India Policy Watch #1: Fertility 2.0
Insights on current policy issues in India
— RSJ
First, the good news.
“India may have already surpassed China as the world’s most-populous nation in a milestone that adds urgency for Prime Minister Narendra Modi to create more jobs and ensure the country sustains its world-beating growth.
The South Asian nation’s population stood at 1.417 billion as of end 2022, according to estimates from the World Population Review, an independent organization focused on census and demographics.
That’s a little over 5 million more than the 1.412 billion reported by China Tuesday when authorities there announced the first decline since the 1960s.” (from Business Standard, 18 Jan)
We have argued for long on these pages that people are resources. They aren’t a problem. We have a governance problem if our default view of people is that they are a burden. We have a chapter in our book (HAVE YOU ORDERED YOUR COPY YET?) explaining why ‘aabadi isn’t barbaadi”. There’s an extract from that chapter in the next section of this edition.
Here’s another news item that caught my attention this week:
“State-run Rashtriya Chemicals and Fertilizers Ltd (RCF) and National Fertilizers Ltd (NFL) plan to build five new factories to manufacture super-efficient nano-urea under a licence from IFFCO Ltd, a development that promises to ease India’s mounting fertilizer subsidy burden.
The two companies have signed arrangements with IFFCO, a producer in the cooperative sector which holds the patent for nano-urea, a person aware of the matter said on condition of anonymity. They will pay royalties to IFFCO for producing nano-urea, a nanotechnology-based product 100 times more efficient than conventional urea, which will shrink the quantity of fertilizer usage and thereby lower the subsidy burden. It also boosts nutrient availability, enhances productivity, helps soil health and reduces the carbon footprint in fertilizer production.”
(from Mint, 19 Jan)
It is useful to appreciate why policymakers and well-meaning thinkers over the ages have worried about population increase. One mental model we have is about the finiteness of resources available on earth to support human life (or life in general). There’s a biological load that the planet can support, and after this limit has been reached, we will face scarcity. Malthus, who was among the first to articulate this, put it simply - the growth of human population is exponential, while food and other resources needed to support life grow linearly. And unless wars, famines or other events correct this, we will hurtle towards a ‘Malthusian catastrophe’. He wrote about in the late 18th century with a warning that unless preventive checks on population are done at a policy level, the catastrophe might be upon us by the mid-19th century. Of course, we know it didn’t turn out that way. What happened then? It is difficult to prove this conclusively, but it is likely that spontaneous order worked. As demand increased, producers searched for additional resources like new arable land (maybe more colonialism), worked harder (two crop cycles instead of one) or became more productive through technology (early mechanisation of agriculture using tools of the industrial revolution). Yet, there was a lurking feeling through the late 19th and early 20th century that we might reach the limit of sustenance.
Till Haber and Bosch did their thing.
Plants need nutrients, specifically N (Nitrogen), P (Phosphorus) and K (Potassium). NPK plus water and the sunlight is the only way to convert solar energy into food. Plants get these nutrients from the soil. When they die, they give them back to the soil. This is how life sustains itself. But this wasn’t enough to sustain a civilisation. We needed more plants, and soon we realised we had natural limits of these nutrients. Among them, Nitrogen was the most elusive. It is the most abundant element in the atmosphere, but it is available in an inert form. And it was almost impossible to isolate it. There were workarounds to this. Certain plants (like legumes) could ‘fix’ Nitrogen from the atmosphere. That is, their rhizomes could support bacteria that could convert the inert Nitrogen into ammonia that could then enrich the soil. Or, we found large guano deposits in Chile and Peru, which were rich in Nitrates, and we exported them worldwide. But these weren’t enough to sustain the ever-growing demand for food. Synthesising ammonia became one of the great scientific problems of the time.
In 1909, a German scientist, Fritz Haber, achieved this breakthrough in his lab. Soon, he and a BASF engineer, Bosch, translated this lab experiment into a commercial process. Ammonia could now be mass-produced. It was not the most efficient process because it required a lot of fuel. But, it revolutionised agriculture production around the world. It was possibly the single most important innovation of the 20th century that had no shortage of great ideas. Agriculture productivity grew between 3-5 times across most countries in that century, and it is safe to say urea and synthetic fertilisers were the single biggest reason for it. Haber-Bosch process is a wonderful example of human ingenuity where a technological breakthrough unlocked a new productivity frontier when we had thought we had reached its limit.
