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Freakonomics: An Indian Perspective

Introduction
THE HIDDEN SIDE OF EVERYTHING
This part of the book discusses about the dropping crime rate in the early 1990s in the US. Crime had been steadily rising in the country, when it suddenly and sharply began to drop. Experts had been so sure of its continued rise that most did not even realize that it was falling until a few years later. Soon it became conventional wisdom as television anchors and analysts said that the reduction in crime was due to stricter gun control, better policing, aging of the population, and the strong economy, but no data or reports were studied to come to this conclusion. What had made the difference had happened over 20 years earlier, an event that no one had correlated. In 1970, a young woman named Norma McCorvey wanted an abortion, but it was illegal to get one. The twenty-one year old had already put up two children for adoption. She was poor, uneducated, unskilled, an alcoholic and a drug addict. Norma was made the lead plaintiff in a classaction lawsuit to legalize abortion under the alias Ms Roe against Henry Wade, the Dallas County District Attorney. The court ruled in her favor in 1973 and abortions were made legal across the US. As far as crime is concerned, it turns out that not all children are born equal. Not even close. Decades of studies have shown that a child born into an adverse family environment is far more likely than other children to become a criminal. And the millions of women most likely to have an abortion in the wake of Roe v. Wade poor, unmarried, and teenage mothers for whom illegal abortions had been too expensive or too hard to get were often models of adversity. They were the very women whose children, if born, would have been much more likely than average to become criminals. But because of Roe v. Wade, these children weren t being born. This powerful cause would have a drastic, distant effect: years later, just as these unborn children would have entered their criminal primes, the rate of crime began to plummet.

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Chapter 1
WHAT DO SCHOOLTEACHERS AND SUMO WRESTLERS HAVE IN COMMON? Who cheats? Just about everyone . . . How cheaters cheat, and how to catch them . . . Cheating schoolteachers in Chicago . . . Could sumo wrestling, the national sport of Japan, be corrupt? . . . What the Bagel Man saw: mankind may be more honest than we think. Might teachers have an incentive to cheat? According to Levitt they do. Teachers, like many other professionals want to be the best at what they do. They might be passed over for a rise or promotion because their students did not make the minimum standards set by the state. The Chicago Public School System implemented high-stakes testing and the schools that received the lowest scores would be placed on probation or shut down. Teachers would teach the test to the students so they would do better on them. In some cases, teachers would go far as as erasing students answers and placing the correct answers in for them. These teachers were caught and later fired. In another case, fifth grade students came home from school and told her mother that her teacher had written the answers to the state exam on the chalkboard. That teacher was fired. As surprising as it is that teachers are deceitful, athletes, also cheat, such as sumo wrestlers. A sumo wrestler has rankings that affect every slice of his life: how much money he makes or for even who he can hang out with. There are six elite tournaments held each year and there are only sixty six elite sumos. Each wrestler had fifteen bouts per tournament, and needs a winning record for his ranking to rise. If he has a losing record his standing will go down. Thus, in many bouts, that involve wrestler that have an (8-6) record vs. a wrestler with a (7-7) record the wrestler with the better record would let the other one win because he had already achieved his eight win. In some cases there would be money involved or agreement between them because the pool of elite wrestlers is extremely tight-knit. As with the teachers, these sumo wrestlers also cheat. What is white collar crime? White collar crime is an illegal act committed by person in conjunction with their ordinary occupational pursuits. A man worked and bought bagels in to work. This idea became so spread that the whole office started wanting bagels every morning. He would bring several bags in and ask if they would leave some money to help cover the cost. Most people were honest and gave the money they were supposed to, but many did not. Feldman decided to quit his job and start a bagel delivery company. He ran into many problems with people being dishonest, but overall had pretty good company. SITUATION IN INDIA Example 1: PEOPLE OF INDIA FORM THE WORLD S LARGEST DEMOCRACY ARE CHEATED UPON BY POLITICIANS

