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Smart or dumb: Cities should be safe

Bhubaneswar emerged as the top candidate among the 20 cities chosen to be part of the Government of India’s Smart Cities Mission. One hopes that the plans of turning the city into a smart one will include strengthening risk resilience, particularly in places that are supposed to ensure safety and health of the citizens.

By Nidhi Gupta (@nidhi1902)

Image credits: NAVFAC (Monthly Safety Stand Down) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Image credits: NAVFAC (Monthly Safety Stand Down), via Wikimedia Commons

A major fire that broke out earlier this week in the SUM Hospital in Bhubaneswar took lives of over 20 people and caused injuries to over 100. The fatalities caused were mostly patients who were on ventilator support in the ICU ward. One was immediately reminded of the fire that broke out at Murshidabad Medical College and Hospital in August this year and the one at the AMRI Hospital in Kolkata in 2011. Given the large number of hospitals that the country has, these incidents of fire may seem statistically insignificant. However, some places of safety (like the hospitals, police stations, etc.) are expected to not only have zero tolerance for human negligence and errors, but also a foolproof disaster management plan. Incidents such as these point to our society’s stubbornness to not learn from history and to our Government’s callous attitude towards loss of life and property.

A healthcare facility in Odisha is governed by the Odisha Clinical Establishments (Control and Regulation) Act, 1990, which lays down standards relating to fire safety. However, it has been reported that only 3 hospitals out of the 568 in Odisha currently have the clearance from fire department and most of the hospitals lack the basic fire-fighting equipment. Moreover, SUM Hospital did not follow fire safety norms and overlooked an advisory that was issued to them by the fire department in 2013. While the hospital management at the SUM Hospital has asserted that owing to diligence shown by its staff the casualty number was low, it can be argued that there should have been no casualties in the first place.

Passing the buck around or offering some monetary compensation does little to console the victims’ grieving families. Reactionary measures like suspending hospital staff (as in the case of SUM Hospital) or board of directors (as in the case of AMRI hospital) cannot be substitutes for ensuring the structural and operational resilience of hospitals. It is of utmost importance that the healthcare facilities in our country are regularly audited for compliance with safety standards and that the staff is periodically trained on safety and evacuation. It is also imperative that the management of facilities found with dubious certificates are heavily penalised. The National Disaster Management Authority (NDMA) of India has issued very comprehensive guidelines for hospital safety, including those for fire safety in hospitals. While these guidelines are not binding, it is expected that hospitals implement these in earnest and be prepared to handle any disasters and be optimally functional immediately afterwards in order to respond to the medical requirements of the affected community.

Bhubaneswar was ranked first in the Smart City Challenge competition held by the Government of India earlier this year and is one of the 20 cities each of which will receive Rs 1000 crore of funding from the Centre and the State Governments. One sincerely hopes that the emphasis being laid to improve “quality of life” for the citizens will also include measures that ensure that the lives of the said citizens are first protected.

Nidhi Gupta is Head, Post-Graduate Programmes at the Takshashila Institution and tweets at @nidhi1902

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Six Things That Trigger Government Action

While enough has already been written about the ban on surge pricing by taxi-aggregators, this policy measure is an interesting case study to analyse what are the factors that led to the Karnataka and Delhi Governments’ decision to spring to action and respond with such a policy measure. The hypothesis of this article is that there are six things that incite governments to ‘do something’ in a situation. Here is a list of the factors, in no particular order. Neither is the presence of all these factors at the same time essential, nor are the factors mutually exclusive.

