policy. The policy experts didn’t understand industries. The industry experts didn’t understand policy.

You can see this in how badly business leaders have handled recent regulatory challenges. When dealing with trade disputes, they lobbied for specific exemptions rather than supporting intellectuals who could articulate why free trade benefits everyone. They treated these as discrete problems to solve rather than symptoms of deeper intellectual confusion about the role of markets in society.

What they should have done was invest in the unsung and unsexy work of maintaining ideas. Fund talented individuals who understand both markets and policy. Economists who can explain why trade benefits everyone, journalists who can make the case for limited government, former officials who can bridge the gap between theory and practice. Support networks that connect these people across institutions and industries. Create fora where policymakers can learn from practitioners and vice versa. Build relationships between people in government, academia, think tanks, and business who share basic commitments to individual liberty and free markets.

If there is a lesson in all of this, it is that we need to rediscover the value of long-term investing not just in companies but in the conditions that make companies possible. That means shifting attention away from hacks and short-term fixes toward the fundamentals: rule of law, free exchange, reliable institutions, and the cultivation of civic trust. These are not glamorous investments. They don’t yield quarterly returns or splashy headlines. But like roads, clean water, or electricity, they are the invisible infrastructure without which no ambitious enterprise can function.

Principled investing means recognizing that some assets are not financial at all. Intellectual honesty, cultural trust in fairness, faith in open institutions. These are compounders whose value grows quietly but decisively over time. The philanthropists and entrepreneurs who understand this will see that supporting the maintenance of these principles is not charity but insurance. It is how you ensure that the scaffolding remains strong enough for the next generation to climb. This requires a mindset shift. Instead of asking, “What is the ROI of this grant in twelve months?” we need to ask, “What foundations will still be standing in fifty years because of this investment?”

Public good principles operate differently from market goods. Their returns are diffuse, shared across society, and only visible in the absence of crisis. You know they were valuable precisely because catastrophe didn’t arrive. The analogy to fundamentals in business is exact. Companies that chase short-term numbers at the expense of balance sheet strength or customer trust eventually pay the price. The ones that last are those that treated fundamentals as non-negotiable. The same is true at the level of civilization. If we want innovation to flourish in 2050 or 2100, we need to nurture the soil in which innovation grows today.

The hopeful news is that this is entirely within our capacity. We know how to do it because previous generations did it before us. The Volker Fund quietly seeded mid-century intellectual life by funding scholars who defended free markets and limited government. The Bradley Foundation built out a network of think tanks and policy shops committed to preserving constitutional order and economic liberty. The Earhart Foundation nurtured individual academics who carried forward traditions of property rights and personal responsibility. The Scaife Foundation underwrote institutions that advanced skepticism of centralized power and a defense of free enterprise. The Olin Foundation invested heavily in law and economics programs that reinforced the rule of law as the backbone of liberty. And the Templeton Foundation, while broader in scope, has consistently supported inquiry into the moral and spiritual conditions, like individual dignity and freedom, that sustain a liberal society.

But these were long-term projects, focused on a classical liberal network working on the foundational and practical questions, not ideas that would immediately result in more engineers or a smaller chip. Those byproducts were the result of getting the foundations right. They invested in ideas not because they were fashionable but because they were essential. They built networks of scholars, journalists, and statesmen who could defend free societies in the long run. They funded institutions that seemed obscure at the time but later provided the intellectual muscle to steer nations through turbulence. They demonstrated that slow, patient investment in the foundations is what keeps the edifice of progress upright.

One modern-day equivalent of a clear articulation of principles and values, not just a project or cause, is the “progress studies” movement that was first articulated by Patrick Collison and Tyler Cowen. It’s a movement that aims to study the combination of economic, technological, scientific, cultural, and organizational advances that have improved standards of living over time, with the goal of understanding how to speed it up and sustain it. We need many more to join their tribe.

The entrepreneurs who built great companies in the late twentieth century had an advantage: they inherited intellectual infrastructure built by previous generations. The ideas justifying free markets had been developed, tested, and institutionalized. They could focus on execution.

Today’s business leaders face a different challenge. If they can recognize that the most important bet is not their next product but the principles that allow all products to exist, then the future is not bleak but bright. It will mean accepting that some of the most valuable work is not measurable, that the best returns may come decades later, and that the surest foundation for freedom and prosperity is principled, long-term investment in the public good.

Singh was, quite possibly, the finest talent spotter in Indian economics, a skill that would go on to shape the country’s economic policy for decades. His keen talent scouting was his most remarkable quality that has been least remarked upon.

Singh was excellent at identifying young talent, most famously Montek Singh Ahluwalia. Before Montek and Isher Judge would go on to marry, they met Manmohan Singh in Delhi in 1970. At the time, Singh was a professor at the Delhi School of Economics, known for his work on India’s exports. He seemed too soft-spoken and erudite for the couple to imagine him joining the Ministry of Foreign Trade as an economic advisor just a year later. Over the years, Singh offered suggestions to Isher Judge for her macro-econometric model of the Indian economy, which formed the basis of her doctoral thesis at MIT under Stanley Fischer.

During his tenure as chief economic advisor (CEA) to the Government of India, Singh’s relationship with Ahluwalia deepened. Their conversations in Washington D.C., where Ahluwalia worked at the World Bank, became more frequent. When the position of economic advisor at the Finance Ministry opened, Singh saw an opportunity. He guided Ahluwalia into the bureaucracy, marking their transition from mentor and mentee to colleagues.  

A worthy protégé, Ahluwalia drafted the famous blueprint for the first stage of reforms in 1991—dubbed the M-Document. Like Singh, he went on to become finance secretary and, later, deputy chairman of the Planning Commission. Ahluwalia was just one among dozens of economists that Singh mentored. But this cycle of mentorship, that Singh set in motion, would repeat well beyond his years in office. Ahluwalia recruited the next generation of talent, most notably Raghuram Rajan.

Perhaps it was the strikes and student movements of the 1970s. Or the rise of the anti-establishment hero in the zeitgeist. Whatever the reason, in a country that usually prioritized age and seniority over merit, Singh knew, even then, that India’s future depended on its emerging talent. The talent he sought not only excelled globally but was committed to returning home and joining public service. The seeds for the 1991 reforms were sown in those years.  

Shankar Acharya recalls the annual International Monetary Fund (IMF) and World Bank meetings in Washington, D.C.—both in autumn and spring—where Singh made it a point to meet young economists. He listened to them. He learned about their work. He discussed the possibilities available back home, within and beyond the government. His efforts led to a steady inflow of Indian talent. Acharya himself, after completing his PhD at Harvard and working at the World Bank, returned to India. He would eventually work his way up the Indian bureaucracy to serve as CEA under Singh as finance minister.  

Another example was Rakesh Mohan, whom Singh mentored through the 1980s, helping him navigate his career decisions at the World Bank and India’s Planning Commission. In 1986, he brought Mohan back to the Planning Commission as an economic advisor, specifically to work on structural reforms. Mohan’s return was part of a broader transformation Singh orchestrated that year. Along with Mohan, he recruited two other economists in their early thirties—Arvind Virmani, who had completed his doctorate under Kenneth Arrow at Harvard, and Jairam Ramesh, who had left his doctoral program at MIT to work at the World Bank.  

These appointments to the Planning Commission faced resistance from bureaucrats. They were skeptical about placing such junior economists in senior positions. But Singh’s judgment was vindicated. Their immediate contributions were significant, and their subsequent achievements changed the course of India’s economy.  

Mohan, who earned his PhD from Princeton and learned the nuts and bolts of deadweight loss from Arnold Harberger, later became the Industry Ministry’s economic advisor. He dismantled the License-Permit-Raj through a new industrial policy. A worthy inheritor to both Harberger and Singh. Mohan later served as deputy governor of the Reserve Bank of India (RBI). Jairam Ramesh, with one foot in technocracy and the other in politics, became a cabinet minister in multiple governments, including Singh’s own. Virmani, meanwhile, rose steadily through the Finance Ministry and the Planning Commission. Eventually, he served as principal advisor to the Planning Commission and later as CEA. Singh took a similar chance many years later, appointing Kaushik Basu as CEA—an academic with no government experience.

Another future CEA, Nitin Desai, interacted with Singh early in his career and later worked alongside Singh at the Planning Commission. Nitin Desai wasn’t part of the dream team in 1991, though. He was engaged, upon request from the UN, as the deputy secretary-general of the United Nations Conference on Environment and Development. Similarly, Singh encouraged Ashok Lahiri to return from the IMF, who would later serve as CEA in both the Vajpayee and United Progressive Alliance (UPA)-1 governments, and go on to have a career in politics. 

This pattern continued into the 1990s. When a young Urjit Patel served at the IMF’s India desk during the standby arrangement negotiations in 1991, Singh took notice. The connection extended beyond the IMF; at Yale, Patel had been a student of T.N. Srinivasan—another one of Singh’s old associates from Srinivasan’s days in New Delhi. Writing letters of reference and helping Patel navigate India’s policy ecosystem, Singh once again demonstrated his knack for nurturing talent. Years later, Patel would follow Singh’s footsteps to lead the RBI as its governor during one of its most turbulent times, overseeing the demonetization of currency. 

Singh was like that, a bit of an outsider everywhere who worked his way up. Quite literally without a home, he had known disruption as a refugee during Partition. An excellent student without a college in 1947. He rebuilt himself, step by step, and with scholarships. First at Punjab University. From there, he went on to Cambridge. Then to Oxford. By 1990, he had reached the pinnacle of economic policymaking in India: serving as CEA, finance secretary, deputy chairman of the Planning Commission, and governor of the RBI. He had occupied every top technocratic position, yet his childhood as an outsider shaped him differently—he systematically worked to create pathways for others like him.

His skill went beyond just identifying promising talent. Through his example of translating academic insights into governmental action, Singh inspired a generation of economists to return to India. 

The likes of Ahluwalia, Mohan, Virmani, Acharya, and Ramesh would eventually be recognized by many. In addition to spotting talent, Singh’s mentorship went a long way, making sure they found the right positions in government, worked with the right people, and had a clear path to the top. Anything less and the talent would have drained from the government. 

The lost opportunities and financial and other insecurities of his youth likely shaped Singh’s ability to empathize with others. When Mohan asked whether to stay in India after a three-year assignment in the early 1980s, Singh advised him to return to the World Bank to gain more experience and financial security before considering government service. He gave that advice to many others returning to India—the best way to have a long and honest career in government was to have other means of financial security. Singh could see beyond immediate interests to focus on what would serve both the individual and institution best in the long run.

Other than being outsider-insiders, good scouts tend to be keen observers and good listeners. Most importantly, they can see individuals more clearly than they can see themselves. Vijay Kelkar, who completed his doctorate at UC Berkeley under Avinash Dixit, recalled Singh’s distinctive mentoring style. During Kelkar’s visits to India, Singh engaged in lengthy discussions, marked by patience and precision. Rather than dominating the conversation, Singh listened intently.  

Kaushik Basu recalls that throughout his tenure as CEA, Singh kept his door open for monthly discussions on economic policy. This level of access was rare. But it reflected Singh’s deep understanding of what outsiders needed to succeed in government.

When Urjit Patel resigned as RBI governor in December 2018, Singh was among the first to call. His immediate concern wasn’t about policy or the economy, but Urjit’s well-being. 

Singh’s talent spotting extended beyond economists from elite universities. He also reached into the Indian civil service. Y.V. Reddy’s transfer from his position as collector of Hyderabad to the Department of Economic Affairs in 1977 appeared to be a routine bureaucratic movement. It was Singh, then finance secretary, who had specifically requested Reddy’s transfer. Here, Singh’s scouting method was systematic: he screened IAS batches for officers who combined strong academic credentials in economics with exceptional service records. Reddy, who had never met Singh, later realized he had been hand-picked as part of this carefully curated talent pipeline. 

N.K. Singh’s first encounter with Singh was likely in the seventies in New York when N.K. Singh was an early-career IAS officer and Singh was working at the United Nations. Manmohan Singh’s help was sought to refine a minister’s speech. This chance meeting led to Manmohan Singh’s appointment as economic advisor to the Ministry of Foreign Trade—on the minister’s insistence—marking his first step into government service. But Singh also noted the talent in N.K. Singh, like in the case of Y.V. Reddy. Their paths would cross repeatedly over the next four decades, from the Ministry of Finance to the Rajya Sabha.

In addition to economist chops, Singh also valued exceptional integrity in the people he worked with, like Gajendra Haldea, who served as joint secretary (infrastructure) in the Finance Ministry and set standards for transparency in infrastructure governance from the early 1990s onward.  

Singh’s skill in spotting talent and placing them in the appropriate position went beyond the realm of economics and bureaucracy. In 2009, when Singh was about to start his second term as prime minister, some, including Singh, wanted to bring Nandan Nilekani—co-founder of Infosys—into the government. Originally, Nilekani was considered for a cabinet position in the then Human Resource Development Ministry, but the idea was quickly nixed. Singh felt Nilekani was an able technocrat, not a politician, and such an appointment would be a wrong fit. Singh later offered him a position at the Planning Commission, but Nilekani declined, stating he wanted an active and operational role. Singh asked him to propose an idea. Nilekani, after studying government initiatives, suggested leading the identity project, which had been approved earlier that year. Nilekani set conditions, asking for a high degree of autonomy. Singh agreed without hesitation granting him a cabinet rank for authority.

Nilekani would go on to ensure that every single Indian had a unique biometric identity–AADHAAR–upon which India’s digital public infrastructure rests today. Nilekani himself is also one of the great talent scouts of our time, inducting excellent engineers, businessmen, scientists and lawyers into India’s tech policy network. 

Since the 1970s, attending multilateral meetings helped Singh build long-term connections, allowing him to persuade Raja Chelliah to return from the IMF. Beyond these institutions, he convinced Bimal Jalan to leave ICICI and Vijay Joshi to take two long breaks from Oxford. In this, Singh mirrored his mentor, I.G. Patel, who had shaped his career—recommending him for an early government job after he graduated from Cambridge, backing him as RBI deputy governor, and, finally, suggesting his name for finance minister to P.V. Narasimha Rao in 1991.  

Among Singh’s most significant connections was C. Rangarajan, whom he had first met in New York in the late 1960s while working at the United Nations. Rangarajan, a monetary economist trained at the University of Pennsylvania, was teaching at New York University, and Singh, a trade theorist, stayed in touch—a relationship that would prove crucial for India’s economic stability in the 1990s. After the first wave of reforms in 1991, Singh brought Rangarajan to the Planning Commission and tasked him with dismantling the command-and-control framework and shaping an economy ready for liberalization.

The tension between the Finance Ministry and the RBI was one Singh knew well—the former eager to spend, the latter enforcing restraint. He took a bold step, leaving it entirely to the RBI to end autonomous monetization of deficits and other socialist-era legacies. On Singh’s initiative, Sukhamoy Chakravarty, his colleague, led the committee to review the monetary system, laying the groundwork for financial reform. The S.S. Marathe Committee pushed to cut bureaucratic approvals for bank credit. For exchange rate management, Singh chose M.S. Patwardhan, while S.R. Sen examined agricultural credit in eastern India. In 1991, he commissioned the Narasimham Committee on financial reform and, in 1993, appointed Raja Chelliah to overhaul taxation.  

Singh’s intellectual ties ran deep. As a student at Cambridge, he met Amartya Sen and Jagdish Bhagwati, who would later stand on opposite ends of the ideological spectrum. All three would go on to win the Adam Smith Prize. Singh’s bond with Bhagwati was closer and extended to Bhagwati’s wife and collaborator, Padma Desai. Bhagwati and Desai’s Planning for Industrialisation challenged India’s command-and-control industrial and trade policies. Their conclusions were divisive. In his 1972 review of the book, Singh acknowledged the inefficiencies they exposed but warned against blindly embracing market mechanisms in a developing economy. Years later, as he had moved closer to their position, Singh credited Bhagwati and Desai’s critique for shaping the intellectual foundation of the 1991 reforms. The engagement came full circle in 1993 when Singh invited Bhagwati and T.N. Srinivasan to assess India’s reforms. As prime minister, he oversaw both Padma Desai and Srinivasan receiving the Padma Bhushan.

Sometimes, these intellectual relationships started as a college tour and evolved into direct policy engagement. One such connection began at Cambridge in the late 1950s when Ashok Desai arrived to begin his B.A. Through a peculiar chain of introductions—Jagdish Bhagwati, Desai’s senior at Sydenham College and newly departed for MIT, arranged for Singh to welcome the newcomer. Singh, then completing his own B.A., guided Ashok Desai through Cambridge life with characteristic thoroughness. Though their time together was brief, they stayed in touch. This early connection would prove crucial decades later when Singh, as finance minister in 1991, inducted him into the team: “You’ve had a good enough time now; it’s time for you to join the government.” This approach—matching talent to the moment and knowing when to press his case—was classic Singh. 

Ashok Desai came on board as chief consultant during a turbulent time. When Singh assumed office in 1991, CEA Deepak Nayyar and finance secretary S.P. Shukla opposed his handling of the crisis and the Big Bang reforms. Rather than dismissing their concerns, Singh engaged with their arguments while remaining firm on the need for reform, and procedural. When this proved insufficient, he brought in Ashok Desai to strengthen his team. Nayyar resigned the following day, but Singh ensured this disagreement didn’t end their relationship—later appointing him to the Prime Minister’s Awards for Excellence in Public Administration committee.

Pranab Mukherjee as his finance minister was perhaps the gravest mistake. But the same characteristics that made Singh a great scout - respect for process and openness to those who disagreed with his policy recommendations would work against him in this instance. As prime minister, when faced with criticism of retrospective taxation from his advisers and international peers like Larry Summers, Singh maintained that finance minister Pranab Mukherjee’s judgment—even when contentious—deserved respect. 

With less devastating consequences, Singh’s eye was less keen closer home. When his eldest daughter, Upinder, chose history over economics at St. Stephen’s, he let her decide but made his disapproval clear, the classic economist’s bias at play. Years later, he supported his middle daughter, Daman, in studying mathematics, but was less enthused when she pursued rural management at the Institute of Rural Management, Anand. His youngest, Amrit, initially followed his path with scholarships to Cambridge and Oxford, only to surprise him by switching to Yale mid-PhD. By then, Singh, ever measured, chose his words carefully. Yet, despite not following in his footsteps, all three thrived—Upinder became a leading historian, Daman a prolific writer, and Amrit a prominent human rights lawyer. 

When the currency crisis unfolded in 1991, India was just two weeks away from defaulting on its loans. Singh’s decades of network-building proved decisive. Within a month of taking office as finance minister, Singh handled the crisis by drawing on relationships and ideas he had spent years nurturing. Singh, working with RBI deputy governor C. Rangarajan, implemented a two-step devaluation of the rupee, making way for export competitiveness. Trade policy reforms followed swiftly, with Montek Singh Ahluwalia and P. Chidambaram reworking earlier recommendations from the 1990 M-Document. Within eight hours, Singh, Ahluwalia, Chidambaram, and prime minister PV Narasimha Rao finalized the changes before announcing them the next day.

On industrial policy, Singh drew on the groundwork prepared by Rakesh Mohan, with far-reaching consequences in the domestic markets. Alongside Jairam Ramesh and Ashok Desai advised the prime minister and finance minister’s offices, and Raja Chelliah advised on crucial tax reform. This core team worked to navigate resistance from the old guard within the Congress Party, ensuring the reforms could move forward smoothly. And his proteges at the Finance Ministry, Y.V. Reddy and N.K. Singh held fort with the RBI and multilaterals. With the right people backing them—no power on earth could stop the right ideas whose time had come.

Though the Rao government did not return to power in 1996, the work of reforms continued as Manmohan Singh’s collaborators carried the momentum forward across successive governments. Ahluwalia served as finance secretary under the United Front government, working closely with finance minister Chidambaram, and later as a member of the Planning Commission under the Vajpayee government. In addition to being an excellent lawyer, Singh saw an astute economist in Chidambaram, who went on to serve as finance minister to other prime ministers and would later join Singh’s cabinet, first as finance minister and then as home minister. Shankar Acharya remained a steady presence as India’s longest-serving CEA, continuing through both the United Front and Vajpayee governments, followed by Rakesh Mohan, Ashok Lahiri, and Arvind Virmani. At the RBI, C. Rangarajan, Bimal Jalan, Y.V. Reddy, D. Subbarao, and Urjit Patel, as successive governors since the 1990s, deepened reforms in monetary policy. Rangarajan, Vijay Kelkar, Y.V. Reddy, and N.K. Singh—chaired the twelfth through fifteenth Finance Commissions, shaping India’s fiscal landscape for decades. 

The tributes to Manmohan Singh often boil down to his brilliance and decency. But, what many miss is his ability and power to build collaborative networks. Singh understood that lasting change comes not from solitary genius, but from creating ecosystems of excellence that outlast any individual. In placing talent above ideology, expertise above authority, and mentorship above credit, he developed a model of institutional change that ensured that for the next thirty years RBI governors, CEAs, and the top minds in economic policy were handpicked by him.  

That a tribute to Manmohan Singh should focus so much on other people might seem unusual. Mirroring the man himself, it’s an acknowledgment of his legacy.

The Classics

The finest books I read this year, once again, were not published this year. This seems to be my habit now; perhaps that is why they are called classics. The first is George Orwell’s Down and Out in Paris and London. Orwell has been a part of my reading life since I was eight or nine when I first encountered Animal Farm. Back then, it was mostly a tale of barnyard creatures to me. Over the years, I have read much of Orwell, yet somehow this memoir escaped me. It is a two-part account of his hardscrabble days in London and Paris, chronicling the grind of poverty with an unflinching eye.

I stumbled upon the book almost by accident. Passing Bookmarks, a socialist bookstore in Bloomsbury, I saw it on the shelf and could not resist. The act of reading it stirred something I had not felt in a long time, a resonance that brought me back to the experience of reading Aleksandr Solzhenitsyn’s One Day in the Life of Ivan Denisovich. In both, as the world crumbles in the background, the protagonist’s gaze narrows to the struggle for a warmer coat, a small victory at the pawn shop, or just enough bread to make it through the day. These are stories of survival pared to their rawest edge, their immediacy piercing.

Another classic I loved this year is Orhan Pamuk’s Snow. It is peak Pamuk, with the politics, the inner turmoil, the pining, the damaged men, and the themes of secularism, patriotism, and modernity clashing with the basest emotions of family and love. But in some ways, it feels even rawer than his other novels, especially compared to my other favorite The Museum of Innocence. The winter setting in Snow makes it almost feel like a Russian novel but is still Pamuk at his best.

Trade Books

This year I read a lot about trade. The old free trade order based on GATT/WTO has been discarded. But how that came about, and where both India and the US go from here has been one of the questions I have wrestled with. Most trade insights are in papers, but there are some great books.

Douglas Irwin’s Clashing Over Commerce: A History of US Trade Policy is one such fantastic but big read. I knew I could never climb that mountain without a deadline. Doug agreed to be the guest for the 100th episode and I dutifully read a few of his books in preparation. In Clashing Over Commerce he masterfully weaves trade theory, trade and economic history, and political history to deliver maximum insights per page.

The next mountain to climb was Anne Krueger’s work. I have read her papers and books for years now, but after reading them all again, in a short period, her relentlessness to improve the world through trade policy comes through. For the unfamiliar, start with her latest International Trade: What Everyone Needs to Know. But I love the entire NBER series she and Bhagwati co-edited. Her volume Foreign Trade Regimes and Economic Development shows her staggering impact of trade policy on developing countries. The Benefits and Costs of Import Substitution in India informed her famous 1974 AER paper on rent-seeking, still a classic.

Jacob Viner’s Studies in the Theory of International Trade is written simply, unlike today’s papers. He is the master at refuting mercantilist arguments. Another Viner classic, The Customs Union Issue, detailing trade creation versus trade divergence framework, remains the foundation for understanding multilateral trade frameworks.

Some of the best books I read this year were on economics. One of them is What Went Wrong with Capitalism by Ruchir Sharma. The title misleads - he argues capitalism’s problem is distortions caused by a century of expanding government intervention and deviation from classical liberal principles. Ruchir called elections worldwide right, and when he rings the warning bell, we should take notice.

Another great read was History of Private Banking in South Canara District by Amol Agarwal. I have read Amol’s blog and columns for years, and this book is written just as accessibly. While seemingly just a history of South Canara banks - and I picked it up because I have members of my family who worked at Syndicate Bank - it is so much more. t provides a lens into the history of colonial banking and its transition to post-colonial banking, how elitist and top-down the RBI policies were for decades, and leads us right up to bank nationalization.

The biggest of them this year was Accelerating India’s Development: A State-Led Roadmap for Effective Governance by Karthik Muralidharan. Karthik is one of the most prolific economists of our time, and I am not exaggerating when I say I must have read at least 40-50 of his papers over the years. The book still surprised me. First, it synthesizes the current research in every area that he touches upon - education, health, welfare delivery, hiring government personnel, and I could go on. But it is so well contextualized to India and so clear in its policy recommendations and way forward that will be THE book to read on the question of economic development through strengthening state capacity.

Another big and comprehensive, but excellent read, is Law and the Economy in India: Before Independence and After by Tirthankar Roy and Anand V. Swamy. The first part of it builds upon their previous book, Law and the Economy in Colonial India. And then in the second part, they cover post-independence India. Roy is the best Indian economic historian of this generation, but this law and economics/regulatory lens makes this book the first of its kind. Accessibly written for law and political science students, it is an absolute must-read.

Progress Studies

Build Baby Build: The Science and Ethics of Housing Regulation by Bryan Caplan and Ady Branzei was another favorite. Maximum policy insights with gorgeous graphics is a genre I did not know existed until I read Bryan’s last book Open Borders: The Science and Ethics of Immigration (coauthored with Zach Weinersmith). In typical Caplan style, brick by brick he builds the cost-benefit case for more YIMBY-style deregulation and permitting reform to build more, better, and prettier.

Anton Howes writes ‘Age of Invention,’ one of my favorite Substacks. His book Arts and Minds: How the Royal Society of Arts Changed a Nation is superb. He explores the rise of a nation of tinkerers and innovators, driven by what he calls an “improving attitude.” It left me wondering: Did the Royal Society’s vision of progress align more with Romer’s endogenous growth theory, or was it closer to Kremer’s O-ring model?

For another perspective on innovation, Chris Miller’s Chip Wars is a standout. Semiconductors—arguably the last century’s emblem of technological progress—are at its heart. Miller charts their history, the major players, their stagnation under communism, and their explosive growth under Taiwan’s unique industrial policies.

If you want to read the other side, of how progress and innovation can be stifled, pick up John Carreyrou’s Bad Blood: Secrets and Lies in a Silicon Valley Startup. It is a gripping account of Theranos and Elizabeth Holmes—her meteoric rise, and her catastrophic fall. But beneath the scandal lies a deeper lesson: real innovation demands openness, dialogue, and competition.

Time Machine

Some books are topping every best book list of 2024. One is Ashok Gopal’s new Ambedkar biography, A Part Apart: The Life and Thought of B.R. Ambedkar. I have read so much of Ambedkar in the original, and past biographies have been a bit of a letdown. This one is sensationally well-written and gives us a sense of Ambedkar’s mind and feelings. I thought there was nothing new to be written on the Ambedkar-Gandhi debate, and Gopal changed my mind. This is the first time I truly understood how Ambedkar viewed it, as opposed to how post-colonial post-modern historians viewed the debate. If there is only one book you read about Ambedkar, then this one should be it.

Another set of portraits and biographical sketches is The Fifteen: The Lives and Times of the Women in India’s Constituent Assembly by Angellica Aribam and Akash Satyawali. A great start to help us understand these women, but I wish it had gone beyond that theme.

Another pleasant surprise was IRU: The Remarkable Life of Irawati Karve by Urmilla Deshpande and Thiago Pinto Barbosa. Like most others, I have read Yuganta and some shorter pieces and thought I knew Karve and her work. She had an exceptional life, not just for her time. Her doctoral years in Germany before the cusp of WWII, and her research on refuting racial differences using brain sizes and skeletal measurements was fascinating.

Another book topping every list is The Golden Road: How Ancient India Transformed the World by William Dalrymple. If Dalrymple wrote a book on the history of watching paint dry, I am sure I would not only read it but enjoy it immensely. It is obvious that civilizations as old as the Indian subcontinent must have had an influence on other parts of the world, but we rarely read much beyond some individual examples or when I go to museums in other cities. This book is that lens. Golden Road is an insight into Indian history that I should have learned in my history lessons but was completely missing from the conversation. This book can change that.

Speaking of learning one’s history, I immensely enjoyed Wanderers, Kings, Merchants: The Story of India Through its Languages by Peggy Mohan. The reductive description is that it is a linguistic history. But like only the very best books can do, it made me understand myself and my family better. Now I know why I am a diglossic English/Hindi/Tamil speaker.

In the effort to know myself better, as a product of the nineties, I picked up Chuck Klosterman’s The Nineties. A very well-written and fun book, but perhaps less compelling in building its case than one would have liked.

I much preferred Jean M. Twenge’s approach in Generations. She dives into the six living generations in the U.S., from the Silents to Generation Alpha. The book is packed with data, thoughtful analysis, and sharp insights.

Identity

Another short and good read is Gurcharan Das’s intellectual biography, The Dilemma of an Indian Liberal. I have read most of Gurcharan’s books; India Grows at Night is a favorite. This book takes us through the shift from the Nehruvian to the Modi consensus in India, and how Gurcharan perceived that shift.

Normally, a book about Kashmir from the perspective of a police officer would not appeal to me. But Kashmir Under 370: A Personal History by J&K’s Former Director General of Police by Mahendra Sabharwal, with Manish Sabharwal, stands apart because of its granularity. But it is not a police procedural either. It dives deep into everyday political and human challenges of conflict in the broader context of historical and constitutional developments.

On identity and conflict, I loved reading Feargal Cochrane’s Belfast. I picked it up on a recent trip to Ireland when I crossed over to Belfast. It is such a personal telling of the history and context of this conflict-torn city. It is heartwarming to see that the city now looks and feels much more healed and united compared to the descriptions in the book. But the book showed me where to look for the cracks and scars.

The Identity Project: The Unmaking of a Democracy by Rahul Bhatia is another grim read about a grim chapter in India’s history. Bhatia, long known for his sharp interviews and incisive journalism—even from his cricket-writing days—brings something deeply personal to this work. The caricature of the extreme, once confined to the occasional family dinner with an opinionated uncle, has now seeped into our lives with unsettling permanence. The proverbial genie has leapt, digitally and algorithmically, out of the bottle.

Another lens into the same issues, viewed through pop culture, is Kunal Purohit’s H-Pop: The Secretive World of Hindutva Pop Stars. In this world, Purohit maps the rise of Hindutva pop culture—how poets and singers carry its message. Not just digitally but in live recitals. Their voices grow louder, their status rising.

These identity wars are not confined to India. In the United States, they have escalated, particularly at the universities. Two books that helped me understand the dynamics of woke politics in academia and their historical roots are Yascha Mounk’s The Identity Trap: A Story of Ideas and Power in Our Time and Christopher F. Rufo’s America’s Cultural Revolution: How the Radical Left Conquered Everything.

Poetry

My favorite this year is Vikram Seth’s translation of the Hanuman Chalisa. I never thought I would need—or even read—a translation of it. Like so many of my generation in the north, I grew up hearing the Chalisa recited everywhere: as shopkeepers opened their stores, during turbulent flights, or when India reached a pivotal stage in a cricket match. I knew every verse. Maybe not in perfect order, but I knew them. Seth is a master, and this translation is extraordinary. The English version is written in verse. It is non-literal yet captures both the meaning and the cadence perfectly. I doubt anyone else could have done it. I have read it so many times this year that I have lost count. Whether you are new to Tulsidas or have recited the Chalisa for years, this is a remarkable read.

And of course, I read more of Gulzar. He feels so familiar to me; reading him feels like going home. 89 Autumns of Poems and Caged: Memories Have Names are both excellent compilations of the master, and the translations are pretty decent. But just read the original.