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India is the world s largest democracy and is home to over one billion people, roughly one-sixth of the world s population. More than 300 million Indians live in abject poverty -- more than all the poor in Africa and Latin America combined -- resulting in India being the country with the world's largest concentration of desperately poor people. India has almost four million people infected by HIV/AIDS. More than half of the country's children are malnourished. Thirty percent of the world s births occur in India and result in 20 percent of the world s maternal deaths and 20 percent of the world s child deaths. Forty-two of every 1,000 girl children, compared to 29 boy children, die before reaching the age of five. More than two million Indian children die every year from preventable or curable diseases. Fewer than half of Indian women are literate. Despite extensive constitutional and statutory safeguards, large sections of the Indian polity remain disadvantaged in their quest for equitable treatment under the judicial system. Human rights abuses are often generated by intense social tensions that disproportionately touch women, the poor, religious minorities, and other disadvantaged groups like dalits . Discrimination against women remains entrenched in India. Deep-rooted cultural beliefs and traditional practices deprive women of education, health care and nutrition. Violence against women is widespread, and includes infanticide, child abuse and rapes. This was a brief description about the condition of the largest democracy of the world. India despite being the largest democracy of the world is unable to grow at the expected rate. One of the main reasons for this situation is our corrupt leaders (politicians). Here are two of the recent biggest political scams in India. 1. 2G spectrum scam:The2G spectrum scam in India involved the issue of 122 licenses by the ruling Congress-led UPA alliance of the 2G spectrum to 85 companies including many new telecom companies with little or no experience in the telecom sector at a price set in the year 2001. The scam involved allegations regarding
y the under pricing of the 2G spectrum by the Department of Telecommunications which resulted in a heavy loss to the exchequer, and y the illegal manipulation of the spectrum allocation process to favour select companies

The issue came to light after the auction of airwaves for 3G services which amounted to 677,190 crore (US$151.01 billion) to the exchequer. A report submitted by the Comptroller and Auditor General based on the money collected from 3G licenses estimated that the loss to the exchequer due to under pricing of the 2G spectrum was 176,379 crore (US$39.33 billion).

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CHEAP TELECOM LICENSES
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Entry fee for spectrum licenses in 2008 pegged at 2001 prices Mobile subscriber base had shot up to 350 million in 2008 from 4 million in 2001

NO PROCEDURES FOLLOWED
y y y y y y

Rules changed after the game had begun Cut-off date for applications advanced by a week Licenses issued on a first-come-first-served basis No proper auction process followed, no bids invited Raja ignored advice of TRAI, Law Ministry, Finance Ministry TRAI had recommended auctioning of spectrum at market rates

FAVOURITISM, CORPORATES ENCASH PREMIUM

y y y y y

Unitech, Swan Telecom got licenses without any prior telecom experience Swan Telecom given license even though it did not meet eligibility criteria Swan got license for Rs. 1537 crore, sold 45% stake to Etisalat for Rs. 4200 crore Unitech Wireless got license for Rs. 1661 crore, sold 60% stake for Rs. 6200 crore All nine companies paid DoT only Rs. 10,772 crore for 2G licences

2. 2010 Commonwealth Games:This is regarded as one of the greatest multinational, multisport events across the globe that does feature contests entailing thousands of elite athletes from members of the Commonwealth of Nations or erstwhile members of the British Empire. Organizer of the Commonwealth Games, 2010, was alleged to be involvement in massive corruption in the sporting extravaganza. Six months after the end of the New Delhi Commonwealth Games that was mired in controversies and scams, the CBI finally closed in on 66-year-old Kalmadi, the CWG s public face, arresting him for allegedly awarding illegal contracts to a Swiss firm for Timing-Scoring-Result (TSR) system for the Games causing a loss of Rs 95 crore to the exchequer. Officials of the Central Vigilance Commission (CVC), India s government watchdog agency brought to light that construction quality certificates scrutinized in 16 Gamesrelated projects had turned out to be fake or suspect . Fake certificates were routinely issued to pass substandard work and material, which have led to very big gains for vendors and contractors. According to the expose, funds worth 2,47,469 Pounds were transferred in Oct 2009 from the Organizing Committee of the Commonwealth Games to a UK-based company AM Films UK Ltd. The money was transferred during the Queen's Baton Relay function in London. In addition to that money, 25,000 pounds were transferred into AM Films account every month. Altogether, about 4,50,000 pounds had been transferred to London.

