The growing importance of trade for India

Trade enriches countries because it extends the scope for efficient division of labour

It is now time to dump a tired old assumption about India—that it has an economy closed to trade both within its territory as well as with the rest of the world. The reality is refreshingly different.

The new Economic Survey written by the team of finance ministry economists headed by Arvind Subramanian has used a unique data set of invoices from the goods and services tax network to estimate the level of trade between states (tangentially, we welcome the innovative use of Big Data in the Economic Survey. Railway passenger data has also been used to estimate internal migration patterns. The Indian government needs to embrace such use of Big Data).

The estimates in the Economic Survey show that interstate trade flows, which include the movement of goods between firms and within firms, are around 54% of gross domestic product (GDP). The usual assumption in economic geography, that large countries with substantial domestic markets have robust internal trade, can explain why interstate trade is so active in India, and is perhaps an antidote to the usual belief that the outdated barriers to trade across states reduce the movement of goods and services across borders.

What is unclear is how much of this internal trade is natural and how much a result of a perverse indirect tax system.

It is much the same story with international trade. The old shibboleths need to be discarded. India once suffered under a system of autarky. Much has changed since then. The ratio of trade to GDP has shot up after the economic reforms of 1991 but especially in the first decade of the current century.

Few seem to notice that India has since 2011 traded more with the rest of the world than China does. The trade intensity of both these economies has come down sharply since world trade started contracting a few years ago, but India continues to maintain its lead over China on this front.

What are the implications of these two facts? Trade enriches countries because it extends the scope for efficient division of labour. It thus raises productivity. And trade barriers are an invitation to poverty. So the new evidence that India actually has a robust trading culture should be welcomed.

The task of the Narendra Modi government is to push ahead with more openness on both fronts. The Prime Minister said in November that he wants India to become the most open economy in the world. The data in the Economic Survey shows that we are no laggards—but the challenge now is to keep dismantling barriers to internal and external trade.

The global task is an important one given the rise of protectionist sentiment in many developed countries. Free trade has helped hundreds of millions of Indians and Chinese emerge from the shackles of poverty. There is immense strategic value for India to combine with countries such as China and Japan to keep the flag of free trade flying in the age of Donald Trump. India should not see international trade as a zero-sum game.

The case for even more internal trade is also a solid one. The makers of our Constitution were perhaps still worried about the risks of separatism in the aftermath of Partition when they put in clauses such as Article 302 that gave Parliament the power to impose restrictions on trade between states, even though there could not be discriminatory policies that were specifically targeted at any one state.

Companies have been forced to build suboptimal supply chains because of a fragmented internal market. The agricultural produce market committee laws restrict the ability of farmers to sell across state borders. Such restrictions are past their due date, and the new goods and services tax will hopefully iron out some of these problems.

India is now a middle-income country that has seen the benefits of trade over the past 25 years. Internal economic integration as well as fewer barriers to international trade should be key policy concerns in the years ahead.

India needs to reclaim its place as one of the great trading cultures of the world. A lot has already been done since 1991. The task now needs to be completed.

What should the government do to open up the Indian economy to benefit more from trade?

Mapping the crime-politics nexus in India

As elections get under way in Uttar Pradesh, there is apparently reason to cheer already. The Association for Democratic Reforms has reported a drop in the number of candidates with criminal records or cases filed against them. As against 2012, when 32% of candidates had criminal cases against them, this time around the figure is 20%—168 out of 836 aspirants to political office.

Of these, 143 have serious criminal cases: murder and attempt to murder, rape and kidnapping. The Bharatiya Janata Party, which is apparently leading a national crusade against corruption, tops the tally.
Not far behind is the Bahujan Samaj Party, whose leader is supposedly running on her prior record of ensuring law and order but who has no problem inducting a notorious figure like Mukhtar Ansari into the party. The Samajwadi Party and Congress have an equally illustrious record on this count.
The spectacle of such figures strutting about in the world’s largest democracy is a matter for periodic despair and hand-wringing. Yet there have been few attempts at explaining this flagrant nexus between politics and crime in India. Milan Vaishnav’s new book, When Crime Pays: Money And Muscle In Indian Politics, fills this void with admirable rigour, clarity and elegance. Drawing on an extraordinary database of affidavits of almost all candidates that contested elections between 2003 and 2009 as well as field research, Vaishnav argues that there is something akin to a marketplace for criminals in Indian politics.