I am new to reading poetry, but I love the little I read. And I love to learn more about the poets. Ghalib: A Thousand Desires by Raza Mir brings Ghalib to life—sharp, outspoken, and a genius who still drives how we read and feel poetry. The most unfamiliar to me is Tamil poetry; Tamil Heroic Poetry by K. Kailasapathy explores the rise of Tamil kingdoms through verses that shaped both militarism and literature. Very useful context.

Currently Reading

Abraham Verghese’s The Covenant of Water is a sweeping tale set in Kerala. It is my favorite kind of story, with multiple generations and a rich cast of characters. Verghese traces their lives through love, loss, and resilience, all set against the backdrop of family and history.

I have been eagerly awaiting Salil Tripathi’s The Gujaratis: A Portrait of a Community ever since he mentioned it to me years ago. It is incredibly well-researched, rich in detail, and very accessible. I cannot wait to learn more about my Gujju brethren.

Manu S. Pillai, one of my favorite historians, delivers again in Gods, Guns, and Missionaries: The Making of the Modern Hindu Identity. He unpacks the historical forces and ideologies shaping contemporary Hindu identity. True to his style, it is fast-paced and deeply engaging.

Katherine Butler Schofield’s Music and Musicians in Late Mughal India is superbly researched. It is helping me draw connections between the Hindustani Classical Music I love today and the world it emerged from, capturing the vibrant yet fleeting musical landscape of the Mughal Empire’s twilight years.

Let me know your favorites in the comments section. And happy reading in 2025.

Born to another family and gender, they might have named him Laya. Zakir, which means one who does zikr, is a form of devotion that involves rhythmically repeating Allah’s name. One could say he inherited this relentless riyaaz and devotion. When he was born, like other Muslim children, his father should have first whispered a prayer in his ear. Instead, the great Ustad Alla Rakha whispered a theka – rhythms – into his ear, making his mother Bavi Begum livid. Alla Rakha responded that rhythm was his prayer.

They could have named him Amir Khusrau – the 13th-century itinerant who merged Persian, Arabic, and Indian musical traditions, laying the foundation for what would become Hindustani classical music. Zakir would go on to blend Hindustani classical with traditions around the world – Western classical, jazz, rock, bluegrass, Celtic, and African.

Perhaps fittingly, Zakir wasn’t named Khusrau or even known by Qureshi – the family name. Nor was he named after India’s third president. He was a singular musician with his own signature. When Zakir was born, his father was ailing with a serious heart condition. A neighborhood fakir, Gyani Baba, sought Zakir’s mother, Bavi Begum: “You have a son. The next four years will be dangerous for him; protect him well. He’ll save his father. Name him Zakir Hussain.” And now, like Bach, Thyagaraja, and Mozart, he is known the world over as Zakir.

The Syncretic

India has had many syncretic legends merging musical and religious traditions – Khusrau for Hindustani and Muthuswami Dikshitar who introduced western elements and the violin to Carnatic classical. Or closer home to Zakir, Ahmed Jan Thirakwa, the giant who could blend different tabla gharanas with ease. In other traditions, one can think of Coltrane, who did it for jazz. Zakir belongs on that list.

Zakir played with everyone. His tabla accompanied Hindustani legends – Bismillah Khan, Bhimsen Joshi, and Ali Akbar Khan, and famously, the trinity of the sitar, Nikhil Banerjee, Vilayat Khan, and Ravi Shankar. Carnatic masters too – Lalgudi G. Jayaraman, V. Lakshminarayana, and Balamuralikrishna. With the great Umayalpuram Sivaraman and Palghat Mani Iyer on mridangam and a decades-long partnership with Vikku [TH] Vinayakram on ghatam. He was initiated into the world of rock by George Harrison, who encouraged him to stay true to the tabla. And he played extensively with Grateful Dead drummer Mickey Hart. Zakir’s forays into jazz started with guitarist John McLaughlin – a lifelong collaboration. He played with saxophone great Jan Garbarek, and most recently banjoist Béla Fleck and bassist Edgar Meyer. And then came the Western classical orchestras. He collaborated with Yo-Yo Ma. Even composed a tabla concerto. He composed for Bollywood films and accompanied everyone from Lata Mangeshkar to Nusrat Fateh Ali Khan to Shankar Mahadevan.

Zakir, at his core, was syncretic – which was odd given his circumstances. Normally, the oldest son born to a legendary tabla player would have lived in an insular world – within the gharana. He would have received his musical education/taleem from his father, uncles, and cousins. Taught the younger cousins and nephews. Married within the kin. And performed with legends playing other instruments in his tradition. He would have earned his stripes and become an ‘ustad’ and eventually retired from public performances into a senior mentor role.

But Zakir was born in India’s most cosmopolitan city – Bombay (now Mumbai, though Zakir preferred Bambai), in 1951. Born to a father who had run away from home to pursue his art, and who constantly toured the world. It went beyond rhythm – Hindustani classical is not just the merging of Persian and Indian sound but also of Hindu and Islamic religious influences. Alla Rakha attributed the rhythms he whispered in Zakir’s ear to his devotion for Saraswati – the Hindu goddess of learning – and Shiva – whose cosmic beat was transcribed by Ganesha.

Alla Rakha left his home in Jammu at 12 and moved to Punjab to pursue music. There, Ustad Mian Kadir Baksh, without heirs of his own, not only trained him in the Punjab gharana but adopted him as its next leader. Unlike the Delhi-rooted tabla gharanas, Punjab traced its origins to Pandit Lala Bhavani Das Pakhawaji, who infused tabla with the bold, open-palmed ‘Thapiyaa Baaj’ of the pakhawaj tradition. Alla Rakha added his own layers, blending Punjab’s foundation with vocal training under Ustad Ashiq Ali Khan of the Patiala gharana and the influence of Bade Ghulam Ali Khan. He also introduced chakradhars, not typical of Punjab.

Yet, Alla Rakha did not sound like his teacher, nor did he expect Zakir to sound like him. Zakir, firmly rooted in Punjab’s gharana—its intricate layakari, dynamic open style, and rapid relas—crafted a voice all his own. He mirrored the path of Ahmed Jan Thirakwa, synthesizing styles across gharanas into something singular. Zakir extended this fusion further, drawing from Brazilian shamans, Cuban percussion, and rock masters. He incorporated the Carnatic tani avartanam—a solo showcasing the percussionist’s creativity and technical skill that starts as a monologue and evolves into a collaborative, rhythmic dialogue.

A different kind of syncretic push really came from his mother, a devout Muslim housewife, who was not a huge fan of Zakir limiting his education to Hindustani music. Tabla was an accompanying instrument, not taking center stage in solos, receiving both lower status and pay. She insisted that in addition to 3 a.m. tabla practice followed by Madrasa prayers, Zakir receives a more secular education in English. She enrolled him at St. Michael’s School in Mahim, founded in 1850 by Catholic missionaries. In his free time, he played cricket and listened to The Doors.

Film music was another melting pot. Alla Rakha had composed music for over 25 films but stopped once he started touring the world. As a teenager, Zakir went on to play for great composers like Madan Mohan, Khayyam, Roshan, and Shankar-Jaikishan. His mother encouraged him to take on these well-paying sessions, which eventually helped her buy their family home in Bombay.

Other than his mother, and sisters Razia and Khurshid, another important female influence as a child was Bibi Bai Almas. Zakir’s mother sent him to live with her friend Almas as a teenager so that he could focus on his schoolwork. But Almas also taught dance, and her daughter Habiba Rahman learned kathak from Sitara Devi. Instead of escaping his taleem, Zakir played alongside these kathak lessons. It turned out to be a blessing in disguise.

Typically, the tabla players who accompany musicians don’t accompany dancers. Partly because it was a different kind of skill, the ability to follow a dancer’s rhythm and expression. Another matter was one of status, not all dancers were considered high status within the classical tradition. And even in the 1960s, many tabla players would only accompany male dancers. Zakir talked about the invaluable learning in accompanying young kathak students that eventually helped him play for Sitara Devi and Birju Maharaj.

The same push to be open and syncretic also came from his wife, Antonia Minnecola (Toni), whom he met in 1971 at the Ali Akbar Khan School of Music. An Italian-American Catholic, she was learning Indian classical music and dance. A grand love story, overcoming many years of parental resistance. And like the happy ending to a good Bollywood film, they had a civil ceremony and nikah and a church wedding seven years later in 1978. This partnership lasted his lifetime. If his mother’s efforts led him to converse with a new world, it was Toni who introduced him to a whole new world of the music of Charles Lloyd; and to Edgar Meyer and Béla Fleck, with whom he would go on to win multiple Grammys.

Zakir and Toni managed the impossible, having a wonderful family with their two daughters – Anisa and Isabella – with Zakir touring and playing 150 concerts every year for 50 years. And unlike other world-famous touring musicians who played over 150 concerts, not a whiff of drama or scandal. One never heard of a cancelled show, or a delayed start, or a tantrum or an affair.

Another source of strength - Shakti - also started at Ali Akbar Khan’s School. McLaughlin frequented a Greenwich Village shop called The House of Musical Traditions, a hub for instruments from around the globe. One day, the owner introduced him to Zakir. Their first meeting ended with an impromptu vocal lesson by Zakir, an unusual session that ended in laughter. They parted ways, but three years later, McLaughlin, now leading the Mahavishnu Orchestra, reconnected with Zakir during a charity concert for the Ali Akbar Khan School of Music. Zakir saw McLaughlin perform and realized he had underestimated the guitarist’s genius. The next day, they played together, and continued for the next five decades.

In 1973, while McLaughlin was studying the veena at Wesleyan College, he met mridangam player Ramnad Raghavan, who introduced his nephew, violinist L. Shankar, to McLaughlin. McLaughlin, Zakir, Shankar, and Raghavan began performing locally. But what eventually became Shakti – McLaughlin, L. Shankar, Zakir, and Vikku Vinayakram would create a new sound, in India and abroad.

Shakti was both deeply rooted in Indian classical and jazz improvisations at its best. The 1976 Montreux performance was greater than the sum of the different parts of Shakti – and jazz greats like Wayne Shorter and Sun Ra would stand in the wings just to hear them. The original lineup changed – L. Shankar moved on and Shakti did a tour with Hariprasad Chaurasia. Then, Carnatic prodigy on the mandolin U. Srinivas joined, and with Vikku unable to travel, his son, Selvaganesh stepped in. Shankar Mahadevan sang a piece in the Remember Shakti concerts. I heard Shakti live for the first time in 2006 (I think) in New Delhi. With the passing of U. Srinivas, by 2023, Shakti 3.0 had Zakir, McLaughlin, Mahadevan, Ganesh Rajagopalan (violin), and Selvaganesh. On Shakti’s 50th anniversary tour, the magical bond between McLaughlin and Zakir was visible. I have never seen two musicians have so much fun on stage, like they would never run out of musical conversation. Backstage, when I met them, both were thrilled with my name, and that my substack is an ode to a Shakti song.

The Performer

It is hard to explain the aura of Zakir to someone who has not sat in the audience and felt it. You can try to break it down—rationalists will call it genius, the sort of brilliance that defies analysis. Others might invoke his charisma, his ability to connect with any audience, that mischief dancing in his eyes. The spiritually inclined go a step further, claiming his rhythms channel something divine, as though the tabla becomes a vessel for forces we cannot name. I have heard Zakir live at least 25-30 times—concerts scattered across cities, years, moods—and I can tell you it is all of the above. Still, I will try to describe these moments as best as I can articulate, where Zakir speaks to every audience member in their language.

There are a few different types of Zakir concerts. The first is Zakir as an accompanist to very senior musicians. At 12, he accompanied Ustad Bismillah Khan in Patna, and by 20, he was playing with Ravi Shankar in New York. He has been an accompanist to Ali Akbar Khan and Hariprasad Chaurasia, and he has played with their children. At a performance with Shiv Kumar Sharma on the Santoor in NYC’s Town Hall, Zakir touched Shivji’s feet, then sat on stage for 40 minutes listening to him improvise on raag Bhupali before sounding the beat for the main piece, followed by the sawaal-jawaab. The charm lay in Zakir’s respect for the seniority of the artist—or darja—of the main instrument and in his ability to hold his own in the playful sawaal-jawaab. Live, he showed incredible rapport with Shivji, formed over 50 years. Another memorable exchange was with N. Rajam at a concert in Pune, where she tried to outwit him in a desh raag improvisation but was thrilled when he thwarted her efforts. More recently, he was the senior artist, playing not with Hari, Shiv, or Rajam but with Rakesh Chaurasia, Rahul Sharma, or Kala Ramnath. He was equally attentive to their raagas improvisations, always introducing them first.

A second kind of Zakir concert is the ensemble. In the early seventies, while accompanying Ustad Ali Akbar Khan in the typical classical format, he was also experimenting in a fusion ensemble—Shanti—with his son Aashish Khan and Steve Leach. He collaborated with his brothers Taufiq and Fazal Qureshi. I have also heard him with play with Dave Holland, and with Béla Fleck Edgar Meyer and Rakesh Chaurasia. Even his exchange with Celtic folk musicians felt like home. Live at Madison Square Garden, Zakir was joined by a dozen percussionists from across the world, and his wife Toni, a Kathak dancer, performed a graceful tukda. Shakti, as the name suggests, is the most electric and energetic of all his ensembles.

The third kind of concert is the Zakir solo. Tabla is an accompanying instrument, usually not center stage, except for a few ustads like Alla Rakha, Samta Prasad, Kishan Maharaj, whom Zakir considered the holy trinity. In later years, a younger artist might join Zakir for a short duration, but otherwise it is Zakir and a trusted sarangi player. These relationships are intergenerational—Ustad Sultan Khan was the shruti to Alla Rakha’s laya, and Sultan Khan’s son Sabir Khan is Zakir’s. Zakir can fill any concert hall, and these solos sell out quickly.

Abroad, these are ticketed performances in grand auditoria, with assigned seats, a published start time that is followed, and a timely finish. The set list is largely predetermined, with bursts of spontaneity. Having lived in the West for over 50 years, Zakir has mastered this format. He explains what he is doing to new listeners, charms them with his wit, and teases them with complex permutations. Occasionally, he sneaks in a riff from Deep Purple or Pink Panther, a mischievous nod to his father—Peter Sellers personally gifted Alla Rakha a Pink Panther album on vinyl.

But there is another kind of concert, the one I grew up with in New Delhi, which has almost a durbar feel. These concerts never start on time, and the ending depends on whether the cops who show up at the late hour know and love the artist. Often, the front rows are by invitation, with the rest open to the public. Even the greatest musicians rarely fill more than half the seats at these shows—listening to live classical music is a dying interest in most large metros besides Chennai.

Yet Zakir always filled the hall. The first few rows might have a last-minute printout marked “Reserved” or “VIP Seating,” and the rest fills up. Nobody worried about the fire code; the fire inspector is likely in the audience. Here, VIPs are typically the musical elite: other classical musicians or rasikas who have earned their stripes or inherited their VIP seats. Grateful Dead riffs do not feature in this setting. Instead, Zakir recites and explains complex thekas and chakradhars, describing in English or Hindustani the sounds he wants to evoke: a deer fleeing a hunter in the forest, a guest arriving for a meal, Lord Shiva’s damru, Lord Ganesha’s pakhawaj, and my favorite – the movement of the planets around the sun, a chakradhar he inherited from his father. Then he recites the taal with hand gestures, and the audience is ready to follow him anywhere. Next, he recreates it on the tabla, first slowly, then faster and faster, doubling and quadrupling the laya, the khula baaj – open- and dynamic style of the Punjab Gharana shining through each beat. His relas make people forget themselves and erupt in applause before the tihai even finishes.

Zakir was masterful with the audience, but my favorite memories are when he loses himself in a feverish solo, oblivious to everything but the drone of the sarangi.

—

PS. Many of these stories are recollections from Zakir’s concerts and interviews. But the best book is his conversation with Nasreen Munni Kabir, Zakir: A Life in Music.

India’s economic pivot from rules-based reform to deals-based tinkering

Prime Minister Narendra Modi’s first term saw India climb the Ease of Doing Business rankings. The country placed 63rd in 2019 and 2020, up 79 positions from 142nd when he took office in 2014. Government reports often cite these rankings as evidence of a pro-growth, pro-business and anti-corruption agenda.

Yet, The Economist’s 2023 Crony Capitalism Index tells a different story, estimating that wealth from crony capitalist sectors rose from about five per cent to eight per cent of GDP during the first two terms of the Modi-led National Democratic Alliance’s (NDA) government. This index ranks India 10th out of 43 countries, with Russia at the top spot and China at 23rd.

Has India embraced rules that ease business or rules that encourage cronyism and corruption?

India’s political economy in transition defies simple explanations based on rankings or anecdotes about corruption. The regulatory legacy of socialist times combined with reform challenges in a federal system complicates matters. Add to this an economic model of picking national champions in a system with high entry barriers and protectionism—cronyism inevitably follows.

These factors have led India to adopt, what Lant Pritchett, Kunal Sen and Eric Werker call, a deals-based economic approach rather than a rules-based one. While this has improved the business environment for some crucial sectors and firms, it has entrenched cronyism further.

The goods and services tax (GST), introduced in 2017, exemplifies this shift from a rules-based to deals-based approach. It was designed as a value-added tax that aimed to unify India’s fragmented tax landscape, replacing hundreds of state taxes and eliminating endemic corruption at state borders. This major reform required broad-based consensus and an amended constitutional compact between central and state governments working towards a single unified market. It suggested a commitment to market-oriented policies and economic liberalisation, continuing the reform trajectory initiated in 1991.

Initially designed with three rates and a plan to consolidate to a single rate, its implementation has strayed far from the promised ideal of a ‘good and simple tax’. The current GST system imposes seven non-zero rates, ranging from 0.25 per cent to 28 per cent. There are also 21 cesses ranging from one per cent to 204 per cent, as well as numerous exemptions. Rate disparities across sectors are stark and often regressive and arbitrary. Gold is taxed at three per cent, gemstones at 0.25 per cent while low-cost biscuits, a cheap calorie source for daily wage earners, carry an 18 per cent tax.

This complexity is exacerbated by frequent revisions—the GST Council altered rates for over 550 goods and services between 2017 and 2022. The frequent rate changes and sector-specific treatment have intensified lobbying, with industry groups pushing for favourable rates or complete exclusion from the system. This chaotic cronyism, characteristic of the government’s deals-based approach, subjects businesses to uncertainty over tax rates and production costs. The frequent tinkering with what should have been a broad-based consumption taxation system imposes high compliance costs and disproportionately burdens smaller businesses. With GST failing to deliver on both simplicity and revenue generation, even one of its architects, Arvind Subramanian, has buyer’s remorse.

But cronyism for large conglomerates goes beyond rates and cesses. When one of the NDA government’s national champions, the Adani Group, took over operations of the Jaipur, Ahmedabad and Lucknow airports from the Airports Authority of India in 2019–20, these transfers were GST-exempt, justified as transfers of ongoing businesses rather than new transactions.

Tinkering with the tax system is not just about raising revenues or favouring some firms and sectors—it also leaves more power in the hands of the bureaucratic and political class. India’s Supreme Court has upheld interpretations of the GST enforcement mechanism that allow tax and investigative agencies to make arrests based on a tax official’s ‘reason to believe’ tax evasion has occurred, without completing assessments. These offences carry prison sentences for executives. Businesses, especially those without political favour, operate under the ever-present threat of arrest and prosecution, not only for wilful evasion but for disputes arising from good faith interpretations of ambiguous and ever-changing GST regulations.

The 2023 inclusion of the Goods and Services Tax Network under The Prevention of Money Laundering Act’s (PMLA) information-sharing framework has escalated the potential for harassing businesses. Enacted in 2005, PMLA originally focused on combating the laundering of money aiding terrorism and drug trafficking. The law has undergone significant changes, particularly since 2014 under the NDA government. PMLA imposes harsher penalties and permits asset freezing and confiscation of suspected crime proceeds, with the potential to paralyse business operations pre-conviction in a judicial system that takes decades to conclude cases.

The 2023 inclusion doesn’t directly bring GST offences under PMLA but enables information exchange between the Goods and Services Tax Network and agencies like the Enforcement Directorate, which could transform routine tax matters into subjects of money laundering investigations. And given the gravity of charges under money laundering provisions, the threat of PMLA can easily be weaponised against businesses, especially those not currying favour with or those critical of the government.

This has given rise to a quid–pro–quo through the electoral bond scheme, introduced in 2018, which allowed anonymous political contributions through state-owned bank-issued bonds. Major companies have channelled billions through these bonds, effectively purchasing influence, securing regulatory and contractual favours and avoiding disfavour. The entire scheme, connecting business and political interests, remained a black box for six years as the Supreme Court delayed hearing the case and became complicit in institutionalising corruption and enabling undisclosed corporate influence over government decisions. In 2024, the Supreme Court belatedly found the scheme to be unconstitutional.

The subsequent mandated disclosure of political donations revealed the intricate connections between corporate largesse and governmental favour. Tracking the electoral bonds donated to political parties across all states suggests that such donations influence criminal investigations and government bids. Future Gaming, while under investigation by central agencies, saw some allegations dissipate after purchasing electoral bonds worth 13.68 billion rupees (US$163 million) between 2019 and 2024. Megha Engineering, facing scrutiny over the Kaleshwaram Lift Irrigation Scheme, secured the Thane–Borivali tunnel contract after purchasing 1.4 billion rupees (US$16.7 million) in electoral bonds in April 2023, a fraction of the 12 billion rupees (US$143 million) it spent on bond purchases between 2019 and 2023.

Others, outside the top three contributors, also benefited shortly after contributing through this scheme. The Vedanta Group received environmental clearances for oil drilling projects in Rajasthan. The Aditya Birla Group set up its alumina refinery in Odisha, while the RP-Sanjiv Goenka Group secured lucrative government contracts in the energy and infrastructure sectors.

The Adani Group’s rise typifies this system of preferential treatment. The group now controls 15 ports and terminals, representing 27 per cent of India’s total port capacity. In 2018, it secured contracts for all six major airports privatised by the government, as the government waived airport operations experience requirements and the cap on airports per bidder. While facing new money laundering and corruption charges over Mumbai airport operations, GVK Industries swiftly transferred the asset to the Adani Group, fuelling speculation about weaponising anti-money laundering laws to influence corporate transfers to national champions. Public sector banks settled 620 billion rupees (US$7.47 billion) in claims from ten distressed companies for 160 billion rupees (US$1.93 billion)—a 74 percent reduction in recoverable debt—when Adani acquired the companies.

Reliance Industries has similarly succeeded in securing favourable treatment, though with less public scrutiny than Adani, given the Ambani family’s rise in the public imagination since the 1970s. Reliance’s entry into the telecom sector through Jio in 2016 was marked by regulatory decisions, like the 2018 amendment that allowed Jio to maintain low prices while preventing competitors from matching them.

The ease of diversification for these conglomerates is notable. The defence sector, traditionally dominated by public sector undertakings, has seen rapid private sector inroads. Tata Advanced Systems secured a US$3 billion deal to manufacture military transport aircraft, while Adani Defence & Aerospace and Larsen & Toubro have rapidly accumulated defence contracts worth millions.

Some argue that this is the Indian version of the Asian growth model of choosing national champions. While parts of this playbook are reminiscent of the Asian model, East Asian countries also maintained low tariffs and embraced global trade. In those economies, winners and losers were picked through the feedback provided by global markets. But in India’s regulatory regime, with rising protectionism and regulatory favouritism, victors often ascend via political connections, instead of global competition.

Since 2016, the NDA government has embraced a more inward-looking stance, aligning with its ‘Make in India’ initiative. This encompassed reversing the trade liberalisation trend that began in 1991, through newproduction subsidies, tariff increases, and a reluctance to join multilateral trade agreements. Since 2014, around 3200 tariff increases have elevated the average rate from 13 to 18 per cent, placing India among the world’s highest tariff regimes.

Arvind Panagariya, Chairman of the 16th Finance Commission, has cautioned that increasing tariffs and frequently using anti-dumping measures risks isolating India from global supply chains and hindering its broader economic aspirations.

Rejecting the Regional Comprehensive Economic Partnership, the largest Asian trade treaty which could have integrated India into regional supply chains, has not been offset by effectively using other trade agreements. Pravin Krishna finds that India’s current bilateral trade agreements commonly include only modest tariff reductions implemented slowly over many years and impose complex rules about product origins, discouraging trade altogether.

The government has used these measures to shield domestic industries from ‘unfair competition’ favouring specific business interests over broader economic benefits. This high tariff regime has created inward-looking industries, with exports remaining a small fraction of total output, contrasting with more globally integrated economies like China and Mexico.

India aims to compete with China as a major electronics manufacturer. But in 2018, India raised mobile phone import duties from 15 to 20 per cent to encourage firms to ‘Make in India’. When this failed to attract investment, import duties for certain mobile phone components or inputs were reduced in January 2024. Soon after, India’s Finance Minister Nirmala Sitharaman announced plans to revert the duty on mobile phones to 15 per cent. This approach has increased consumer costs without making Indian mobile phones domestically or globally competitive. Similarly, in 2023, the government abruptly banned laptops and IT hardware imports to boost domestic production. It eased these restrictions soon after. However, with all the policy flip-flops, local manufacturing has not expanded sufficiently to replace imports.

The perennial protection for the auto industry, with tariffs of 125 per cent for cars and 100 per cent for motorcycles, insulates domestic manufacturers from global competition. The government’s ‘infant industry’ justification rings hollow for this 80-year-old sector. Despite, or likely because of the high protection, Indian cars are not competitive in the global market.

The ‘Make in India’ model—subsidies and protectionism without the disciplining mechanism of global competition—has enabled a form of cronyism that, in turn, demands greater protectionism. And attracting foreign investment and capital from global leaders to ‘Make in India’ results in making exceptions for specific firms, leading to policy uncertainty.

The electric vehicle sector is the most recent casualty. It started with the NDA government wooing Elon Musk to set up a Tesla Gigafactory in India. Musk demanded lower import duties as a precondition, challenging the government’s protectionist stance. The government announced a reduction in duties contingent on local manufacturing commitments, but only offered it to a few firms with conditionalities. Allegedly, the latest point of contention is over the government’s favouring of Gujarat, Modi’s home state, over Tesla’s preference for established automotive manufacturing bases in states like Tamil Nadu. The Tesla deal seems to have run out of charge.

The Production Linked Incentive (PLI) scheme, introduced in 2020, offers subsidies of three to five per cent on incremental sales for five years to large firms meeting scale-related qualifications in select sectors. However, the focus on capital-intensive sectors overlooks labour-intensive industries like apparel and footwear, and its emphasis on largescale production may disadvantage smaller domestic firms. Despite some successes like Apple’s investments, the overall private investment rate has barely budged.

These efforts have led to a decline in net foreign direct investment as a percentage of GDP from 1.2 per cent to 0.8 per cent during the first two terms of the NDA government. Policy uncertainty has also led to low levels of domestic private investment, which shows no signs of real recovery since its decline in 2012. A deals-based approach only gives confidence to a few investors, whereas a rules-based approach would have attracted the non-politically connected majority.

This system of crony capitalism creates an uneven playing field where political connections often trump market forces and innovation. Small and medium enterprises, lacking the resources for substantial political donations, find themselves at a significant disadvantage. Bureaucrats and politicians often weaponise laws, further chilling private investment. The system stifles long-term economic growth by misallocating resources to politically connected firms rather than those that are most efficient or innovative. It also raises concerns about the integrity of India’s regulatory environment and the independence of its institutions—an important consideration for the foreign capital India hopes to attract.

There was a time when Narendra Modi railed against India’s oligarchic capitalism and corruption. In his 2014 election campaign, he pledged to create a rules-based system to tackle cronyism and encourage genuine market competition through this plan for ‘minimum government, maximum governance’. In the first term, the NDA government investigated previously sheltered oligarchs like Vijay Mallya and Nitin Sandesara and also Nirav Modi, caught under its watch.

In 2014, the NDA government initially continued India’s rules-based economic reforms. Building on previous governments’ reforms, it passed the Insolvency and Bankruptcy Code, 2016, to streamline exits and unlock resources shackled in failed firms. A new inflation targeting regime followed, with an independent Monetary Policy Committee comprising central bank and government appointees to set inflation targets and tolerance bands aimed at price stability and economic growth. It implemented the GST, unifying states under a single value-added tax system and eliminating corruption at state borders.

Next on the list were streamlining factor markets like land and labour—knottier problems that previous governments had not successfully solved due to coalition pressures and state holdouts. Many believed that factor-market reforms needed a single-party majority in parliament, a strong leader with economic vision and an understanding of the pressures on state governments. While Modi checked all these boxes, his leadership failed to build consensus beyond his party. Policy announcements were followed by protests, paralysing any further economic reforms.

Abandoning broad-based land and labour reforms was a turning point for the government. One view was that if broad-based reforms were not implementable, the government still needed to ‘do something’ to encourage private enterprise and stimulate growth. This gave rise to golden handshakes and sweetheart deals to large conglomerates. Progress towards a rules-based approach was abandoned for a deals-based system, entrenching cronyism, with the government favouring specific sectors and firms instead of broad reforms to ease entry, competition and innovation.

The government’s economic evangelists claim that it champions private enterprise, historically demonised under socialism. While both rules-based and deals-based approaches support private businesses, their impact differs significantly.

A rules-based approach benefits both incumbents and future firms, fostering innovation and incubating ideas. But the deals-based system rewards the status quo. Rules-based economics treats all equally, while deals-based tinkering allows the state to pick winners and losers. And this shift explains the unhealthy relationship between government and business—one which is sometimes beneficial to both sides but is also weaponised when convenient for the political class. Most importantly, the policy uncertainty and absence of rule of law hurt investment, innovation and economic growth.

In its third term, the Modi-led NDA government places the Indian economy at a critical juncture. It must choose whether it wants India to grow through a rules-based market order, or transition from crony socialism to crony capitalism.

That buzz around Indian Americans in politics only intensified with Vivek Ramaswamy’s speech at the Republican National Convention (RNC) and Nikki Haley following the party line to endorse Trump. With Kamala Harris at the top of the Democratic ticket, Indian Americans are making waves on both sides of the political aisle, and everyone’s taking notice.

Indian Americans, though just 1.5% of the U.S. population, have an outsized impact. They’re not only the highest-earning ethnic group but also occupy top positions at Microsoft, Google, IBM, Adobe, and FedEx. They dominate the field in STEM and medicine, and now, they’re stepping into the political spotlight on both sides of the aisle.

The 1980 census reported only 206,000 Indian immigrants in the US. Kamala, Usha, Nikki, and Vivek’s parents belong to this cohort of immigrants.  

How did the children of Indian immigrants reach the top of US establishments in just one generation? Should we view them as part of the elite or categorize them as  BIPOC — Black, Indigenous, and People of Color? Are they more likely to vote – or now, increasingly run – as Democrats or Republicans? And what does all this mean for the broader political landscape and policies on immigration, race, and DEI?

I answer all these questions by explaining (1) the composition of Indian Americans in the US, especially from the lens of caste; (2) the origins of when and how Indian Americans came to the US; (3) the political leanings and views of the more recent Indian immigrants on immigration reform and DEI as a relatively small minority in the US. 

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 Twice-Born and the Thrice-Selected

When Biden endorsed Kamala Harris, the NY Post, predictably, dubbed Harris the first D.E.I. President, with Charles Gasparino arguing that Harris’s rise was because of race, not merit. Equally predictably, NYT’s Lydia Polgreen fired back, claiming, “If Kamala Harris Is a D.E.I. Candidate, So Is JD Vance.” Her point? “Race isn’t the only diversity,” and elite colleges like Yale also court white guys from tough backgrounds, like Vance. Polgreen thinks the reason only Harris gets called out is “written on their faces.”

But I’d say it’s written in Harris’s elite family background and caste. 

Harris’s mother, Shyamala Gopalan, was born to PV Gopalan and Rajam and raised in a Tamilian Brahmin family in India. This background likely afforded the Gopalans status akin to white privilege in Indian society. And because of the Brahmanical advantage, families like Shyamala’s, Vivek’s, and Usha’s often boast multiple generations of college graduates in a country still striving for universal literacy and numeracy. Shyamala and all her siblings were encouraged to pursue advanced graduate degrees typical of Tamil Brahmin families.  