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The Indian people vote for the politicians and place their lives in the hands of these corrupt individuals who only think about serving their financial interest rather than the country. The Indian politicians are somewhat similar to the teachers and sumo wrestlers in the book. All these people cheat to save their reputation and enhance their financial stability. The teachers cheat so that they are not thrown out of school, the sumo wrestlers cheat so that their ranking is maintained and the politicians cheat so that they can earn more and more profits by using illegal methods. We have just discussed two scams above, but there are plenty more happening everyday in India. The Indian politicians need to be corrected to stop this cheating process. There is a need for very strict laws and actions to stop such activities. ROLE OF INCENTIVE In chapter one, Levitt and Dubner explore mechanisms to discover cheaters. It has to do with incentives, a concept in economics. There are three basic flavors of incentives: economic, social, and moral. Often a single incentive scheme will include all three varieties. Cheating can be something extremely small or something quite large. The authors talk about both. Leaving children at daycare for just a few extra minutes does not really seem like it would be that significant, but it is. Technically when parents leave their children for those few extra minutes while they run to the grocery store, it is cheating. They are cheating the system because they are not charged for the extra time their children are there. Most parents take advantage of it. In an effort to make the parents stop leaving the children after hours, the daycare set up a rule that for everyday their kids are picked up late they are charged three dollars. Against what they thought,, this penalty actually made the situation worse. Everything the daycare was trying plainly backfired. SUTUATION IN INDIA Example 2: Example 2.1: SEC 80(G) Inspite of all the contributions made to social causes, there is a huge gap between the demand of money from the needy and the amount donated by philanthropists. This probably, is the reason why the Government has given tax benefits on donations. This provides an incentive to the rich to help the needy and bridge the gap between the two sections of society. Such kind of incentives are very important in a country like India where the gap between the rich and poor is very big. Such incentives helps individuals to become socially responsible and contribute in the upliftment of rural and poor India. The amount donated towards charity attracts deduction under section 80G of the Income Tax Act, 1961. Section 80G has been in the law book since financial year 1967-68 and it seems it s here to stay. Several deductions have been swept away but the tax sop for donations appears to have survived the axe. The main features of tax benefit with respect to charity are as follows: Allowable to all kind of Assessee:- Any person or assessee who makes an eligible donation is entitled to get tax deductions subject to conditions. This section does not restrict the deduction to individuals, companies or any specific category of taxpayer. Donation to Foreign Trust:- Donations made to foreign trusts do not qualify for deduction under this section.

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Donation to Political Parties:- You cannot claim deduction for donations made to political parties for any reason, including paying for brochures, souvenirs or pamphlets brought out by such parties. Only donation made to made to prescribed funds and institutions qualify for deduction: - All donations are not eligible for tax benefits. Tax benefits can be claimed only on specific donations i.e. those made to prescribed funds and institutions. Maximum allowable deduction:-If aggregate of the sums donated exceed 10% of the adjusted gross total income, the amount in excess of 10% ceases to be entitled for tax benefit. The Government of India provided economical incentive in the form of tax reduction, thus business firms started donating to the society. Till the time people aren t given some positive incentive,they do not tend to work towards a particular goal. Example 2.2: CORPORATE SOCIAL RESPONSIBILITY- A compulsory practice for firms in INDIA Globalization has influenced trade all over the world; companies have looked for new opportunities in doing business outside their home country. In recent years Corporate Social Responsibility (CSR) has gained growing recognition as a new and emerging form of governance in business. With brand value and reputation increasingly being seen as one of a company s most valuable assets, CSR is now seen as building loyalty and trust amongst shareholders, employees and customers. CSR applies to a wide variety of company activities, especially in enterprises that operate multinationally in very different social and environmental settings. CSR is closely linked with the principle of sustainable development, which argues that enterprises should make decisions based not only on financial factors such as profits or dividends but also based on immediate and long term social and environmental consequences of its activities. CSR has a significant role in controlling the perils of uncontrolled development, satisfying the needs of the present generation and at the same time ensuring that the resources of future generations is not jeopardized. Companies are more willing to report on their contributions to the maintenance of a sound environment, a healthier society or more ethical business practices through both internal and external action within the countries in which they operate. The area often lacking is CSR reporting in the area of labour rights and relations. One of the prime concerns of CSR should be the quality of industrial relations within a company. It must be a contradiction in terms for a firm that fails to apply collective agreements or respect employment contracts to be regarded as socially responsible . One of the most significant issues within the CSR agenda concerns the dynamic relationship between CSR and good public governance. The limits both to corporate accountability through law and to voluntary CSR-related actions by businesses lie with the public good governance agenda. Legislation to deal with worst case instances of irresponsible behaviour and to set a minimum floor for business conduct will not work in the absence of effective drivers for business implementation and enforcement, whether they are market-based, or a result of enforcement through the state. As we saw in Sec 80(G), economical incentive was important to contribute in some way to society. Under CSR, companies were given extra benefits for establishing their production units in rural