On the supply side, there is a growing willingness of political parties to field candidates with criminal records. The costs of elections have burgeoned in recent years. Parties are on the lookout not only for self-financing candidates but those who can also fill the parties’ coffers to help other candidates. But why do criminals want to contest elections in the first place?

Vaishnav suggests that this should be seen as a form of vertical integration. Previously, criminals and thugs did the bidding of parties in order to secure political protection. Over the years, especially as elections got more competitive from 1967 onwards, they have worked out that it was better for them to contest directly and ensure the requisite political cover.

Then again, why do people elect criminals to office? In analysing this demand side, Vaishnav demolishes claims about the ignorance of voters. On the contrary, he argues, people vote for candidates with criminal reputations precisely because of this reputation.
A combination of factors is at work. For one thing, the weakness of the Indian state in upholding the rule of law and in delivering public services compels constituents to turn to local tough-men for ameliorating their problems. For another, where divisions of caste, ethnicity or religion are strong, criminal politicians acquire greater salience owing to the dynamics of voter identification.

It is important to ask when criminalization of politics takes off and why. Vaishnav points to the 1967 election as the point of inflection. This seems plausible, though his reasoning is less persuasive. Drawing on the work of Samuel Huntington, he argues that by the late 1960s there was a combination of institutional decay, primarily within the Congress party, and a spurt in popular participation and consequent demands on the state. It was in this context that criminals came to acquire salience in politics.

There are at least three problems with this explanation. First, the framework of institutional decay and socio-economic change is too broad and vague to be usefully operationalized. An earlier generation of political scientists invoked it to explain everything from the declining fortunes of the Congress in the late 1960s to the imposition of the Emergency.

Second, all these arguments turn on an idealized picture of the Congress party in the period between 1950 and 1965. The notion that the Congress was a well-oiled, internally democratic, decentralized and responsive political machine is a mirage—created by the white heat of Indira Gandhi’s abrasive politics. And it is an image that cannot survive closer historical treatment.

Finally, there is a problem in identifying the role of criminals in the early period only by looking at instances of electoral or other form of overt violence. The best exercise of any power, including muscle-power, may actually occur when it is latent and not overtly observable.

Such embedded muscle-power was arguably central to the Congress’ preponderance in Indian politics for the first 15 years—especially through traditional forms of caste dominance in rural India. The political economy of power in such local networks is critical to understanding what went on before the mid-1960s.

Vaishnav’s analysis of the background to the rise of Y.S. Rajasekhara Reddy, former chief minister of Andhra Pradesh, shows that he is not unmindful of this dynamic. But it needs more attention.

The book is spot on, however, in identifying Indira Gandhi’s 1969 ban on corporate donations to parties as a critical turning point. This enabled her at once to block funding to opposition parties and to tighten her own grip on the Congress. By the time Rajiv Gandhi amended the Companies Act again in 1985 to legalize corporate funding, the damage had already been done. Giving and receiving in “black” had become far more convenient to all concerned.

Tackling this problem is fundamental to addressing the crime-politics nexus as well as corruption, more broadly speaking. And Vaishnav’s book is the best map we have in navigating this tricky terrain.

 

Drawing a blueprint for innovation

When we talk of innovative organizations, many of us actually have in mind a specific act or decision, rather than the organizational characteristics that elicited and nurtured it

The long-running Selected Paper Series features notable work by University of Chicago faculty. This essay is an edited excerpt; the original was presented as a speech at an Executive Programme Club luncheon on 29 October 1964, and reprinted as Selected Paper No. 14 under the title The Innovative Organization.