But this came with costs. There’s no elegant way for plants to absorb Nitrogen from urea. It has to be spread on soil and then sprayed on leaves. About 30-40 per cent of it gets used at best. The rest is wasted. It leaches into groundwater and rivers and kills aquatic ecosystems. They eventually end up in our food and into us. The production of urea requires a huge amount of fossil fuel. Nitrous oxide, a greenhouse gas, is a byproduct of the Haber process. The environmental impact of synthetic fertilisers has begun to undermine their benefits. It is still a force of good but with an asterisk next to it.
In India, we have an additional burden of fertilisers. Fertilisers are expensive to manufacture. The input costs keep going up. A 45 kg bag of granulated urea costs about Rs. 4000 to manufacture. This is unaffordable for most Indian farmers, or so the government believes. So, it subsidises fertilisers. The farmer gets the same bag for Rs. 266. The government (and therefore the taxpayer) pays Rs. 3750 per bag for this subsidy to the fertilizer manufacturers. Put together, the annual fertiliser in India totals Rs. 2.5 lakh crores (trillion). It is not a small number. It is about half of our total healthcare spend. We, here, take a dim view of subsidies. Subsidies distort markets and create deadweight losses. The producers (often government entities in India) don’t have the incentive to be competitive. Private players don’t have an incentive to come in. They are delivered inefficiently and do not often reach the intended recipients. Then there are interest groups formed to perpetuate the subsidies because they benefit from them, and this leads to rent-seeking behaviour from the state. And, finally, all of this is funded by the State whose track record of using taxpayers’ money in the most effective manner is dismal. There’s no economic rationale to justify subsidy. Yet, once you have gotten this gravy train going, it is impossible to bring it to a halt. You can argue that India shouldn’t have so many marginal farmers in the first place who find urea prices impossible to afford. That getting these farmers out of agriculture is the only viable future for them. But there’s a human cost to pay in the short term to go down this path. There’s electoral cost too. So, we will continue down the path of ever-increasing fertiliser subsidies and dig ourselves into a deeper hole. And, we will have the union minister for fertilisers proudly claiming that we will have a 40 per cent increase in subsidies during this year.
That brings me back to the news item about nano urea. India is setting four new plants, apart from the one already in production, that will manufacture nano-urea under a licence from IFFCO Ltd. Nano urea seems like some miracle drug. On paper, if one were to believe the hype, it is 100 times more efficient than conventional urea, will boost crop productivity by 20 per cent, improve soil health and reduce carbon footprint. The patent is held by IFFCO based on the work done by a young Indian scientist, Ramesh Raliya, who returned from the US to set up Nano Biotechnology Research Centre with IFFCO. There have been some field pilots done, and based on that, the fertilisers ministry has decided to double down on production. I hope they have been scientifically rigorous on the tests and aren’t buying their own hype.
Let me take just take the claim that nano urea is super efficient by, say about 80 per cent (not some 99 per cent that the literature shows). What does it mean in terms of urea consumption? Liquid nano urea will replace the urea that’s spread on leaves and plants directly. It won’t possibly substitute the urea spread on the soil. I could be wrong here, but that’s my understanding reading through the patent that’s filed. If this were true and 50 per cent of urea is what’s sprayed directly on plants (which is where efficiency will be seen), we would see a net reduction of about 40 per cent of urea consumption.
Let’s keep it at this broad level. The total subsidy budget for next year is likely to be about Rs. 2.5 lakh crores. Urea accounts for about two-thirds of the total subsidy, which comes to about Rs 1.7 lakh crores. And we might eventually end up saving about 40 per cent of it. That’s a cool Rs 70,000 Crores. I mean, why build 5 factories? Build 50 and start exporting this. Besides the subsidy savings and the impact on the current account because of lower imports, there is all the positive impact on the environment and carbon footprint. It seems too good to be true.
But that’s what the Haber-Bosch process looked like when it was used commercially. “Bread from air” was how people saw it. Like they say, any sufficiently advanced technology is indistinguishable from magic. Well, I’m rooting for nano urea to live up to its hype. It will again show that the answer to our problems is not to go back on scientific progress and development. It is to find a forward-looking solution for the problems that’s brought upon us by the progress of the past. Science will ultimately solve the problems created by science.
Jan Nisar Akhtar (father of Javed Akhtar) wrote this line in a song from Chhoo Mantar (1956):
“Tumhi ne dard diya hai,
tumhi dawaa dena”
(God, it is you who has given me this pain, and it is you who must provide succour too).