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areas. This helped in the overall development of that particular area. Along with incentives from Government, the image of the company also improved. Today all the top companies in India have one common feature- socially responsible. Example 2.3: UNDERAGE DRINKING A survey conducted by Campaign Against Drunken Driving (CADD), a non-governmental organisation, on current patterns of drinking amongst youth in Mumbai has revealed that alcohol consumption in the 14-16 years age group is highest in Mumbai at 18.9%. The survey cites easy availability of alcohol and lack of any checks at the point of sale as reasons for teenagers in the maximum city guzzling more booze. In Mumbai, nearly 62% of patrons at pubs and bars are below 21, the legal drinking age in Maharashtra, with 31.8% being less than 18. Here, 14- and 15-year-olds are drinking liquor, which is hardly surprising given that nearly 43.9% of respondents below the age of 16 and 38% of those below the age of 18 linked alcohol with glamour. The survey states that none of the respondents in the survey had ever been checked for proof of age at any liquor vend, bar, or pub and the average age at which people in Mumbai begin drinking is 15 years. In a scathing indictment of the law-enforcement agencies, the survey states: There is no evident structure of implementation of underage drinking laws by the police or the excise department in Mumbai. Overall, alcohol consumption in Mumbai has increased 110% in the past nine years. Youth contribute to nearly 60% of this increase. As we saw in the above two cases, economical and social incentives were being provided. Unlike the above cases, in this case moral incentive is not being provided. The teenagers do not get sufficient incentives from their families not to drink. Even the pubs and alcohol venders are not being provided with proper moral incentives. Even after an increase in drinking age to 25, teenage students are still not stopped from drinking alcohol be it in bars, pubs or at home only. This is happening because the youth is not being provided with proper incentives. There is no harsh punishment if youngsters are caught. Even the people supplying alcohol to teenagers aren t been penalized appropriately, thus this practice cannot be stopped. There should be strict measures taken against people involving into such practices.

UNDUNDERAGE DRINKING GOES UNCHECKED IN CITY

CHANDIGARH: Though a ban has been imposed on sale of liquor to those below 25 years, they continue to buy drinks easily in no questioned asked. There have been no check on this trend. Youngsters in the city do not seem to care about the law. Though th decision to fix the drinking age had been criticized by the metropolitan cities, UT was hardly affected. ''No one verifies our age wh we visit bars. The rule is immature and needs to be reconsidered. We are in no way bothered,'' said AnkitGarg, 21, who is a colleg student. Inder Veer, a first-year college student said, ''I do not understand this decision. If we are allowed to vote, marry and do anything of our choice at the age of 21, why can't we be allowed to drink?

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Chapter-2
How is the Ku Klux Klan like a Group of Real-Estate Agents?

This chapter centers on the theme of information and the way that individuals, organizations, and businesses often exploit their access to crucial information at the expense of others. The authors assert that information asymmetry is one of the most powerful economic tools. The authors relate a number of other instances of information asymmetry being used as an economic tool, including, most prominently, the practices of real estate agencies. By analyzing data about real estate agents common practices when they are selling their own houses, Levitt discovered that they may not always have their clients best interests at heart. The Internet, the authors note, has prompted a massive shift in many industries simply by providing consumers with more information than they have ever readily had access to.
Excerpt 1 from the book

It is common for one party to a transaction to have better information than the other party. In the parlance of economists, such a case is known as an information asymmetry. We accept as a verity of capitalism that someone knows more than someone else. But information asymmetries everywhere have been gravely wounded by the Internet. Information is the currency of the Internet. As a medium, the Internet is brilliantly efficient at shifting information from hands of those who have it into the hands of those who don t. The Internet has accomplished what even the most fervent consumer advocates usually cannot: it has vastly shrunk the gap between the experts and the people who do not have access to information.

EXAMPLE 1

E-Choupal Empowering Indian Farmers with the power of Information

The e-Choupal, India s largest rural ICT initiative, leverages information technology and the Internet to improve efficiency in the rural Indian agricultural sector, promoting greater information exchange and the creation of an alternative market structure. Although rural India suffers from a weak infrastructure and poor literacy profile, the greater access and exchange of market and farming information provided by this initiative alleviates rural isolation and poverty by creating market transparency. This in turn improves the rural Indian farmers productivity and incomes. The e-Choupal project integrates the Internet centers (e-Choupals)

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into the livelihood of the rural Indian communities thus bridging the gap of real-time information access to otherwise poor, illiterate farmers.
Problem of information asymmetry in Rural Indian Agriculture