  1. Descriptive or vividness bias: Descriptive bias is one of the cognitive biases in evaluation. According to this bias, information that is vivid, descriptive, and visually stimulating has a greater impact of being registered as valid evidence regardless of how close it is to reality. Thus, campaigns and protests that have vivid imagery circulated through media tend to strike a chord with the masses and the government alike. Thanks to social media, such vivid images go viral very quickly and garner a sense of urgency with which the issue in question must be responded to. For instance, in the case of surge pricing, the pictures showing 2.8X, 3X went viral and caught people’s and Mr Kejriwal’s attention.
  1. Need to respond to interest groups: Governments can be coerced into action deliberately or unconsciously by various interest groups, such as labour unions, auto unions, OBCs, etc. More likely than not, the government looks at these interest groups in terms of gaining an electoral advantage. By terming the surge pricing as “daylight robbery” by cab-aggregators, Mr Kejriwal wants to portray this image of the protector of the interests of middle-class, who are the typical user of taxis, while simultaneously endearing himself to the auto-rickshaw drivers, who are purported to be among his staunchest supporters. Another important group is the government itself, which has vested interests in the success of its policies. The reinstatement of the odd-even policy by the Delhi government, led to a scarcity of commuting options for the public. One can surmise that because the government did not want to withdraw its already rolled-out odd-even policy, it reacted with another policy measure to tackle the scarcity.
  1. Sense of violation of fairness: All governments try to maintain the perception that they want fair and equitable outcomes for their people. As soon as there is a sense that fairness is being compromised in favour of one or the other groups, governments decide on actions that restore a sense of fairness. Again, the middle-class was portrayed as being shortchanged in case of surge pricing.
  1. Judicial activism: As per Indian law, an individual, an institution, or a non-governmental organisation (NGO) may approach the courts of justice to file a Public Interest Litigation (PIL) to raise issues of broad public concern and demand social justice. Typically, the litigants use PILs to focus the attention of people and government toward matters related to larger public interest especially in the areas of human rights, consumer welfare, and environment.
  1. Mistrust towards MNCs/private enterprises: More often than not governments treat private enterprises, especially large multi-national corporations, with suspicion. Any perceptible large-scale action on behalf of these enterprises immediately makes the government vigilant and ready to take action. Further antagonism builds up because of the past reputation of an entity, particularly if there has been bad press. This can lead the government to treat every future action by the said entity with caution and exaggerated measures. With a rape case being filed last year against one of the Uber drivers, the cab-aggregators have since been under the government’s scanner.
  1. Government’s urge to regulate: The government finds it difficult to let go of its urge to be in the driving seat and hence it often responds in order to take control of situations that are otherwise best left to market forces. For instance, technological innovation is omnipresent in today’s world and the government is not always nimble enough to respond to the fast pace of technology. As a result, the government reacts by establishing regulations, especially in the short-term, that help them rein in the pace of technology while the government itself thinks of long-term solutions. The government regulates taxis and auto-rickshaws by issuing limited number of licenses to ply. Drivers’ unions also help maintaining the status quo that governments know how to navigate. Taxi aggregators have broken this system, and Uber was also criticized for operating beyond any such oversight world over.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902


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Budget 2016 – Higher education remains in focus

In this year’s union budget, the Finance Minister (FM) announced an increase of 7.1% in the allocation towards education. Overall, Rs 72,394 crore have been allocated in 2016-17 for education, as against Rs 67,585.5 crore in the revised estimate of 2015-16. The revised budget for 2015-16 reduced the overall education allocation to Rs 67,585.5 crore from Rs 69,074.76 crore as was pegged in the budget estimate.

Out of the total outlay of Rs 72,394 crore, Rs 43,554 crore has been earmarked for school education and literacy and Rs 28,840 crore for higher education. While school education saw an increase of 2.4%, higher education sector received a raise of 14.4% in the planned outlay as compared to the last year. This is indicative of central government’s focus on higher education in comparison with school education. In fact, the preference for higher education is also substantiated by the fact that while the demand for grants by the department of higher education has been met with matching budget allocation for two consecutive years, there has been a shortfall of roughly 20,000 crore in the case of elementary education.

Higher Education Budget Trends

Indeed, Mr. Jaitley announced the setting up of a Higher Education Financing Agency (HEFA) with an initial capital base of Rs 1,000 crore. He stated that the aim of HEFA is to finance improvement in infrastructure in top institutions. While HEFA is much needed and could go towards supporting better research and development infrastructure, details on it are missing from the budget documents and it is not clear yet to which institutions this money will be allocated.

As noted by the FM, HEFA will be set up as a not-for-profit and could leverage CSR funds. It is interesting to see how the Government defines the agenda for CSR funds for its own schemes and initiatives, whether it is the Swachha Bharat mission or now the HEFA.

The FM also said that, “an enabling regulatory architecture will be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions”. To give teeth to its commitment of promoting research, the government has also pegged Rs 236 crore under a new sub-heading research and innovation with announcement of schemes such as “IMPRINT” “Unnat Bharat Abhiyan” and “Uchhatar Avishkar Abhiyan”. However, it is interesting to note that barring Rs 10 crore for Unnat Bharat Abhiyan, which is aimed at identifying development challenges in rural India and coming up with sustainable solutions, the remaining Rs 226 crore is directed towards research and innovation in technology and engineering related challenges. Importance given to research in social sciences is thus trumped by that set for natural sciences.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902

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Using behavioural economics insights for vector-borne diseases

Aiming for better health outcomes without addressing the behavioural roots of health problems is bound to be unsuccessful.