Akhtar was talking about God. He might as well be talking about science.
An Excerpt from Missing in Action: Why Should You Care About Public Policy
— A chapter from our upcoming book that releases tomorrow
Chapter 25: Aabadi Isn’t Barbaadi
There was a time not so long ago when a population clock (counter) would play for a few ominous seconds on Doordarshan (DD). During the ‘80s, the State-run DD was the only channel in the country and right in the middle of a film or an episode of B.R. Chopra’s Mahabharat we would see the counter ticking away furiously, eighty-one crore Indians and counting. Thus sobered about the grim reality of our population, we would go back to the fifth day of the great war wondering about Abhimanyu.
Over the years, governments of all hues have viewed our population as a problem. This is a view that most citizens also hold because this has been drummed into their heads. Population explosion or ‘janasankhya visphot’ is a hook on which Indians hang a lot of their problems. People are seen as hungry stomachs to feed rather than enterprising brains that can contribute to prosperity. From an economic perspective, population is a neutral variable. It can be good or bad depending on the context. We will examine it in the Indian context in this chapter.
The supposed ills of a large population have an outsized influence on our policymaking. The near-death experience in the mid-60s when we were in danger of being a global basket case casts its long shadow on our thinking. The idea that the human population would outpace farm productivity leading to hunger, pestilence and deaths has been debunked over the years. The role of human capital, institutions and ideas on productivity have been established by economists like Solow and Romer. Yet we persist with the Malthusian notion.
As Julian Simon argued in his 1981 book The Ultimate Resource, we are an intelligent race who innovate in the face of scarcity. Human ingenuity is the ultimate resource that can make other resources plentiful. More humans lead to more ideas, bigger markets, larger infrastructure spending and, paradoxically, higher prices for scarce resources, which leads to conservation or search for replacement products. There is empirical evidence to support this has been good for the world over the last century.
Pitted against Simon was Paul Ehrlich whose 1968 book The Population Bomb was a stronger and more logical update of the Malthusian argument for a different era. Ehrlich believed human exploitation of resources would make them scarcer and costlier until we ran out of them. Famously, in 1980, Ehrlich and Simon placed a bet on the future prices of five metals ten years later. Here’s Ronald Bailey in his book The End of Doom (Thomas Dunne, 2015) about the bet:
In October 1980, Ehrlich and Simon drew up a futures contract obligating Simon to sell Ehrlich the same quantities that could be purchased for $1,000 of five metals (copper, chromium, nickel, tin, and tungsten) ten years later at inflation‐adjusted 1980 prices. If the combined prices rose above $1,000, Simon would pay the difference. If they fell below $1,000, Ehrlich would pay Simon the difference. Ehrlich mailed Simon a check for $576.07 in October 1990. There was no note in the letter. The price of the basket of metals chosen by Ehrlich and his cohorts had fallen by more than 50 percent. The cornucopian Simon won.
Population isn’t a problem. The ability to tap human capital to produce ‘catch-up’ growth and ‘cutting-edge’ growth is the issue in India. We have failed to create institutions or policy frameworks that enable the ultimate resource. As Nitin Pai, director of the Takshashila Institution, a think tank, puts it eloquently: under-governance, and not overpopulation, is India’s problem.
To say that our public institutions have the capacity to handle only so large a population is not an argument to reduce the population. It is an argument to enlarge the capacity of our public institutions. Like Procustes, we cannot chop off the legs of sleepers who were too tall to sleep on his bed. We need longer beds. Enlarging capacity is about better ideas, better technology, better people and more people engaged in governance. It is wholly wrong to attribute our failure to scale up governance to keep pace with population growth to ‘overpopulation’. (Source)
Nevertheless, we continue to blame our population. Several prime ministers in the past have failed to appreciate this and PM Modi, in his address to the nation on 15 August 2019, followed the same line. This sentiment is shared by large sections of our society too. It’s not difficult to find Malthusians opposing migration on the grounds that there are just way too many people in their city.
We will get older before getting richer. That is the plain truth. At a mere $2000 per capita income, we are sliding below-replacement fertility rate in most of the states. This is a bigger problem than our imagined overpopulation. In 2040, we will be an old, low-income country lacking a social security net. At this time, the only moral imperative is income growth. Everything else pales in comparison. But we continue with false trade-offs between growth and other higher-order virtues—equity, environment and national pride. This is not to argue that these aren’t important. But we should consider our priorities as a $2000 per capita income economy. Not what we imagine ourselves to be.