Agriculture is vital to India, as it produces 23% of GDP and employs 66% of the workforce. Over the years, India s agricultural productivity has improved to the point that the country is now both self-sufficient and a net exporter of a variety of food grains. However, most rural Indian farmers have remained quite poor, due to exploitation by middle men,who hold vital information about the prevailing prices, and inefficient market structures. In mature agricultural economies such as the United States, farmers benefit greatly from easy access to market information and vertical market integration. The Indian system revolves around the involvement of numerous intermediaries. In this system, crops are sold by rural farmers with smallholdings to traders, who act as purchasing agents for corporate buyers at a local, government-mandated marketplace called a mandi. Due to the lack of market information, rural Indian farmers have only an approximate idea of price trends and have to accept whatever the price offered them by the traders on the day that they bring their crops to the mandi. As a result, traders are well positioned to exploit both farmers and buyers through practices that sustain system-wide inefficiencies. This information asymmetry in the agricultural system has led to the decrease in standard of living of the farmers Typically poor and often illiterate, rural Indian farmers generally have very limited access to information and education regarding improved farming techniques,that could enhance their yield. Farmers also typically do not have ready access to quality inputs, like sowing seeds, herbicides and pesticides, or to critical information such as accurate weather forecasts that could help them improve the quality of their crops. Such inefficiencies drastically increased transaction costs and slashed potential profits for the rural Indian farmers. With e-Choupal, the farmers have a choice and the exploitative power of the middleman due to information is neutralized.
Implementation of the E-Choupal initiative

Under the e-Choupal (which means "village square" or "gathering place" in Hindi) project, Internet centers are set up in rural Indian farming villages to provide farmers of soybeans, wheat, coffee with easy access to real-time information and the Internet. These real-time prices are collated from the mandi via an arrangement with ITC Limited and are provided on ITC Limited's e-Choupal portal. The real-time market prices for wholesale products enable poor Indian farmers to better negotiate prices, and thus get the most out of their crops. The eChoupal portal also provides the rural agricultural communities with information in their respective local languages on weather forecasts, education on improved farm practices and risk management, and as well as knowledge and purchases of better quality farm inputs. Through the Internet, farmers can even share best practices and consult with an agronomist by e-mail to 9|Page

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seek assistance for problems associated with their crops. This ready access to localized, relevant information and resources greatly helps poor, rural Indian farmers to improve the quality of their crops and thus realize a better price for their efforts. Therefore the Internet efficiently transfers valuable information solving the problem of information asymmetry.
Benefits

The total benefits to the rural Indian farmers include lower prices for farm inputs and other goods, higher crop yield, better profits and a sense of empowerment, ITC Limited, for its parts, benefits from lower net procurement costs (it saves about 2.5% from the commission fees and transportation costs that it would otherwise pay to village traders who serve as its buying agents at the mandi). It also gains more direct control over the quality of the farm produce it buys. The e-Choupal initiative also provides ITC Limited with direct access to the farmers, who provide feedback on information about conditions on the ground, thus improving planning and building relationships

Conclusion

The e-Choupal model demonstrates that a large corporation can play a major role in recognizing markets and increasing the efficiency of an agricultural system, to benefit farmers and rural communities as well as shareholders. The case also shows the key role of information technology to help bring about transparency, increased access to information, and rural transformation.

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Relevant Newspaper articles

Freakonomics: An Indian Perspective

Economic Times

'ITC e-Choupal to quintuple reach'

AnuradhaHimatsingka, ET Bureau Apr 12, 2010, 06.19am IST

ITC's e-Choupal network has reached out to over four million farmers growing a range of crops such as soyabean, coffee, wheat, rice and pulses in over 40,000 villages through 6,500 kiosks across 10 states including Madhya Pradesh , Uttar Pradesh, Rajasthan, Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu. When the government reimposed restrictions on commodity sourcing to tackle wholesale price inflation in 2006-07 ,ITC chief executive (agribusiness ) S Sivakumar the man who scripted the e-Choupal model of business began exploring various options to insulate farmers using the e-Choupal model from the risks of reversal in the government's agri reforms. The company is now in the process of rolling out e-Choupal's Version 3.0. The new version will help ITC discover new anchor businesses to insulate its existing e-Choupal model from risks of reversal in government's agri reforms. It will also deepen the company's relationship with individual farmers and, thus, create more value itself, for the farmer and the network partners. The company hopes to launch the full version of e-Choupal 3.0 by 2012. So, will the new version further improve afarmer's life? Sivakumar is confident it would . "Under the new version, ITC plans to offer personalised crop management advisory services to individual farmers, integrating mobile phones into the digital and physical network of eChoupal ." It will enable a farmer to provide information on the type of soil, crop variety, the date of sowing and details about crop condition on an ongoing basis to the company. Subsequently, this data will be processed to give farmers specific advice. Integration of mobile phones with sophisticated analytics will not only enable personalised solutions but also reduce costs. But all this will require a fair amount of experimenting .The necessary hardware-cum-software prototypes are being developed by Nokia and ITC Infotech. Though Nokia Life Tools for agriculture is in the marketplace, the two-way mobile application and its full operationalisation will take some time