A recent public health issue that has made global headlines and has caught the imagination of public health practitioners the world over has been the spread of Zika– a virus that spreads through mosquitoes. While it hasn’t yet been conclusively established, there’s increasing evidence of the connection between the virus and microcephaly – a birth defect that causes brain damage in foetuses. This possible link between the virus and microcephaly has sent alarm bells ringing. The virus has infected people in more than 20 countries in Central and South America and the Caribbean and has the potential for further international spread. With the World Health Organisation (WHO) declaring the spread of Zika virus as an international public health emergency, countries around the world are announcing a slew of policy measures to tackle the outbreak and spread of the virus.

The WHO estimates that more than half the world’s population is at risk from vector-borne diseases (spread through mosquitoes) and that more than one million people die every year from such diseases. Low- and middle-income countries with high incidence of poverty, tropical weather – in which mosquitoes thrive and fragile public health systems are normally at a higher risk for spread of vector-borne illnesses. Clearly, vector control is the most important tool in preventing the outbreak and controlling the spread of such diseases. Indeed, as has been in the case of Zika, fumigation, distribution of mosquito repellant and vaccine development are the immediate measures that various countries adopt. Other solutions promulgated range from the benign travel advisories to the more controversial ones advising women to not get pregnant until the crisis has passed.

However, it is important that any policies for vector control do not just rely on traditional methods but also include insights from the recent advances in behavioural economics. This branch of economics, which has made inroads into public policies (at least in the US and the UK), counters neo-classical economics in that it does not assume (and rightly so) human beings to be fully rational agents when it comes to making decisions and choices. Various research studies in this area have shown how humans tend to consistently make sub-optimal choices. One of the insights is that of present bias, wherein the human mind disproportionately weighs present costs over future benefits and hence makes people deviate from their own desired behaviour. For instance, the cost (time and money) of getting a vaccination today outweighs the unseen future benefits and hence many people (especially the poor) delay getting the vaccinations. The researchers have also studied and proposed how policies – often termed as “nudges” can be designed that match people’s actual psychology. Typical health ailments that have been targeted through nudge approaches are obesity and smoking. However, the concept has not yet found currency to fight the diseases of the global South.

As human beings are at the centre of all policies that are aimed at improving public health, achieving improved health outcomes is nearly impossible without addressing the behavioural roots of health problems. It is therefore critical that developing countries’ large-scale public health policies to contain the spread of vector-borne diseases must utilize the insights from behavioural economics.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902


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Sikkim shows the way

Sikkim has spearheaded the Organic India Mission and has emerged as an example worth emulating. It has taken visionary leadership, political will, and concerted efforts of many state departments to bring a dream to fruition.


As if the beautiful landscapes, the majestic mountains, the friendly people, the peaceful monasteries and the delicious momos at every corner weren’t enough to add to the charm of Sikkim, it has recently become India’s first fully organic state. What this means is that the 60,000 hectares (600 sq. kms) of agricultural land in the state is now used for sustainable cultivation through implementation of organic practices and principles. That the state has the smallest agricultural land in the country, has a delicate Himalayan ecosystem with nearly 66 percent of the population dependent on agriculture or a related activity, presented an uphill task for those working towards realising this mission of transforming Sikkim to an organic state.

It was in 2003 that the Chief Minister of Sikkim, Pawan Kumar Chamling, committed to the transition of Sikkim to fully organic farming through a declaration in the legislative assembly. On one hand, going “fully organic” meant that farmers would not use any pesticides for crops, would only use dung manure and foliage as fertilisers, and would abstain from all genetically modified crops or livestock. On the other, it meant that the government would introduce policies that tackled both the demand and the supply side of organic farming to make it profitable and sustainable.

On the supply side, Mr. Chamling began, in 2003, by banning the use of synthetic fertilisers and pesticides. This meant that all state subsidies on fertilizers were slowly withdrawn, import and transportation of fertilisers and pesticides from other states was prohibited, and a seven-year roadmap was prepared to replace the use of chemical fertilizers by organic ones. To give teeth to the ban, the government mobilised resources towards creating rural composting and bio-fertiliser units, conducting demonstrations of integrated nutrient management, establishing seed processing centres, upgrading soil testing laboratories, training the farmers, etc.

