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Socialistic Bottomlines - Prasoon Majumdar - The Sunday Indian
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Friday, October 20, 2017

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Socialistic Bottomlines


Lessons from the private sector on providing world-class services
PRASOON MAJUMDAR | Issue Dated: July 5, 2016, New Delhi
Tags : Prasoon Majumdar |

It is quite interesting to observe that the Government, both at the Centre and State level, which is considered to be the biggest provider of public goods, has not succeeded in making its services available to the rural hinterlands or to the underprivileged, marginalized population in urban India. On the other hand, private companies have not only made their services available to most of those regions and populace which the government could not reach; and yet, have created mammoth businesses out of the same market.

This isn’t a new phenomenon. This trend has been visible and has been sustaining for over a decade. But strangely, policy makers have yet not taken any cue from the private sector and have not made any breakthrough towards delivery of even those services that still remain the mainstay of the Government or under its strict regulation. A case in point is the availability of organized finance. As per reports, if a salaried employee in any Indian city today applies for a car loan, he ends up getting a deal from most of the nationalized banks at an annual interest rate of 7 to 8 percent, whereas if a farmer applies for a similar loan (say, for a tractor), he would not get it anywhere below 14 percent, that too post the intervention of the sarpanch (village head), and after greasing the palms of officials. As a result, the credit ratios of banks pan India are falling. This situation gave birth to a flourishing micro-finance industry (MFI), which is churning out thousands of crores of loans by providing doorstep services to the very same population unsupported by banks. In a span of less than 15 years, Bandhan, the largest MFI in India, has almost Rs. 10,000 crores of booked loans, with a client base of 6.5 million, operating out of 2000 plus branches, in 22 states. The collective loan portfolio of the micro-finance industry is above Rs. 50,000 crores, catering to an almost staggering 100 million households. And now, with RBI permitting small bank licenses, these micro-finance companies would be able to reach the doorstep of clients, and make money too.

Another case in point is the area of mobile phone services. While fresh, potable, drinking water and hygienic sanitation still remain unprecedented casualties in most parts of India, it would be impossible to find a household in the remotest of locations without mobile phone services – provided there is availability of power. And it is not just about network penetration reaching villages hitherto untouched by land lines; it is also about the providing of flawless mobile services by private operators. And the result is that most of the mobile operators have been successful in creating a healthy revenue stream; and even those who haven’t yet, have paved the way for future revenues. Bharti Airtel, India's largest mobile operator, has a customer base of 265 million in India alone. If one were to add up the user base for all service providers, the figure has crossed a billion.

Likewise, there are innumerable examples of institutions and companies who have successfully catered to and made profitable money from domains where the government has more or less failed. The question which arises now is, why is it that the government, both at the Centre and State, fails to deliver?

One of the key reasons for this government failure is the discriminatory treatment meted out to applicants of these government services. It is an overriding feudal mindset that compartmentalizes the ‘kind’ of service that gets eventually delivered. Go to any rural hinterland... Starting from the roads to sanitation, from education to health, from electricity to availability of basic services, everything is of such appalling quality. How is it possible that in villages after villages, slums after slums, ghettos after ghettos, every minutest of government service available is substandard and even outrightly inhuman? Is it because the government believes that people living in such conditions deserve third-class and absolutely sub-standard services? I feel this actually might be the case. Globally, in most of the developed world and increasingly in the developing world, those are the farmers, artisans, skilled labourers, who are amongst the highest earners and are endowed equally with all basic services, as compared to every other citizen in the country. In India's case, it seems to be just the absolute reverse.

In principle, private companies have treated all their clients equally, irrespective of where they stay, what they earn, what they do, which caste or religion they belong to... – equally! They have also taken their services to the doorstep of these clients, giving them the due respect. These companies have showcased that it is not just the government that might carry the apparent tag of promoting ‘socialism’.  It is more about offering the best, non-differentiated services and at the right prices. If not for anything else, the government should take a few lessons from the private sector to learn how to respect the citizens of its nation!

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Issue Dated: Feb 5, 2017