What set Shyamala apart was her decision to move to the US for graduate work at Berkeley, a rare choice for Indians at the time. At 19, while studying for her PhD, she became actively involved in the civil rights movement, through which she met Donald J. Harris. Donald, now professor emeritus and the first Black economist granted tenure at Stanford University, has his own notable background. Born to a landowning family in Jamaica, he was raised by his grandmothers – one a descendant of plantation and slave owners, the other a farmer and educator. In 1950s Jamaica, where formal schooling was a privilege enjoyed by merely 10% of children, Donald attended Titchfield High School, originally established in 1786 for the education of white children from poorer backgrounds, because there was no system in place for the education of the children of slaves. He went on to the University College of West Indies, then UC Berkeley.

Compared to her parents’ elite academic careers, Harris’s degrees from Howard University and University of California, Hastings College of the Law seem par for the course. Or as Zarna Garg, would say, within the Indian community she is “a bit of a disappointment…because she is not a doctor.”

So why has Harris become a DEI punchline with the right and defended as a legitimate DEI star with the left? It is partly because most of the commentary misses the elite backgrounds of many Indian immigrants to the US. These aren’t your typical “tired, poor, huddled masses.” We’re talking about India’s educated upper crust.

In their excellent book “The Other One Percent: Indians in America,”  Sanjoy Chakravorty, Devesh Kapur, and Nirvikar Singh [hereinafter CKS] argue that Indian Americans succeed because they are thrice-selected. 

Most Indians in the US come from upper or dominant castes. The millennia-long practice of marriage endogamy and selection gave individuals and families from these castes a multi-generational advantage in access to education. Second, they were selected through highly competitive exams in India to enter top educational institutions or by the American schools where they studied. Ponnavolu writes, “Indian Institutes of Technology (IITs) accept only one in 50 applicants. (For perspective, Harvard takes one in 19, and Oxford, one in six.” Third, US immigration policies favored skilled professionals, creating a filter for the best candidates, further refined by the competitive American job market with the H1B visa lottery since the mid-nineties. These selection processes ensure that Indian immigrants often arrive as top performers with strong educational and professional backgrounds. 

Ironically, JD Vance understands this better than his progressive counterparts. He married Usha Chilukuri, born in San Diego, to Indian-born Telugu-speaking professors. Her father, Krish Chilukuri, is an aerospace engineer from the prestigious IIT Madras. His father, Chilukuri Ramasastry, was a member of IIT’s founding faculty and the best student prize in physics memorialized in his name. Usha’s mother, Lakshmi, is a marine biologist and now provost at one of the colleges in UC San Diego. Usha’s great aunt Shanthamma Chilukuri, now 96, continues her career as a physics professor in Visakhapatnam.

It doesn’t surprise me, or most Indian Americans, that Usha Vance went to Yale and got her master’s at Cambridge University, followed by a law degree at Yale. She served as a law clerk to the then District of Columbia Circuit Judge Brett Kavanaugh and for Supreme Court Chief Justice John Roberts. 

Like Usha, Vivek Ramaswamy also went to Harvard and then Yale. J.D. Vance met Usha at Yale Law School, while Vivek met his wife Apoorva during her time at Yale Medical School. Vivek’s parents are from the Tamilian Brahmin Iyer community. His father V. Ganapathy Ramaswamy, worked as an engineer and patent attorney for General Electric, and his mother, Geetha, is a geriatric psychiatrist.

Usha Vance’s credentials only seem puzzling to those who have no clue about the early Indian immigrants to the US. My progressive American friends view her as BIPOC, which means she is, by definition, disenfranchised and received a hobbled start in life. While Indian Americans are people of color, to the extent that they are not Caucasian or white, treating them as BIPOC entirely misses the point. 

Usha’s last name is typically associated with the Telugu Kamma caste. But she and her family are vegetarians and, as one friend said, “sound” like Telugu Brahmins. Various message boards and Twitter litigated her family’s origin story. While caste doesn’t matter in American politics, Indians and Indian Americans (often inadvertently) view Usha’s life and career through this lens.

Americans often miss the importance of caste when understanding India and Indians. The Indian caste system is a complex social structure with thousands of subcastes, or jatis, linked to geographic regions and linguistic subgroups. These jatis fall under four main varnas: Brahmin, Kshatriya, Vaishya, and Shudra, and Dalits [the self-identification term used by erstwhile outcaste/untouchable groups]. Non-Hindu groups like Muslims, Buddhists, Sikhs, and Christians, while outside the traditional Hindu structure, have their own hierarchies and unofficial relationships to the varnas and jatis.

Unlike race, caste markers are invisible to those outside the system, hidden in plain sight for Indians who can discern it from someone’s last name, region, dialect, pronunciation, and even diet. Moreover, most Indians that Americans meet in the US are from upper or dominant castes, obscuring the real impact of the caste system. But, make no mistake, caste intricacies shape social interactions, opportunities, and identities in India, and the Indian diaspora abroad. In 2020, Cisco was the first US based company to be sued for caste based discrimination. The California legislature passed Senate Bill (SB) No. 403 to include caste as a protected category. Not just caste discrimination, but also Gandhian civil disobedience made its way to the US, as South Asian Dalit activists went on a hunger strike to persuade Governor Newsom to sign it into law. Newsom vetoed the bill in October 2023.

To most Americans, whether Vance is Brahmin or Kamma seems like a petty difference between an East Coast elite with degrees from Yale and Princeton versus a West Coast elite with degrees from Stanford and Berkeley. But to Indian Americans, especially Telugu-speaking, and Indians back home, it still matters significantly.

Both Brahmins and Kammas are dominant and privileged groups from Telugu-speaking communities in Andhra Pradesh. The development of colonial Western education and the need for an English-fluent bureaucratic class allowed Brahmins to dominate various fields. In the Telugu-speaking area [now split into two states, Andhra Pradesh and Telangana], non-Brahmin castes include Kshatriyas, Arya-Vaisyas, Kammas, Reddys, Kapus, Balijas, Veļamas, and Other Backward Classes.

Kammas and Reddys are landowning communities, but Kamma property is concentrated in the fertile Krishna and Godavari deltas, while Reddys own land in the arid Deccan plateau. Consequently, Kammas started out as more prosperous, paving their way to upward mobility in academic fields, while Reddys have dominated the state’s political power since Independence. This changed in the 1980s when N.T. Rama Rao, the first Kamma Chief Minister of Andhra Pradesh, came to power, followed by his son-in-law Chandrababu Naidu.

Kammas are known for their propensity to migrate for investment opportunities, including to the United States. The Telugu film industry, also the origin of RRR and the Oscar-winning foot-tapping earworm Naatu Naatu, is dominated by the Kammas. Kammas are prominent in the Telugu diaspora, controlling the Telugu Association of North America (TANA). In response, Reddys created the American Telugu Association (ATA), demonstrating that caste rivalry persists even in the US.

Usha Vance’s family appears to be Brahmin, a group more easily recognized by Americans as elite and privileged. Their surprise at Usha’s stellar resume exposes the lack of education and context about India. The right is surprised because she is the daughter of immigrants, while the left views Usha as BIPOC and J.D. Vance as someone with “white privilege.” 

It will become easier for the left and the right to place the various Indian Americans on the political stage this year once they learn a little more about the kinds of Indian subgroups that emigrated to the US.

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The Three Phases of Indian Immigration

Indian immigration to the US in the nineteenth century was in very small numbers, mainly sailors. From 1900-1965, only a few thousand Indian-born or Indian-origin people were in the US. In the early part of the twentieth century, American immigration policy was quite literally racist; with inclusions and exclusions based on race. In the early twentieth century, following the backlash against Indian immigrants in Canada, Indians in the US termed Hindus, were clubbed together with the movement against allowing Asian immigrants.

The 1917 Immigration Act banned admission with the purpose of settlement, created the “Asiatic Barred Zone” which prohibited immigrants from most of Asia including all of British India, and was followed by the 1924 Immigration Act, after which even Indians outside the Asiatic Barred Zone were barred because they could not be naturalized. A small group of Sikh Punjabis entered the US, first legally, and then illegally through Mexico. Eventually, the subgroup was large enough to have another subgroup of children of Punjabi Sikhs married to Mexican Christians in California.

While this was not a ban against students visiting American Universities, both the social movement against Indians and the immigration restrictions incentivized few to come to the US, think Indian constitution framer B.R. Ambedkar, and other anti colonial agitators like Lala Lajpat Rai and Jaya Prakash Narayan who visited the US as young students. The absence of a preexisting Indian network did not help matters. The effective ban continued for almost half a century, and it was only with the 1965 immigration reform act that the doors opened to immigrants without specific regard to their race.

Normally, when this kind of immigration reform occurs, the host country signals an openness to accept immigrants. But the sending countries don’t respond uniformly. Depending on the political and social structure, often the poor and disenfranchised find their way to a new country. Others, like Cubans, may even get pushed out by their political system and leave because they have nothing to lose. The Indian case was interesting. In the sixties, the poor and disenfranchised Indians did not have the resources to make the trip to the US only to find jobs in agriculture, restaurant kitchens, or in construction. But the elites, armed with high levels of education conducted in English, and social and financial capital, could afford to move to the US, and access the incredible jobs in STEM, medicine, and academia. 

CKS classify Indian immigration to the US into three phases - the Early Movers from 1965-79; the Family Reunification from 1980-1994; and the IT Boom from 1995 onwards. 

The Early movers under the liberalized regime (1965-1979) were accomplished individuals who gained legal entry based on their education and skills. CKS write that forty-five percent already possessed or later acquired graduate or professional degrees, especially in medicine and STEM.

Normally one would not expect the elites from the sending country to respond to this kind of change. But the political system in India granted universal adult franchise in 1950, which informed a new political mobilization among the non-elites. That, combined with various affirmative action programs, and a stagnant socialist economy, reduced the relative status and opportunities for the elites, incentivizing them to look for greener pastures. Thanks to their elite status inherited from a colonial period, they spoke English, were not the first in their families to attend an elite university and could easily assimilate with Americans. And with the American promise of religious freedom, the largely upper-caste immigrants could hold on to their religion and culture and assimilate in every other way. 

Most of the current generation of Indian Americans in politics are children of this generation of early movers. 

Like Nikki Haley’s parents, Ajit Singh and Raj Kaur Randhawa. Ajit got his Ph.D. at the University of British Columbia. He was a biology professor at Voorhees College, and Raj got a master’s in education and started a career as a South Carolina public school teacher. 

A few years before the Randhawas, an aspiring engineer Amar Jindal fell in love with a classmate’s sister, Raj (née Gupta), a doctoral physics candidate in Chandigarh, Punjab. They sold Raj’s dowry jewelry to travel to the US when a pregnant Raj received a scholarship offering her a spot at Louisiana State University. A few months after moving, Piyush “Bobby” Jindal, eventually the 55th Governor of Louisiana, was born in Baton Rouge.

Like Harris’s mother Shyamala Gopalan, others were brought in through the university system. Vinod Khosla, now considered old Silicon Valley royalty, moved to the US to pursue graduate degrees at Carnegie Mellon University and Stanford after his engineering degree at India’s prestigious IIT. Khoslas are from Punjab’s dominant ‘Khatri’ castes and have been elite martial and trading castes depending on the region and century. Vinod, born to this family, selected first through the very competitive IIT examination, then the US university selection system, and finally the American labor market, is a near-perfect example of the first movers from 1965-1980. 

The second big immigration move came from 1980-1994, along the lines of Family Unification. The demographic that moved in this wave was also largely dominant castes but less likely to be selected through the American university system. Think of the classic Indian American owned motels dotting all of small-town America. Twenty-five years ago, Tunku Varadarajan reported that “slightly more than 50 percent of all motels in the United States are now owned by people of Indian origin.”

However, going deeper, Varadarajan found dominance of one community, “about 70 percent of all Indian motel owners -- or a third of all motel owners in America -- are called Patel, a surname that indicates they are members of a Gujarati Hindu subcaste” of Patidars. He charmingly dubbed their group’s success the “Patel Motel Cartel.” Twenty-five years have passed, and now Indian Americans are said to nearly dominate the sector. The family-based immigration allowed entry of newcomers, and the caste-based networks traced back to multiple generations in India allowed the new entrants to raise scarce capital and collateral for down payments on motels.

Gujaratis were the largest immigrant subgroup in the 1965-79 immigration rush, which set them up to bring in family members after 1980. Another group that benefited from the family reunification immigrant wave was the Punjabis, who had even older family roots in the US.

The third group, CKS track, are the tech workers from India who moved to the US since the mid-nineties. The nineties saw a new IT-driven boom in the US, and with it came a fresh generation of Indian immigrants. These were mostly Indian-trained engineers and STEM students, lured by the success of earlier generations of Indians. The US tech job market was on fire, and employment and skill-related visas again became the hottest tickets to entry. In this wave, South Indians, primarily Telugu and Tamil speakers, dominated. Unlike the early movers, who were medical doctors and PhDs, this most recent immigrant wave mostly had master’s degrees and quickly found their place in the job market. They were still a highly educated group, with about a third of them already holding or later earning master’s degrees. Still, they had fewer numbers with professional and doctorate degrees that defined the Early Movers generation. CKS write,

“So specialized was this group of immigrants that by 2013, the India-born made up well over 10 percent of the American labor force in some fields (like computer science and engineering, and electrical engineering and technology). These new arrivals—the IT Generation—entered the United States along two major paths: as students in science and technology fields with F-1 visas or as workers in computer-related professions with H-1B or L-1 visas; and their corresponding status for immediate family members (spouse and children), the H-4 and L-2 visas. We estimate that 90 percent or more of all Indians stayed on in the United States and became permanent residents (by getting green cards) or citizens. This new immigration stream was enabled by adaptations to U.S. immigration policies (most notably the H-1B visa program, and more briefly, the L-1 visa program) and higher education policies in India (most notably the burgeoning of private engineering colleges).”

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Are Indian Americans Republican or Democrat?

Almost every survey shows that Indian Americans have consistently leaned Democratic in recent years. The 2020 Carnegie Endowment survey found 56% identified as Democrats, with 72% planning to vote for Biden in the presidential election. The 2022-23 Pew survey showed that 68% of Indian American voters leaned Democratic. NPR’s 2020 analysis found that 77% voted for Clinton in 2016 versus 16% for Trump.

The survey results are not surprising. Indian Americans are a small minority in the US, especially in religious terms. The 2020 Carnegie Endowment finds that Indian Americans perceive the Republican party as intolerant of minorities and overly influenced by Christian evangelicalism. The Republican stance on immigration, including legal immigrants, is also a factor. Those who identify as Republicans are primarily moved to do so because of economic policy, healthcare, and illegal immigration.

Immigration

Seven out of 10 Indian immigrants to the US moved after 2000. The pathway is often through the American education system, where 1 in 5 of all international students in the US are Indian-born, second only to Chinese students. Indians are more likely to stay and benefit firms in the US. H1B visas are for highly skilled foreign workers, and nearly three-quarters of H1B visa beneficiaries are Indian, with Chinese at 12% and Canadians at 1%.

However, one major problem with the US immigration system is that it is punitive towards those who are highly skilled, entered the country legally, and happen to be Indian. It’s not the kind of racist immigration policy from the 1920s, but it is still capped by country of birth. Many H1B visa holders apply for employment-based green cards to gain permanent residency. However, the US imposes a 7% per-country cap on employment-based green cards, disproportionately affecting countries with large populations like India. The annual limit on employment-based green cards is set at 140,000, which includes dependents. The demand far exceeds this cap due to the high number of skilled workers from India, particularly in STEM fields. About 1.1 million of the nearly 1.8 million cases in the backlog are from India (63 percent). Another 250,000 are from China (14 percent).

The pathway from these employment-based visas to a green card is classified into different stages (EB1, EB2, EB3, EB4). Think of it as a line the highly skilled immigrants join, and the wait time depends on the length of each line. David J. Bier at Cato writes,

“For new applicants from India, the backlog for the EB‑2 and EB‑3 categories (which are combined because applicants can move between them) is effectively a life sentence: 134 years. About 424,000 employment-based applicants will die waiting, and over 90 percent of them will be Indians. Given that Indians are currently half of all new employer-sponsored applicants, roughly half of all newly sponsored immigrants will die before they receive a green card.”

The reliance on H1B visas to bring in high-skilled Indian workers to the US exacerbates the issue. H1B visa holders must continually renew their visas to maintain legal status while waiting for their green cards. This creates uncertainty and instability, as any denial of renewal can result in job loss and forced departure from the US. Indians are typically married and have families, and they have one of the lowest divorce rates of any group. As the H1B to green card wait continues endlessly, their spouses, typically highly skilled, cannot work on their H4 dependent visa.

The “aging out” issue for children of H1B workers in the US is creating significant challenges for many Indian families. When these children turn 21, they’re no longer considered dependents and lose their spot on their parent’s H1B visa or green card application. They must then initiate their own visa or green card process, essentially starting over. This situation can disrupt their education, as they may lose their legal status to remain in the country while studying, potentially forcing them to return to India even if they spent their entire life in the US through legal entry.

The US Citizenship Act (HR 1177) 2021 proposed changes to the US immigration system. It aimed to eliminate the per-country cap on employment-based green cards. It sought to increase the annual limit on employment-based green cards from 140,000 to 170,000. It also planned to recapture unused visas from previous years. These changes could have reduced the backlog for the 1.2 million Indians in waiting. The act offered exemptions from numerical limits for STEM Ph.D. holders. For Indian immigrants, the reforms meant potential reductions in wait times and improvements in job mobility. The bill included provisions to prevent children from “aging out” of dependent status. Because of the Republican opposition to HR 1177 and the 60-vote filibuster threshold in the Senate, the law did not move in Congress, leaving millions of Indians waiting.

The Republican party, including high-profile Indian Americans like Vivek Ramaswamy, repeatedly postures that they are against illegal immigration but support legal immigration for high-skilled workers. However, when the opportunity came in 2021, Republicans did not come through for legal Indian immigrants. Because of this, Indian Americans are likely to remain on the Democratic side.

While both U.S.-born and naturalized Indian Americans favor the Democratic Party, this tilt more pronounced for U.S.-born Indian Americans. This Democratic preference is likely to strengthen as each year, approximately 150,000 Indian Americans become newly eligible to vote—a third through naturalization and the rest children of immigrants reaching voting age.

DEI

The country “quotas” holding Indians back add insult to other real and perceived injuries. Not all, but many highly skilled Indians in the US have already experienced a different quota system in India. Affirmative action, or reservations and quotas as they are called in India, are based on caste. As members of privileged and dominant castes in India, they often moved to the US because this kind of affirmative action does not apply, and the perception of Americans allowing the meritorious to rise persists. However, elite colleges having quotas limiting Asians and South Asians in favor of other BIPOCs creates tension.

These issues have persisted for over a decade, with over 60 Asian American groups coming together to address it. In its 2023 opinion Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, the Supreme Court found that Harvard’s admissions program considered the race of applicants in a way that was not narrowly tailored to achieve the educational benefits of diversity and disadvantaged Asian American applicants. For instance, “an African American [student] in [the fourth lowest academic] decile has a higher chance of admission (12.8%) than an Asian American in the *top* decile (12.7%).”

Elite colleges limiting Asian and South Asian admissions in favor of other BIPOC groups and elite high schools like Thomas Jefferson High School for Science and Technology changing their admissions exam requirements to foster diversity have left Indian Americans feeling aggrieved and angry for being punished for what they see as their children pursuing excellence.

Another example is student debt forgiveness for students from elite families, while Indian parents judiciously saved for decades to pay for their children’s college tuition. These policies have left Indian Americans feeling alienated by some policies most closely associated with Democrats.

When Biden was still in the race, the Asian American Voter Survey 2024 noted a decline in Biden’s support from 65% in 2020 to 46%, while Trump’s support only grew from 28% to 29%. These surveys indicate a strong but potentially shifting preference among Indian American voters, and Kamala has an opportunity to consolidate that vote in favor fo the democrats. But her Indian American identity will only go so far, this group will care about policy issues like healthcare, DEI and immigration. 

On these issues, the Indian American support is for the Democrats to lose rather than for the Republicans to win.

Identity matters, but the question is whether the political class understands that it matters to provide context or just for its own sake. To use Shyamala’s refrain, you think Indian Americans fell out of a coconut tree? As Harris says, “You exist in the context of all in which you live and what came before you.” 

India’s exit polls predicted a clean sweep for Modi, with BJP winning more seats than the 2019 election (i.e., more than 303 seats) and close to 400 seats for the NDA coalition. The election commission is yet to make its final announcement, but BJP only won 240 seats, and the NDA coalition will land at about 295. It seems they are all set to form a government led by Modi.

But why did everyone call it so wrong? One argument is media bias in favor of Modi. A second is preference falsification by voters/surveyors/media etc. But I think the third possibility, that the sampling was faulty and the data were bad, is more likely. And I think they erred because constituency sizes are very large, and small sample sizes need to be either very precise or lucky to get it right. And very precise sampling is difficult because of the paucity of overall census data. Modi government’s decision to postpone the 2021 census may have been to their and their supporters’ detriment.

I hope political scientists and data scientists will dig into this in the coming weeks and months. But until then, my hunch is that it is a sampling problem possibly exacerbated by lack of census data.

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1.     Media Bias

Andy Mukherjee, prescient as always, told us to take the exit polls with a pinch of salt. He called the exit polls more “psychological warfare” against the opposition, calling big numbers in favor of Modi because of “partisan role of media moguls.”

While Andy is right that media bias is a problem, it is not the reason for faulty exit polls. The media’s bias stems from Modi’s position of power, rather than existing independently of it. The government has enormous powers over businesses, especially media houses, and it can create a lot of problems through tax raids, audits, searches, asset seizures, and freezing bank accounts. And it also has a lot of favors to dole out to the media houses who comply. But all this is true only when Modi and BJP are in government wielding that position of power.

If the exit polls had suggested that Modi is not coming back, media houses would have used it to increase TRPs and get interviews from BJP leadership. And if the exit polls suggested that the BJP will not win a majority of seats, then it is in their interest to curry favor with those who are likely to form the next government, since the new masters will wield the same legal and regulatory weapons.

2.     Could it be preference falsification?

Another possibility discussed across TV channels today is whether voters lied to surveyors, or surveyors/polling companies lied to their bosses. The argument is that Indian voters were not in support of Modi, but when asked, they lie about their true preferences, either out of fear of harassment or social censure. Timur Kuran argues that because of group pressure, the preferences people express in public can often differ from those they hold privately. Kuran used it to explain the perceived stability of the communist regimes that collapsed. Under communism, because of the brute force of the state and social surveillance, everyone had praise for the regime and its leaders despite mass discontent. Social pressure created a situation where individuals could not express their true preferences in public. But as public opposition to communism started to rise, people’s public preferences changed quickly and came closer to their private preferences. In the 1990s, this caused the sudden fall of several seemingly strong and stable communist regimes.

Preference falsification can happen at the level of individual voters or at the level of media persons and journalists. With individual voters too, it seems unlikely. Though, in the past, I argued that it may have been a factor in the 2019 elections (I was wrong).

Most of the major exit poll surveyors use a tablet where the voter registers their preference anonymously. In the past, it used to be through a paper list where the voter checked their preference and dropped it into the box/bag of the surveyor. It is not a short or long interview with the voter over audio or video. There is relative anonymity. It seems odd to lie, and in such large numbers, but only in some states, across all the different surveyors across different exit polls.

A friend who is a political scientist told me an even odder, though believable, falsification by surveyors. In the middle of the heat wave, surveyors who are already over worked, underpaid, and running a marathon over 7 phases, have lots of incentives to not stand outside polling booths in the heat. They falsify polls, and no one will question them if they add a false BJP vote, but other parries, especially those which have performed poorly in the recent past, may raise questions. I doubt this is the case, but it doesn’t sound outrageous.

If it were a case of preference falsification at such a large scale, then betting markets (illegal in India) should have diverged a lot from the exit polls. But the betting markets, while landing at fewer seats for the BJP than suggested by the polls, did not suggest that the BJP would not win a majority.

Another reason is that even the INDIA bloc’s poll numbers, which suggested the opposite result of the exit polls, led their leadership to believe they would win 295 seats. But they are 60 seats shy of that number. There was no reason for preference falsification because it was not a poll by a media house. And yet their own exit poll was also way off. This makes me think the problem is not so much preference falsification as data/sampling/surveying error.

3      Faulty sampling/surveying

For instance, Pradeep Gupta and his team at Axis My India polls have a pretty good track record predicting the last two national elections and most of the state elections in the last decade. Gupta personally prides himself on his surveys getting it right and wept on national TV today when the actuals diverged so much from his expectations and exit polls. One of the reasons is that Axis My Poll uses the largest sample sizes of the various exit polls. They interviewed about 580,000 voters using 912 surveyors. While these numbers sound staggering, they are relatively small in India. If spread equally, that is about 1,100 voters per constituency. India has both very large constituency sizes and severe malapportionment, i.e., it does not have equal constituency sizes across states – to learn more, read this post of mine; it is a long story. But some constituencies have over 3 million voters, while others have about 1.8 million voters.

In India, typically, the exit polls use the method called stratified sampling. In this method, pollsters select subdistricts/wards/blocks that represent the demographics and socioeconomic, religious, cultural, and partisan makeup of the state or constituency. This ensures the sample covers the entire gamut of voters, even though only about 1,100 will be polled.

However, the precision of choosing the different strata for sampling depends on up-to-date data. And India has not had a census since 2011. The 2021 Indian census was initially delayed due to the pandemic-related lockdowns. But it’s now 3 years since the pandemic, and while everything seems to have bounced back, census data is nowhere in sight.

And India is amid what we call a structural transformation of the economy. Some regions are going from rural to peri-urban to urban. Metropolitan areas like Mumbai are expanding their boundaries. The pandemic-related economic stresses have led to the decline of some areas while leading to a boom in others. Migration is a mainstay, with young men moving from some of the poorest regions of India to some of the richest regions. To precisely stratify the constituency to create a sample, pollsters need up-to-date data.

In addition to stratification, another method is weighting the samples correctly. The raw data is weighted to match the likely composition of the electorate based on factors like past exit polling or past election results. This corrects for over- or under-sampling of certain voter groups. But again, if the census data is 13+ years old, and the constituencies have transformed, it is much harder to weight the samples correctly.

In September 2020, Nityanand Rai, Minister of State of Home Affairs, told Parliament the census was postponed indefinitely. In December 2023, Rai provided the same reason in a written reply to Parliament. Covid didn’t prevent other government programs involving millions of people – like the 2021 Kumbh Mela. Almost two dozen state elections have been conducted since the pandemic. Census operations start three months after freezing administrative boundaries. On December 30, 2023, the Additional Registrar General of India informed states the deadline to freeze boundaries was extended to June 30, 2024, from January 1, 2024. This ninth extension was required to conduct elections before the administrative freeze. Now it seems that the census is indefinitely postponed, and for the first time in colonial or independent India’s history.

India added a quarter of a billion people since the last census. It has grown at 5-6%, and its metropolitan areas and migrants have grown even faster. Not having census numbers makes large-scale and complex constituencies harder to sample. It could be the reason the same polling firms have a better record at state-level elections where the assembly sizes are smaller, and constituents and their issues are less stratified.

4.     Sampling error combined with preference falsification.

Finally, given the faulty sampling, it is possible media houses engaged in some preference falsification. Let’s say some media houses got poll results suggesting BJP will not win a clear majority. But because of small sample sizes, or all the data and sampling problems, they are not confident in their poll. The other media houses are all showing results that give BJP a landslide win. In such a scenario, announcing that the BJP will underperform may place a target on their back should Modi win a third term. So, it is safer to falsify preferences in this scenario.

We will eventually find out the reasons the exit polls were so wrong. But I think not having census data to have precision in sampling and weighting is definitely one of the factors. BJP has postponed and suppressed the census for political reasons like India’s next electoral delimitation that is constitutionally due in the first census after 2026. But it looks like suppressing census data has not worked out well for the BJP, in setting expectations or finding reliable polling data for their electoral outcomes.

Prime Minister Modi declared a successful economic recovery post-Covid. A number of international agencies have dubbed India the fastest-growing economy. India has eliminated extreme poverty (below a dollar a day), a cause for celebration (while noting that defining “extreme poverty” as living on less than a dollar a day is what Lant Pritchett would call setting the bar so low it’s practically a trip hazard). PM Modi seems to be the most popular national leader in the world and is expected to sweep the polls this year. Everyone seems to be bullish on India. Except…well,  Indians.

While there is no shortage of industrialists praising the Modi government and its economic policies, as a community, they don’t seem to be putting their money where their mouth is. Their reluctance to invest in longer-term plans paints a different picture, one of caution rather than celebration. How can I generalize across all businesses and sectors, you may ask. Have I engaged deeply with businessmen in India? Am I just another foreign-trained economist, criticizing Modi, being true to my tribe? Haven’t I heard the businessmen, in India and the world over, praising Modi? I have also seen the numbers for Gross Fixed Capital Formation.

Low Gross Fixed Capital Formation

Economists care about what people do more than what people say. One way to compare how businesses and investors perceive the economic environment is by tracking Gross Fixed Capital Formation (GFCF), a fancy term for the total amount a country – individuals, firms, government – spends on long-lasting stuff. Think buildings, machines, and technology that businesses use to produce goods and services. Roads, airports, and train tracks the government lays. This also covers intangible assets like software and patents, and even the cost of sprucing up existing assets to boost their performance. But it’s not all just durable goods; sorry, some of your household’s prized new purchases won’t count. Most aspects adding to GFCF contribute to overall capacity maintenance, capacity building and expansion in the economy. During Modi’s tenure, GFCF as a percentage of GDP declined and has remained low until the post-pandemic recovery. In fact the highest level of GFCF as a percentage of GDP during the first nine years of Modi’s leadership is lower than the lowest level in PM Singh’s tenure.

GFCF is a big deal because it’s essentially the economy’s growth engine. Investing in new or better assets pumps up production capacity, potentially leading to more jobs, higher incomes, and economic expansion. Government spending on infrastructure also gets lumped into GFCF, improving efficiency and productivity across the board. But GFCF isn’t just a growth lever; it’s also a peek into the collective mindset about the future. Think of tracking GFCF akin to placing a stethoscope and listening to – their dil ki awaaz – or what investors’ heart or gut feels about the future.

When people believe the economy is on an upswing, they plan for that rosy future. For example, if economic growth hints at longer lives, hospitals might gear up to treat more seniors by adding more wards. Likewise, if companies anticipate a bustling economy full of exuberant consumers, they’ll ramp up production to meet expected demand. We typically look at GFCF as a percentage of GDP because, as an economy grows, the requirements and expectations for fixed investment also change.

This is the trend of GFCF as a percentage of GDP for the last four union governments – with PM Manmohan Singh from 2004-05 to 2013-14 and PM Modi from 2014-15 to 2022-23. The beginning of this decline in GFCF as a percentage of GDP predates Modi, but it has never recovered.

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WTH happened in 2011-12? 

Because of a series of unfortunate events, Pranab Mukherjee ended up as finance minister and managed to give one last parting gift straight out of Indira Gandhi’s economic legacy.

In 2007, Vodafone acquired a stake in Hutchison Essar via an offshore deal. The Indian tax authorities, never ones to miss a party, slapped a hefty tax bill on Vodafone. After zigzagging through courts and appeals, in 2012, the Supreme Court of India held in favor of Vodafone that no taxes were owed in this offshore deal between foreign entities.

Enter Pranab Mukherjee, stage left. In a move that would make his fellow Comrades proud, he amended the Income Tax Act to ensure these transactions were taxable, not just in the future, but with retroactive effect all the way back to 1962, sidestepping the Supreme Court’s verdict. This wasn’t just moving the goalposts; it was declaring a new game had started decades ago, where only the red team won.

And Vodafone was not the only victim, there were others, like UK’s Cairn Energy. Suddenly, investors found themselves navigating a landscape where today’s rules might not apply tomorrow, and deals completed under a past set of rules were fair game for taxation, a scenario no one could have, or indeed did, foresee. The result? Investors, whether parked domestically or eyeing India from abroad, dropped India like a hot potato when it came to big,  difficult to undo, long-term bets.