Additionally, Sikkim State Organic Board was constituted in 2003 and different officers and field functionaries were asked to travel to learn the best practices of organic farming. The state government undertook various measures and projects to build the capacity of the farmers and encourage adoption of better technologies. In fact, even a dozen science graduates and post-graduates were trained and employed to lead these projects. Organic certification was initiated in a phased manner in the state in 2010 and all the produce was brought under the “Organic inputs and Livestock Feed Regulatory Act, 2014”.

To tackle the demand, Sikkim State Cooperative Supply and Marketing Federation Ltd. (Simfed) set up more than 150 multipurpose cooperative societies to buy the farmers’ produce from their doorsteps. Simfed has also ensured that the marketing and payment system is transparent with a policy of making the payments within 15 days of procurement of the produce. Retail outlets have been set up as far as in an upscale market of New Delhi. What is more, as a subtle measure of introducing behavioural change a chapter on organic farming has been introduced in the school curriculum.

Sikkim has shown that it takes holistic thinking, careful planning, innovative measures, and coordinated efforts of various state departments to translate a policy on paper into a reality. Above all it has proven that if there is political will then unifying the population to achieve goals for common good is not as difficult as it is made out to be.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902

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How much for that pothole?


It is seriously worrying that the top 5 Google search results for the word “pothole”, excluding the link to the dictionary meaning, are links to Bangalore related news. According to a conservative government estimate, Bangalore is home to about 4000 potholes with varying degrees of hazard associated with them. Indeed, last September one such pothole claimed the life of a young woman when she suffered head injuries due to a fall. While calculating the cost of a life is nearly impossible, there are other costs associated with potholes that can be estimated.

First, there is the cost of slow moving traffic that leads to loss of productive hours. Let us assume that each pothole adds 1 second to the time taken to cover a particular stretch of road, and also that only half of the 50 lakh vehicles in Bangalore are on road each day. If, on an average, there are two people traveling in each of these 25 lakh vehicles and each vehicle crosses only ten potholes in a day (one only wishes!), then a quick back of the envelope calculation tells us that roughly 14000 productive person hours are lost each day. Even with the minimum wage of Rs. 160 per day, this amounts to a loss of Rs. 22.4 lakh everyday.

Secondly, if we are to believe the report that potholes mess up a person’s spine then we must add the cost of medical care. Let us say that Rs. 0.1 per pothole gets added to the eventual medical bills that a person will incur when the disastrous health effects become apparent to the person. This makes Rs. 1 worth of extra medical cost per person per day, which amounts to an expenditure of 50 lakh per day for the 50 lakh people traveling in those 25 lakh vehicles.

Thus, the total cost of 4000 potholes is Rs. 47.4 lakh per day, which translates to Rs. 1185 per pothole per day. And we are not even speaking of any environmental costs, or of money spent towards extra petrol for slow moving traffic, or of wear and tear of vehicles, and above all of the accidents which these potholes inevitably cause.

In the light of these estimates, one can say that BBMP has made perhaps the wisest investment in the Python machine, which it has imported from Canada for Rs. 3.5 crores for the purpose of quickly repairing potholes. This machine practically pays for itself in under 8 days from the moment Bangalore becomes free of this menace. Now only if authorities can fill up these holes faster than they appear on our roads.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902.

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On setting wrong precedents

If we agree that the Film and Television Institute of India (FTII) is a world-class institute then we must continue to act in a manner that preserves that image and abstain from acts that do the contrary and denigrate the institution’s prestige. 

Amidst protests by the students of FTII, Gajendra Chauhan took charge, on 8th January, as the chairman of the institute. Students, who have been agitating since mid-June last year, have questioned Chauhan’s eligibility for the chief position of the premier film institute in the country and one of the prestigious cinema institutes globally.

Mr. Chauhan, an actor and a BJP member, was appointed by the Information and Broadcasting Ministry as the chairman of FTII in June 2015. Since this announcement, the students and alumni have protested against this decision, and have demanded that the government review it and appoint someone who can inspire the students. While prestigious academic institutions the world over apply stringent selection procedures to ensure that only the best students are admitted, they also hold high standards for appointments to the leading positions in both academic and administrative capacities. Of course, an institution of world repute needs a visionary at the helm. It is the less-than-noteworthy credentials of Mr. Chauhan that the student body at FTII is primarily unhappy about.