We all belong to many organizations, formal and informal. Almost everyone who works for a living is a member of a formal organization. If my belief is correct, most people either belong to an innovative organization or would like to. But when we talk about innovative organizations, many of us actually have in mind a specific innovative act or decision, rather than the organizational characteristics that elicited and nurtured that act or decision.
If this is a fair representation of your approach to the question, “What is an innovative organization like?” you are no worse off than (fellow Booth faculty member) Tom Whisler and I were about a year ago when we asked ourselves the same question. We found we had no satisfactory answers; nor could we find any by searching through the literature. We then decided to put the question to the most eminent among our colleagues, and organized a conference of some 20 of the leading social scientists in the country for the sole purpose of getting an answer or answers.
Types of organizational innovation
We can start by defining an innovative organization, very simply, as that which is first among a set of organizations to do something that none of the set has done before. Whisler sharpened this definition by pointing out that innovation can be contrasted with invention by the infinitives “to use” and “to conceive”. The first one to use an idea is an innovator, and she may or may not be the inventor—the one who conceived it.
Innovation also can be contrasted with adaptation. Adaptive behaviour implies a response to environmental stimuli that is successful in terms of organizational survival. An innovation need not be adaptive, but when it is adaptive it is more than just a response to a stimulus. It is also an anticipation of the stimulus, and a response to it before it appears in the environment. Such an innovation might be Eastman’s patenting a manufacturing process for colour film just as a competitor develops a radical new camera that can use only this kind of film.
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Accepting these thoughts on innovation, we can specify the kinds of innovation that can occur in an industrial organization.
First, we can have product innovation: development of completely new products, or changes in existing ones, or combinations of existing products into new ones.
Next, we can have what I term “process innovation”: innovation anywhere in the organization that changes the method by which the product is produced. This includes change in the form of administration, or in the relative size of the administrative component—changes that can affect the process of production as much as the introduction of new and more efficient machinery.
Third, we can have marketing innovation: innovation in packaging, distribution, or the measurement and prediction of demand. Any changes made in the organization as a result of changes in the requirements of consumers are marketing innovations—as are changes in consumer behaviour and attitudes brought about by the organization. Changing a housewife’s belief that she’s “cheating her husband” because she uses a cake mix to a belief that she is helping him if she does use one because that makes her a more efficient homemaker is a marketing innovation—as much of a marketing innovation as the pop-top can.
With this frame of reference, we can examine the issues our social scientists thought important, and see how they might affect product, process, or marketing innovations.
The issues they explored fall under three general headings: a concern with the organization’s personnel, with its structure and with its external environment. Let us go into the personnel area first.
Inside the organization: Personnel
In discussing the personnel of an innovative organization, the social scientists considered such matters as personal and job security, educational processes and decision-making criteria, among others. They agreed that psychological and job security are both necessary for creativity. Only someone who is personally secure can deviate from the group solution and suggest the novel approach; just as some modicum of job security is necessary before he can afford to propose a deviant solution that might be upsetting to various elements of the organization.
Security as a general stimulus to creativity clearly can be associated with all three categories of organizational innovation. The same can be said about diversity of educational backgrounds in personnel: if the members of a decision-making group in an organization were all exposed to the same educational discipline, they would tend to consider the same sorts of alternatives as possible solutions.

Almost all decisions in the product and marketing areas could be based on abstract criteria