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Excerpt 2 from the book

The Internet happened. In the spring of 1996,Quotesmith.com became the first of several websites that enabled a customer to compare, within seconds, the price of term life insurance sold by several companies. Shopping around for the cheapest policy, a process that had been convoluted and time-consuming, was suddenly made simple. With customers able to instantaneously find the cheapest policy,the more expensive companies had no choice but to lower their prices. The Internet has prompted a massive shift in many industries simply by providing consumers with more information than they have ever readily had access to. The above Excerpt from the book indicates how the introduction of Internet led to shift from seller domination to consumer domination. It led to increase in awareness amongst the consumers and prevented practices of misleading pricing. It also invoked competition leading to cheaper prices, but more importantly it provided convenience to the consumer. The process of purchasing was suddenly made simple. E-commerce in India brought about similar advantages for the worlds second largest population. EXAMPLE 2

Rapidly growing E- Commerce in India leading to consumer domination

Electronic commercecommonly known as e-commerce, ecommerce refers to the buying and selling of products or services over electronic systems such as the Internet. Ecommerce does have unique advantages for business Imagine a shop, a showroom or an office that is open 24hrs a day, 7 days a week. The introduction of E-commerce in India has had a positive impact on many industries but most importantly increased the convenience of consumers and protected them from misleading advertising. It has resulted in the consumer getting access to a wider market of goods therefore getting many alternatives at cheap prices. This has led to the domination of buyers forcing the sellers to either reduce prices or used effective marketing strategies to gain more market share. Emergence of innovative online shopping portals is the impact of the growing trend of e-commerce in India.Gone are the days when credit cards were used online just to book air tickets. With more than 52 million active Internet users and a whopping Rs. 9,210 crore annual turnout (Source: ICube 2009, IAMAI), e-commerce has finally taken roots in India. Along with the giants like eBay, Pantaloons and Rediff, a number of small portals with fresh and exciting business models have transformed the face of Indian e-commerce industry. A recent survey conducted by DataQuest shortlisted the 20 hottest e-commerce startups based on business model, user experience and traction. Names like 20north.com, Bindaasbargain.com, Fashionandyou.com, Flipkart.com, Naaptol.com, etc. feature in the list.

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Most of the upcoming ecommerce ventures in India are based on highly-specialised business models and cater to select customer-base and needs. Websites like FashionandYou.com offer great discounts on fashion and luxury brands, whereas others like SnapDeal.com are group-buying sites that offer a wide-range of services to people living in metros. This simplifies shopping for the end customer who no longer needs to wade in and out of a myriad of sites looking for select goods.

Taking simplicity to a next level are websites such as BindaasBargain.com which sell just one deal per day. Customers can visit an uncluttered webpage and quickly decide whether they want to buy the deal or not. Not only does this cut down on the buyer s decision-making time, but also enables the company to maintain a lean fulfillment and customer support operation, the benefit of which is passed on to the customer ultimately in the form of steep discounts.

Keeping the Indian customer in mind
. It is interesting to see how the e-commerce entities have tailored themselves to bring the Indian customer out of his shell. Most of the companies provide users with the cash-on-delivery option and also a convenient return/refund policy.

One of the major challenges long faced by e-commerce portals in India is to meet the need of Indian customer to touch-and-feel a product before purchase. Along with multiple product images, e-shops have introduced zoom and video features. A 360-degree zoom feature has been introduced by companies to ensure realistic experience for the buyer. E-commerce has been a new buzzword over the last decade and has grown exponentially year on year in an under-penetrated country like India.In fact, e-commerce is expected to fast catch-up with the growth in overall trade market. This can be gauged from the fact that e-commerce penetration is still quite lower even amongst active Internet users who look for information regarding products.So, gradually, the conversion ratio of these users which currently stands at around 40% from being mere on-lookers to having brought any product over internet, could only rise from here.

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The online travel industry has grown smartly from Rs.6250 crore in 2007 to Rs.25258 crore until Dec 2010 on the back of conveniences of paying online. Currently, domestic air travel segment constitutes 63% of online travel industry followed by 28% share from online Railway tickets.

E-tailing which comprises buying consumer items including electronic products, Home appliances, personal products such as apparels and jewellery and other accessories is currently worth Rs.2050 crore, and is expected to grow by 32% to Rs.2700 crore by next year.