To be fair, we can’t judge Mr. Chauhan’s performance as the leading figure of FTII even before he has taken charge. However, as suggested by the agitators, there is no dearth of worthy individuals who are capable of being appointed as the chairman of FTII. What is more, many alumni of FTII are well respected (and have won awards the world over) for their contribution to various cinematic fields. The question that arises then is how do Mr. Chauhan’s credentials compare with those of someone like Adoor Gopalakrishnan, who has previously led FTII.

These are legitimate questions that the government had better considered and responded seriously to, for any such institution does not only train professionals but also prepares future leaders. A heavy-handed approach adopted in this appointment undermines not only the students’ agency but also the reputation of the institute.Disempowering the student body by ignoring their demands and appointing people to prestigious positions on their political affiliations rather than their job-specific credentials sends a wrong message to the world.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902.

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Anatomy of incorrect information

It hasn’t yet been a week since Delhi implemented the odd-even policy on its roads, but analyses abound about the efficacy of the pilot scheme. While the believers are vociferously trying to prove that this is a step in the right direction, the critics are going to lengths to discredit the scheme by highlighting the cons (both real and imagined). Two days ago a fake photograph of an over-crowded Rajiv Chowk metro station went viral on social media. With this photograph people were trying to prove the impracticality of odd-even scheme claiming that the alternate transport (Delhi metro) was incapable of handling the additional load of commuters. Seeing this picture on the Facebook and Twitter feeds of many people, including those of famous journalists, led me to thinking about a framework to reason out why some bits of information gain so much popularity as opposed to others.

Depicting the veracity of information on one axis and the ease of diffusion on the other, it is trivial to observe that information, whether accurate or inaccurate, that gets diffused widely and quickly is what catches people’s attention. While the popularity of accurate knowledge is self-explanatory, the anatomy of incorrect information that grabs eyeballs merits a discussion.


The three factors upon which the transmission of information depends on are content, platform, and people.

Firstly, the information deluge that we are faced with on a daily basis has drastically reduced people’s attention span. Therefore, not many take the trouble to verify authenticity of the claims they make, particularly when these claims are related to current events or to celebrities. Hence, it can be confidently said that most of the statements about the recent terrorist attack on an airbase in Pathankot will get transmitted irrespective of whether they hold water or not. Furthermore, the more simplistically such claims are made, the easier they are to understand and the higher the chance that they will gain ground fast. This brings us to the next sections that explain how and why even inaccurate information gets diffused quickly.

With the constant struggle of getting better TRP ratings than their competitors, the 24-hour news channels on television are always in a hurry to report lest the news becomes stale. Take, for instance, the fact that most of the national news channels reported wrong results of the recently concluded assembly elections in Bihar. Gone are the days of detailed blogs and op-ed arguments when it comes to riding the public opinion. With platforms like Facebook and Twitter, publicly expressing opinions about all that is current news has become a fad and a necessity. Not many care to verify or give evidence for the claims that they make by re-posting/re-tweeting information from others. These platforms have also become the primary source of news for many.

Lastly, people are an important ingredient in proliferation of information. Certain ideas find currency with certain kinds of people. People are likely to propagate ideas that they identify with or that reaffirm their existing beliefs, prejudices, and world-views. Last November, TV channels purportedly reported wrong results of Bihar elections owing to their inclination to justify their own exit polls, which had also predicted incorrect outcomes. A majority of Republicans in the US still doubt the legitimacy of Obama’s American birth certificate.

I, for one, am very likely to believe and spread claims that faith in a religion does not make people any happier than atheists.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902.

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It’s the governance, stupid!

By Nidhi Gupta and Varun Santhosh

The recent spate of citizen protests in Bangalore is a symptom of the deep governance deficit in the city

The tech-savvy residents of the outer regions of Bangalore are increasingly taking to public protests to voice their discontent with the myriad infrastructure problems that beset their neighbourhoods. These problems are symptomatic of the underlying issues arising out of a myopic vision and a deficit (sometimes bordering on absence) of governance. As long as the state government and the city’s administrators remain mired in a cycle of firefighting, band-aid fixes and peddling ‘white-elephant’ projects as grand solutions, the protests will only spread and improving the livability of India’s Silicon Valley will remain a distant dream.