The Vodafone case was followed by more drama for big businesses, as the Supreme Court canceled licenses granted for telecom spectrum and mining etc., acquired through bribes. When the second UPA term ended in 2014, it was clear that businesses were not in a mood to bet big on India. Though the blame is correctly placed on Pranab Mukherjee, leftist coalition partners, a polyvocal cabinet, and therefore PM Manmohan Singh, all this happened during 2011-14.

Since then, a decade has passed; however, the Modi government never managed to revive GFCF as a percentage of GDP. Enormous expectations were placed on the Modi government in 2014: (1) Modi campaigned on an economic development and progress agenda; (2) his party won a clear mandate to form the government without relying on pesky coalition partners; and (3) he was the clear leader within his party, with a singular voice, without any party politics within to undermine his economic agenda. The expectation was that all the uncertainty that came with the coalition politics that Singh couldn’t manage would be a thing of the past.

But what is puzzling is that GFCF as a percentage of GDP never recovered from what happened towards the end of Singh’s tenure, even at its highest levels during PM Modi’s tenure. And the public sector part of GFCF has been pretty stable, and the decline really came from the private sector not going back to the old levels.

One reason to compare the GFCF under Modi to the Singh years is the recent white paper released by the Modi government, which argued that when Modi took office the economy was “in a fragile state; public finances were in bad shape; there was economic mismanagement and financial indiscipline; and there was widespread corruption.” And over the last decade the Modi government has managed to, “restore the health of the economy and make it vigorous and capable of fulfilling the growth aspirations of the people”. If the basic argument of this white paper is correct, and the Modi government has indeed cleaned up the mess of its predecessor, why hasn’t GFCF as a percentage of GDP caught up and even surpassed the 2011 level?

Now there are a few possibilities put forth by the press, government officials, etc. First, that the GFCF at 30-35% of the GDP during the Singh years was just a blip, and largely unrealistic, and perhaps even driven by the low-interest rates leading up to the financial crisis. And the current trend is the correction. This doesn’t quite hold up well because the dip in 2011-12 is much sharper than what happened during the 2008 crash. And the banking sector seems to have recovered from the worst problems of the 2008 global financial crisis. In fact, the recent white paper makes a point of discussing the big cleanup that was required, and according to the government successfully completed.

A second explanation is that this has little to do with domestic policy and is driven by the global slowdown, which only recently picked up after the pandemic. This explanation also does not add up. Take, for instance, Bangladesh, which is also a fast-growing economy, with GDP per capita at Indian levels. Despite being a smaller economy and even more vulnerable to global trends, it seems to have increased its share of GFCF as a percentage of its GDP. (Note this graph has slightly different numbers because I am using World Bank data, calculated for the calendar years which are different from India’s financial year used in the first two figures).

Is India growing? 

YES! And depending on who you ask, somewhere between 4-7 percent in the last few years. (The drama and contention around the GDP numbers is a long story, and I don’t want to get into that mess right now. Perhaps in a future post).

Then why aren’t people investing?

If we look at what happened since 2014 until the pandemic as a continuation of the trend started by the Vodafone debacle, then the answer is that they are facing too much regime uncertainty even though Pranab Mukherjee has left the stage. This seems odd given that India has had a single-party government since 2014, with an extremely popular prime minister at the helm. And in the last ten years, Modi governments have not been polyvocal; they speak in one voice, and that voice is Narendra Modi’s. So, what kind of uncertainty are we talking about?

Let’s think about regime uncertainty that presents itself in a few different ways - political/electoral uncertainty, policy uncertainty, and in some cases foundational uncertainty. Though Modi managed to remove the electoral uncertainty from the table, the last ten years have been mired in a lot of policy uncertainty, usually by the Modi government’s own doing.

Electoral versus Policy Uncertainty

Think of some of the fastest-growing places in the world, Shanghai, Hong Kong, Seoul, etc. Skyscrapers seem to be a mainstay. What will it take for Mumbai or Bengaluru to build more skyscrapers? A certain amount of demand for office space, which given the real estate prices seems to exist. And access to the financial, physical, and human capital it takes to build a skyscraper, which also seems to exist in these big Indian cities. Why aren’t India’s builders building more skyscrapers, even in places where the local laws will allow it?

It seems reasonable to assume that a 100-storey skyscraper will take longer and cost more than building a 10-storey office building.

One reason builders might pause, even those who are bullish about a metropolitan area and demand for skyscrapers, is policy uncertainty. Now we’re talking about regulations that dictate how tall your building can be, what materials you’re allowed to use, what kind of safety codes, fire codes, and environmental codes are in play, how many inspections will be required, and so on. Policy uncertainty is planning your skyscraper based on a certain set of building codes, only to find those codes are as stable as a house of cards on a windy day. A surprise regulation here, a new kind of inspection system there, a new kind of tax, or a change in tax classification applied to skyscrapers, and suddenly, your well-calculated budget and timeline read like fiction. If these are evolving, or can be changed arbitrarily, and without the input of builders, then builders will be cautious before planning a skyscraper. Maybe they settle for building the ten-storey office building instead.

A way that builders, especially in India, solve this problem of uncertainty is through political connections. If you are assuming honest businessmen at work, think lobbying, campaign finance, etc., and if they are closer to real-world builders in India, then explicit corruption, bribes, kickbacks, Swiss bank accounts etc., to make sure that the codes on which the blueprint was made won’t change, no new regulations or inspections will be introduced, that the police will get rid of any environmental groups protesting, and so on.

But India is an electoral democracy. What happens if the politician you bribed is no longer in office? This brings us to political uncertainty. Often, even if the politician changes, the party platforms are like firms, which have a longer life and can commit to more durable promises. So, builders don’t just have connections with individual politicians but with political parties. But if there is a lot of uncertainty over which party will win, if a single party will form the local or state government and so on, then the builder will either wait until there is more certainty or build something that can be completed quickly, ideally within the current electoral cycle. It’s the unpredictable nature of who’s in charge and what they’ll do next that can make or break the timeline and cost of your skyscraper.

While corruption and kickbacks are the way business is done in many places, including India, they bring their own kind of uncertainty. First is from whistleblowers, nonpartisan bureaucrats, opposition politicians, etc., waiting to unravel a “deal.” Another possibility, connected to policy and political uncertainty but still following a slightly different cycle, is judicial uncertainty. In sensible countries and systems, the judiciary enforces contracts, provides stability, maintains the rule of law, and prevents the government from enforcing arbitrary rules. In this sense, the judiciary enforcing contracts and conducting a review of pernicious and capricious regulation is the protection for builders. However, what happens if the judiciary is also changing and venturing into new areas? A “populist” court decides that the environment is very important and allows environmental protestors to get an injunction against the skyscraper even if the builder followed the existing codes. Or a major deviation from precedent, a new interpretation of the existing building codes to further the courts’ populist environmentalism. Or if the court decides to not only investigate the corruption charges but also demolish the buildings if the inspections and permissions were “bought” from those in power.

There is yet another possibility. Think of it as the ground beneath your skyscraper. It should be solid, right? But what if, suddenly, this ground could shift, not because of an earthquake, but because the soil and rock formation itself might change? This isn’t just about a surprise inspection; it’s about waking up to find that the very essence of property rights, the way you conduct transactions in your business, and your business model might be up for debate. It’s a bit like playing a game where the rules aren’t just changing; they might be rewritten entirely, leaving you wondering if your skyscraper will still be standing tomorrow. If parliament decides that the city where you are building the skyscraper is no longer part of a state but is a separate union territory directly under the federal bureaucracy. Or a global pandemic that stalls all business. Or if during such a pandemic, Indian regulators impose a lockdown that is so long and stringent, that businesses have to completely change to work-from-home policies. The model of business changes so drastically that there is no longer a demand for a skyscraper in the business district. Now we’ve got some foundational uncertainty, no pun intended.

Now imagine not just building physical skyscrapers but metaphorical ones in the world of investment and economic growth. Imagine, if you will, you’re about to embark on this grand project, but there’s a twist—not everything is as stable as it appears.

Though I have tried to separate the kinds of uncertainty faced by businessmen in an economy, these things are interrelated. Take, for instance, a policy like demonetization. Though it is a policy, issued by executive notification, eventually passed by an ordinance, with a statute enacted months after the announcement was made. If 86% of the cash notes, which is the blood in the veins of the construction business, is suddenly demonetized, builders cannot pay any of the vendors and get inputs. The fact that building is a cash business automatically makes them suspect, at the very least until they can prove that the cash dealings were completely legitimate. And none of the vendors can keep their promises in the short run, and in the long run, many may not survive because they don’t have access to similar amounts of bank credit and lost their cash options during demonetization.

The problem is not just demonetization, which is almost universally acknowledged as a disastrous policy, but that even the policy reforms the Modi government has considered a big success are served with a side of policy uncertainty. Exhibit A: the Goods and Services Tax (GST). Billed as a transformative leap toward a “Good and Simple Tax,” the GST aimed to knit India into a single, seamless market, free from the labyrinth of state taxes and cesses that had traders pulling out their hair and wallet at every checkpoint. Yet, in a turn that would perplex even the most ardent optimist, India rolled out with not one, but seven distinct non-zero GST rates, 0.25 percent, 1.5 percent, 3 percent, 5 percent, 12 percent, 18 percent, and 28 percent. Plus a bonus round of cesses – I stopped counting after 21 different cess categories and rates.

And then comes the existential dread, not over the meaning of life, but over whether a KitKat is a biscuit or a chocolate because, of course, biscuits are taxed lower than chocolates. Pepsi’s Nimbooz stirs up another conundrum: is it lemonade or pulp juice, each quenching thirst under a different tax bracket? And let’s not start on the barfi debate—how plain is plain enough for the 5% tax rate before dry fruits drag it to the 12% rate or chocolate shoves it into the 28% category? The GST Council donned its halwai hat to decree that chocolate barfis are, in fact, barfis, thus sparing them the excesses of chocolate tax. Since its inception, the GST council has changed the rates of over 500 goods and services through the 51 council meetings, each tinkering with the rates in a quest for everything but simplicity and certainty. This isn’t just tax policy; it’s a full-blown classification and identity crisis that can leave businesses in a state of bewilderment over the true tax bill. On the face of it, it looks like one area of policy reform and is an improvement over past tax systems, but the uncertainty of the new form impacts virtually all the goods and services in the economy.

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But isn’t Indian infrastructure much much better? 

Indian airports, train stations, roads, etc. are much better than before. Anyone who travels to India 3-4 years apart can immediately feel the change. But the reason is related to the above point of policy versus electoral uncertainty.

When the government contracts with a large infrastructure firm like Adani or GMR etc., one of the big questions between winning the project and completing it is political uncertainty, because these are government contracts for large public projects that are undertaken by private sector infrastructure companies. Modi’s ten years in office, especially as a strong voice with a clear mandate, made it possible to keep these promises.

All the permissions, environment clearances, etc. come from the same place, and the locus of control is the prime minister’s office. In the previous Singh government, for instance, the lack of coordination between different ministries was a real problem. The cabinet was a reflection of the coalition government, and large projects were endlessly stuck waiting for environmental clearance.

So, the argument is not that India is not building these capital assets, or that they are not improving. It is that the private sector is not making investments and building for the future with the same fervor as it did in the past. And this is despite the relatively high political or electoral certainty offered by the Modi government.

While large firms like Adani and L&T have the certainty required for large government-funded infrastructure projects, it is the smaller players who seem cautious. Households that need to build another room or floor are waiting instead of building. Businesses that need to expand capacity are not building the assets required for that expansion and so on.

Why is GFCF improving since 2021? What changed?

During Modi’s tenure, GFCF as a percentage of GDP has been low, even declining, there is an uptick since 2021-22. First, let’s go back to Vodafone because that story didn’t end with Pranab Mukherjee’s amendment in 2012. Vodafone didn’t appreciate India’s retroactive tax grab, so it invoked an India-Netherlands investment treaty to drag the dispute into international arbitration. In 2020, the Permanent Court of Arbitration sided with Vodafone, deciding India’s retroactive application of tax rules didn’t play fair with promises of equitable treatment. The court ordered that India should back off the tax penalty and cover Vodafone’s legal tab.

By August 2021, good sense prevailed, and India signaled a change of heart, scraping the retroactive tax bill, Vodafone’s included, and return any tax and penalty it had already collected. This pivot became official with the passing of the Taxation Laws (Amendment) Act 2021, also benefiting other firms like Cairn Energy after years of litigation.

Could it be intangible assets?

But turning the clock back on the wreckage caused by retroactive taxation in 2012 is not the only thing that changed in 2021. An important part is clearly the share of intangible assets in the economy that are now growing faster than ever. Intangibles included in GFCF are assets like software, patents, branding, etc.

If we go back to the example of the skyscraper, then think of the design and the blueprints created by architects for these skyscrapers, or the new software written to run the elevators at high speeds, and the brand value that attracts tenants and investors.

Intangible assets, such as software, intellectual property, and brand value, are not bound by the same physical constraints as skyscrapers. But the other aspect is that these assets are more easily scalable. The software written for running the elevators in one skyscraper can be used across different buildings. And a lot of the growth in India has been in developing software. SaaS startups in India, driven by venture capital coming in from abroad, have been part of this growth of intangibles.

Moreover, the characteristics of intangible assets that make them valuable - scalability, sunk costs, spillovers, and synergies - are also what set them apart from physical assets. The ability to use intangible assets repeatedly across different contexts without significant reinvestment is a unique advantage that physical assets don’t always have. While sunk costs can be a challenge for both types of assets, the nature of these costs is different. For intangibles, sunk costs are more about the time and effort invested in research and development of the asset. Compare this to the sunk cost of physical materials and labor used in construction. And the intellectual property, even when a project fails, can be more easily adapted to other uses, whereas the physical materials used for the foundation of a building that never got completed cannot be as easily repurposed. Jonathan Haskel and Stian Westlake detail these aspects of scalability and sunk costs of intangibles. But there are additional elements, like spillovers and synergies of intangible investments that extend beyond the investing firm. While a physical structure might increase the value of surrounding properties, it’s not the same effect as an innovative software or platform that can be utilized by others in the industry.

However, this doesn’t mean that investing in intangibles is free from uncertainties. The rapid pace of technological change, for example, can quickly render some intangible assets obsolete. Regulatory changes around data privacy, intellectual property rights, or digital marketplaces can also have significant impacts on the value of intangible assets.

Coming back to India, there were some major changes in the last few years that built India’s digital public infrastructure. Though it started in 2009, by 2016 it was clear that the biometric identity offered by Aadhaar would eventually cover all Indians. However, two other things happened in 2016. Jio Reliance offered 4G internet and data plans at extremely affordable prices to Indians, with the promise of covering all of India. And second, the Unified Payments Interface, a real-time payment system that allowed users to transfer money across multiple bank accounts. The combination of these three platforms led to the creation and expansion of what is now known as the India Stack. By 2018, cheap data provided at scale was clearly here to stay. UPI had launched its updated version that included the now ubiquitous QR codes. Updates and upgrades to the India stack started to include Digital Locker, electronic KYC (eKYC), digital signature on demand (e-Sign), and Direct Benefit Transfers (DBT), etc. And by 2022, the UPI was combined with the Open Network for Digital Commerce, ONDC, making it one of the most interoperable systems in the world. With this digital public infrastructure and a pandemic lockdown making coordination costs even higher, India’s SaaS and app-based sector has taken off.

The venture capital fueling this is driven by the internally based funds, and a lot of investors ask start-ups to form a Delaware or Singapore holding company before they are willing to invest. And SaaS-based startups require very little brick-and-mortar investments, unlike a manufacturing firm like Foxconn, making investors more likely to invest in these ventures even in a climate of policy uncertainty.

How does this impact India’s future?

Going back to the skyscraper metaphor, if there is too much policy uncertainty, then either the businessman won’t build anything, or if in dire need of expanding capacity, then build a ten-storey office building. The builder, in turn, won’t hire engineers, workers, and architects at scale and instead do it piecemeal. And the consequence of that is that these businesses cannot get the big benefit of economies of scale. A large part of the fixed cost investments that businessmen bear in the future, is to find the right scale at which their marginal cost will reduce. But if there is too much uncertainty that prevents businesses from taking on large fixed costs, and this is done piecemeal, then 10 small factories will never have the economies of scale of one big factory.

For India, this is a far worse outcome than anywhere else. India naturally offers economies of scale in virtually every sector because of sheer numbers. Even the most niche products and services can find enough patrons to make the project viable. And not being able to capitalize on that natural advantage is a shame. And second, India is in desperate need of better infrastructure and capacity building at every level, given its growth rate and ongoing structural transformation, and urban-rural migration. Without the private sector willing to engage in long-term plans, at scale, this kind of growth and transformation will be difficult to sustain.

The only way to avoid this kind of policy and political uncertainty is through a strong adherence to principles of the rule of law. To reform regulation such that the identity of the individual businessmen/bureaucrat/politician no longer matters. These days rule of law has come to be associated with “foreign” and “liberal” values and are seen as an attack on the government and political integrity of India. That such talk of liberalism only serves elite think tank interests or opposition politicians but gets in the way of everyone’s business. But no matter what Indians say they believe, they aren’t making long-term investments with these homegrown exception-based rules. To invest, they want certainty, like any other individual and businessman across the world. And the micro-level policy certainty they are looking for can only be possible with a stubborn attachment to meta-level rule of law.

Rule of law and Certainty

To be clear, there can be a divergence in the short term between certainty and rule of law. Take for instance the case of the Electoral Bonds Scheme rolled out in 2017 by the Modi government.

Think of these bonds as a kind of promissory note, for funding political parties anonymously and without using cash transactions. You could pick these up from certain State Bank of India branches (owned and controlled by the Government of India), and drop them into a political party’s hat, and no one (well…) would be the wiser about where the money came from or who it went to. The bonds came in sizes ranging from Rs 1,000 to Rs 1 crore, and parties had to cash them in swiftly, within 15 days. The idea was simple: this would clean up political donations by funneling them through banks instead of under tables.

The government lauded the anonymity feature as the best method of cleaning up campaign financing without bringing in scrutiny and political retribution. Critics felt the anonymity actually muddied the waters, letting donors, with their identities hidden, potentially sway politics without oversight. Even the big guns, the Reserve Bank of India and the Election Commission, waved red flags, hinting at risks like money laundering and foreign interference.

The bigger problem, however, was not transparency, but asymmetry. The transactions were anonymous to the general public, and opposition parties, but not anonymous to the Modi government and therefore to the dominant political party, BJP. The government not only knew who made and received the payments, its biggest bank was charged with keeping track of every single transaction.

Naturally, the scheme was challenged in court, and India’s Schrödinger Supreme Court, wanting to be both independent and pliant to the government at the same time, chose to postpone hearing the matter. Fast forward to February 15, 2024, and the Supreme Court calls game over, ruling Electoral Bonds unconstitutional. Their reasoning? Voters have a right to know who’s funding their politicians. This verdict wasn’t just a slap on the wrist; it was a directive to pull back the curtain. The State Bank of India was told to hand over the records of these bonds to the Election Commission, which in turn, had to make them public.

This moment was hailed as a win for transparency in political funding, a reminder that in a democracy, knowing who’s behind the curtain is non-negotiable. Rule of law prevailed in India.

If the decision had come in 2017 or even 2018, then both rule of law and certainty would have prevailed in India. But waiting almost seven years to pronounce judgment, and looking the other way when billions of rupees had exchanged hands, gave a sense of legitimacy to the scheme. And now all the political deals made in the last seven years using electoral bonds have suddenly become uncertainty.

When rule of law and certainty align…. Inflation Targeting

The odd thing is that the Modi government did manage to control certain types of uncertainty that have plagued India for a long time - inflation uncertainty - and also managed to comply with rule of law and create good institutional design. This was done while reforming monetary policy, no less, moving India to an inflation targeting regime.

The primary objective is to keep the inflation rate within a target range, which is currently set at 4% with a tolerance band of +/- 2%. For this a Monetary Policy Committee (MPC) was created in 2016, and its job is to maintain inflation between 2% and 6%. The MPC does this by setting the repo rate - the rate at which banks borrow money from the RBI - to target the inflation rate. Changing this rate is how the MPC hopes to influence what banks do next, which in turn, affects how much everything costs, how easy it is to get a loan, and ultimately, how fast prices rise or fall.

A mix of RBI insiders and government appointees, six in total, gets together at least four times a year and every member of the MPC gets a vote on where to set the repo rate, and if they ever tie, the RBI Governor breaks it. They keep everyone in the loop by publishing minutes of their meeting after a two-week cool-off period.

The design of the MPC and the transparency associated with the committee votes has brought much needed certainty and stability to Indian investors and consumers and helped form inflation expectations.

India needs this kind of reform, that brings institutional stability and policy certainty in virtually all areas, not just monetary policy. Double-digit inflation is very much a thing of the past in India, and the real game changing reform was brought in by the Modi government. Incidentally, keeping inflation low and predictable is great for investors, and also an electoral win. Advisors of Modi would do well to remember the success of MPC and replicate the stability, certainty, and transparency it fostered across other areas of the economy.

The second was Richard Rhodes’s The Making of the Atomic Bomb. I started reading it during the run-up to the Oppenheimer movie buzz, but I finished it months later. Unlike Vogel, thankfully, this one was on the Kindle, and traveled with me. I felt like a fly on the wall, watching them pull together a heist in the middle of a war with the craziest geniuses.

Students, podcast listeners, EV winners, and others often ask me what I am reading, how I choose the books I read, and how I read. As an economist, I read/skim too many papers for the list to be valuable. In this post, I’ll focus on non-fiction books - about 90 percent of my book reading - and start with the last question first.

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How I read

I read multiple books at the same time. Few books, TV series, movies, etc., keep me engaged for hours. So, if I set the standard as “this should engage me start to finish, in one shot, and be an un-put-downable page-turner,” I would limit myself to murder mysteries or Mary Oliver’s charming Dog Songs (I finished it standing, waiting for the coffee to brew). Reading multiple books across topics ensures that I always have a book I want to read at that moment. I am also a slow reader. This combination means I take weeks, sometimes months, to finish books. And I don’t finish everything I start, and I am quite ruthless about abandoning crap.

This year's major realization was that books about the “current thing” written in the “current moment” are usually rubbish. Exhibit A is Going Infinite by Michael Lewis. I’ve been following the whole sordid SBF saga. The book, however, was disappointing. It might be the first Lewis book I didn’t finish.

What engaged me the most this year was Indian history because some parts of the book I am working on go back to the eighteenth and nineteenth centuries.

Time Machine

Rahul Sagar’s books were clear favorites. The Progressive Maharaja: Sir Madhava Rao’s Hints on the Art and Science of Government presents this extraordinary and previously unknown minister to Indian monarchs, with an almost 100-page introduction by Sagar before Rao’s writing. Rao’s approach reads more like James Buchanan’s or Knut Wicksell's, linking public finance with constitutional constraints, than his contemporaries. Remarkably, India had Wicksellian ideas in the nineteenth century and forgot those ideas before Wicksell came around. I was giddy reading Rao’s draft constitution, and in our conversation I thanked Rahul for introducing me to what felt like an old friend.

Sagar’s other work, To Raise a Fallen People, is a compilation of essays and articles by now-forgotten nineteenth-century South Asian commentators. The key insight is that India has long strongly advocated for liberalism and cosmopolitanism, as well as domestic and foreign trade. The phases of mercantilism, socialism, and autarky were deviations from this norm. Both books significantly enhanced my understanding of nineteenth-century Indian thought, a gap I am keen to fill in my knowledge. Thankfully, his platform, Ideas of India, has a great catalog to help me find the writings from that time.

Linda Colley’s The Gun, the Ship, and the Pen was also insightful. Covered a lot of ground on lesser-known constitution writing adeptly and accessibly. This is another reminder that what we consider “modern” is not always “western.” Think Tunisia in 1860.

Philip J Stern’s Empire Incorporated: The Corporations that Built British Colonialism offers an intriguing perspective on corporate colonialism by the East India Company and its, forgive the pun, other ‘limited liability partner’ in colonialism - the British parliament.

History of thought

I have always loved reading the history of economic thought. Unsurprisingly, one of my favorites this year was Who is the Greatest Economist of All Time and Why Does it Matter? by Tyler Cowen. The book is published online with its own AI chat box and allows learning and reading HET in a new way. https://goatgreatesteconomistofalltime.ai/en I read it the old-fashioned way, cover to cover. Oddly, my favorite thing is that it is deliciously reductive when most historians of thought belabor and expound the meaning of a single sentence or phrase for entire chapters. I think Tyler underrates Hayek. And I need to read more JS Mill.

And more generally, read more utilitarians, given their influence on India. Eric Stokes’s The English Utilitarians and India is a useful account of the kinds of questions Company administrators and British Parliamentarians asked in the late eighteenth and early nineteenth century on property rights, taxation, courts, and the whole gamut. Oddly, after reading it, I rate the Enlightenment thinkers even higher. Smith was always right about the Company.

I also enjoyed Jennifer Burns’s Milton Friedman: The Last Conservative. The institutional builder side of Friedman and Chicago academic politics was relatively new to me, and it is an excellent read on Friedman’s scholarship and professional life. A quick and fun read was Ned Phelps’s My Journeys in Economic Theory if only to shed more light on how different Chicago was at the time.

The one book I loved reading on crypto this year is Lawrence H. White’s Better Money. I’m biased, and I’d read anything written by Larry. Economists always ask, “Compared to what?” This book explains Bitcoin compared to the gold and fiat standards. It’s a great way to think about monetary systems, not just Bitcoin. It’s odd to classify this book under the history of thought, but there is a LOT of history of ideas embedded in the discussion.

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Socialism, 1991 Reforms, Transition Economies

In preparation for recording oral histories with the 1991 reformers, I greatly enjoyed reading Forks in The Road: My Days At RBI And Beyond by C Rangarajan. It was gripping when he described the day-to-day of the balance of payments crisis, how the second evaluation took place, the reforms in July 1991, and external sector management thereafter (our podcast here).

Another policy memoir I read this year was Backstage by Montek Singh Ahluwalia (our podcast here). It is beautifully written, and it feels like one is in the room with Ahluwalia through his various positions in government.

While thinking about reforms, I better understood India’s socialist model through Nikhil Menon’s Planning Democracy: Modern India’s Quest for Development. He provides an excellent lens into how the planning infrastructure got built, with Mahalanobis as the architect and general contractor (our podcast here). Also, there are many lovely gems on Hindi movie doyens who lend a helping hand to socialist propaganda.

Aditya Balasubramanian’s Toward a Free Economy: Swatantra and Opposition Politics in Democratic India analyzes a similar period. There is not much history of economic thought as I had expected, but a political history from the opposition perspective, mounted by the ideologically principled Swatantra Party. It shows a mirror to both modern-day opposition and conservatives if we have any left in India.

Another book about that time, not just about Nehruvian socialism, though it pops up often, is Nehru’s India: A History in Seven Myths by Taylor C. Sherman. It is well-researched, has a lot of new (to me) details on Nehru, and Sherman doesn’t pull any punches.

On the transition from socialism to markets in other countries, I learned a lot from Peter Boettke, Matthew D. Mitchell, and Konstantin Zhukov’s books, The Road to Socialism and Back: An Economic History of Poland, 1939-2019 and The Road to Freedom: Estonia’s Rise from Soviet Vassal State to One of the Freest Nations on Earth. With some transition economies, like Poland overtaking the UK in GDP per capita this year, we need to think more deeply about the varied experiences of transition economies and lessons for South Asia and Africa. I also re-read Boettke’s work on Hayek for our podcast, but that’s another long list for another day.

Global Cooperation and G20: Role of Finance Track, by Saon Ray, Samridhi Jain, Vasundhara Thakur, and Smita Miglani, helped me update my understanding of post-financial crisis financial sector changes globally and in India. But it’s written like a serious academic book for academics, dense and dry, not for beginners or the faint-hearted.

In the theme of structural transformation and state capacity building since 1991, but specifically for internal security, the edited volume by Devesh Kapur and Amit Ahuja, Internal Security in India: Violence, Order, and the State – an all-star list of contributors dispelled many myths. India is getting less violent, not more, and some chapters in the book help understand the current unrest in the Northeast and the constant internet curfews and shutdowns (our podcast here).

Earlier this year, I took a deep dive into understanding the India-China border conflict with The Fractured Himalaya: India, Tibet, China 1949-62 by Nirupama Menon Rao. Great on Nehru’s thinking the way the Tibet question has played out. I was fortunate to have Nirupama join me on the podcast. 

For Policy Wonks in training

Some contemporary policy books I read on questions troubling India were Missing in Action: Why You Should Care About Public Policy, by Pranay Kotasthane and Raghu S Jaitley (our podcast here). Every chapter starts with a well-chosen Bollywood dialogue or song, and it is a first principles approach to big questions.

On the same broad theme of the role of and interplay between society, state, and markets, Samaaj, Sarkaar, Bazaar: A Citizen-first Approach, essays and articles by Rohini Nilekani (our podcast here) provide a great peek into her policy, journalism, activism, and philanthropy.

Also, Caged Tiger: How Too Much Government is Holding Indians Back, by Subhashish Badra on contemporary policy questions, is a quick read, accessible, and well-written with lots of public choice insights. Ashoka Mody’s India Is Broken: A People Betrayed, Independence to Today is too entangled with the current moment and offers a rather pessimistic view of India. But if you don’t have a background in policy, I would start with Vijay Kelkar and Ajay Shah’s new edition of In Service of the Republic before reading these books.

For those who want to start conversations with their children about markets, society, and the state, I recommend reading Nitopadesha by Nitin Pai as a family. If Adam Smith and Elinor Ostrom, Machiavelli, George Orwell, Martin Luther King, James Madison, and the like were to write Panchatantra and Jataka tales or Aesop’s Fables, you would get Nitopadesha (our podcast here).

Courts are never as good as a Cutchery

The big case I followed keenly this year was marriage equality. For our podcast, I found Kirpal’s edited volume, Sex and the Supreme Court: How the Law Is Upholding the Dignity of the Indian Citizen, helpful in understanding how the Court thinks about individual rights versus custom. Raises good questions, especially in light of the incomprehensible Supriyo v Union of India.

We also discussed Kirpal’s Fifteen Judgments: Cases That Shaped India’s Financial Landscape. I learned that the highest court is paternalistic in virtually all matters, and the economy and financial sector are no exception. And that Indian courts are willing to live with absolutely no market failure and infinite government failure.

Speaking of failure, an excellent data-driven analysis quantifying the many failures of the Indian Supreme Court is Court on Trial by Aparna Chandra, Sital Kalantry, and William H.J. Hubbard. Also, see Unsealed Covers, previously published essays and blog posts by Gautam Bhatia, but worth a read as a compiled volume.

Cities as labor markets and a bottom-up emergent order

Alain Bertaud, my colleague at Mercatus, published Order Without Design a few years ago. I had the good fortune of reading it in the manuscript stage at NYU, and I reread it while preparing for the podcast. Alain is an incredible thinker; his ideas are important for India's structural transformation, internal migration, and urbanization. I hope his ideas gain greater recognition, and I would say this is a must-read, any year, any time. I’d replace the ubiquitous signs “yahaan peshaab karna mana hai” and “yahaan paan thookna mana hai” on government building walls with “we don’t need top down planning for urban order.”

Speaking of urban wall art, another book on cities I enjoyed is by my former SUNY colleague, Sanford Ikeda. A City Cannot Be a Work of Art (open access link) feels like a giant party graciously hosted by Ikeda where Jane Jacobs meets Israel Kirzner and Elinor Ostrom.

Another book on practical urban policy questions that shuns top-down planning and takes a bottom-up approach, focused on India, is India’s Blind Spot: Understanding and Managing Our Cities by Devashish Dhar. It’s nice to see some of Alain’s ideas echo in the work of Indian urbanists.

On the regional impact of India’s transformation, Regional Economic Diversity: Lessons from an Emergent India by Poornima Dore and Krishnan Narayanan takes a data-driven approach and explains the sub-national transition in India well. It is also written like a serious academic press book, full of tables and graphs. Grab it if you work in the area; otherwise, listen to our podcast.