Perhaps related to the individual’s education, but more probably a personality factor, is the kind of decision-making criteria she employs. One of our social scientists thought it crucial to innovation whether an individual uses abstract or concrete decision-making criteria. The scientist asserted that there is a tendency to decide in favour of the alternative that can be supported by objective, countable, quantifiable attributes. Alternatives supported by abstract criteria dealing with the unverifiable and the future tend to be disregarded. If, as he argued, there is a general preference for the concrete over the abstract, then surely that preference will bias decisions against innovation.
Here, perhaps we can make a useful distinction. Almost all decisions in the product and marketing areas could be based on abstract criteria, while some of the decisions in the process area can only be based on concrete criteria (i.e., what kind of punch press to use). Thus, increasing the use of abstract decision-making criteria will lead to greater product and marketing innovation relative to process innovation.
The organization: Structure
The personnel-oriented issues generally focused on conditions that both stimulate personal creativity and inhibit, through group action, the adoption of conformist alternatives. In a like manner, the issues involving organizational structure focused on how differing structures evoke innovation, and how they facilitate the adoption of change.
One such issue is the degree to which organizational functions are differentiated. It has been demonstrated, at least among scientists, that persons whose tasks are highly specialized are less innovative than those who perform in, and are responsible for, a number of task areas. It would seem to follow that an organization that demands as little specialization as possible maximizes the probability of innovation.
A closely related idea is that rates of executive succession are correlated with innovation. The hypothesis here is that a deliberate increase in executive turnover will increase innovation. It is based on the idea that new executives infuse new ideas into existing group structures. The difficulty with this notion is that the technique used to increase the flow of ideas also decreases job security and perhaps personal security as well—factors that, at the individual level, are linked to less innovative behaviour.
Scarcity versus slack
Organizational slack—unused and uncommitted resources—can exist at the administrative and technological levels, or simply in the form of money and facilities. The question of whether innovation was a function of a lack of slack or of an abundance of it was difficult to resolve. As many case studies could be produced in support of the necessity-is-the-mother-of-invention view as could be produced favouring the argument that for the most part only successful firms can afford to innovate.
The argument of slack versus necessity as a spur to innovation was resolved by a political scientist. He equated the politics of scarcity with repressive law, with law indistinguishable from custom, with redistribution of existing resources, and with suppression, as techniques of conflict resolution. The politics of abundance he equated with restitutive law, with variability between law and custom, and with the resolution of conflict by increasing the resources of competing groups.
“Abundance,” he said, “permits social choice to replace central decision-making,” so that “scarcity is associated with centralization, abundance with decentralization.”
Extrapolating from these statements, we find that firms near failure, if they innovate administratively, would tend to centralize and cut costs by firing people, dropping unprofitable lines, etc. These changes almost always occur in the area I call process innovation. They are introduced into the organization from the top down.
A successful firm, perhaps decentralized, permits decision- making at hierarchic levels below the top so that innovations can be introduced at many levels, including those in close contact with the environment. This increases the probability of marketing innovations as well as product and process innovations.
Outside the organization: Environment
In what kind of environment is an innovative organization most likely to flourish? The most obvious location is one where a pool of innovative people may be found, some of whom the organization can employ. For the constant stimulation of new ideas, there should be other organizations nearby that encourage innovation and employ innovators. Such conditions are met in areas that include universities and large numbers of independent research and development laboratories; in these areas there is likely to be considerable interchange of ideas among innovative people.
Information may be more rapidly metabolized if the organization is located near others that have the same or similar personnel requirements. This increases individual job mobility, and the individuals bring new ideas with them as they change from one organization to another. However, this has possible drawbacks. Creativity and innovation have been related to conflict, the resolution of which often requires innovation. Locating an organization near others similar in nature reduces the probability that conflicting ideas will penetrate the organization; and this, in fact, is what frequently happens.
Thus it appears that the organization must be located near similar ones to increase worker mobility, and near dissimilar ones to induce conflict and its subsequent resolution. The environment that provides both, as well as access to large numbers of innovative individuals, is that of an urban complex.
The innovative bureaucracy
What, then, would an innovative organization look like? Every variable we examined so far seemed to apply equally well to product, process, or marketing innovations, except one: decision-making criteria. Here we found that decision-making based on abstract criteria would stimulate greater innovation in the product and marketing areas compared with the process area. The reason is that decisions about actual production of a product generally involve concrete phenomena. If we classify all organizational decisions into two kinds—those based only on concrete criteria and those based possibly on abstract ones—we find that at the same time we have separated decisions made under certainty from those made under uncertainty.
Almost all the marketing and product-oriented decisions fall into the uncertain category, as do the personnel, financial, legal, and (some) administrative decisions from the process area. Only actual production decisions are made under certainty.
A semi-bureaucratic organization
Organize all the functions that develop from decisions under certainty into a monocratic bureaucracy and all the others into one almost-structureless unit without hierarchy.
The monocratic bureaucracy should be highly centralized so that product innovations or innovations in the process of production—innovations that arise in the structureless unit—can be installed quickly and efficiently. As a rule, the centralized bureaucracy will be concerned only with the actual process of manufacture. This is an arrangement with which we are familiar, but what about the other unit?
The structureless unit should be the organizational superior to the top of the already-established monocratic bureaucracy. Within this unit, teams are assembled around problems, with each executive a member of three or four different problem teams. No one heads more than one problem team at a time, but when head of a team she has responsibility for the final decision. The head also rates each team member for search and innovativeness, and for effective use of abstract criteria. All members in the unit receive bonus payments according to their ratings. Problem teams are dissolved as soon as a decision is reached. New teams and heads are assembled as problems arise. Everyone in the unit simultaneously is head of one team and a member of some others.
The ‘farm system’
By eliminating status we increase personal security, but job security is a more difficult matter. Perhaps the answer is for the organization to buy another organization and maintain it in a more traditional fashion. Then the latter organization could be used to guarantee jobs for anyone who wishes to be moved—or who should be moved—out of the statusless unit. The innovative organization would then maintain the manufacturing version of a bush league system, and positions in the “farm” organization could be guaranteed for everyone in the statusless unit. This would not be detrimental to the farm organization, for certainly everyone selected for the innovative unit already would have demonstrated competence more than sufficient for success in the farm organization. As a further benefit, those in the farm organization who exhibit unusual ability and the desire to participate in the work of the innovative organization could be moved up to it.
Executive exchange programme
To infuse new ideas into the organization, rather than require an artificially high turnover rate, the organization could establish an exchange programme with other organizations in similar activities, as well as with those in very different ones. Each person in the structureless unit would get leave, to be spent working in one of the cooperating organizations, which would send someone as a replacement. In this way the first unit would get the benefit of the visitor’s experience, and when the original member returned he would bring fresh ideas from his contacts in the second.
The exchange plan achieves the same things as enforced rates of executive turnover, and does so while maintaining stability in the system. In addition, it artificially solves the environmental problem of locating near and interacting with both similar and non-similar organizations.
Perhaps the remaining issue to be dealt with in the present context concerns the necessity for such an organization. Remember that the Weberian bureaucracy is still the most efficient form of organization for dealing with a stable environment. It is up to each organization to determine the characteristics of its present and future environment. Each organization must determine how much of a return it can expect from reliability, and also the rate at which reliability leads to obsolescence.
The resolution of these questions requires, of course, an innovative approach!