Residents of Sarjapur and Bellandur, along the Outer Ring Road(ORR), staged a protest yesterday to highlight their infrastructural woes. A fortnight ago, in a protest with a clarion call to “Save Whitefield“, around 10,000 residents of Whitefield, a suburb that is host to most of the IT companies, got together to form a human chain that stretched for 10 kilometres. The tipping point that mobilised the otherwise docile professionals was school children being stuck in traffic for almost 3 hours on their way back home. This followed similar other protests in Whitefield and HSR Layout in the past two months. Such vocal demonstrations by a section of the citizens bring to fore the issues plaguing the city and accentuate the extent of discomfort that people and businesses endure on a daily basis. But the response it garnered from the government is revealing. It ranged from half-hearted midnight operations to asphalt roads, hours before the protest, blaming different agencies for dug-up roads to mooting the idea of tunnel ring roads.

As pointed out earlier (by Pavan and Karthik), Bangalore has not only seen a rapid growth from about 200 sqkm to around 709.5 sqkm, but a failure of infrastructure and governance to catch up with such growth. The recently released BBMP restructuring report prepared by  a 3-member expert committee, points out that the existing 198 wards in the BBMP area demarcated in 2007 were based on the 2001 census. From 2001-11, the city expanded by 44.6 per cent, one of the highest in its comparable class in the world. During the same period, while the inner core areas grew by about 18 per cent, the outer regions expanded by more than 100 per cent. The report further states that 43 wards have a population more than 50,000 (based on 2011 Census) and the largest ward, Horamavu, is well over 1.1 lakhs at the moment. Compare this to the ward size recommended to be fixed ideally between 20,000 for the outer growth areas and 30,000 for the inner city areas.

Coming back to one of the main triggers of the protests – traffic. It is a norm in Whitefield and ORR regions for people to waste many productive hours negotiating traffic pileups. While narrow roads, potholes, lack of pavements, etc. contribute to the traffic jams, the primary issue, especially in Whitefield, is that the suburb has only two access points and no alternate routes. This nightmare scenario could have been averted had the city administration planned a more robust road network with multi-modal public transport options like commuter rail and bus rapid transit systems when it was wooing IT companies to set up shop. Furthermore, the problems not only stop at bad planning, but also extend to haphazard announcements of one-ways and arbitrary banning of U-turns leading to circuitous routes.

Consider the other perennial problem of lethal potholes in Bangalore. There are two parts to this problem — one, why do potholes appear in the first place and two, why are they not fixed? The first problem arises due to poor quality control in road-building practices and the utter lack of coordination between various civic departments such as the BWSSB, BESCOM, BSNL and BBMP that results in repeated mutilation of newly laid roads. The re-emergence of potholes can be blamed on patchwork repairs carried out with substandard materials. It is quintessentially the government’s way of trying to placate its frustrated citizens after each round of rains. To make matters worse, the administrators repeatedly slip on their self-declared deadlines of making the city pothole free. In short, there is neither sound planning nor a well-managed process.

Another classic case of the administration caught napping is the garbage issue that has dogged the erstwhile ‘garden city’ for the past many years.  Since 2012, the protests of villagers against landfills in their backyards, has moved from Mavalipura to Mandur to most recently, Bingipura. The response of the various governments, including spending 329 crores in the year 2013-14, has hardly changed the situation on the ground. The policy-making space has been ceded so much that the judiciary has continuously overstepped its mandate to propose tender rules for new contracts on waste management, to the latest 2-bin-1-bag ruling. The story follows a similar trajectory on the issue of degradation of lakes. Is it any surprise then that protests continue to arise at a frequent basis in Bangalore?

The solutions to these myriad problems exist. Many civic organizations, activists and experts have lent their time, energy and ideas to fix these issues in Bangalore over the years. The implementation of TenderSURE roads in the Central Business District has lit a beacon of hope. The 2015 BBMP Restructuring Committee’s report addresses most of the chronic problems and recommends a credible roadmap towards a more liveable Bangalore for all its citizens. However, it is yet to gather momentum. Dr. B.R. Ambedkar, in his famous speech during the Constituent Assembly debates said, “I feel, however good a Constitution may be, it is sure to turn out bad because those who are called to work it, happen to be a bad lot”. Similarly, all the good policies and governance mechanisms are doomed to fail, unless the intent and accountability of our policymakers is fixed. 

Nidhi Gupta and Varun Santhosh are Programme Managers at the Takshashila Institution and tweet at @nidhi1902 and @santvarun respectively.