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Re-reading

Virginia Postrel's The Fabric of Civilization: How Textiles Made the World was a book I read a few years ago but reread this year. I loved the book when it first came out (podcast here), and even though I picked up the book to reference a small portion, I read the whole thing. It is wonderfully written, with insights from economic history, history of science, fashion, chemistry, and culture.

The second book I reread was Career and Family: Women’s Century-Long Journey toward Equity by Claudia Goldin. Partly because of the Nobel announcement when it was in the air, and also for a project I am working on with Kadambari Shah. There is no surprise here, the book is excellent and holds up well on the second read. As a rule, I’d read anything by Goldin, a book, paper, essay, or post-it.

Back to a new book on family structure, Melissa S. Kearney’s The Two-Parent Privilege: How Americans Stopped Getting Married and Started Falling Behind was a good read. That children in two-parent families do better is unsurprising. For me, the insightful parts were learning that America has its version of inequality due to marriage endogamy and selection, not through caste-based arranged marriage, but through class and education.

Film, Music, Culture

Close to the end of the year, I got to read several books on film and music. It started with Nasreen Munni Kabir’s new book Talking Life: Javed Akhtar in Conversation, an addition to their previous two books Taking Films and Talking Songs. To record the podcast (will release in January), I re-read all the books in her In Conversation series with Gulzar, AR Rahman, Waheeda Rehman, Zakir Hussain, and Lata Mangeshkar. Nasreen is prolific but also very accessible, and all the books were fun reads and made me listen to many music references.

I read very little poetry this year. Dana Gioia’s Meet Me at the Lighthouse, which I heard about from Russ Roberts’s podcast. Not my usual sort of read, but I found it very moving, probably because I had context about his other work and life.

And I got quite obsessed with Bulleh Shah (it’s a long story….). First, I got the Murty Classical Library translation of Bulleh Shah, but it is a translation from Gurmukhi to English and not a transliteration. Even the boomer native Punjabi speakers I know don’t/can’t read Gurmukhi. So, I abandoned that pretty early and moved on to internet sources with transliteration. His poetry is worth reading. And a lot of it has been set to music by Punjabi qawwals; even better than reading is listening to Nusrat or Master Saleem singing Bulleh Shah couplets.

Books I am reading right now, at various stages of completion:

Vajpayee: The Ascent of the Hindu Right 1924-1977 by Abhishek Choudhary. My colleague Shreyas Narla and my husband have been raving about it, and I’m only 30 pages in, but it’s well-researched and well-written. Also, Pratinav Anil’s Another India: The Making of the World’s Largest Muslim Minority, 1947-77, makes for an interesting companion to Vajpayee.

Also, Seema Sirohi’s Friends with Benefits: The India-U.S. Story. I picked it up because she’s covered US-India relations as a foreign correspondent for over 30 years, and I am enjoying it. It traces the change in the US-India relationship, one that was mired in distrust, to now strategic partners who can work together on big geopolitical questions.

I am currently enjoying Rahul Matthan's conceptual approach in The Third Way: India’s Revolutionary Approach to Data. I need to think more about India’s digital public goods, and Mathan provides a framework.

When the Chips Are Down: A Deep Dive into a Global Crisis by Pranay Kotasthane and Abhiram Manchi is on the semiconductor chips crisis from the Indian point of view. In addition to geopolitics and technology, there is much on industrial targeting, central planning, and innovation policy. I am amazed by (read envious of) Pranay’s productivity; he has two books out in 2023, writes two weekly newsletters, has a Hindi podcast, and teaches at Takshashila!

How I choose my books

There are a few different ways to find the books I haven’t read before.

First, when reading for a particular writing project, like a paper or a lecture, I read in clusters to get a sense of the literature. If I have a podcast guest who has written multiple books, I always try to read as much of it as possible. For these kinds of projects, my first reading is quick, and then I revisit parts of the book more carefully.

Reading to think through a question I am working on often requires revisiting older books I have read before, and then I only read specific portions. For instance, I am reading Adam Smith’s Wealth of Nations for maybe the seventh or eighth time for an essay I am writing. For another project, I’m reading Olson’s Logic of Collective Action for perhaps the third or fourth time. Reading the relevant bits of Scott’s Seeing Like a State when I prepare for something (usually bad policy) has become a nervous habit.

I have an ever-growing list of classic books; I hope I get to them eventually. But I have found that I am great at picking up a classic book and skimming but terrible at reading classics without a project that requires that reading. I envy those who can pick up classic books and read them from start to finish for no reason other than that it is a classic must-read book.

Second, I read a new book in an area I am deeply interested in (like constitutions), and the consensus is that I “should” read it. I consider recommendations from people I trust and follow, often from podcasts I listen to or colleagues at work, etc.

Third, books are sent to me. I am in a privileged position where I receive books at the manuscript stage from fellow academics or authors. I also receive lots of review copies from publishers for the podcast or Substack. I’m grateful for these books and always (eventually) read them. So please continue sending review copies (Address: Mercatus Center at George Mason University, 3434 Washington Blvd, Arlington, VA 22201).

My students, friends, and family continue to gift me books. Please stop. As gifts, I prefer vinyl …they take up less space and have more repeat value, and I won’t give them away as I do with books.

Happy reading and a very happy new year.

Malapportionment is quite severe in India. At the extremes: In Bihar, one Member of Parliament (MP) represents approximately 3.1 million citizens. An Uttar Pradesh MP represents approximately 2.96 million citizens. A Tamil Nadu MP represents approximately 1.97 million citizens. And a Kerala MP represents approximately 1.75 million citizens. Consequently, India is no longer living up to its fundamental constitutional principle of “one person, one vote.”

My friend Amit Varma asked me to discuss how India ended up at this point on his excellent The Seen and the Unseen podcast. On the episode (#336), we discussed the problem of delimitation frozen to 1971 census numbers, the design problem with Indian bicameralism and India’s fiscal centripetalism. Since I am currently working on two papers on the topic, I thought I would add some of the data visualizations from my talk last year in a Substack post to supplement Amit’s podcast show notes.

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Constitutional Design

Delimitation refers to the action of fixing the boundary or limits of something. In Indian politics, it means determining the number of constituencies, their size in each state, and their boundaries. All three decisions carry significant political consequences. Delimitation Commissions, separate from an Election Commission that conducts elections, are established to understand, and capture, how the country’s demographics are changing, based on decennial census data. Delimitation Commissions provide the roadmap for how the country needs to change electorally — in other words, how many new constituencies need to be added/subtracted in a given state, and/or how their boundaries need to be redefined.

The constitutional provisions governing proportional representation in India are Articles 80-82 for Parliament, the main focus of this post and the podcast. You can assume a similar principle at work for state legislative assembly seats (Articles 170-171). One exception is Union Territories (UT), where proportional representation is not mandated. Parliament decides the number of seats for Union territories and small states with populations of less than 6 million.

Article 81 requires that for the Lok Sabha (lower house/house of the people) each state receives electoral seats in proportion to its population and allocates seats in a way “that the ratio between that number and the population of the state is, so far as practicable, the same for all states.” The 1950 constitution capped Lok Sabha seats at 500 and allowed a maximum of one Member of Parliament (MP) per 750,000 population.

Article 80 capped the maximum number of Rajya Sabha (upper house/council of states) members from states at 238, with an additional 12 members designated for functional representation or nomination. However, the most interesting aspect of Indian bicameralism is that the original constitution allowed for no malapportionment in either house of Parliament. It required that Rajya Sabha members from states also be chosen by the state legislature “in accordance with the system of proportional representation by means of the single transferable vote.” This differs from other systems, like the U.S., where each state, irrespective of population, gets the same number of electoral seats in the upper house, e.g. two Senate seats per U.S. state.

And since populations grow, and not evenly across all constituencies, Article 82 provided for redistricting based on the numbers from each decennial census.

The original constitutional scheme envisaged a perfectly apportioned Parliament, where both Lok Sabha and Rajya Sabha members for each state were in proportion to the population of the given state (though elected through different processes - direct versus indirect).

This system worked well, albeit with complexity, in the first two decades post-independence. Census data were used for redistricting and Delimitation Commissions were set up to allow seats to states as well as to draw boundaries. The main challenge in the initial years was threefold: (1) states joining the union and creation of new states, (2) reorganization of states, and (3) fast and uneven pace of population growth across states. To manage this, seats were added to Parliament and state legislatures. The Seventh Amendment (1956) increased the seats to 520, and the Thirty First Amendment (1973) brought it to a maximum of 545 seats. Currently, the Lok Sabha strength is capped at 552 seats.

How did India end up here?

Like many terrible changes in the Indian Republic, this one can also be traced back to the Forty-Second Amendment to the Indian Constitution, which in 1976, froze the number and boundary of constituencies in the Lok Sabha (Article 81) and state legislatures (Article 170) according to the population numbers from the 1971 census. The freeze was fixed for a period of 25 years, until the 2001 census.

The ostensible reason was uneven population growth. The politicians from southern states of India claimed that they more strictly and successfully followed the Union government’s population control mandate compared to the northern states. As a consequence, they alleged, that they were electorally and politically penalized for complying with the Union government mandate.

However, India’s original constitution was designed to address this problem. Both the Lok Sabha and Rajya Sabha were supposed to adjust seat share across states based on proportional representation, direct and indirect, respectively. So uneven population growth was not the real reason because the seat share in both Houses of Parliament would adjust based on population and any malapportionment would be eliminated after every census.

The actual reason was that India was a bicameral federal union, but it wasn’t fiscally federal. The southern states, with wealthier residents, contributed more to the collective Indian revenue pool. In the seventies, under Indira Gandhi’s centrally planned economy, there was virtually no fiscal federalism. The Union government redistributed resources based on need, and the poorer states, with higher fertility rates and therefore higher population and population growth, received a much larger share of the revenue than they generated within the state. The fundamental issue was not about population or people; it was always about money!

The Janata government, elected after the Emergency, undid much of the damage of the Forty-Second Amendment through the Forty-Third and Forty-Fourth Amendments, but didn’t undo the changes to Articles 81, 82, and 170.

The reason the freeze impacted the Lok Sabha, instead of the Rajya Sabha - which is designed as the Council of States - is that budgetary allocations or money bills (per Article 109), are not required to pass the Rajya Sabha. They only need the approval of the Lok Sabha. Thus, a fiscally centralized system only punishes wealthier southern states through a reduction of proportional seats in the Lok Sabha.

The change in India’s demographics, fiscal centralization, led to malapportionment during the delimitation freeze from 1976 to 2001 (shown in the figure1). By 2001, Tamil Nadu had five seats more than its population share and Uttar Pradesh had eight seats fewer than its population share. As expected, poorer states like Rajasthan, Madhya Pradesh, and Bihar are disadvantaged and lost seats relative to their population proportion, while Kerala and Andhra Pradesh gained seats. Maharashtra, the recipient of the highest in-migration, often loses a little in seat share despite a decline in fertility rates.

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When the time came to revisit the issue in 2001, the Vajpayee government also postponed the decision to 2026 due to the fragile nature of the coalition. This was Vajpayee’s third term as prime minister, with the first term lasting only 16 days in 1996. When the NDA coalition won in 1998, it was with the support of many regional parties including AIADMK, which famously left the coalition in 18 months because of which the Vajpayee-led government fell.

When he returned as prime minister with another NDA coalition in 1999, it was with coalition partners like DMK and Telugu Desam Party, from states that would lose political power in Parliament if the 1971 census freeze was removed. However, there were other issues to consider. First, population growth within states was also uneven. Second, there was a movement to carve out smaller states from Madhya Pradesh and Bihar, an issue BJP had been sympathetic to for years. Also, the malapportionment of SC/STs, who have a constitutionally mandated allotment of parliamentary seats based on the population (Article 330), was a concern. So, the Vajpayee-led arrived at a constitutional compromise.

The Eighty-Fourth Amendment extended the 1971 census freeze on the total number of seats per state in the Lok Sabha/state legislatures until the publication of the census figures after 2026 (which is expected in 2031, unless the 2021 census is delayed so much that it is only published in 2026).

The Delimitation Act 2002, under which the Fourth Delimitation Commission adjusted the number of seats reserved for the scheduled tribes/castes, applied the 1991 census data. Soon after, the Eighty-Seventh Amendment continued the number of seats allotted to each state based on the 1971 census but made an accommodation for redistricting within each state based on the 2001 census.

The consequence was that the constituency size within each state was more symmetric. The new states, Chattisgarh, Uttarakhand, and Jharkhand, were not severely malapportioned as a consequence of the constitutional amendments and within state redistricting policies implemented between 2001-2003.

But every single state in India has a different constituency size, and the sizes, especially for the larger states, are not converging but diverging! This is because the liberalization of the economy since 1991 led to a higher growth rate for all states, but not at the same rate. The southern and western states grew faster, and the drop in fertility rates and difference from the northern states have become even more stark since 2001.

Since the 2021 census numbers are still not available as I write this in July 2023, for most of the graphs in this post, I used census data until 2011. For projections since 2011, I used the 2019 Report of the Technical Group on Population Projections by the National Commission on Population, which provides projections from 2011-2036 for all Indian states and UTs, and was made available in November 2019. I also roughly crosschecked these estimates with Election Commission data (accurate for population over 18), and AADHAAR data. This helps triangulate and come up with better growth estimates. At this point, all scholars projecting malapportionment are working off estimates based on some assumptions, and the differences are not very large given the extent of malapportionment. For instance, malapportionment based on projections from March 2019 are discussed in this paper by Milan Vaishnav and Jamie Hintson.

Today, the asymmetry in seat share for states looks much worse than it did in 2001. Tamil Nadu has nine seats more and  Kerala has six seats more than their population proportion.  While Bihar and Uttar Pradesh, respectively, have nine seats and twelve seats less than their population proportion.

By 2031, when the delimitation freeze ends, the problem will only intensify. Uttar Pradesh and Bihar will likely fall 12 to 13 seats short of their population proportion, and Tamil Nadu will likely have 11 seats more than its population proportion, with all other states somewhere in between.

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Why is the delimitation freeze based on 1971 census numbers a problem?

To begin, let’s address a simple issue. There are consequences of freezing the seat share based on census data from half a century ago. First, all Indians are underrepresented (though not equally so) because the Indian constituencies are too large.

Currently, across India, the average MP represents 2.5 million people. The size of each constituency is too large compared to other countries and compared to the original Indian Constitution, which capped the ratio at one MP per 750,000.

The second consequence is that India no longer adheres to the principle of “one person, one vote” in its electoral practice. One aspect of the “one person, one vote” concept, as envisioned by Ambedkar, was about granting every single Indian over 18 the right to vote in elections. India has adopted universal adult franchise since the birth of the republic in 1950. But to give the principle of “one person, one vote” any meaning, constituency sizes must be roughly equal. The random circumstance of being born in Bihar means that the constituency size is about 3.1 million, but if the same person is born in or moves to Kerala, the value of their vote increases because the constituency size is 1.75 million.

But aside from the principle of “one person, one vote,” other asymmetries exist, and some groups are underrepresented compared to others. Most of these are a result of when fertility rates started declining for a given socio-economic group.

It’s well established that economically prosperous regions have lower fertility rates. The poorer the region, the higher the fertility rates; in a fast-growing developing economy like India, poorer regions experienced a fall in fertility rates later than relatively richer regions.

Consequently, poorer regions are affected more by the 1971 freeze. Poorer Indians are trapped in regions that have higher malapportionment, and therefore, are underrepresented in Parliament.

This also impacts youth adversely. Because regions where fertility rates fell later have more young people. The states with larger average constituency sizes have a larger share of the population below 25. Youth are underrepresented in Parliament, and this problem will only worsen.

We can also identify specific marginalized groups that are more likely to have experienced a decline in fertility rates more recently. SC/ST fertility rates are both higher and dropped later compared to other groups.

The Indian constitution mandates that electoral seats are reserved for SC/ST groups in each state. The number of seats reserved for SC/STs in each state is based on the population share of SC/STs in the given state/UT (Article 330). Since the adjustments made in the Eighty-Fourth and Eighty-Seventh Constitutional amendments and the Delimitation Order of 2008, some of the asymmetry has been reduced. Now, the SC/ST groups are estimated to be 4 seats short in the Lok Sabha, relative to their population in the states.

Another group affected by the delimitation freeze are Muslims, as Muslim fertility rates are higher and declined later than other religious groups. However, Muslims differ from SC/STs in that they are overall a smaller group and do not have any reservation of electoral constituencies in the Lok Sabha.

Hindus are 5.5 times larger in population relative to Muslims. So the slightly higher Muslim fertility rates does not mean that (1) Muslims will electorally or otherwise outnumber Hindus in India, or that (2) only Muslims are impacted by delimitation. Since total number of Hindus are 5.5x Muslims, more Hindus are adversely affected by the malapportionment. But the 1971 freeze, and the kicking the can down the road in 2001 to 2031, means younger Muslims are more likely to be in malapportioned states and therefore underrepresented. 

And this underrepresentation or loss of franchise is experienced by all the voters in a given state, and they respond accordingly. Voter turnouts are lower in larger constituencies. 

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Some possible solutions

To uphold the principle of “one person, one vote,” India needs to correctly apportion its constituencies and ideally increase the total number of constituencies across all states. If the Indian Parliament doesn’t postpone dealing with the issue again, the problem will require a permanent and incentive aligned solution in 2031.

One option is to return to the original constitutional ratio of one MP per 750,000, in which case the Lok Sabha would need to expand to 1,872 seats. In my view, this would be ideal for an MP to function as a real representative with manageable constituency sizes. It would also reduce the power of the executive, as transaction costs of coordination increase in the Lok Sabha, and the legislature is governed using more overlapping caucuses.

If that seems excessive, another version of achieving this has been suggested by Vaishnav and Hinston, where the total number of seats in the Lok Sabha increases such that no state loses it’s current number of electoral seats. To achieve this without malapportionment, the total number of seats in Lok Sabha would need to be 848 by 2026. However, it’s important to note that the states would lose proportional share/power in Lok Sabha based on the change in demographics since 1971.

The problem is not just one of uneven population growth across states. That alone does not lead to these problems, especially given the Indian constitutional design where even the upper house, or Rajya Sabha, allows for apportionment with population growth.

The issue arises from our peculiar bicameral design for states (easy to create and alter state lines under Article 3) and India’s fiscal centralization. The Indian fiscal system is designed such that states’ collective share in total revenue is less than 40%, and the states’ total expenditure is about 60%. The remainder is raised and spent by the Union government.

The Indian system operates primarily through intergovernmental transfers managed by the Union government. Some states spend more than they raise, while other states spend less than the proportion raised. There’s considerable variation among the states on their fiscal dependence on the Union government, largely based on the variation in states’ gross domestic product (GSDP) per capita.

Per capita revenues raised by the states are highly correlated with per capita GSDP. Based on 2014-15 revenue and expenditures, M. Govind Rao has calculated the correlation coefficient at 0.940. For instance, Kerala’s own state per capita revenue is seven times Bihar’s. And per capita expenditures of the states, even after accounting for intergovernmental transfers, are correlated to GSDP per capita. Rao estimates the correlation between developmental expenditures (expenditures on social and economic services) and total expenditures to per capita GSDP at 0.786 and 0.614 respectively.

Even after intergovernmental transfers from the Union government, low-income states spend less than high-income states. But high-income states don’t enjoy all the revenue that is raised off the income and productivity of those states.

Solution 1: Fiscal Federalism + Perfect Apportionment of Seats

The simplest way to resolve the problem without any other constitutional changes is for India to move to a system of perfect apportionment, based on the most recent census. Simultaneously, through the Finance Commission, India could move toward a completely decentralized/devolved fiscal system.

Each state would have hard budget constraints, greater revenue-raising capacity, and keep most or all of its revenue, without a central pool disbursed based on development needs. The Union government would levy and spend only Union taxes, and reduce its expenditure to the Union government domain, not involving itself with state-level schemes or development expenditures. Although not as drastic as what I’ve suggested, Pranay Kotasthane has proposed moving towards a 60-40 split in revenue sharing in favor of the states.

Although this solution is the most sensible in the long run, it’s both economically and politically unviable in the short run (i.e. by 2031). The main issue with moving away from intergovernmental transfers is that states aren’t converging in their economic outcomes. They’re diverging.

The poorer states won’t be able to commit much to development expenditure through revenue raised by the state. Nor can they build revenue-raising capacity very swiftly. Therefore, a fiscally decentralized system would rely more on migration pull through economic productivity of the southern states, which isn’t simple because of linguistic fractionalization and NIMBY attitudes.

It’s also politically unviable in the short run because it requires the political actors at the Union government level to reduce their control over total revenue, and instead hand over fiscal control to the state level actors. Every politician’s power is based on the size of their spending power/budget, and while this could be done by gradually changing the Union-State shares over time, it is difficult to revamp the revenue sharing swiftly (before 2031, which is when the delimitation freeze will be revisited).

Solution 2: Intergovernmental Transfers With a Senate-Style Rajya Sabha

A second possibility is to maintain intergovernmental transfers but create a U.S. Senate-style Rajya Sabha, where each state gets the same number of Rajya Sabha seats irrespective of population, to counterbalance the population-proportioned seats in the Lok Sabha. Nitin Pai has recommended this system where each state, regardless of size, has the same number of Rajya Sabha seats. This idea has been seconded by Pranay Kotasthane. This has also been suggested as one possible solution by Vaishnav and Hinston.

This approach requires some amendments to the constitution, most importantly to Article 3 (governing the creation and alteration of states) and Article 109 governing money bills. This solution won’t resolve the problem unless money bills must pass in the reimagined Rajya Sabha. It also requires amending the Representation of People’s Act to mandate that Rajya Sabha members are domiciled in the state they represent. Otherwise, the party in power at the Union government could abuse Rajya Sabha membership to achieve its political ends.

The problem is that while it resolves the malapportionment in the Lok Sabha, it introduces a more severe version of it in the Rajya Sabha!

For instance, India’s current malapportionment in the Rajya Sabha due to the 1971 census freeze is not as severe as the malapportionment in the U.S. Senate.

If we implement a U.S. Senate-style Rajya Sabha, the malapportionment in the Rajya Sabha will be even more severe than in the US.

Solution 3: Revenue Sabha + Perfect Apportionment of Lok Sabha Seats

A Reimagination of India’s Bicameral Federal Union

A third way to resolve the problem while allowing for intergovernmental transfers to help poor states develop, and simultaneously avoid severe malapportionment in the Rajya Sabha is to redesign it completely based on fiscal principles. Here I present a radical idea of converting Rajya Sabha into Revenue Sabha to compliment a perfectly apportioned Lok Sabha based on the 2031 census.

I recommend using population proportions based on the most recent census for Lok Sabha seats. But my suggested change is to allot the seats in the Rajya Sabha based on revenue-raising capacity, using States’ Own Revenue Per Capita (ORPC) as the benchmark.

I suggest the following formula for allocating seats for each state in the Rajya Sabha, reimagined as Revenue Sabha:

The reason I use ORPC for each state is that it does not include revenue that is collected in a particular state which doesn’t accrue in that state. For instance, a lot of firms are headquartered in Mumbai or Bangalore, but the corporation/corporate tax is based on the activities of the firm across the country.

This has two benefits. First, each state has very strong incentives to build revenue-raising capacity, which is highly (almost perfectly) correlated with state GDP per capita. This would align political incentives with economic growth, because the only way of increasing political power in the Rajya Sabha is by pursuing economic growth.

Second, it is very difficult to game or misrepresent own revenue per capita, or increase and manipulate it to gain political power in the short run.

Here are some examples of how this works. I used the pre-pandemic actuals (not budget estimates) for ORPC for Bihar, which was Rs. 2,356 compared to the national average across all states of Rs. 8,771. The ratio of Bihar’s ORPC to the national average is 0.27. At present, Bihar has 16 seats in the Rajya Sabha. If we use current population proportions for the Rajya Sabha, Bihar would have 21 seats. But in the Revenue Sabha, Bihar would receive seats based on its revenue-raising capacity per capita, as well as population proportion, bringing the seat share to 5.6 (if we choose to round up, then 6 seats, and if we round down then 5 seats).

Similarly, for Karnataka, ORPC is Rs.14,323, which is 1.63 times the national average ORPC. Karnataka has 12 seats in Rajya Sabha, which will come down to 11 if Rajya Sabha were perfectly apportioned by population share. But in the Revenue Sabha, Karnataka would have 19 seats (rounding up).

If we calculate the number of Rajya Sabha and Revenue Sabha seats for all states, the picture looks like this:

In this system, it is not about north versus south, or a particular language, or region. Just like Tamil Nadu, Kerala, Karnataka and Andhra Pradesh; Haryana, Gujarat, Uttarakhand etc. will gain because they are richer and have a higher ORPC than the national average. And Bihar, Uttar Pradesh, Jharkhand, and Assam will lose seat share because they have not developed their economy and revenue-raising capacity.

This will not require some amendments I had suggested in the previous solution. For instance, Article 3 (how states are created, altered etc.) can stay as is, since splitting of states, or combining small states will lead to a calculation of the ORPC as a ratio of the national average to determine Rajya Sabha seat share.

The Revenue Sabha will require amending Article 109, which governs money bills. This system will not resolve the problem unless money bills have to pass in the newly designed Rajya Sabha/Revenue Sabha.

The domicile (or lack thereof) problem in Rajya Sabha can still become a serious design issue though representation is based on fiscal interests, which cannot be easily manipulated, but some members not representing the states’ interest can be brought to the Rajya Sabha. So ideally, the Representation of People’s Act should be appropriately amended.

A perfectly apportioned Lok Sabha, based on the 2031 census, along with a Revenue Sabha will create the right political incentives for a plural, developing economy like India. Even with aging demographics, shifting and changing internal migrations, etc., many decades from now, when Kerala ages and is no longer as productive, and Bihar develops as a young and vibrant economy, the Revenue Sabha will automatically accommodate that. At that point, Bihar may have to transfer both manpower and revenue to Kerala. India can continue to have a system where fiscal resources are shared and political power is not malapportioned across states.

Shoutout to for his help with some of these data visualizations and Shreyas Narla for his research assistance for the working papers on which the podcast, my 2022 lecture, and this post are based.

When asked why the Indian rupee didn’t end up a tin pot currency, I often credit its stability to Dr. C. Rangarajan, who was deputy governor of the Reserve Bank of India (RBI) in 1991, and governor from 1992-97. His work alongside finance minister Dr. Manmohan Singh (‘92-96), and with Mr. P. Chidambaram (‘96-7), in the first few years after the crisis, was instrumental in bringing stability.

Typically, countries that face balance of payments and currency crises tend to stabilize briefly through IMF loans (that come with conditionalities), before regressing to their previous state. India had currency problems in the mid fifties. In 1966, India devalued the rupee and failed at implementing any economic reforms, discussed in the 1991 Project at Mercatus and covered in detail in this excellent essay by Prakhar Misra. But India never regressed with balance of payments and currency problems after 1991.

I had a chance to have a conversation with him on the Ideas of India podcast and ask him the same question: what did India do differently to ensure it didn’t have currency crises after 1991?

RANGARAJAN: This has been the experience of many countries which went to IMF, but the point is that we took reforms very seriously after we went to IMF. It is also proof of the fact that the reforms were not imposed. The reforms were our own making. We had decided that the time has come to move in a different direction, change from what we are doing earlier, and therefore, the additionality of the funds that came was a good thing.

They needed it at that time because the balance-of-payments crisis had to be overcome. Before we can initiate reforms, some degree of stability has to be established. Therefore, stability and reforms went together, and therefore we took the money from IMF and other international institutions and many others. The program that we wanted to initiate as a consequence of the crisis was something with which the IMF and other institutions were in agreement, and this was put down in the document of agreement. These are reforms which we thought were important from the point of view of the country, and this is what we want to do.

Therefore, very often people talk about the nature of conditionalities and so on. I would like to make a point: The conditionalities, if they want to call them that way, were conditionalities from their point of view. They were the reforms that we wanted to introduce at that particular time. Therefore, this is an important difference, perhaps, between the practices or between what happened in other countries or what happened to India also earlier.

Take one good example. We devalued the currency, but in the previous occasions when we devalued the currency, the steps that we took later on were essentially in the nature of controlling imports and so on. But whereas this time in 1991 when we devalued the currency, we went on to embrace, so to say, free trade and decided to become part of the global trade—in fact, reduce the tariff rates and remove the quantitative controls and so on. This is something contrary to what we used to do earlier after the decision to devalue the rupee. That will give you an idea of why the experiment this time, or results were far different from the earlier times.

This is an underappreciated point in policy formulation for developing countries. There is a tendency to "export" best practices from the developed world through IMF conditionalities, etc., or for the elites in developing countries to "import" practices that they observe from their peers in developed countries. However, neither approach is effective.

Exporting best practices through conditionalities may not have buy-in from the local elites, bureaucrats, and politicians who have to implement those policies at home. In the case of balance of payments crises, implementing bitter and electorally unpopular medicine, such as cutting government spending and bringing in fiscal discipline, can be challenging without buy-in. Such policies fail to take root.

Importing best practices can present a similar problem if the policies are not adapted to the local situation. In this paper, Alex Tabarrok and I argue that inappropriate imitation in India occurs because the Indian intelligentsia—the top people involved in politics, bureaucracy, universities, think tanks, foundations, and so forth—are closely connected with Anglo-American elites, sometimes even more closely than they are with the Indian populace. As a result, the Indian elite initiates and supports policies that appear to be normal but may have little relevance to the Indian population as a whole and may be wildly at odds with Indian state capacity. The result is first-world regulation that, at best, remains unimplemented, or worse, has a number of unintended consequence due to weak enforcement.

The incredible feat that the team of 1991 reformers pulled off was implementing best practices to deal with the currency crisis while transitioning the economy out of command and control, but in a completely homegrown way. They pursued some reforms gradually, such as reducing deficits and tariffs, while passing others with a single stroke, such as eliminating the license control system in trade and industry. Most of the reformers were career bureaucrats or technocrats who had built long-term relationships and trust within the Indian political system. Additionally, most of the reforms were based on the legwork done by expert committee reports over a decade prior to the 1991 reforms.

It wasn’t the Washington Consensus that saved the rupee, but its close cousin - the New Delhi consensus.

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Dr. Rangarajan exemplifies the technocrat/civil servant who helped build that consensus. He earned his Ph.D. in economics at the University of Pennsylvania and after teaching at NYU and IIM Ahmedabad, he was the first economist to be laterally brought into the RBI as deputy governor in 1982. He served as a member of the Planning Commission in 1991 and as the governor of the Reserve Bank of India from 1992 to 1997. He has also served as the governor of the state of Andhra Pradesh, as chairman of the Twelfth Finance Commission, and as a member of parliament when he was appointed to Rajya Sabha. He chaired the Economic Advisory Council to the prime minister (Dr. Manmohan Singh) and currently serves as the chair of the Madras School of Economics. At 91 years old, he is still lecturing, writing, and is so busy that it took many weeks to schedule the podcast recording.

He just published his excellent memoir Forks in the Road: My Days at RBI and Beyond, detailing many decisions in his career, especially as central banker during the crisis in 1991 and the reforms that followed.

The entire conversation is excellent, and you can listen 👇 or read the full transcript.

ICYMI, this is the 77th episode of the Ideas of India podcast produced by the Mercatus Center. You can subscribe to the podcast on Apple, Spotify, Google, Overcast, Stitcher or the podcast app of your choice. We also produce fully linked transcripts available here.

Ambedkar Jayanti

It is B.R. Ambedkar's 132nd birth anniversary today. Celebrated worldwide as a Dalit icon, we often forget about Ambedkar, the economist who was trained at Columbia University under Edwin R.A. Seligman and at the London School of Economics with Edwin Cannan.

It's worth reading some of his works in economics for two reasons. First, they are quite different from the typical Marxist narrative around Ambedkar's thought. Both works are very much rooted in the neoclassical orthodoxy of the interwar years, and Ambedkar is writing about public finance, monetary policy, factor productivity, etc. Second, some of his writing on the Indian economy is still very relevant.

