The scarcity mindset and the real scarcity in India

For a long time after independence we still believed that resources are in shortage and everything needs to be rationed and controlled else things will go horribly wrong. This closed scarcity mindset led to policies which caused shortage of telephone connections, scooters, cars, foreign exchange, food grains  etc. The other side of the scarcity mindset was to protect the person producing these goods or services - whether it was inadvertent or not I leave it for you to judge. The field was not opened to competition even among domestic players.  so you had two car manufacturers for almost 35 years, one telecom provider for 50 years and so on.

With great difficulty, we have expelled this in many areas of life such as goods of consumption, electronics, automobiles etc but wherever the government is still  the main producer or the Government controls the activity tightly and the licences are not on tap - the same situation is seen. Needlessly to say all natural monopolies are suffering.

Let us take railways as an example and apply the scarcity mindset on it. 

Here is how the scarcity mindset works and the solutions it brings out:  

Railways is an important national asset. All classes should have equal claim on it. The rich and upper castes cannot dominate the field. We need to be more fair in the allocation of capacity on railways. So we propose following solutions

• There are not enough resources to create additional rail capacity. So we should give reservation on the rail seats to poorer people - so we shall have 22% reservation in  seats on trains  for SC/ST and 49% reservation in seats on trains for OBC.
• Ticket prices will be capped and will be decided by the Government ( not by regulators or by the management of Railways) as people cannot afford railway tickets.
• Capacity of a/c coaches will be reduced as the rich eat into the capacity of the poor.
• There are not enough jobs in the nation so we need to reserve jobs in Railways for SC/ST and OBC. We need to reserve slots in promotion for OBC. 
• Private sector cannot be trusted -we have to do everything

Even if all the statements made by this mindset are true and the people are "honest", the result of such a mindset is that it removes vitality from this field and leaves it stagnant for decades.

Thankfully no politician has thought of these things in Railways yet - but you never know !!

Here is how an expansive mindset works:

Railways is a key asset for the nation. It has a great multiplier effect on trade, spread of knowledge and skills and tourism. Hence we need to create capacity for the railways to handle as much traffic as may be necessary

• Railway has demand from rich and poor. the rich are willing to much more for air travel so they will pay good amount for train travel. They otherwise spend a lot and fly or drive. So treat this spending power  as a blessing and have lot of capacity at the top-end with very high end product. Use these profits to provide more services at fair price at lower end. This is essentially a variant of the Free-mium model.
• There is a lot of footfalls at the railway stations. Railway stations are early 20th century buildings. The land is used poorly There is tremendous scope to change them and create  malls, ATMs, food courts and boost the cash flow of the railways. 
• Railways should do what it does best and outsource the rest - just because the honey collector will lick his fingers and steal some honey, we should not go and collect honey.
• Railways can touch the lives of tens of crores of people indirectly and just 10 lakh people directly. So it is better to keep it efficient. At best, 5-6 lakh jobs can be given to "disadvantaged" but an efficient railway can get  economic mobility  to crores of people. So we should not interfere in running of railways and reduce its efficiency.

You can substitute railways for education- schools, colleges and technical training institutes, electricity, water  or for that matter anything  else for which there is a shortage and you will find the mindset  and its downstream effects namely stagnation or inefficiency and shortages.

The other aspect that needs to be exorcised from the national political conscience is to control everything and try to give an equal deal not a fair deal. The quest for  equality have led to creation of important national assets at the wrong places. Picturesque Himalayan landscapes have been industrialized  using artificial incentives which distort the market so much that even a honest businessman could not stay away lest he lose in the market place. Once these incentive periods ran out, these assets are getting shut down as there is no logic in keeping  them there without the incentives. No one gained from this attempt at artificially increasing the industrialization of the Himalayan landscape to the same extent of industrial clusters in say Maharashtra or Karnataka or Tamilnadu. Perhaps all that was required to provide an economic plan suited to its ecology and its strengths.

Another example is the setting up of IIT and IIMs in places which have no ecosystem to support them. IIT Bombay attracts hundred of applicant for faculty positions and IIT Jodhpur hardly gets any applications and even if some one does join he leaves in short time as there is nothing to do for his spouse - a very real criteria in todays day and age. So we have problems of plenty at one institution and utter drought at another. Instead the government could have surveyed what the public in Jodhpur wanted and perhaps given them infrastructure to  say double tourist arrivals.

The aspirations of the country are exploding. In most areas, no amount of fairer division of the output can satisfy the public's demands as there is not enough output  or output of desired quality. The solution is to have an expansive mindset and expand the productive capacity of the nation.

We need to scale up services and goods in short supply. Even the most intelligent and honest leaders with the scarcity  and control mindset cannot really solve these problems. It is not honesty or intelligence that is the missing ingredient, it is the expansive mentality that things can be solved by expansion of human endeavours ie a "We can" attitude.

The scarcity and control psyche is so deeply embedded in our country's psyche, perhaps due to the 200 dark years from 1750 to 1947, that it is taking a long time to go away.

For example if we can expand the production to top class engineers from say current 50000 per year to 300000 per year and expand production of skilled workmen in similar proportions we can have the world auto industry and light engineering industry for breakfast.  These may appear impossible but we should not forget that the right leaders and right policies could expand mobile tele-density more than 100 fold in 6 years from 2001 to 2007.

There is no real shortage of anything in India except that of 

1. exceptional  leaders who do not have a scarcity and control mindset and that of 

2. citizens who will recognize such a leader and give him the mandate to rule.