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Bond Markets – a primer

Markets catering to sale and purchase of financial items such as stocks, commodities, bonds, currencies, etc. are called financial markets. While financial markets can be of various types, two of the most common financial markets are money markets and capital markets. Both these markets are used to manage liquidity and risk for companies, governments and individuals. However, they differ from each other in the risk involved (and hence the returns) and the time horizon for which an investor remains invested in these markets. Money markets are low-risk and are accessed with a short-term view, but the buying and selling of financial assets in capital markets involves higher risk and is done for a medium to long-term period. While some financial markets can be very small involving just a few participants, others like the New York Stock Exchange are very big with daily trade volumes in the order of trillions of dollars.

Capital markets, in particular, are vital to the functioning of an economy and act as proxies for a general condition of the world market. These markets are used to channel financial investments between suppliers of capital such as retail and institutional investors, and users of capital such as governments, businesses, and individuals. Capital markets are accessed in order to raise capital for long-term purposes such as mergers & acquisitions, entering into a new line of business, large government projects, etc. Capital markets typically involve issuing financial instruments like equity (stock) and debt (bond).

Bond markets

A bond is essentially a loan that an investor makes to corporations or governments who want to raise money. Bonds fetch investors periodic interest payments (coupons) over a fixed period of time (until maturity). At the end of maturity the investor is guaranteed his principal amount back. Maturity periods of bonds range from 3 months to 30 years. The most common long-term bond has the maturity period of 10 years.

A bond market (also called the debt market) primarily includes government issued securities and corporate debt securities. The roots of bond markets can be traced back to the Italian Renaissance, when governments compelled wealthy citizens to loan money for the financing of wars against the Ottoman Empire. In return, these citizens were paid a compensation fee as interest. In fact, even during the two world wars bond markets played a crucial role in financing military operations of various nations.

Corporations issue bonds to finance their long-term corporate operations. The largest, oldest and most developed corporate bond market is the US Dollar corporate bond market, followed by the Euro denominated corporate bonds. Corporates bonds are listed and traded in exchanges and are considered riskier than government bonds.

The biggest players in the bond markets are governments which sell debt to fund theircountries’ operations. Governments borrow/lend money from/to other governments and banks and often purchase debt from other countries if they have excess reserves of that country’s money (arising out of trade between these two countries). For instance, Japan is a major holder of US government debt. As of 2009, the size of the worldwide bond market is estimated at $82.2 trillion with US alone accounting for 44% of this market with the average daily trading volume in U.S. Treasuries was $409.8 billion in 2009. Government bonds are traded directly between two parties without the involvement of an exchange.

US 30 year bond

Price of a bond vs. the yield – Yield of a bond is the return that an investor gets on the bond and is calculated as coupon amount/price. For a bond bought at its face value, the yield is equal to the interest rate. However, just like other publicly traded securities, the prices of bonds and hence their yields change on a regular basis. The price of a bond and its yield have an inverse relationship with each other, i.e. when a bond’s price rises then its yield falls and vice versa. For example, if you buy a bond with a 10% coupon atits $1,000 par value, the yield is 10% ($100/$1,000). However, if the price goes down to $800, then the yield goes up to 12.5% because you are getting the same guaranteed $100 on an asset that is worth $800 ($100/$800). Conversely, if the bond goes up in price to $1,200, the yield shrinks to 8.33% ($100/$1,200).

The natural question that follows is why does the price of a bond change. While the issuance price of a bond is usually set at par, the actual market price depends on a number of factors including the credit worthiness of the issuer, time until maturity of the bond, the demand for a bond, and the prevailing interest rates in the economy. Bonds that have already been issued and continue to be traded in the secondary market must therefore continually readjust their prices to be in line with current interest rates.

When interest rates in an economy rise, then the prices of the bonds in the market fall. This leads to an increase in the yield of older bonds thereby making them comparable with new bonds with higher coupon (interest) rates. Similarly, when the interest rates decline, the prices of bonds goes up thereby reducing the yield on older bonds and making them comparable with new bonds that have low coupon rates.

Capital markets, especially the bond markets, play an important role in the smooth functioning and growth of an economy. In fact, the importance of bond markets (primarily the Government bond markets) can be gauged from the fact that they are the biggest source of influence in setting the long-term interest rates for the economy as a whole.

Nidhi Gupta is a Social Policy graduate from the London School of Economics and manages outreach and business development at the Takshashila Institution. She is on twitter @nidhi1902

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