In The Evolution of Provincial Finance in British India (1923), Ambedkar criticized the highly centralized system of public finance in British India, which limited the ability of provincial governments to raise revenue and invest in development projects. Centralization also concentrated power in the hands of a few British elites. Since the rule of the East India Company, India has been plagued by a lack of state capacity and investment, and not much has changed after independence. India is still plagued by fiscal centripetalism, and many answers can be found in Ambedkar's work on increasing the revenue-raising capability of provincial and local governments, greater decentralization, and building the capacity of state finance commissions.

The his article Small Holdings In India And Their Remedies (1918) Ambedkar detailed the productivity problems of small land holdings, which have only become worse in modern-day India. Interestingly, many of the arguments Ambedkar made in this paper talked about the structural transformation required in the economy to modernize and mechanize agriculture, conducted with a small labor force, and a large and growing industrial sector to absorb people exiting agriculture. Ambedkar's view of the necessary exit from agriculture into industry is still underappreciated and unrecognized in Indian policy circles, which continues to romanticize agricultural and rural life.

[I]ndustrialization of India is the soundest remedy for the agricultural problems of India. The cumulative effects of industralization, namely, a lessening pressure and an increasing amount of capital and capital goods will forcibly create the economic necessity of enlarging the holding. Not only this, but industralization by destroying the premium on land will give rise to few occasions for its sub-division and fragmentation. Industrialization is a natural and powerful remedy and is to be preferred to such ill-conceived projects as we have considered above. By legislation we will get a sham economic holding at the cost of many social ills. But by industrialization a large economic holding will force itself upon us as a pure gain.

The Problem of the Rupee (1923), which Ambedkar submitted for his D.Sc. thesis at the LSE, criticizes the gold-exchange currency system of the colonial rupee. The system's goal was not to manage price stability for rupee holders by adjusting gold reserves. Instead, it maintained a fixed exchange rate between the Indian rupee and the British pound, resulting in chronic trade imbalances and a loss of gold reserves for India. Ambedkar suggested returning to a pure gold standard with a gold currency, which would be automatic and outside the manipulation of the colonial masters. Some of the arguments on large deficits, lack of prudential controls, and the impact of inflation on the poor are still extremely relevant.

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Fellowship Application Deadlines!

My colleagues working on Academic and Student Programs at the Mercatus Centerhave created fantastic fellowship opportunities. I am an alumnus of this program and was a PhD. Fellow from 2008-13. The Lavioe and Buchanan Fellowship application deadlines are on April 15!

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Following the disqualification, Indian democracy has been declared dead by national and international media. But democracy in India wasn’t assassinated by Modi, as the pundits are claiming. India’s situation is more a slow growing cancer that is infecting everything. India’s illiberal laws, a biased judicial decision and the Indian Supreme Court’s flawed guidelines on legislative disqualification, created a situation ripe for political opportunism. Consequently, Om Birla, the partisan speaker of the Lok Sabha, from the ruling BJP, showed remarkable haste in issuing the disqualification notice.

Ordinary Indians grapple daily with the challenges posed by the nation’s deficient legal, judicial and executive systems. Now, India’s most prominent opposition leader, hailing from its most distinguished political dynasty, has become the latest casualty of these institutional shortcomings.

I explain the criminal defamation charges, the punishment, the rules that led to Gandhi’s disqualification from parliament, and how the disqualification impacts Modi and Gandhi.

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Wait, What Exactly Happened?

During his 2019 campaign for parliamentary elections, Rahul Gandhi delivered a speech in Kolar, Karnataka on April 13, 2019. He said,

They tell you they are fighting against black money, they make you stand in a line under the sun, they take money from your pockets to put in the bank, and then you come to realise that Nirav Modi stole your money and ran away. Rs 35,000 crore out of your pockets and into his ... One small question, how are the names of all these thieves ‘Modi, Modi, Modi’ ... Nirav Modi, Lalit Modi, Narendra Modi, and if you search a little more, aur bahut saare Modi niklenge (many more Modis will emerge).

Purnesh Modi is a three-time MLA (Member of Legislative Assembly) from Surat West in Gujarat. A member of the BJP and a fan of Narendra Modi, he has often compared his personal journey as a tea seller to the prime minister’s early years. He, along with others with the surname Modi, also belongs to an OBC (Other Backward Class). He filed a complaint against Gandhi under Sections 499 and 500 of the Indian Penal Code that criminalize and penalize defamation. He claimed that Gandhi humiliated and defamed persons with the Modi surname.

Rahul Gandhi’s disqualification came a day after Chief Judicial Magistrate H.H. Varma penned the 168-page judgment in Gujarati convicting Gandhi of criminal defamation. And yes, criminal defamation is still a thing in India, carrying a prison sentence. 

The main issue was that in his speech, along with absconding money launderers and criminals Lalit Modi and Nirav Modi, Gandhi likened PM Narendra Modi, and others with the surname Modi, to “thieves.” Chief Judicial Magistrate H.H. Varma held that the accused referred to the surname of PM Narendra Modi “to satisfy his political greed and insulted and defamed 13 crore [1.3 million] people living in the whole of India having the surname ‘Modi.’”

It’s a badly reasoned (if one can even call it that) judgement based on an illiberal law and likely to be overturned on appeal. The Gujarat magistrate, where the BJP has strong influence and Modi served as chief minister, handed down the maximum sentence to Rahul Gandhi, seemingly motivated by political reasons.

Criminal Defamation in India

Defamation (technically, libel) was criminalized in English law to preserve public order. In the 18th and 19th century it wasn’t uncommon for the defamed to challenge the defamer to a duel to protect their honor/reputation. This disrupted public order compelling state intervention through criminal prosecution. Criminal defamation provided the victim with peaceful means to secure punishment of their defamer instead of “resorting to personal violence to obtain revenge.”

The criminal defamation provisions in India are detailed in Sections 499 and 500 of the Indian Penal Code (1860), famously codified by Macaulay, which India inherited from its colonial masters and retained for over 75 years. 

In India, both an individual and organization can file a criminal or civil suit against defamation. Like civil defamation, there are a number of exceptions to criminal defamation—like statements that are true, made in public interest, and most relevant in this case, about the public conduct of a public servant, made in good faith and so on. But under Section 499, a prima facie offense of defamation is made out with the mere existence of a defamatory statement. The exceptions are raised and evaluated later during the trial. Consequently, even filing a nonsensical case, that won’t lead to a conviction, can tie up the accused in court for years, given the speed and pendency in Indian courts. Criminal defamation is weaponized in India because of this procedural oddity. 

It’s been misused against journalists, publishers, whistleblowers, activists, etc., by people across all political parties, companies and individuals. It stifles speech even when it doesn’t lead to conviction because the threshold and therefore cost of filing frivolous and malicious suits is low, and the cost of defending the speech is high. Criminal defamation should be repealed; it has no place in a democratic country like India. But India has plenty of illiberal laws that have survived, and have even been strengthened, under democratic rule.

Usually, in successful convictions, a statement harms the reputation/stature of the aggrieved individual mentioned in the statement. But Rahul Gandhi’s case is different. 

Purnesh Modi v. Rahul Gandhi

This case is really odd because none of the three people specifically named in Rahul Gandhi’s speech—Nirav Modi, Lalit Modi, Narendra Modi—filed the defamation suit. It was filed by Purnesh Modi, a state-level legislator with no national importance. 

Lalit, Nirav and Narendra Modi were unlikely to succeed even if they had filed the complaint.

In the case of Lalit Modi and Nirav Modi, truth as a defense would apply. Lalit Modi was charged with serious misconduct and rigging cricket cash cow, Indian Premier League auctions. He allegedly profited in the hundreds of millions and fled India in the face of tax evasion and money laundering charges. The Indian government is working with Interpol and looking at extradition options from the U.K. where he is currently based. Nirav Modi defrauded the state-owned Punjab National Bank of billions of rupees and is a fugitive in the U.K., which honored India’s extradition request. But he has not yet been extradited for health reasons. Both “stole” public funds from public institutions. The government has already made that case to other governments and criminal agencies while trying to extradite them.

On Narendra Modi, there is even less of a case. Both Gandhi and Modi have called each other a “thief” in their political speeches. This is in the context of corruption and public money benefiting cronies. When irregularities were exposed in a major defense deal with Rafale, Rahul Gandhi led a campaign with the slogan “Chowkidar Chor Hai,” which translates to “the watchman is actually a thief.” Modi had fought his 2014 election campaign on a clean and corruption-free record attacking then-incumbent Manmohan Singh’s government embroiled in corruption scams. In response to Gandhi, now as prime minister, Modi quipped, “chor chowkidaar ko daante” [a twist on ulta chor kotwaal ko daante], which translates to “the thief is scolding the watchman.”

None of this was particularly statesman-like but it also wasn’t out of the ordinary. Corruption and misuse of public money is routinely referred to as theft, and corrupt politicians as thieves, in Indian (especially Hindi) discourse. Prime minister Modi is a public servant and his conduct on a public matter (defense deal) was brought up in the context of other corruption scandals by Gandhi on a campaign trail. It should qualify for the public servant exception in Modi’s case.

But Lalit Modi, Nirav Modi and Narendra Modi never filed the defamation suit. 

Back to the aggrieved Purnesh Modi. If the question is one of defamation against prominent people named Modi, Purnesh Modi didn’t make the cut before this conviction against Rahul Gandhi. The speech in question was made in Karnataka, not Gujarat, where Purnesh Modi is a state legislator. Obscure Kenyan cricketers of Gujarati origin, like Hitesh Modi, would rank higher than Purnesh Modi in recall, and salience in Indian public consciousness, when naming and ranking prominent Modis.

Under any sane legal system, Purnesh Modi won’t have standing. But in India, Section 199(1) of Code of Criminal Procedure, 1973 allows “some aggrieved person” to make a criminal defamation complaint, where the “aggrieved person” may not be the defamed person. Not only is criminal defamation bad law, relaxed procedure for standing in defamation opens the door to use frivolous lawsuits to stifle speech.

Also, can entire communities be defamed? In India there is the added complexity of casteism and casteist slurs in India with the intention of defaming members from disenfranchised groups. These slurs have been historically weaponized against Dalit and tribal groups, now a crime under Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989. Modi, like many other last names in India, is also a sub-caste. It translates to “grocer” in Gujarati, and by trade they run anything ranging from small local mom-and-pop stores and tea stalls to major conglomerates. Incidentally Gujarati Gandhis also belong to the same sub-caste (though it doesn’t apply to Rahul Gandhi whose ancestry is Kashmiri Brahmin, Parsi and Italian). And though the erstwhile trader caste Modi is now part of Other Backward Classes (OBCs) in Gujarat since the ’90s, it is not a protected group when it comes to casteist hate speech under Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989. Not that Rahul Gandhi’s statements qualify as casteist. The context was clear and the malice and intent were missing.

It’s plenty clear from the context of Rahul Gandhi’s statements that he wasn’t calling all grocers or traders thieves—only attacking the more powerful crony capitalists in India (some of whom were named Modi) and the prime minister for running a cronyist and corrupt government. Gandhi has made similar statements against the Ambanis and more recently against Adani and Gujarati businessmen’s closeness to the prime minister.

Narendra Modi is more likely to get in trouble for propagating the worst forms of casteism and slurs against the Valmiki community. In his book “Karmayog,” he qualifies the Valmikis’ centuries-old caste-based vocation—of manually cleaning toilets—as an “experience in spirituality.” Manual scavenging is a practice so casteist and perverse in India, it was banned by parliament because members of society forced these caste members to only engage in manual scavenging and tagged them untouchable to keep them from other professions.

All of this is moot because the court clarified that the complaint was not a public one, but filed due to the “personal, physical, mental and social trauma suffered by the complainant [Purnesh Modi]” because of the defamatory words used by Gandhi. Because of his words “people with the Modi surname were defamed and looked down upon in society.” This is also bizarre, because the main question in criminal defamation is not just personal trauma, but the loss of reputation. And Purnesh Modi cannot show any loss of reputation. He won the Surat West constituency in 2022 (after Gandhi’s remarks) with a slightly higher vote share than when he won the same constituency in 2017! His Congress opponent in 2022 (Patwa) received a lower vote share in 2022 than his opponent in 2017 (Patel). He is totally irrelevant in national politics and not embroiled in any corruption charges or scams that Gandhi was referring to. Until he filed and won the defamation case, I doubt if in a country of over 1.4 billion, more than 100 people named Purnesh Modi in the top 10 Modis defamed by Gandhi’s statement.  

The politically motivated part in this judgment is that Magistrate Varma went for the highest sentence: two years imprisonment and Rs. 15,000 fine. And two years is the minimum sentence for disqualification from parliament. The judgment clarified that Varma went for the highest sentence allowed because reduced punishment for Rahul Gandhi, a member of parliament, would send out the wrong message.

Any sane and noncorrupt judge should have acquitted Gandhi, and on appeal, any sane and noncorrupt judge at the high court will throw the conviction out. 

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Disqualification of Gandhi From Parliament

This brings us to the main question of “death of democracy” due to his disqualification from parliament. 

The Indian Constitution outlines the criteria for eligibility and disqualification for lawmakers in Articles 102(1)(e) (for parliamentarians) and 191(1)(e) (for state legislators). The main law governing this is the Representation of the People Act, 1951. According to Section 8(3), legislators are disqualified if they are convicted of a crime and receive at least two years in prison. This disqualification lasts for six years after their release.

Section 8(3) of the Act applies to candidates eligible and running for state or national office, while Section 8(4) pertains to current legislators. Under the original Section 8(4), they can stay in office for three months after conviction, or until their appeal is settled if filed within that period.

Seems harsh? Why does India have such harsh rules disbarring those convicted from political office?

Activists have long felt that this is not a strong enough provision to keep criminals out of legislatures. In the ’40s and ’50s, lots of parliamentarians had served prison sentences, but for agitating against the British, usually convicted for sedition. In post-independent India, by the ’90s, there was a serious problem of criminals elected to state legislatures and parliament, using their political power to avoid convictions. And the crimes are not merely speech, defamation or corruption. One in five members of parliament face serious criminal charges like kidnapping, intimidation, extortion, murder, etc. The numbers are worse in state legislatures.

Because elected legislators are often charged with crimes and don’t have the right incentives to prevent criminals from holding elected office, activists, lawyers and citizens started approaching the very activist Indian Supreme Court to do something about criminality in politics. An important first step was the disclosure of all pending criminal cases and all assets before standing for elections. But that information and disclosure alone didn’t make much of a difference, because it didn’t change the reasons for the demand and supply of the criminal-turned-politician. In India, the demand for criminals as politicians as well as the supply of criminals standing for elections is explained by weak state capacity, campaign finance laws, political uncertainty and coethnic voting, in Milan Vaishnav’s excellent book “When Crime Pays.” 

In 2005, a Kerala-based lawyer Lily Thomas and NGO Lok Prahari filed a public interest litigation challenging the constitutionality of Section 8(4) which protected convicted legislators from disqualification on account of their appeals pending before the higher courts. India’s court pendency is now infamous, and sometimes it takes decades to resolve a criminal case, and when the case is pending appeal for years, criminals continue to occupy elected positions. 

In 2013, in Lily Thomas v. Union of India the Supreme Court declared Section 8(4)—allowing three months to convicted sitting legislatures before disqualification—unconstitutional. Their reasoning was that disqualifications for prospective and sitting members must be the same. If someone running for state or parliamentary seat is convicted of a criminal offence and sentenced to over two years, and the election is within three months, and the court has not yet set aside the conviction or taken on the appeal, then the individual is disqualified immediately. The court’s argument was that allowing an already elected sitting legislator the benefit of three months before disqualification is differential treatment, violating equal protection under Article 14.

The persons falling in the two groups (those who could run for office versus elected legislators) are well defined and determinable groups. Such classification cannot be said to be unreasonable. There are plenty of reasons elected officials are reasonably classified as a different group, well established in law. Privileging parliamentary speech is one such example.

The effect of Lily Thomas was that upon conviction, sitting legislators will be disqualified immediately without being given the three months’ window pending appeal provided under Section 8(4) of the RPA. 

Lily Thomas is very poorly reasoned, and weakens procedural safeguards against political opportunism in parliament. The court wanted a quick fix for criminals in legislature without really addressing the root cause—India’s poor state capacity, long pendency in the judiciary and over-criminalization of the most basic economic and political actions. It’s a complicated problem for which all three branches of government are to blame. 

India’s laws are illiberal, criminalizing everything from criminal defamation to tree cutting (which carries a two year sentence in Haryana and Punjab or a two- to four-year sentence in Bihar). The maximum sentences for these offenses, turned into crimes by the Indian legal system, is enough to invoke disqualification as a legislator. 

ORF’s Jailed for Doing Business report finds:

Of the 1,536 laws that govern doing business in India, more than half carry imprisonment clauses. Of the 69,233 compliances that businesses have to follow, 37.8 percent (or almost two out of every five) carry imprisonment clauses. More than half the clauses requiring imprisonment carry a sentence of at least one year.

India’s judiciary is so slow, the pendency is misused by criminals of all parties and type. While a case is under appeal for years, criminals can occupy elected positions. 

India’s executive, on the other hand, is overreaching, and trigger happy, throwing the book at individuals and businesses in an arbitrary way, either to extract rents and bribes, or to act “tough on corruption.” It is particularly malicious in using these rules to punish those in opposition. So the rule to wait for appeal before disqualification of a legislator is common sense and good procedure. 

And this is why Lily Thomas is bad law. In their obsession with outcomes—fewer convicted criminals in the legislative branch—the Supreme Court gave a procedurally idiotic solution, which opens the door for abuse against the opposition members in parliament and state legislatures. 

In its aftermath in 2013, three members of parliament—Lalu Prasad Yadav (RJD), Jagdish Sharma (JD (U)) and Rasheed Masood (INC)—who were members of coalition parties forming Manmohan Singh’s government were disqualified on account of their respective convictions for corruption and misuse of public money.

Then-Prime Minister Manmohan Singh, one of India’s top economists who understood a thing or two about bad incentives, and his government tried to bring in an ordinance to overrule this procedurally problematic aspect of Lily Thomas. But he was criticized for using an ordinance to protect its allies. Ironically, Rahul Gandhi opposed his own government and prime minister, and didn’t allow the ordinance to go through, because he was also trying to signal cleaner politics without criminality in the run up to the 2014 election. The ordinance was withdrawn. Lily Thomas continued to be the law governing the matter. And misunderstanding the consequences of bad procedure by Gandhi is one reason for his disqualification. 

However, if Rahul Gandhi’s case is accepted for appeal at the high court, then until it is resolved, Rahul Gandhi’s disqualification will be set aside. This is because the moment the case is under appeal at a higher court, nothing stops him or another candidate with a conviction under appeal from standing for election for the exact same parliamentary seat from which he was disqualified too quickly.

Since the Lily Thomas judgment, T.M. Selvaganapathy was convicted and sentenced to over two years, and he resigned from his seat in the Rajya Sabha. And the only instance since 2013 disqualifications that the Lily Thomas rule was invoked in parliament was for Azam Khan, disqualified without the benefit of the 90 days. He was convicted for hate speech and has over five dozen ongoing criminal cases against him in various courts. 

There have been more disqualifications of MLAs in state legislatures. Enos Ekka and the late Kamal Kishore Bhagat(MLAs in Jharkhand), and Babanrao Gholap and Suresh Halwankar (MLAs in Maharashtra) were disqualified upon conviction. Another high-profile disqualification of an opposition party leader and state chief minister would have been J. Jayalalitha in Tamil Nadu, but she fell ill and died shortly during the pendency of her appeal which subsequently failed. 

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The Speed of Disqualification

The swift disqualification of Rahul Gandhi reveals a clear effort by the Modi government to target him. This outcome has been facilitated by restrictive laws, convoluted procedures and an excessively activist judiciary, all exploited by BJP members.

[Inserted for clarification]: Though the disqualification is specified by Lily Thomas, some authority, which is not the court, has to issue the disqualification notice. This is done by the Lok Sabha Secretariat, coming from the speaker of the Lok Sabha.

The exact timeframe for disqualification is unspecified. The speaker of the house, who holds discretionary power in this matter, would usually wait a few days before initiating disqualification proceedings. The court held that it has to be brought within 90 days, otherwise the rule laid down in Lily Thomas would be moot. 

A fair-minded speaker would pause a few days after a conviction to assess the situation, allowing time for the convicted legislator to consider resignation or appeal. Acting too quickly risks wasting the house’s time if the higher court accepts the appeal shortly after disqualification.

But the Speaker of the Lok Sabha, Om Birla, has quite deliberately made haste in the disqualification. He is a member of the BJP, and it is hard to argue that this wasn’t politically motivated. Unlike most other convictions, on corruption, serious crimes like rape, kidnapping, assault, extortion, murder, etc., it is clear that the case against Rahul Gandhi is flimsy and about punishing speech. Not just speech against the office of the prime minister or the government but against the image of Narendra Modi. Whether Birla is a sycophant trying to please Dear Leader, or the directive came from the BJP leadership, and therefore Modi, is unclear. But either way, it is a partisan disqualification, especially in its speed. Om Birla is not exactly known for his efficient running of the Lok Sabha. 

Everyone, including the Supreme Court, knows this, and is worried about it. The most ridiculous aspect of Lily Thomas, and the overall functioning of the Supreme Court, is that the court has been separately considering the powers of the speaker of union and state legislatures because it thinks that speakers are partisan, have bad political incentives and bring bad disqualification proceedings!

Will Gandhi’s Conviction Hurt Modi?

The weird thing about the entire case is that few remembered Modi had been called a thief before this conviction; if they did remember, it wasn’t salient in the current national discourse. Now EVERYONE across the world knows it. If the loss of reputation was the real worry, then I am afraid that both Purnesh Modi and Narendra Modi have fallen prey to the Streisand effect. 

The Streisand effect refers to the unintended result of trying to censor information, only to end up publicizing it more widely. This typically occurs on the internet, where controlling content is difficult. In 2003, Barbara Streisand sued the California Coastal Records Project for violating her privacy by displaying a photo of her Malibu mansion. Before the lawsuit, the photo had only been downloaded six times, but afterward, over 400,000 people visited the website, and the image spread widely online before it was removed by court order.

Modi, because his image looms so large, and he has carefully cultivated that image for a decade, is a prime candidate for the Streisand effect. We saw this a few months ago when a BBC documentary “India: The Modi Question,” focused on Modi’s role during Hindu-Muslim riots that tore through the state of Gujarat in 2002, when he was its chief minister. For most of us who were in India, reading papers/watching news at the time, this is old news. Indians on all sides of the communal riots question have adjusted to this reality. Since 2014 when Modi became the prime minister, other than the occasional op-ed/column or discussion on the anniversary of Godhra, what happened in 2002 in Gujarat is not a hot topic of discussion. That is, until the Modi government banned the BBC documentary from getting screened in India. An entire generation that was too young to remember the events of 2002 was clamoring to watch the documentary online. Modi’s ban completely backfired. The documentary has been viewed online and the government couldn’t do much to stop it.

The defamation case against Rahul Gandhi is definitely not about protecting Modi’s reputation. No one thinks he is a thief. Currently he has the highest approval ratings of any elected leader in the world—78%. Even issues that affect other BJP leaders or his close associates like Adani don’t impact him adversely. India has not had such a popular prime minister since Nehru. 

So the defamation case, and the conviction, with the maximum sentence was about getting Rahul Gandhi out of politics. But it also goes against the image Modi is trying to portray—of India as a vibrant and robust democracy and a country with a functional rule of law and open for business. Recently, Gandhi was trolled by the BJP and its supporters for calling India undemocratic and the Modi government illiberal in a speech at Cambridge in the U.K. Modi just proved Gandhi right.

And in targeting Rahul Gandhi in the run up to the election might also energize the opposition, increasingly getting embroiled in criminal charges brought by the Modi government’s enforcement directorate. After Gandhi’s disqualification, 14 political parties jointly petitioned the Supreme Court, to set guidelines to limit the “arbitrary” actions by investigating agencies of the executive, currently weaponized against opposition politicians.

Will the Conviction and Disqualification Hurt Rahul Gandhi?

Rahul Gandhi has everything to gain and little to lose from this conviction and disqualification. If the conviction is upheld by the High Court and Supreme Court, then Gandhi is disbarred from running for office for six years. This method of knocking out the opposition even before an electoral contest is the goal of the BJP.

Rahul Gandhi comes from a political lineage. He has excellent examples in his family, on both sides of speaking against the government—those who have been in prison for months and years for speaking against the government, and also those who suffered electorally for punishing the opposition and curbing free speech. In fact, he is not even the most prominent member in his own family to be disqualified from parliament. In 1975 a court ruling  declared his grandmother Indira Gandhi’s election to the Lok Sabha void, and barred her from contesting for six years upon conviction for corruption and election malpractice.

Rahul Gandhi’s great-great grandfather Motilal Nehru was one of the most important members of the Indian National Congress, and served twice as its president (1919, 1928). He chaired the committee that wrote the first constitutional document written entirely by Indians—which had robust protections for free speech. In 1921, he joined Gandhi’s noncooperation movement and both he and his son, Jawaharlal Nehru, were arrested and sent to prison. Motilal’s wife, and Jawaharlal’s mother, Swarup Rani, was an important foot soldier in the civil disobedience movement, recruiting and leading women. She was famously injured during a lathi charge for making salt and participating in the salt march, after all the men were arrested. 

Rahul Gandhi’s great-grandfather, Jawaharlal Nehru, served over nine years in prison for his participation in the Indian nationalist movement and usually on sedition charges. Rahul Gandhi’s grandparents Feroze Gandhi and Indira Gandhi, met and bonded during the agitations against the British, and were arrested on the same day in 1942. Indira Gandhi served for eight months, Feroze Gandhi served more time in the ’40s. Both Feroze Gandhi and Jawaharlal Nehru were members of the Constituent Assembly that wrote the document guaranteeing individual rights.

Though Indira Gandhi briefly went to prison for agitation against the colonial government, she turned dictator when she came to power. In the 1971 election to parliament, her main opponent, Raj Narain, a Gandhian socialist from the Samyukta Socialist Party in Rae Bareilly, accused her of election malpractice. Judge Jagmohan Lal Sinha found Indira Gandhi guilty - for using the services of her election agent Yashpal Kapoor while he was still in government employment and for obtaining assistance of state government officials, the district magistrate, the superintendent of police, etc., for her campaign speeches in Rae Bareli.

Sinha declared Gandhi’s election to the Lok Sabha void. She was also barred from holding an elective post for the next six years. To ensure a smooth transition the functioning of the government, Sinha unconditionally stayed the judgement for 20 days and the Supreme Court, granted a conditional stay on the verdict allowing her to address parliament, but barring participating and voting in the Lok Sabha.

While her appeal was pending at the Supreme Court, and under immense pressure from the opposition and some senior members of her party to resign, Gandhi issued an ordinance on the evening of June 25, declaring a state of internal Emergency. For the first time in the Indian republic, elections, constitutional rights and civil liberties were suspended, while she ruled by decree for 22 months. Her first order after the declaration of Emergency was to arrest leading members of the opposition.

When Indira Gandhi announced elections after the Emergency, her party faced a stunning loss, including her own constituency. Those who agitated against her, and were locked up during the Emergency, found themselves in parliament forming the government in 1977.

Rahul Gandhi need not look outside his family for lessons on convictions for speaking against the government. Every member of his family that went to jail for speech against the government has been rewarded by the party and the voters.

Had Gandhi been accused of corruption, fraud, or even anti-national activities and sedition, it would be a different matter. But a conviction for calling Lalit, Nirav and Narendra Modi thieves, while Lalit and Nirav Modi are absconding in the U.K., when the Modi government is struggling to extradite and hold them accountable, is an entirely different matter. 

Gandhi has been accused of being a toothless leader of the Congress Party, and the nepotistic crown prince of the grand old political family of India. There are hundreds of memes on Gandhi blamed for the Congress Party losing elections, even his family’s stronghold parliamentary constituency. 

Only very recently has Gandhi come into his own. He recently gained a lot of momentum leading the Bharat Jodo Yatra—a 2500-mile-long march across India. Gandhi walked from dawn to dusk for five months straight, energizing his party workers and meeting and gathering supporters in each state. It was a leaf out of the old congress playbook of the OG —Mohandas Gandhi – who marched across India in various agitations. 

Going to jail for speaking against the government will be yet another leaf out of the old playbook, one Indians understand very well. Indian voters have always rallied around and electorally rewarded this kind of sacrifice. Opposition leaders, especially in states where the BJP is not in government, are already rallying in support of Gandhi.

If this is not just the work of BJP members and Modi sycophants trying to please him, and Modi or the BJP leadership were instrumental in orchestrating Gandhi’s conviction and disqualification, they likely made a huge mistake.

By targeting Rahul Gandhi, Modi just gave the opposition renewed momentum, and free campaign publicity, in the run up to the 2024 elections. Even if the disqualification from parliament holds, and he is eventually convicted and disbarred from contesting elections for six years, nothing prevents Gandhi from leading his party and the opposition, or campaigning for others in the 2024 elections.

If Narendra Modi is actually pulling the strings, the smarter move is to expedite the appeal, get it thrown out and reinstate Rahul Gandhi to parliament. 

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But I wasn’t talking about my understanding of demonetization or Supreme Court judgments. I lack the expertise to critique farce, even one that is in the garb of institutional authority played out within the premises of the Supreme Court and delivered in the form of a court judgment. The day before the Court delivered its verdict, I tweeted: 

I offered to write about why I thought the whole case was farcical, but Indian newspapers refused to publish such trivialities; because they are very, very serious and only publish important matters (not because they are scared of the contempt proceedings that will follow from criticizing the Supreme Court). 

In this post, I describe the farce by the Supreme Court. This is important because even a farce, as long as it is in the form of a Supreme Court judgment, has import for the future. Not as legal precedent—there is nothing precedent worthy in the 388-page opinion—but in conduct. If the highest court in India can double as a moot court, debating a policy that invalidated 86% of the currency in circulation through a surprise telecast without any constitutional remedy, it will surely repeat it for lesser cases.

The Supreme Court follows the standard three-act structure of judicial evasion: a six-year delay in hearing the arguments making the entire case moot, the submission of important evidence through sealed envelopes (so secret even the petitioners don’t know the facts) and completely ignoring the question raised by the petitioners about the infringement of their fundamental rights. I will not comment on the actual judgment upholding the constitutionality of demonetization because there is nothing there to analyze. 

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Since six years have passed, some details to refresh your memory. It started on November 8, 2016 (when most newsrooms were focused on the Clinton-Trump election). At about 8 p.m. India time, Prime Minister Narendra Modi announced that by midnight the 500 and 1,000 rupee (approximately $7.50 and $15 at the time) denomination currency would no longer be legal tender. And those with the old currency could exchange it for the new currency notes until December 31, 2016. Modi’s surprise announcement was intentional, to not give any time for individuals to hide/launder their “black money” (the colloquialism used for income/wealth on which taxes are not paid). About 47% of the population (almost 600 million people) were unbanked at the time. The entire policy was enacted through an executive notification, followed up by dozens of Reserve Bank of India (RBI) notifications to deal with the remonetization process (i.e., introducing new currency). 

Naturally, Prime Minister Modi declared it a success. Demonetization singlehandedly won the war against tax evasion, black money, and illegal activities. India is now a completely formalized, corruption-free economy with zero illegality. 

Demonetization was a short sketch dramedy, but giving it retroactive constitutional validity required a three-act farce. 