Philosophy in Medieval India

Philosophy in Medieval India
The major religious movements were brought about by the mystics. They contributed to
the religious ideas and beliefs. Bhakti saints like Vallabhacharya, Ramanuja, Nimbaraka
brought about new philosophical thinking which had its origin in Shankaracharya’s advaita
(non-dualism) philosophy.

Vishistadvaita of Ramanujacharya
Vïshistadvaita means modified monism. The ultimate reality according to this philosophy
is Brahman (God) and matter and soul are his qualities.
Sivadvaita of Srikanthacharya
According to this philosophy the ultimate Brahman is Shiva, endowed with Shakti. Shiva
exists in this world as well as beyond it.

Dvaita of Madhavacharya
The literal meaning of dvaita is dualism which stands in opposition to non-dualism and
monism of Shankaracharya. He believed that the world is not an illusion (maya) but a
reality full of differences.
Dvaitadvaita of Nimbaraka
Dvaitadvaita means dualistic monism. According to this philosophy God transformed
himself into world and soul. This world and soul are different from God (Brahman). They
could survive with the support of God only. They are separate but dependent.
Suddhadvaita of Vallabhacharya
Vallabhacharya wrote commentaries on Vedanta Sutra and Bhagavad Gita. For him.
Brahman (God) was Sri Krishna who manifested himself as souls and matter. God and
soul are not distinct, but one. The stress was on pure non-dualism. His philosophy came to
be known as Pushtimarga (the path of grace) and the school was called Rudrasampradaya.

new vaccine for malaria is up to 100% effective

A new vaccine for malaria is up to 100% effective when assessed at 10 weeks after last dose, according to the results of a clinical trial.

The vaccine called Sanaria PfSPZ-CVac incorporated fully viable — not weakened or otherwise inactivated — malaria pathogens together with the medication to combat them.

Malaria parasites are transmitted by the bite of female Anopheles mosquitoes.

The Plasmodium falciparum parasite is responsible for most malaria infections and almost all deaths caused by the disease worldwide.

Most of the previous vaccines which have been tried involved the use of individual molecules found in the pathogen. However, they were unable to provide sufficient immunity to the disease.

The study by University of Tubingen in Germany in collaboration with the biotech company Sanaria involved 67 healthy adult test persons, none of whom had previously had malaria.

The best immune response was shown in a group of nine test persons who received the highest dose of the vaccine three times at four-week intervals.

At the end of the trial, all nine of these individuals had 100% protection from the disease.

“That protection was probably caused by specific T-lymphocytes and antibody responses to the parasites in the liver,” said Professor Peter Kremsner.

The researchers analysed the bodies’ immune reactions and identified protein patterns which will make it possible to further improve malaria vaccines, Professor Kremsner added.

They injected live malaria parasites into the test subjects, at the same time preventing the development of the disease by adding chloroquine — which has been used to treat malaria for many years.

This enabled the researchers to exploit the behaviour of the parasites and the properties of chloroquine.

Once the person is infected, the Plasmodium falciparum parasite migrates to the liver to reproduce.

Malaria only breaks out when the pathogen leaves the liver, entering the bloodstream and going into the red corpuscles, where it continues to reproduce and spread.

As soon as the pathogen enters the bloodstream, however, it can be killed by chloroquine — and the disease cannot break out.

“By vaccinating with a live, fully active pathogen, it seems clear that we were able to set of a very strong immune response,” said study leader Benjamin Mordmueller.

“Additionally, all the data we have so far indicate that what we have here is relatively stable, long-lasting protection,” said Mr. Mordmueller.

In the group of test persons who demonstrated 100% protection after receiving a high dose three times, Mr. Mordmueller said, the protection was reliably still in place after ten weeks — and remained measurable for even longer.

The research was published in the journal Nature.

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