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Another area that has shown significant growth is the financial services market, such as online insurance payments and transactions through trading accounts, which grew from Rs 1540 crore to an estimated Rs 2,000 crore during the one-year period ending December, 2010.

Relevant Newspaper articles

Economic Times

India e-commerce market to cross Rs 46,000 crore in 2011: Study

PTI Mar 21, 2011, 01.31pm IST

KOLKATA: Fuelled by the sustained growth of the online travel industry, the Indian e-commerce market will gallop at an impressive growth rate of 47 per cent to over Rs 46,000 crore in the 2011 calendar year, a report said. "This growth is primarily driven by the online travel industry, which contributes 76 per cent to the total net commerce industry in India today," a report released by the Internet and Mobile Association of India ( IAMAI) said. The Internet commerce industry in India has seen a manifold increase in the last couple of years, with the total market size increasing from Rs 19,688 crore by the end of 2009 to an estimated Rs 31,598 crore in 2010.

Carrefour to offer online shopping in India;builds IT platform

PTI Jun 19, 2011, 10.43am IST

NEW DELHI: Looking to tap and engage tech savvy business establishments in India effectively, French retailer Carrefour is building an IT platform that will
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enable its customers to shop online. "We are in the process of building a platform for e- enablement to engage them (customers) effectively," Carrefour WC & C India Director -IT Supply Chain and OrganisationSubhodipBandyopadhyay told PTI. Carrefour that currently has only one cash and carry store in India here at the capital offers multiple channels of engagement to its registered customers such as phones, e- mail and direct contact on the shop floor He said the new IT platform has been built "keeping in mind the Indian IT growth story and tech savvy business establishments all over India, particularly in National Capital Region, we believe, it will be one more way of delighting our esteemed customer base." Carrefour has chosen IBM-Websphere Commerce as the platform and implementation is being done by Salmon India. With the help of new initiative, customers which includes hotels, restaurants, catering companies, offices and institutions apart from small traders and kirana stores would be able to look for and place orders as per their specific requirements, Bandyopadhyay said. The new IT platform which is likely to be rolled out in the third quarter of 2011, will also enable the company to take orders from its registered members even outside Delhi and NCR. By the end of this year, the company has plans to open a couple of more cashand-carry stores in Northern India.

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Chapter 3
Why Do Drug Dealers Still Live with Their Moms?

John Kenneth Galbraith coined the term "conventional wisdom", calling it a convenient and comfortable point of view that is often false. Indeed, Levitt argues, much of what we accept to be true really isn't, and only by asking the right questions can we know this. Steven Levitt and Stephen Dubner in the third chapter tackle the issue of drug dealers and why they still live with their mothers. Levitt describes how someone he knew from the University did research on the gangs and drug dealers for sociology. Levitt, as an economist, was asked by the sociologist to help him with a notebook given to him by one of the members. Levitt looked through it and realized that drug dealing is run like any other business - Levitt compares it to McDonald's. According to Levitt, at the bottom are the people that stand at street corners waiting to run at a threat or sell his merchandise, then there are the ringleaders of the gangs - who don't sell drugs, but do distribute the money within the small sector, then there are the ones at the top - the ones that get the most out of it (of course there are people in between these three, but they are not necessary for this prcis). The notebook contained numbers that explained the distribution of the money. From this information, Levitt discovered that the actual dealers aren't rich because they get a very small portion of the earnings - they work at about $3.30 an hour - and they need to take second jobs. Clearly minimum wage makes a person struggle to find a home so how difficult would it be at $3.30 an hour? Thus, the low pay for the dealers means that they can't even rent a place so what other choice do they have but to live with their mothers?

The idea of conventional wisdom can also be demonstrated very simple examples seen in the Indian Society.
Example: 1 Black money: Boon rather than bane By ruling that "baksheesh is a valid business expense and can be shown as such in income tax returns", a division bench of the Bombay High Court has, implicitly, corroborated the point that the giving and taking of bribes (or 'speed money', or baksheesh) has become an established way of Indian life and should be accepted as such.