Act 1 – 2,207 days in the making

The demonetization policy—announced through executive notification—was immediately challenged in courts as early as November 11, 2016. Before the deadline to convert the demonetized notes for new notes—December 31, 2016—it came up before the Supreme Court on November 15, 25, and December 2, 5, 9 and 15. Similar challenges were filed in various high courts. On December 16, 2016, a two-judge bench referred all these challenges to a Constitution Bench, as it raised questions of constitutional importance. The Court also ordered the withdrawal of

all the Writ Petitions/proceedings pending in different High Courts across the country and to be heard by this Court along with the Writ Petitions which are already pending in this Court raising same or similar issues, to avoid multiplicity of hearing and conflicting decisions on the same subject matter. Accordingly, we issue notice in the respective Transfer Petitions and by way of interim direction, stay the further proceedings of the Writ Petitions/proceedings in the concerned High Court. We further direct that if any other Writ Petitions/proceedings are pending in any High Court, further hearing of those matters shall also remain stayed in terms of this order. We further direct that no other Court shall entertain, hear or decide any Writ Petition/proceedings on the issue or in relation to or arising from the decision of the Government of India to demonetize the old notes of Rs.500/- and Rs.1000/-, as the entire issue in relation thereto is pending consideration before this Court in the present proceedings. (emphasis added)

The Court made itself the sole venue for challenging the constitutionality of demonetization. And then, it did absolutely nothing on demonetization for six years. The Constitution Bench, with five judges, started hearing arguments in late 2022—six years after the event. And finally gave a verdict 2,207 days after the first petition was filed. The government gave 1.3 billion people only 53 days to deposit/exchange their old currency notes. And Indians responded by returning 99.86% of currency notes before the deadline. And the Supreme Court took 2,207 days to decide on the constitutionality of the policy. Perhaps that is how long it takes to produce a farce.

If you are wondering what the Court was doing during these 2,207 days, it was correcting other grave injustices. Like setting aside the lifetime ban imposed by BCCI on cricketer S. Sreesanth charged with corruption and match-fixing. The Court also spent more than one hearing on ensuring the beautification and maintenance of a monument called “Sisodia Rani ka Bagh” in Jhalana, Jaipur. The Court’s order includes important matters like working water fountains and regulating the timing of loudspeakers past 8 p.m. The Court also sprang to correct the inaction by the Punjab government in filling the vacancies of elementary-trained teachers, a case that started because the honorable judges of the Punjab and Haryana High Court took suo moto cognizance of the plight of elementary school teachers. 

And the honorable judges never missed the opportunity to ensure that Delhi remained “livable” for them; they made sure that garbage piling up alongside railway tracks was dealt with by the Delhi government as part of the Court’s environmental policymaking. In fact, the Supreme Court had its hands full, passing 197 orders on the never-ending Delhi air pollution case, a public interest litigation that started in 1985 and is still heard by the Supreme Court to monitor progress (more on this in my post on air pollution). So they were quite busy.

The delay was not due to cases heard in order of priority or because of the 69,598 pending cases (as of December 1, 2022). Or due to the 50-odd days of vacation the Court takes every year. Nor is the Court bound by a rule to hear in order of filing date. Constitution benches, like the one created for the demonetization case, are designed to hear arguments in a few weeks and deliver a verdict on the constitutionality of government policy swiftly. 

Delay is now the most important component of the new doctrine of judicial evasion. Gautam Bhatia has defined it as: “by keeping a case pending, and delaying adjudication, the Court effectively decides it in favour of one of the parties (most often, the party in a stronger position, i.e., the government), simply by allowing status quo to continue.” I would go one step further. In cases where the policy is patently unconstitutional, and the Court knows it will be very difficult to avoid locking horns with the executive, it delays hearing the matter until it is moot. The result may not deliver justice but at the very least, promises comedic relief. With comedians being muzzled, prosecuted and arrested by the government, the Supreme Court once again comes to our rescue.

By the time the Court delivered its opinion, it didn’t matter whether demonetization was constitutional or unconstitutional. The matter was done; the dust had settled. Over 99% of the currency was returned within the deadline. More than 100 people were dead waiting in line to access their own money in late 2016. There was nothing to reverse.

In the climax of Act I, the judges asked the petitioners at the start of oral arguments whether the issues in the case had now become “academic.” The most delicious part of the farce was when the petitioners convinced the judges that their judicial delay had not rendered the issues academic. 

Act II - played out behind the curtain

The Court didn’t exhaust all available farcical elements in Act I. A large part of the charade was played out in Act II—but behind the curtain. In this instance, through another innovation of the Indian Supreme Court’s doctrine of evasion—the use of the sealed envelope. It is not unusual for Indian courts, or courts in other countries, to have some kinds of evidence submitted in a sealed form. Usually, these are sensitive/classified information, and one of the parties believes they should not be part of the court record, though they are material in deciding the case at hand. Typical examples are information relating to national security (strategic details of defense equipment/the placement of armed forces units, etc.), information withheld to protect the identity of a whistleblower witness, etc.

In the present case, one question raised by the petitioners was whether Section 26(2) of the RBI Act suffered from excessive delegation to the RBI. 

26(2). On recommendation of the Central Board (of the RBI) the [Central Government] may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender.

It came down to whether RBI’s authority to demonetize “any series of bank notes” implies it has the authority to demonetize “all series of bank notes.” The contortion by the majority to extend “any” to mean “all” deserves a special mention in comedic writing. 

But the second question raised before the Court was the meaning and implication of “recommendation of the Central Board.” The Court has to look into a set of questions around whether the executive acted on its own, if such actions must be initiated by the central bank before the executive implements the policy, if the executive acted under the advice of the central bank, how that advice was communicated, etc. Essentially, whether proper procedure was followed on a matter of policy where both institutions are involved, given that the constitutionality of demonetization hinges on the decision-making process between the central bank and the union executive, one would imagine that the details of that process are extremely relevant. In fact, they were so relevant they had to remain secret. 

The documents describing the process of decision-making between these two institutions were submitted in a sealed envelope to the court. Explaining or justifying why the contents are sensitive or classified and must remain sealed would have taken away the comedic strength of the judges’ performance. 

The public has not seen the documents, which are not part of the Court record—again, not unusual when certain kinds of evidence are sealed. But Supreme Court judges are masters of this game. In this case, they ensured that even the petitioners were not given an opportunity to see these sealed documents. It also helped keep the spirit of the farce going. They made sure that the petitioners could not challenge or respond to the contents of the document and make it a serious affair, inadvertently ruining all the fun. And for the twist in the climax of Act II: Even the judges were given these secret documents after they heard all arguments, but before the judgment. The government, clearly better trained in farce than the petitioners, refused to provide them the secret documents. The Court had to order the government and the RBI on December 7, 2022 (after arguments were complete) to “produce the relevant records.” 

Of course, there is no question of sealing evidence to protect members of the executive. Since demonetization in 2016, a new union government has taken office. The then Governor of the RBI, Dr. Urjit Patel, resigned in December 2018. The three deputy governors during demonetization, R. Gandhi, N.S. Vishwanathan and S.S. Mundra, have completed their terms and are no longer at the RBI. The then revenue secretary, Hasmukh Adhia, and finance secretary, Ashok Lavasa, have retired from the Indian Administrative Service. And the finance minister, Arun Jaitley, died in 2019. Any “recommendation from the RBI” produced in a sealed envelope cannot possibly be a post-dated face-saving measure. There is no one left in the office to save. The only person still in the same office in need of face-saving is Prime Minister Narendra Modi. And we all know that the Supreme Court of India is fiercely independent. So, the entire sealed envelope charade is only to entertain the public, not to cover up the prime minister’s ill-conceived diktat. I could be wrong, but where are the documents to prove it?

Unfortunately, the dissent ruined some of the comedic pleasure. It points out that the demonetization policy did not originate at the RBI but came from the central government, that there was a difference of opinion between the executive and the RBI and that the consultation or recommendation was not actual agreement. 

For six years, everyone in the country had been fooled into thinking that the RBI was pulling all the strings, and had unilaterally initiated demonetization without ensuring there were enough new notes, without checking if the ATMs were fitted to accept new 2,000-rupee currency notes and before designing and issuing new 500 and 1,000 rupee notes so that people could make change. But it wasn’t the RBI! The central bankers clearly have no sense of humor, taking the job of issuing and distributing currency so seriously, and disagreeing with the executive’s move to shock and awe through currency. I am shocked that the absurdity of not being allowed to access one’s own money came only from the executive. The way they ban film dialogue and jail comedians, I thought they didn’t have a funny bone. Maybe they are taking secret lessons from the judges on how to write a dramedy in exchange for secret documents.

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Act III - What fundamental rights?

In Act III there is a surprising twist. It is revealed that it is actually a tragic farce after the comedy of the first two acts. The trouble was that 105 people had died in November-December 2016. The cause of death was  1) waiting in line at ATMs and banks for hours and days to exchange/deposit old currency notes, 2) being unable to get medical treatment due to the inability to access their own currency, 3) suicide due to the financial hardship they faced from the currency crunch and 4) because of overwork and stress of bank employees during the 53 days for returning the old notes. Though the idea of a policy that led to government bank employees dying from overwork is a whole other class of comedy. But the tragic loss of life and livelihood was raised by the humorless petitioners. Apparently, Indians have fundamental rights guaranteed by the constitution, and the Supreme Court is the ultimate custodian of that constitutional guarantee. 

The petitioners asked: 1) Whether it infringed on Article 300A (the constitutional right to property); 2) whether the notification infringed on Articles 14 (equal protection) and 19((1)(g) freedom to practice any profession, or to carry on any occupation, trade or business); and 3) whether the RBI notifications restricting the amount of currency each individual could withdraw in November/December 2016 infringed on Article 21 (right to life)? 

Luckily the judges did not break character and continued the farce by not acknowledging these questions and not judging if the policy violated fundamental/constitutional rights. 

Starting with property rights and expropriation:

300A: No person shall be deprived of his property save by authority of law.

The Indian Constitution guaranteed a fundamental right to property (Articles 19(1)(f) and Article 31) and checks against expropriation by the government when it was adopted in 1950. It required that property could not be taken except by the authority of law, only to serve the public interest and only after providing compensation. But over three decades of implementing socialism, the right to property was a constant battleground over questions of land reforms, nationalization, etc. After several constitutional amendments diluting the constraints on the acquisition of property, parliament deleted the fundamental right to property in 1978 and added Article 300A, which is a weaker constitutional protection against expropriation by the executive. This long history is detailed in my humorless eight-part essay series on the right to property:  one, two, three, four, five, six, seven, eight.

The main protection offered by Article 300A is that the state may not take property except by the “authority of law.” To “deprive” an individual of property, there must be legislation. The state cannot deprive a person of his property by taking recourse to executive power unless that executive order is backed by and carries out the clear mandate of some legislation that does not suffer from excessive delegation. This provides some protection to individuals against expropriation. It ensures that an overzealous minister or municipal corporator doesn’t simply issue a diktat to take property and that the actions are at least authorized by state or parliamentary legislation. 

Demonetization was implemented by executive notification and without legislation. And the express purpose of demonetization was the expropriation of black money (assumed to be held only in currency—also hilarious!). And the requirement to exchange old/demonetized currency for new currency implicitly imposed a one-time wealth loss on currency holders who are unable or unwilling to convert their entire holdings of old notes. The expectation was that those with large holdings of income/wealth on which tax had not been paid or was earned through illegal activities would not deposit the notes from fear of prosecution or scrutiny. They will simply eat their losses. And in the process, the government will make a one-time revenue gain. 

And so, we have expropriation without legislation. A plain reading of 300A and the demonetization notification (on time!!!) would have invalidated the demonetization policy unless parliament passed legislation. But the Supreme Court is too busy and too creative for a plain reading. 

Demonetization was implemented by executive notification to catch everyone by surprise. But the government has other constitutional means of surprise expropriation—an ordinance, with six months to pass it as legislation in parliament. Other surprise expropriations in the past by Indira Gandhi (demonetization in 1978 and bank nationalization in 1969) were done by ordinance, not executive notification. Even Indira Gandhi, the only Indian prime minister to impose an Emergency, was better at following basic constitutional procedure in her expropriation.

But buying time for the executive to pass an ordinance was not why the Court refused to hear the matter in November/December 2016. They were just very busy transferring challenges from high courts to themselves. At the end of the period to return the notes, on December 30, 2016, the Modi government passed the Specified Bank Notes (Cessation of Liabilities) Ordinance, which parliament subsequently enacted as legislation in 2017—after the deadline to return all demonetized/old currency notes. It made the constitutional invalidity under Article 300A moot because the Court didn’t hear the petition immediately. 

One can hardly fault the Court for not paying attention to 300A. The Constitution of India does not provide strong protection for property rights. It allows expropriation as long as it takes the proper form of legislation. All the government had to do to ensure it was procedurally sound was pass an ordinance. The additional protection is that instead of a bureaucrat in the finance ministry, the cabinet (on paper accountable to parliament) has approved the policy. It is not ideal, and the protection is flimsy, but it protects against arbitrary and predatory diktats. And we all know that Indian leaders don’t issue any arbitrary or predatory diktats. And demonetization was done in the public interest, and well-intentioned orders can never ever be arbitrary or predatory. That’s the real reason the Court has not addressed the question, and the judgment includes no discussion on whether the original notification violated Article 300A, if the ordinance and later legislation sufficiently saved the action, etc. It’s not like this situation is likely to come up anytime in the future. Why waste precious pages in a 388-page judgment on flimsy protection of property rights?

Nor does the Court address the infringement on Article 19(1)(g)—the freedom to pursue trade/occupation/profession/business. The reason is that there is really nothing to say. Demonetization would have likely passed the Article 19(1)(g) test because Article 19(6) reads in such broad exceptions—to make reasonable restrictions in the public interest—to the constitutional guarantee to make it moot even before the challenge. And keeping their tradition of relief by humor, the courts have always deferred to parliament on what constitutes public interest. And is there any restriction that can be unreasonable when fighting the great battle against untaxed income and wealth? But the humorless petitioners had raised the challenge, and the court had to opine on whether it was a restriction on people’s right to trade. 

In the weeks that followed demonetization, the RBI struggled to exchange the old currency, and Indians were once again allowed the nostalgia of the good old days of rationing and shortages under socialism. The innovation, this time, was that their own money was rationed due to a shortage of currency notes. But surely something as insignificant as currency notes cannot possibly infringe on people’s ability to carry on with their jobs/businesses.

Mahesh Vyas at the Center for Monitoring Indian Economy found a sharp decline in labor force participation in the demonetization quarter. But only 15 million dropped out of the labor force, which the judges probably considered a rounding error given India’s population. Gabriel Chodorow-Reich, Gita Gopinath, Prachi Mishra and Abhinav Narayanan used different outcome variables, including night lights data, labor force data, digitization, etc., and found that demonetization induced at least a 2 percentage point decline in GDP in the quarter of demonetization. Only 2 percentage points of GDP! Supreme Court judges are willing to bet that on poker night. India is now an economic superpower, didn’t you know?

And the question of violating Article 14 is ludicrous. The government went out of its way to ensure every single Indian was treated the same. They saw no difference between the 600 million Indians without bank accounts and those with bank accounts. Sudipto Karmakar and Abhinav Narayanan found that, in December 2016, 17% of households that didn’t have bank accounts experienced 2-7% lower consumption than the control group of households with bank accounts, the size of the effect varying by the initial asset levels of the household. See, equal treatment before the law. 

The right to life under Article 21—“No person shall be deprived of his life or personal liberty except according to procedure established by law”—was initially written and interpreted as the “due process” check against arbitrary government action. But in the last few decades, the activist Supreme Court has read a number of positive entitlements into the right to life. It now includes the right to food, clothing, shelter, a reasonable wage, clean air, clean water, medical treatment, cultural and environmental heritage, education, and anything else the Court fancies—i.e., everything except due process. The Supreme Court even included the “finer facets of human civilisation which makes life worth living” including “tradition and cultural heritage.” Like the tradition of farce, maybe? But these entitlements clearly do not include access to one’s own currency. Money cannot buy the finer things in life. That’s why the Court didn’t see it fit even to have a discussion on whether executive notifications blocking people’s access to their own currency/rationing violates the due process requirement outlined in Article 21. 

The tragedy in Act III made me appreciate the comic relief in Acts I and II more. Despite the best efforts of the petitioners to milk the tragedy in Act III, the Court ensured that the audience leaves laughing. There was absolutely no discussion or clarification of the status of expropriation by executive notification under 300A, the limits to reasonable restrictions on trade in 19(6), and whether the policy violated Articles 14 and 21. So it ended on a funny note.

My only quibble, it was too short at only 388 pages. 

In the eighties, when we called relatives long distance, we had to book a “trunk call” and a manual phone operator - a government employee - would connect us. It took forever to connect, the call dropped often, the line quality was poor, and we yelled just to be heard. Until last year, my then 103-year-old, now late grandfather spoke louder when I called him from the US. I have had more than one hilarious chat with a wrong number, and overheard at least one crossed connection in my teenage years.

These problems were so common, that misbehaving phones found their way into Indian movies. The most famous example from my childhood is from the 1987 movie Mr. India, where Annu Kapoor playing Mr. Gaitonde, editor of the Crimes of India, has a phone so dysfunctional it became a character in the film. And writers Salim-Javed, masters of setting up characters, introduce Gaitonde and his phone through a series of wrong numbers.

This was not the only nod to the controlled political economy of the eighties in Mr. India. The unsavory characters (Daga, Teja, Wolcott) were gold smugglers at a time when gold, foreign exchange, and imports were tightly controlled. And thanks to price and quantity controls on essential commodities, even the local grocer in the movie (Roopchand) was a small time villain and involved with the big time smugglers in black markets of grains and adulteration of food. Sridevi (Seema) using the phone in her editor’s office is not unusual. Most people didn’t have access to a phone connection, and when the movie released there were only 4 million phone subscriptions in India, with another million or so on a waitlist that lasted 4-5 years. In 1910, the US had 11 million phone subscribers!

My parents moved to New Delhi soon after I was born and requested a phone line, which they received after my fifth birthday. While they were waiting, I remember them using my grandparents’ phone to receive messages and make calls, especially when one of my parents was traveling. Despite the wait, I was in a privileged minority, because I had a phone at home even as a child. My sister and I put it to good use in our teenage years.

In a post a few weeks ago, I wrote that two thirds of all Indians have access to a smartphone, and 95% Indians will have access to a smart phone by 2040. But this transformation is not limited to smart phone penetration, cost, quality, and access. It extends to major plot points and tropes in Hindi cinema because of the state of telephones under socialism. And how these tropes different from Hollywood movies and changed after telecom liberalization. The rest of the post tells the story through 18 movie clips.

Crossed connections and wrong numbers in cinema

Imagine you’re trying to call someone you know, and you have dialed the correct number, but instead of hearing their voice, you hear a conversation between two other people you were not trying to reach. Alternatively, your phone rings, and instead of the voice of the person trying to reach you, you hear two strangers having a conversation. This happened because fixed line phones connected calls using wires between phones and phone exchanges, and these wires got mixed up – literally, crossed lines - or were damaged over time.

Indian telecommunications infrastructure was so bad by the 1980s that crossed connections became a trope in Indian films that continued until the turn of the century. In Mr. India, an important plot point is when Sridevi overhears a conversation between Daga (Sharat Saxena) and Mr. Wolcott (Bob Christo) about Hawa Hawaii.

The problem was so rampant, people figured out how to game a crossed connection! And trope flipped on its head in later Hindi comedies. In Dulhe Raja (1998), Johnny Lever deliberately crosses wires at the telephone pole to receive a call from Govinda, stopping the police from demolishing Govinda’s dhaba.

Crossed connections are different from a wrong number, which can happen for many reasons. What the silent generation and/or boomers mean by a wrong number is when they dialed the correct number, but got connected to the wrong line/phone by the phone company. Depending on the decade, this happened either because of a human error made by switchboard operators, or because the automatic switches needed upgrades, or the phone device was malfunctioning. Or maybe all of the above like Mr Gaitonde’s phone!

For the current generation of smartphone users, wrong numbers arise when the person dialing makes an error while dialing the number. In the good old days, this kind of wrong number also happened because of a misprint in the phone directory.

This was the major plot point in another cult comedy Hera Pheri (2000) where Akshay Kumar,  Suniel Shetty, and Paresh Rawal’s characters get embroiled in a kidnapping-ransom call when they receive a wrong number (because of a misprint in the phone directory) from gangster Kabira intended for a rich businessman Devi Prasad.

These tropes were not just used in Indian movies. What is unique about Indian movies is how recently they were used as plot points! In Hollywood movies with similar storylines, the main difference was the decade.

In 1943, Lucille Fletcher wrote a radio play called Sorry, Wrong Number. A bedridden wife of a successful businessman learns about a murder being planned when she accidentally overhears a phone conversation through a crossed connection (more detail involves spoilers and it’s worth watching). It was adapted into a film starting Barbara Stanwyck and Burt Lancaster and became one of the highest grossers in 1948. Crossed connections were totally believable in America in 1948. But as technological upgrades were made, overhearing conversations because of a telephone exchange screwup were less common.

By 1960, the plot point revolving around overhearing someone’s conversation moves to “party lines.” Party lines were discounted phone connections for individuals, who would share a single number with multiple phone instruments - one in each subscriber’s room/apartment/business. Introduced to cope with war time shortages, party lines continued to serve those who couldn’t afford their own private line well into the fifties. But they provided no privacy in communication, the others sharing the line could overhear the conversation. Now, overhearing conversations were not phone company errors, but a consequence of shared phones. This was also the story of the romantic comedy Pillow Talk (1960) where Rock Hudson and Doris Day share a phone line/party line (with a few others). Arguments between neighbors destined to turn lovers, misrepresentation, error, heartbreak, all lead up to a happy ending.

Party lines caused problems, like a single user monopolizing the phone, or eavesdropping, and both letters to the editor and the help lines of phone companies were flooded with complaints.

These technological tropes are universal, as culture is deeply entwined with technology and progress. And, in India, crossed connections and wrong numbers were a part of movies until 2000! Socialism led to the persistence for these technological errors for an additional half century.

India’s telecom landscape under socialism

Post-independence India was a federal republic, but in 1950 the Government of India granted itself sole power to legislate on “posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication.” The Industrial Policy Resolution of 1956, listed “telephones and telephone cables, telegraph and wireless apparatus” in the category of industries that only the government could develop. The Department of Posts and Telegraphs (DoPT) was not only a monopoly on phone services, but also the policy maker, regulator, service provider, and manufacturer of telecommunications equipment through Indian Telephone Industries Limited, HTL Limited and Hindustan Cables Limited.

The DoPT took over the infrastructure of the colonial government; and the following decades of terrible incentives for state owned enterprises, lack of competition, and inability to import left Indians with obsolete technology and shortages. State-owned Indian telecoms couldn’t afford to import the latest technology and equipment because it cost the state valuable foreign exchange, a highly controlled resource in India’s closed economy. Under India’s exchange control system, to ensure foreign exchange utilization, exporters were required to surrender their foreign exchange earnings to the Reserve Bank of India (RBI) at the official exchange rate. The system allocated the exchange earnings to users through import licensing to domestic producers, who required foreign exchange for importing essential inputs. Through instruments like the Foreign Exchange Regulation Act of 1973, any foreign exchange holding above the permitted limit incurred a criminal penalty and jail time. This system led to an artificially overvalued exchange rate.

Arun Shourie wrote his excellent doctoral dissertation on foreign exchange allocation describing this bureaucratic maze that businessmen were required to navigate. State owned enterprises also got their foreign exchange allocation through this command-and-control system, though with less corruption compared to the problems faced by private businesses. Though the DoPT received priority, poor incentives of government employees to update technology led to delays. The consequence was low rates of call completion, crossed connections and wrong numbers. GP Manish writes that in India “the national average call-completion rate for local calls stood at a low 40 percent in 1984–85, and the corresponding figure for long-distance calls stood at 20 percent in 1985–86. This meant that a subscriber had to make, on average, two and a half attempts to make a successful local call and five attempts for a long-distance one.” These problems were faced by Americans in around WWI but continued in India for eight more decades! And naturally found its way into everyday life and culture.

Another trope I remember from my childhood was using wrong numbers to connect predestined lovers. In Dil To Paagal Hai (1997), Madhuri is convinced she will meet her soulmate on Valentine’s Day (also Puran Maasi), and Shah Rukh Khan gets connected to her mistakenly from a public telephone (remember those?).

In Kuch Kuch Hota Hai (1995), two characters named Anjali get mixed up by an operator at the hotel - and the friends who will turn lovers manage to have a brief, though frustrating, conversation after decades without realizing it.

Wrong numbers were so common that even faking wrong numbers became a trope. Like the one used by the bride’s sisters in Hum Aapke Hain Kaun to help steal the grooms’ shoes – a common north Indian wedding ritual.

Another problem was poor sound quality and disturbances and dead lines. This led to yet another trope - faking disturbances and poor-quality connections. In this hilarious sequence, Satish Kaushik and Johnny Lever avoid creditors (Rakesh Bedi and Satish Kaushik respectively) by faking poor quality phone connections - the only respite in the otherwise awful, painfully long and boring Hum Aapke Dil Mein Rehete Hain (1999).

And I cannot think of comedies from my childhood without Jaane Bhi do Yaaron (1983) at the top of the list. Here is a mishmash of all the phone problems, waiting for long distance calls to connect, poor sound quality, phone line mix-ups used masterfully as a distraction technique in this ridiculously zany scene with Naseeruddin Shah and Satish Kaushik.

These tropes are not just true of Hindi movies, but in all Indian languages. Hera Pheri was adapted from the 1989 Malayam film Ramji Rao Speaking. And Mr. India’s Kannada and Telugu adaptations showed phones that misbehaved. This list is a result of my familiarity with Hindi cinema relative to movies in other languages.

Manual, Automatic and Electric Switchboards

The reason for the poor call completion rate in both early twentieth century America and late twentieth century India was the lag in adopting the latest technology. Initially, errors were largely manual, because telephone companies used humans to operate telephone switchboards (you can see the women working the manual switchboard in the Sorry, Wrong Number clip above).

In the very early years, teenage boys were employed as switchboard operators, but their mischief, inattention to detail, and overall inefficiency got them replaced wholesale by young women. In 1950, about one of 13 working women in the US was employed as a telephone operator. Though women made fewer errors than teenage boys, they were overworked and overwhelmed by calls as the number of subscribers increased, and human error was common. The only solution was to reduce human error move from a manual to an automatic system.

But automatic switchboards were in existence since the late nineteenth century, thanks to Almon Brown Strowger, a Kansas City undertaker and inventor. Folklore suggests that he invented the automatic switchboard to explicitly put telephone operators out of business - not because of high error rates, but because he suspected that one of the telephone operators (in some versions of this lore, the wife of a competitor) was redirecting business from potential clients. After creating a complicated arrangement of mechanical and electrical elements to form a switchboard that did not require a manual operator, he set up the Strowger Automatic Telephone Exchange Co. He even tried to sell it to Bell, but it took time for the world to adapt to the automatic switchboard system. One major reason was that the “telephone girls” provided more than just connecting lines on a switchboard. They took messages, answered client questions, gave suggestions of local businesses, etc.

Another reason was that it wasn’t cheap to set up the automatic exchange and increasing scale didn’t help reduce costs. Counterintuitively, small phone companies were the early adopters of automatic switchboards. David A Price, editor of the Richmond Federal Reserve’s publication Econ Focus explains:

The difference with automatic telephone switching was that the cost structure, perhaps surprisingly, favored the smaller firms with their smaller customer bases. With the electromechanical systems of the day, each additional customer was more, not less, expensive. Economies of scale weren't in the picture. To oversimplify somewhat, a network with eight customers needed eight times eight, or 64, interconnections; a network with nine needed 81.

From Price’s excellent post on the decline of phone operators, I learnt that the early adopters of Strowger’s automatic switchboard were small independent firms, about 6,000 of them, that entered the market within three years of the expiration of Alexander Graham Bell’s patent. Large firms like Bell moved towards automation in response to the rising wages during WWI. And sometimes because Telephone operators going on strike brought telecommunications to a standstill. But the transition took time in the US and was even slower in the rest of the world.

The Strowger’s automatic switchboard reduced error compared to manual switchboards, but with wear and tear, the chances of the mechanical switch dialing wrong numbers increased. Outside the US, where replacement parts for automatic switches were not easily available, maintenance and upgrades were slower and error rates were higher. Crossbar Switches replaced Strowger’s switchboards and the rotary system. And by the 1970s, most large telephone companies in developed countries started their transition to an electronic switchboard system.

When the Indian government took over the telecommunications infrastructure of the colonial government in 1947, there was one phone line per 3,400 Indians. The reason was that the British attitude to phones was not the same as the Americans. Michael Mann argues that in the late nineteenth and early twentieth century, Britain’s elite viewed phones only as a means of administrative and military control in the colonies, leading to a digital divide that took almost a century to bridge by post-colonial governments. The US had more than twice the number of phone connections in 1910 than India had in 1990!

In the fifties and sixties, American firms like Bell were running tests for moving away from Strowger’s automatic, though largely mechanical system to a fully electronic system. The Indian telecom engineers also attempted a similar transition, but the electronic switchboards remained R&D projects.  

In 1987, when Mr. India was released, the ‘wrong number’ and ‘cross connection’ tropes worked because only one-tenth of India’s capacity was running on electronic switches. Human error, mechanical error due to old switches, and poor quality phone devices produced by the state monopoly meant Indians experienced more error than call completion.  Sunil Mani evaluated the delays in technology adoption in India and wrote that, in March 1987, the 3.98 million phone lines in India consisted of 416,000 manual switches (10 percent of total switching capacity), 1.99 million Strowger switches (50 percent of total capacity), 1.14 million Crossbar switches (29 percent), and 429,000 digital electronic switches (11 percent). Over 89% of Indian phones was operating on technology that was at least half a century old. Asian tigers like Malayasia and South Korea that opened up to global trade decades before India were at 64% and 70% electronic switches. Of the developed countries, Norway led at 100% electronic exchange and the US was at 76% electronic switches.

Another consequence of a state monopoly over telecom was that the number of phone lines in India were very few, especially given the population. Some of this had to do with per capita incomes. But another reason was the price and quantity controls in all aspects required to produce phone instruments, wires, etc. In 1990, India had less than six million telephone connections which served a population of 892 million, with 2.5 million requests on the waiting list, where the waiting time was almost half a decade. Anyone who had a phone provided either a free service or charged for the use of the phone by those around them. Local mom and pop stores with a phone took messages for customers.

The best critique of the phone department encompassing all these problems – poor quality, deadlines, crossed connections and wrong numbers - is in Jaspal Bhatti’s legendary satire Flop Show, in the telephone department episode.

The episode also highlights the bittersweet trauma of someone who gets a phone connection after a long wait, only for it to turn into the neighborhood phone!

Even in 1960, when Pillow Talk was a result of individuals waiting for personal phone lines, Americans had more access to phones than any other country. The US had 49.3 million fixed telephone subscriptions. Jerry Lewis in Bellboy, struggling to figure out which phone ringing, had Americans in stitches.

That year, Americans had 28 fixed phone subscriptions per hundred people, compared to Indians with 0.075.

Fixed telephone subscriptions (per 100 people) in India and the US

Telecom Liberalization in India

When Mr. India was conceptualized and shot in 1985-86, Indian telecom began its long due reforms, though slowly. The first major institutional reform split the DoPT and created a separate department of telecommunications. Large metropolitan areas like Delhi and Bombay were served by the newly structured (still state-owned) Mahanagar Telephone Nigam Limited (MTNL); services in the rest of the country remained with the DoT; and international telephone service was under Videsh Sanchar Nigam Limited (VSNL). 

In 1987, only 3% of India’s 600,000 villages were connected to the phone network. Rajiv Gandhi and Sam Pitroda’s brainchild, the Center for Development of Telematics started developing solutions for areas outside large cities and kicked off rural telecom transformation in independent India. The center invested in R&D around different kinds of electronic solutions for rural areas, small towns, larger city phone exchanges, etc. that suited Indian conditions, population, and weather. The technology took off because the government also reduced its control and allowed private firms to manufacture telephone equipment. In a few years, instrument quality improved and price decreased. In July 1991, the government devalued the currency and started dismantling the industrial licensing system as well as the import licensing requirements for most sectors.

In 1992, the government allowed the participation of private firms in cellular services. The Narasimha Rao government’s National Telecom Policy in 1994 permitted private investment in basic telephone services. Eventual delicensing of the sector and permitting entry of foreign firms saw technological upgrades in phones and switches.