….
Not(PolicyWTF): Pausing Before Preaching
This section looks at surprisingly sane policies
- Pranay Kotasthane
Our judiciary sometimes behaves like a panchayat. Some court orders preach so much that they resemble WhatsApp rants by your neighbourhood uncle. Then there’s also a tendency to succumb to the performative pressure in today’s times, where every decision needs to take a moralising tone rather than confront tough trade-offs.
However, the judiciary surpassed itself on at least two occasions in the last two weeks, and it deserves all the appreciation for it.
The first instance was its Jan 10 order on a petition demanding an urgent Supreme Court hearing on the Joshimath land subsidence issue. Taking a pragmatic stance on the issue, the Chief Justice of India deferred the hearing by a week on the grounds that:
"Everything which is important in the country need not come to us. There are democratically elected institutions to see this. They can deal with what falls under their control. We'll keep it on 16th” (LiveLaw)
In normal circumstances, the Court would have gone on a “development vs environment” tirade, which would have helped none. For acknowledging that it cannot—and doesn’t need to—solve everything wrong, the Supreme Court deserves praise.
On Jan 16th, the Supreme Court stuck to its guns, explaining that it could not intervene since the Uttarakhand High Court was already considering the issue.
"You don't want to use this issue for social media sound bytes. From the order of the High Court, it seems that the issues raised are in an IA before the High Court. Over and above if you have any other issues, we can give you liberty to approach the High Court with them. (LiveLaw).
It’s rare when institutions resist the temptation to expand their scope, and for this reason, the Supreme Court’s order stood out.
The second reason was, of course, the Supreme Court Collegium’s decision to respond publicly to the union government’s objections regarding certain appointments.
The objections by the union government were comical and sad at the same time.
In one instance, the government opposed the appointment because of the person’s sexual orientation and because he had a Swiss partner. Laughably, the sole premise of the union government’s opposition to the current method of appointments is that it lacks “transparency, objectivity, and social diversity”.
In another instance, the union government didn’t like that a candidate shared an article criticising the PM. The government isn’t even pretending that the judiciary needs to align with the government’s views. In the third instance, the union government didn’t like the fact that the candidate was “highly opinionated and selectively critical on social media.” Note the importance given to the candidates’ social media profiles.
We’ll see more chapters of this stand-off between the judiciary and the executive soon. But for now, the judiciary’s forthright stance against the government’s ludicrous objections deserves praise.
India Policy Watch #2: Another Impossible Trinity
Insights on current policy issues in India
— Pranay Kotasthane
The “impossible trinity” or the “policy trilemma” is a useful thinking aid. The framework is represented a choice among three favourable options, only two of which are possible at the same time. There’s nothing scientific about it, but it can help shed light on the trade-offs involved.
For instance, living in many Indian cities can be represented as a trilemma between these three parameters:
A decent standard of living: means that a median resident can afford a dignified dwelling, can commute without fearing death or disability, and can breathe non-hazardous air most of the time.
Economic dynamism: means that the place offers a wide range of economic opportunities at all income levels. &
Individual liberty: means that a place allows an individual to be herself, where community beliefs do not suppress individual initiative, preferences, and expressions.
Some intentionally broad generalisations follow from this characterisation. Most of our smaller towns offer a reasonable standard of living but no economic dynamism and little individual liberty. Places like Goa and perhaps cities in Kerala offer a decent standard of living and individual liberty but far fewer economic opportunities. Cities such as Mumbai, Delhi, and Bengaluru offer economic dynamism and higher individual liberty but come at the expense of losing a decent standard of living. Finally, there are cities in Gujarat which might offer you economic dynamism and a reasonable standard of living, but then you might have to eat meat sheepishly and consume alcohol surreptitiously.
Does this trilemma make sense to you? And are there places that have resolved this impossible trinity?
HomeWork
Reading and listening recommendations on public policy matters
[Paper] This USIP paper explains the methods used in judicial appointments as a trade-off between independence and accountability rather well.
[Book] Another edition compiling lessons from policy successes, this time from the Nordic countries.
[Paper] Smriti Parsheera’s paper on the governance of Digital Public Infrastructure in India is essential reading for anyone interested in technology policy. A critique by Rahul Matthan is here.
#197 Everything for Everyone All At Once