However, this did not immediately spur a response in fixed line and cellular services from private enterprise. As the dominant provider and only regulator, DoT’s discretionary control, and differential licensing policies had advantaged its own services over those of private firms, especially its fixed telephone connections which grew almost five times during the nineties once the industrial licensing and foreign exchange control system was dismantled. For private operators, revenue didn’t cover costs because of other bottlenecks; and because license fees for entry into cellular services were very high. Recognizing these issues and in line with the negotiations that took place at the WTO, the government set up an independent regulator - the Telecom Regulatory Authority of India- to oversee the sector.

Mobile phones were introduced in 1996 but for the first few years they were used by a small and privilege elite, paying exorbitant costs to receive and make calls. The big switch came with the 1999 Telecom Policy introduced by the Vajpayee government. Cellular service providers were allowed to pay license fees as a share of the revenue they earned after the fixed fee was paid upon entry. The government ended VSNL’s monopoly on international services, including internet services, and allowed private operators.

The same year Govinda uses “What is mobile number?” as a pickup line in Haseena Maan Jayegi, through a song (it is still a nineties Bollywood movie). Unlike his previous massy films with Karisma Kapoor, or his character in Dulhe Raja, in this film Govinda is the son of a rich businessman with early access to mobile phones.

Eventually, the government introduced a unified license regime, mobile broadband, and mobile number portability. The cumulative effect of the reforms dismantled the monopoly of the state and encouraged competition in the telecommunications sector. This was also accompanied by rising incomes because of trade and openness and liberalization of industrial policy. The move away from socialism meant private individuals and businesses were allowed to transact more freely, and phones were essential to enable this higher level of social cooperation. Higher income and business revenues meant a swift rise in demand for phone lines, and the market responded.

Telephone lines became available on demand. For decades, there was barely one telephone connection per 100 people. By the mid-nineties, with the entry of private operators too, fixed/wired telephone connections increased and the waiting time had come down from 5 years to 13 months and completely vanished by the turn of the century. Thanks to healthy competition, MTNL’s call completion rates increased to 93.6% in 1997. But phone line penetration in small towns and metropolitan suburbs were increasingly serviced by private firms! GP Manish uses the improvements in telephone quality as an illustration of the qualitative difference between changes in the 1980s (liberalization by stealth) versus embracing markets post 1991, not captured by aggregate GDP and growth figures.

Hera Pheri released in the year 2000, perhaps the last year such a storyline based on wrong numbers was plausible. India’s phone trajectory changed after the New Telecom Policy in 1999. Hera Pheri’s sequel, Phir Hera Pheri (2006) starts out as a story about a bank fraud/scam, more in line with the problems of a transition economy than a plot involving a phone directory misprint! Mobile phones had caller ID and little error. The new trope in Indian films was network problems and dropped calls, a common occurrence in the early 2000s.

Mobile phones in Hindi Cinema

If one were to look for the single most ubiquitous marker of post-liberalization India, it would be mobile phones. Indians leapfrogged from 1940s technology directly to mobile and smart phones post liberalization in the nineties. Mobile phone subscriptions took off after the New Telecom Policy of 1999.

Unlike early years of Strowger switches, cellular technology thrives on economies of scale and post-liberalization India provides that scale. But the technological and cultural consequence was that within a decade, India went from horrible call quality, wrong numbers, crossed connections, and yelling to be heard on long distance calls to virtually error free connections over mobile phones!

Even network coverage improved with fewer dropped calls. Twenty first century movie tropes around cell phones were now based on precision, not error. An early depicter of the change in technology was Ram Gopal Varma, first in Satya (1998) where an ambush is called off last minute using cell phones, described by Uday Bhatia in his excellent book and this essay on how Indian films viewed the transition to markets post 1991. Cell phones were ubiquitous in Ram Gopal Varma’s Company (2002), a movie on the corporate-film-police-mafia complex. It has an elegant sequence of kill orders issued by competing mafia lords using fixed line and mobile phones. 

By 2008, in A Wednesday, a thriller revolving around terrorism in Mumbai, cellphones were used to detonate bombs, communicate anonymously, and negotiate with the police. Burner phones are used throughout the film but the climax (1:18:15) hangs on the precision of a mobile phone call.

In Rajneeti (2010), one of the murders in the killing spree by rival political parties is a car bomb detonated by a phone call.  These sequences were not that different from phone activated bombs in Hollywood films like Bourne Ultimatum (2007). Hindi cinema used the same tropes as Hollywood, except now it was in the same decade.

Post liberalization the phone tropes had morphed, based on phones as a precision device! This trope is more familiar to Gen Z and Gen Alpha Indians and those outside India watching Hollywood movies and TV series.

By 2010, India had caught up to most of the developed world in mobile phone penetration. And consequently, Indian movies had also caught up, at least in in telephone tropes.

Mobile telephone subscriptions (per 100 people) in India and the US

Telecom liberalization led to the single greatest revolution in my lifetime in India. There is a good chance that in a few days, almost 900 million Indians wishing each other “Happy New Year” will crash Whatsapp.

Post Script:

Many thanks to Uday Bhatia, Subrat Mohanty and Pavan Jha for sharing their encyclopedic knowledge of Hindi cinema and brainstorming wrong number movie clips :). Film buffs shouldn’t miss Pavan and Subrat’s long form podcast Haal Chaal Theek Hai or Uday’s book on Satya. Also catch Subrat’s lovely chat with Jai Arjun Singh and Amit Varma in this episode of the Seen and the Unseen podcast.

And a HUGE SHOUTOUT to Shreyas Narla, my partner in crime in researching telecom liberalization for the 1991 project as well as helping me unearth movie clips.

This post is not an exhaustive list of these tropes in Hindi Cinema, and as a movie buff I hope others add to the list. I would also love to learn more about how these tropes were used in Indian cinema in other languages.

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With air pollution dominating my thoughts and nudges for charitable giving in my inbox, my first instinct is to give to causes that help mitigate pollution in Delhi. But I am also aware of the literature on emotional giving or ineffective altruism. In their 2021 paper, Caviola, Schubert and Greene explain why both effective and ineffective causes may attract dollars. People often give emotionally to a cause that has personally impacted them in some way.

A US$100 donation can save a person in the developing world from trachoma, a disease that causes blindness. By contrast, it costs US$50,000 to train a guide dog to help a blind person in the developed world. This large difference in impact per dollar is not unusual. According to expert estimates, the most effective charities are often 100 times more effective than typical charities.

This paper resonated with me because I am exactly the sort of irrational dog lover likely to support the best training programs for guide dogs. These super dogs have my lifelong admiration. My Labrador retrievers can barely fetch a ball.

We all know air pollution is bad. But how bad? And compared to what?

As an alternative, I looked up the top charities recommended by GiveWell—the top two work on reducing Malaria deaths. Malaria kills between 600,000 and 700,000 each year. And GiveWell is considered one of the most credible evaluators in the philanthropic space. Should I be thinking less about air pollution in Delhi and more about malaria in Africa?

So, I thought it best to evaluate 1) my priors on air pollution, 2) whether air pollution mitigation in Delhi merits my dollars/rupees. And if Delhi air pollution merits intervention, then it would be good to 3) identify the reasons air pollution became such a big problem in Delhi (you would be surprised), which would lead to uncovering 4) how to mitigate the problem of air pollution so I can decide where to send my dollars. And since I got to #4, to understand 5) why people think that giving to malaria charities is “higher impact” than solving air pollution.

One simple Google search in I learned that globally air pollution kills 10 times the number of people killed by malaria. But the reason many researchers and experts feel that the “highest impact” comes from giving to malaria charities is because it is easier to quantify malaria deaths, and quantify malaria interventions by counting doses and nets, which lends itself well to evaluation and comparison. The top charities are listed as such not necessarily because the evaluators can objectively rank the most pressing problems or rank the institutions that have the highest impact on human well-being.

There are many reasons air pollution mitigation doesn’t make it to the top of these lists despite a ten times higher death toll. It cannot be avoided by distributing a $5 net. The costs and the benefits from air pollution in Delhi cannot be easily quantified. Nor can the benefits from the interventions to mitigate pollution be easily measured. Simply put, air pollution in Delhi is complex, while malaria death and malaria nets in Africa are legible. We can only evaluate impact of interventions and projects that are legible. And only studying complex phenomena narrowly can make them legible.

The very act of impact evaluation requires narrowing down the problem to make it legible and, in the process, other complex and unwieldy problems, that might be more pressing, will be left out. Impact evaluations only encompass the highest impact philanthropic efforts that we can measure and publish with confidence. Halfway into comparing air pollution and malaria, I had a renewed appreciation for James C. Scott’s ideas on the tradeoff between legibility and complexity. Air pollution mitigation institutions don’t make it to the top five of the GiveWell list because both the causes of air pollution and the interventions to mitigate pollution are complicated. 

1. Is Air Pollution the Most Pressing Problem That Needs My Attention and Dollars?

YES!

Air pollution kills between 6.7 - 8.7 million people each year!

But how does air pollution compare with other leading causes of death? Still pretty bad ... it’s actually in the top three causes.

So, air pollution kills a lot of people. And even those who don’t prematurely die from pollution suffer—from worsened quality of life due to respiratory problems, losses in productivity, etc. It also adversely impacts individuals irrespective of their lifestyle. Short of moving cities or countries, it is not easily avoidable. And it hurts children the most.

For the rest of this post, I’ll use the 6.7 million estimate from the Global Burden of Disease Study 2021, since it has the most recent data for Indian states.

2. How Bad is Air Pollution for Indians, Especially in Delhi?

Pretty bad! One in four people dying from air pollution live in India, where it is the leading cause of death. The total number of Indians dying prematurely due to air pollution is almost three times the total number of Africans dying from Malaria.  

India has 17 percent of the global population but 25 percent of premature air pollution deaths.

In their 2021 paper, “Health and economic impact of air pollution in the states of India: the Global Burden of Disease Study 2019,” Pandey et al. use the output-based approach to estimate the economic cost of premature deaths and morbidity attributable to air pollution in each state of India. The output-based approach equates the economic cost of premature mortality to the present value of lost income and measures the cost of morbidity by lost output.

They find that 1.67 million deaths were attributable to air pollution in India in 2019, accounting for 17.8% of the total deaths in the country. Lost output from premature deaths and morbidity attributable to air pollution accounted for economic losses of $28.8 billion and $8.0 billion, respectively, in 2019. This total loss of $36.8 billion was 1.36% of India’s GDP that year.

There is substantial variation across Indian states. In 2019, the less developed states in north and northeastern India had a higher burden from household air pollution than the more developed states in the west and south. And irrespective of level of development, states across northern India had a high burden of ambient particulate matter pollution.

Economic losses at the state level are associated with the number and the age­ distribution of deaths, and morbidity in each state and state GDP per worker. They also show the variation in economic loss due to premature deaths and morbidity attributable to air pollution as a percentage of the state GDP and find that poorer states lose a larger share of their GDP because of air pollution.

Delhi is one of the richer states and has lower levels of household or indoor pollution (mostly caused by cooking fuel). But, on the map, Delhi doesn’t look like other southern and western rich states. Delhi has relatively more severe ambient particulate matter pollution, especially PM2.5.

Delhi had the highest per-capita economic loss due to air pollution!

Air pollution leads to 10 times the deaths of malaria. Loss of productivity due to morbidity is at an even higher scale. And India is incredibly young, still growing in population and economic activity contributing to air pollution, and will have long-term consequences on human capital.

I feel a lot better about my focus on Delhi pollution. Though it affects me personally, and I have an emotional connection to Delhi; mitigating air pollution in India is one of the most urgent policy issues! But first, we need to understand why the air is so bad in Delhi.

3. Why Is Delhi’s Ambient Particulate Matter Pollution So Bad and Getting Worse Each Year?

The news about Delhi’s air pollution is dominated by stories of crop residue burning in the northern states of Punjab and Haryana, causing Delhi to turn into a gas chamber. But I grew up in Delhi, and the farmers in those states have been burning paddy crop residue for decades. The burning only takes place for two weeks each year. What about the other 50 weeks? Experts extrapolating from the Chinese experience usually blame industrialization, but Delhi’s industrial activity has shrunk as a proportion of all economic activity and has also been driven to the outskirts by regulation and court orders. Others blame economic growth and liberalization that led to an explosion of vehicles, an increase in industrial pollution, loss of tree cover and so on.

There isn’t a simple relationship between an increase in GDP per capita and pollution. As Indians get richer, indoor air pollution decreases, as the additional income increases access to cleaner domestic fuel. Delhi has one of the lowest levels of household air pollution. And southern states that benefitted the most from the liberalization-fueled economic growth have not experienced the same kind of increase in vehicular pollution.

Delhi’s transportation policy in the last two decades can be summed up as: construction of roads and metro to accommodate the dramatic increase in private vehicles because the Supreme Court of India killed Delhi’s functional bus system. And this increase in construction and vehicular pollution is the reason for such high, and increasing, levels of ambient pollution.

The main contributor to Delhi’s poor air quality is ambient particulate matter pollution, especially PM2.5 and to a lesser extent PM10. Road dust and vehicular population account for 58% of PM2.5 and 65% of PM10.

Sources of PM2.5 Emission Load in Delhi (2013-14)

Sources of PM10 Emission Load in Delhi (2013-14)

Less than 1.5% of India’s population lives in the NCR region, but it has over 4% of all registered vehicles. This increase is not just because Delhiites have gotten richer. Delhi and Mumbai have comparable populations, and Mumbai is richer. But Delhi has four times the number of private vehicles compared to Mumbai; and closer to six times if neighboring areas like Faridabad and Ghaziabad are included (Government of India Road Transport Yearbook 2019). Simultaneously, the absolute number of buses (and therefore buses per capita) have decreased in Delhi in the last two decades.

Ironically, the increase in pollution from the increase in the number of vehicles and road dust from construction are the unintended consequences of the activist Supreme Court of India trying to reduce pollution in Delhi.

Seeing Like a Supreme Court

It started in 1984-85 when a Delhi lawyer named M.C. Mehta filed a number of public interest litigation cases in the Supreme Court of India. In the 1980s, the Supreme Court had turned activist by diluting locus standi requirements (the ability/standing to bring an action before the court) and started pronouncing judgment in all manner of cases from air pollution to a self-appointing judiciary.

The court started by setting standards for gasoline, phasing out leaded petrol, eclipsing rules for phasing out decades-old vehicles, etc. In a drastic measure, on July 28, 1998, the Supreme Court ordered all commercial public transport in Delhi, which included about 100,000 buses, taxis and auto-rickshaws, to convert to run on a cleaner fuel, CNG (compressed natural gas), by April 1, 2001. It simultaneously ordered the Delhi government to create a bus fleet with 10,000 buses by 2001.

Delhi was historically a union territory, directly governed by the government of India. It got a new legislature in 1993 and didn’t have much state capacity, especially for large-scale municipal decision-making in the 1990s. The first term of the Delhi government saw three different chief ministers and a barely functioning executive. In 1998, when the Court ordered its new measures for commercial vehicles, first-time Chief Minister Sheila Dixit, leading an executive machinery that was barely five years old, couldn’t implement the orders in time. In April 2001, there wasn’t a big enough supply of CNG buses, CNG-enabled gas stations, CNG auto-rickshaws, etc. forthcoming. The result was Soviet-style shortages with long lines of drivers waiting for fuel.

The Economic Survey of Delhi 2002 reported that the Delhi Transport Corporation’s (DTC) on-road bus fleet reduced by 40% and average bus occupancy increased by 40% in 2001, compared to the preceding year. I started university shortly after the diesel bus ban and CNG conversion order came into play, and the lasting memory of my first year of university was figuring out how to get on and off overcrowded buses without getting groped. After 12-18 months, the general view in Delhi was to switch to private vehicles, either owned or for hire. After struggling for the first year in college, my solution was carpooling with five other friends. I wasn’t alone.

A second court order during that time froze the number of auto-rickshaw (three-wheeler scooter rickshaw) licenses that were issued in the city at 55,000. Delhi is a large and sprawling city, and while public and private buses covered the hubs, autorickshaws served as the last mile taxi for the poor and middle class. This freeze lasted until 2011 when an additional 45,000 licenses were issued though Delhi and its suburbs had grown many times over in size.

Another blow to the bus fleet came in 2011. A fatal accident involving a 14-year-old boy—the 61st victim in 2007 to be killed by the rash and negligent driving of one of these private Blue Line bus drivers—caused Judges Mukul Mudgal and P.K. Bhasin of the Delhi High Court to take suo moto cognizance of the matter after reading the news. The ordered over 2,000 private Blue Line buses off the Delhi roads because of rash driving. The Supreme Court upheld this madness.

The Blue Line operators brought the Court’s attention to the fact that the DTC bus service only had about 6,000 CNG buses, well short of the Supreme Court’s 1998 order of increasing the fleet to 10,000 CNG buses. Unmoved, the Delhi High Court ordered the Blue Line buses off the roads when the permits expired in 2012, and gave the Delhi government renewed orders and more time to increase the size of the bus fleet. Delhi is still short of that number. The Delhi government tried to salvage the situation by partnering with private buses to create a cluster bus service. Though these efforts were partially successful, Delhi residents are still facing a massive shortage of reliable public transport.

These actions by the Court decimated bus transport in Delhi, and the city never recovered. Delhi has fewer registered buses today than it did in 2001. This includes newer mini buses and private bus models. The government-owned and -run DTC has fewer buses today relative to 2001.

Unsurprisingly, given the shortage of buses and auto-rickshaws, Delhi residents started relying on private vehicles. The sharpest increase was in motorized two-wheelers (MTW). Between the 1997 freeze of auto-rickshaws at 55,000 and the increase in 2011 to 100,000, the population of Delhi increased by more than 45%, and the registered number of cars and MTWs rose by 250%.

During this same time period, the Delhi metro was constructed. Approved in 1998, the Delhi metro launched its first route in 2002. Since 1998, Delhi has seen the construction of 390 km of metro rail across all the routes serving 286 stations.

Though immensely successful, the Delhi metro isn’t a substitute for the bus fleet; it is a complement. This is due to the sprawling nature of Delhi unlike, say, Mumbai. The Delhi metro covers roughly 1,500 square km (approximately 580 square miles) in the greater Delhi area. It has helped Delhi residents cope with the urban sprawl and rising housing costs. But because there aren’t enough buses and auto-rickshaws to cover the last mile, residents who could afford them switched to private vehicles.

One second-order consequence of the increase in private vehicles was road congestion and long commutes. Consequently, the Delhi government and the government of India went on a road construction spree. Road construction is enormously profitable for politicians through kickbacks, and the builder-politician nexus is well established. Delhi residents were adding 1,000 private vehicles a day, and the consequent congestion was the perfect opportunity to increase road lengths.

In 2000, there were 2.5 million private motor vehicles in Delhi, which increased to just over 11 million in 2019. To accommodate this growth, Delhi’s road network also increased. Official reports suggest a decrease in road length in Delhi, often attributed to the success of the Delhi metro. But a more careful look at the road data in the latest Delhi Statistical Handbook shows that Municipal Corporation of Delhi (MCD) roads have not been reported since 2015. Using older MCD numbers and the latest numbers for other state/national highways etc. in Delhi, road length has increased by 57% since the 1997 Supreme Court order.

The increase in the construction of roads and metro is the reason for the increase in PM10 pollution, half of which is attributable to road dust.

Pandey et al. find that 59% of the 1.67 million premature deaths from air pollution in India in 2019 were from ambient particulate matter pollution, and another 37% from household air pollution. But, the death rate due to household air pollution decreased by 64.2% from 1990 to 2019, while that due to ambient particulate matter pollution increased by 115.3%.

As Indians get richer, household air pollution decreases, as higher incomes increase access to cleaner fuels. But in the absence of state capacity, good rules and standards and basics like a good public bus fleet running on clean energy, the burden attributable to ambient particulate matter pollution will likely increase. This is because as Indians get richer, in the absence of quick and reliable transportation, they will rely on personal vehicles, which means more road and metro construction and more vehicles to cover the last mile.

4. What Is the Best Way To Help Mitigate Air Pollution in Delhi?

There is a new class of environmentalism premised on demonizing economic growth as the reason for air pollution and the consequent evils. But the relationship between economic growth and air pollution is not so straight forward. One hundred years ago, London had worse air quality than Delhi today.

London solved this by getting richer, reducing its reliance on burning coal, building out a sewage system, transportation system, households switching to gas as cooking fuel, developing a waste disposal and management system, setting standard for vehicles and cleaner fuel, building an underground metro system and bus fleet, relying on innovation and entrepreneurship that developed devices to reduce household pollution and so on. But it took time and increases in both prosperity and state capacity made it possible.

I have tried to get a grip on the problem of air pollution in India, specifically Delhi, by quantifying it. I spent hours looking up the number for the increase in the number of private vehicles, the decrease in buses, increase in road construction and metro construction and so on. And yet, the point of narrowing down to the increase in cars in the last two decades is to understand the unwieldy and complex problem. It would be foolish to narrowly point to the increase in cars and then solve the problem by limiting the number of cars. Or to look at the increase in road construction and ban new roads. Or to blame economic growth that allowed a few million Delhi residents to afford cars. The increase in cars is the symptom or consequence of the larger problem—Delhi’s lack of cohesive public transportation for its residents. Delhi residents have a government that can build 10,000 km of roads over a two-decade period, but not procure 10,000 CNG buses or issue 10,000 licenses to private bus services.

To prevent further increases in pollution in Delhi requires developing a high-capacity government with the ability to introduce and manage a large bus fleet running on clean fuel, preventing the procurement rules and institutions that foster the corrupt builder-politician nexus, as well as a Supreme Court that doesn’t dictate policy orders without sufficient knowledge, a more functional municipal system, etc.

It takes decades, maybe centuries to develop high state capacity that can tackle commons problems, mitigate pollution and create a world-class clean public transportation system. And this requires increases in economic growth and government revenue as well as well aligned political incentives. The problem is there is no simple solution that can be easily implemented. Unlike malaria, the impact of air pollution cannot be avoided by handing out air purifiers. They they don’t even make a dent in lowering the hazardous AQI in Delhi. The problem can only be solved though better governance mechanisms and innovation. Innovation can take the form of better construction technology that doesn’t contribute as much to particulate matter pollution. Or by developing cleaner fuel for vehicles. Or through better carbon capture and particulate matter capture technology. But none of this is legible or predictable.

And it is not easy to know whether think tanks working on Delhi transportation policy, or think tanks working on judicial policy or for-profit companies working on clean fuel or clean construction technology will have the most impact. These solutions to air pollution don’t lend themselves to easy measurement and quantification. But just because the impact cannot be easily measured or compared does not mean these longer-term, less predictable and more complex institutional responses won’t have an impact. It simply means that demanding impact evaluation as the basis for philanthropic contribution is asking a question that cannot be answered.

This is not to say that GiveWell is misleading us by listing the Malaria Consortium and the Against Malaria Foundation as its top choices. GiveWell’s calculation includes the impact per dollar and they find that it costs only $7 to save one child using antimalaria medicine and only $5 per malaria net. So even though malaria leads to one-tenth of the fatalities as air pollution globally, spending on malaria prevention may well be the highest impact per dollar for interventions we can calculate. The impact evaluation tells us that it saves most lives per dollar compared to other projects or interventions that can be easily calculated and compared, like giving vitamin A supplements to prevent blindness or  training guide dogs. Air pollution, though a more pressing global policy problem, is not as simple.

6. Back to Malaria—Is It Really That Simple?

While writing this post, I also thought more about malaria and whether malaria prevention is more complex than impact evaluations lead us to believe. If legibility is the consequence of a narrowing of vision to make a complex problem tractable, then are these malaria mitigation interventions too simple?

95% of all malaria deaths are in Africa, and that malaria disproportionately kills children.

This is probably why the effective altruism community, which believes in helping those far removed from one’s situation, measures by lives saved per dollar when thinking about long-term and high-impact efforts, and rates malaria prevention charities so highly. In his latest column, Ezra Klein defends the basic principles of effective altruism and separates it from the SBF-FTX mess. He writes:

This is my annual giving column, so I won’t beat around the bush. I recommend donating to GiveWell’s four top-rated charities: the Malaria Consortium, the Against Malaria Foundation, Helen Keller International and New Incentives. These charities distribute medication and bed nets to prevent malaria, vitamin A supplements to prevent blindness and death in children and cash to get poor kids vaccinated against a host of diseases.

What sets these groups apart is the confidence we have in the good that they do. Plenty of charities sound great to donors, but their programs are never studied, and when they are, the benefits often disappoint. These organizations are different: Their work is backed by unusually high-quality studies showing that they save lives and prevent illness at lower cost than pretty much anything else we know of. (emphasis added)

It is impossible not to feel for the children in Africa dying from malaria. But suggesting that distributing nets and antimalarial medication is the best way to save lives and prevent illness compared to anything else we know is narrow. Regions outside Africa only account for 4% of malaria deaths. But I don’t see high use of mosquito nets and antimalarial medication in Europe and the U.S. Outside of camping equipment stores, I don’t think I have seen any mosquito nets bought or sold in the U.S. These countries don’t have malaria deaths because they have access to good public sanitation, clean water, electricity and healthcare. Malaria hits children in poor regions with low state capacity.

Common sense tells us that the best way to save lives and prevent illness is economic growth. But then how do we know for sure that economic growth in Africa will help reduce malaria incidence?

Look at the decline in malaria deaths in India since the big bang reforms in 1991, which placed India on a higher growth trajectory averaging about 6 percent annual growth for almost three decades. Malaria deaths declined because Indians could afford better sanitation preventing illness and greater access to healthcare in case they contracted malaria. India did not witness a sudden surge in producing, importing or distributing mosquito nets. I grew up in India, in an area that is even today hit by dengue during the monsoon, but I have never seen the shortage of mosquito nets driving the surge in dengue patients. On the contrary, a surge in cases is caused by the municipal government allowing water logging and not maintaining appropriate levels of public sanitation. Or because of overcrowded hospitals that cannot save the lives of dengue patients in time.

So, it seems bizarre to claim that these impact studies on distributing malaria nets prove “that they save lives and prevent illness at lower cost than pretty much anything else we know of.” Economic growth and high state capacity saves lives at a much higher scale, not just from malaria but from all infectious diseases. And malaria-affected individuals can be saved and illness can be prevented at very low marginal cost if we embrace the idea of economic growth and prosperity for all of humanity.

Economic growth helped save lives and prevent illness from ALL infectious diseases.

Sustained economic growth in India has saved an additional 405 lives per 100,000 in a country with 1.4 billion people. If India had the 1990 death rate from infectious diseases in 2019, an additional 5 million Indians would die each year. That’s the total estimated excess death toll from Covid in India. Economic growth in India has saved those lives every year. And as Indians become prosperous, the number of lives saved will increase without any additional spending on mosquito nets.

Perhaps I am focusing on the wrong part of GiveWell and Ezra Klein’s claim. I should focus on “at a lower cost than pretty much anything else we know.” Perhaps those recommending these charities as having the highest impact are doing so because they can be implemented and evaluated with confidence at a lower cost relative to efforts to improve state capacity and boost economic growth. Giving to charities that work on state capacity, institutions, public sanitation policy, economic growth, etc. is not a sure thing. Maybe they only increase the chances of economic growth by 5%. But with enough diligence and evaluation, we can be 90% sure that our dollars buy the additional mosquito net, and that mosquito net has a 70-80% chance of saving a life. So, this is less about the overall impact and more about “impact we know” or better phrased as “impact we can count and take credit for.” The Against Malaria Consortium’s website says they have raised $488,628,184, funded 223,421,135 nets and protected 402,158,043 people. Contributing to this institution a donor can calculate the number of lives they saved with their contribution. This is not just about legibility but also attribution. Each dollar donated will not just save lives but also assuage guilt, signal virtue and make one feel good during the holidays. Telling people about investments in clean construction technology hardly has the same effect at the holiday party.

It is not just philanthropy. In my conversations with Lant Pritchett (1 and 2) he argued that development policy and aid has been infected by attribution. We have long known that the first step to development in poor regions of the world is economic growth. But economic growth is neither easy to achieve, and when achieved not easily attributable to a single intervention.

India’s development trajectory changed when the reforms in 1991 ended the worst parts of socialist command and control, opened India to global trade and put in place several institutional changes for currency and macroeconomic stability, pushing India into higher growth for the next three decades. As a result, GDP per capita increased sevenfold, and about 250 million Indians—more than the total population of Brazil—were lifted out of poverty. All socioeconomic groups prospered because of sustained economic growth. India added approximately $3.6 trillion to its economy as a direct consequence of these reforms. 

Lant Pritchett writes about the Ford Foundation investing in the Indian Council for Research on International Economic Relations (ICRIER) in 1982. ICRIER is a nonprofit research center created “to foster improved understanding of policy choices for India in an era of growing international economic integration and interdependence.”

Suppose the Ford Foundation gave 36 million dollars (I have no idea what it really was but I strongly suspect this was the right order of magnitude and I just make it divisible) to support ICRIER.

Optimistically, suppose this gift increased by 50 percent the chance ICRIER was created and became an effective think tank (perhaps other funding could have come along, perhaps not) and suppose the existence and actions of this think tank increased by 10 percent the odds India adopted growth accelerating policies (my read of the situation is that it was higher). Then the expected value of Ford Foundation’s 36 million of support was 180 billion dollars (bracketing discounting), a 5000-fold return per dollar of investment.

Pessimistically, suppose the Ford Foundation funding only increased the likelihood of an effective think tank by 10 percent (someone else almost certainly would have funded it) and the impact of ICRIER on the likelihood of a growth accelerating policy outcome was only 1 percent, the investment still returns 100-fold—3.6 billion on 36 million.

Suppose instead the Ford Foundation had given 36 million in what many regard as the highest return individualized investment: girl’s education. There are hundreds of studies showing a positive return both to wages and to other outcomes—fertility, child survival, empowerment, etc. Let’s suppose, super optimistically, the return on this investment was 20 percent. This means an additional 7.2 million dollars.

But, Ford Foundation can take direct causal credit for the outcomes for these specific girls. They have the names of the girls supported. They can take their pictures and put them in their brochures. They could do an RCT and prove rigorously the increased benefits were the direct result of their grant.

The need for attribution in philanthropy has led to “rigorous impact evaluation,” and to conduct these impact evaluations necessarily requires narrowing and simplifying the problem into legible and calculable forms. The end result is claims that distributing malaria nets is the best way to save lives and prevent illness. Common sense tells us otherwise.

What About Charitable Giving?

This holiday season, you should send your charitable giving to save African children from malaria by distributing nets or medicines because it is a cause close to your heart or you have an emotional connection to the region or people. Only because you think it is important. Any other reason like impact and rigor is usually based on the most convenient calculation to make one feel better.

If you want the unemotional giving to have the highest impact on eradicating malaria, best to contribute to institutions working on kickstarting economic growth in Africa, or building municipal capacity to increase public sanitation, or developing vaccines and building state capacity to distribute malaria vaccines, or building hospitals and increasing the number of doctors and nurses in Africa. All these efforts help reduce the number of malaria deaths but also help improve the lives of Africans in many other ways.

If you want the highest impact intervention on lowering global mortality, reducing air pollution is a good cause. Once again, donating to institutions working on a range of solutions from transportation policy, urban policy, judicial reform to state capacity will have some impact. Investing in for-profit businesses and startups working on clean tech solutions is even better. London air got cleaner, not just from regulatory oversight, but from dramatic innovations towards cleaner fuel.

This view has affected how I support others working on complex problems to make the world better. I direct the India grants for Emergent Ventures - a fellowship and grant program supporting moonshot ideas and talent started by Tyler Cowen at the Mercatus Center at George Mason University. There is also an Emergent Ventures Africa program, let by the excellent Rasheed Griffith. You can read about the kind of moonshot ideas supported by the program at Marginal Revolution.

If you want to make the greatest impact in the long term, nothing can beat contributing to institutions working toward increasing economic growth and prosperity in poor regions like Africa and India. Increasing economic growth will help solve both malaria and air pollution. It will be your least attributable contribution, but the one with the highest impact. Economic growth in India is my personal moonshot project. I haven’t just bet my charitable giving, but my career on it. I lead the Indian political economy program at the Mercatus Center.