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However, while the court's judgment will be welcomed by the payer of the baksheesh, or bribe, which will be treated as a legitimate tax deductible expense, the recipients, or payees, of such gratuities will face problems in declaring payments under this head in their tax returns. Sometimes referred to as the 'parallel economy', by one estimate black money currently accounts for some 40 per cent of the country's GDP, which works out to Rs 10 lakhcrore, Conventional wisdom condemns black money as a bane, a criminal subversion of the nation's wealth. But is black money really a boon in disguise? By its nature, private capital black or white generates more wealth than public, or state, capital. When he was PM, Rajiv Gandhi remarked that of every rupee spent on development and poverty alleviation schemes, only 16 paise reached the targeted. More recent findings suggest that Rajiv was an optimist, and that of every governmental rupee spent only 5 to 6 paise actually reach the beneficiaries while the rest is pocketed by government officials or babus and the various intermediate officers. This is the single most important reason why, despite a supposedly booming economy now growing at 9 per cent a year, India remains a warehouse of desperate poverty, with over 830 million of its citizens subsisting on less than Rs 20 a day, according to the findings of the National Sample Survey. Black money, which is ruled out by the rupee appreciating against the dollar inevitably has a trickle-down as well as a multiplier effect, no matter how it is spent or deployed. So it is simple and convenient to accept that black money and parallel markets are a bane to the economy as they are not accounted for in the GDP and the total value of black money in an economy cannot be measured. Despite those facts, when analyzed, black money that is pumped into the economy does have a multiplier effect, and the black money that is laundered and invested or eared also adds to the total GDP. Thus, in this case we see how conventional wisdom is not necessarily be true. Just a little thinking and looking at the issue from another perspective is a cure to blind belief.

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Example: 2 Jobs grow faster than population in India Employment in India is going through dramatic changes defying conventional wisdom and turning many common perceptions on their heads. For the first time since Independence, employment has grown at a faster rate than population during a five-year period between 2005 and 2010. This is a clear reversal of the jobless growth witnessed in the '90s. These apparently paradoxical conclusions emerge from the National

Sample Survey Organisation's 61st round survey report on employment and unemployment. It was carried out during 2009-2010, covering a sample of over 6 lakh people spread over rural and urban areas. The results have ignited a debate among economists on what the implications are, though the veracity of the findings remains largely unquestioned. According to the report, the workforce participation rate, that is the number of persons working as a percentage of the total population, has increased by 2.85% a year between 2005 and 2010, which is well beyond the current population growth rate. This increase has been more significant in urban areas, and among males. However, the report reveals that the unemployment rate has also gone up, especially among females in both rural and urban areas.

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How can employment and unemployment both be going up? This happens because unemployment does not mean somebody who is not working, but only those who are seeking work but not getting it. Thus, unemployment can go up even as employment does if more and more people who were earlier quite content to not work start seeking employment. This includes housewives, children, the elderly and the ailing. In short, more people from among those who earlier did not seek work are now in the job market. Some of them find jobs, some don't, pushing up the numbers in both the 'employed' and 'unemployed' categories. Some experts argue that this is happening because families are opting for more and more members entering the job market in order to boost family incomes. Example: 3 Some 'A' and 'B' group companies continue to trade below their book value

Despite solid gains in the broader market, there are several companies still trading at prices well below their book value. While market experts hope to see multi-baggers in this group of undervalued stocks, the process of picking potential winners and backing it up with conviction is fraught with risk, they say. An analysis of numbers sourced from ET database reveal that there are about a dozen 'A' group and over 600 'B' group companies that are currently trading below the net asset value or book value. Going by conventional wisdom, if a company is trading at a price-to-book value(PBV) of less than 1, the company's assets are either overvalued or it is earning a poor return on its assets. Ironically, multi-baggers spring out of this group, as companies with lower PBV are generally not widely tracked and are underowned. About 37 stocks from BSE 500 companies are trading at a discount to their book value. Aditya Birla Nuvo, Videocon Industries, India Bulls Real Estate, LancoInfratech, Reliance Communicationss and IVRCL Infrastructure are among companies that are trading below book value.

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Chapter 4
Where Have All the Criminals Gone?
1966,one year after NicolaeCaeusasu became the communist dictator of Romania, he made abortion illegal. Such grandiose declarations were the commonplace during Ceausescu s reign, for his master plan was to create a nation worthy of the New Socialist Man. When the Romanians complained about the food shortage brought about by his management, he complained The worms never get satisfied, regardless of how much food you give them Ceausescu s ban on abortion was designed to achieve one of his major aims- to rapidly strengthen Romania by boosting its population. His actions provided the desired effect as after one year of the abortion ban, the Romanian birth rate doubled. The children that were born turned out to have miserable lives. The abortion ban stayed in effect until Ceausescu finally lost his grip on Romania. Most of the teenagers were teenagers and college students. Nicole Ceausescu met a violent death. It should not be overlooked that his demise was precipitated in large measure by the youth of Romania.

Relevant example from Indian context-

FOOD INFLATION A cause of government ineffeciency

The above example from the book Freakonomics indicates how bad legislative policies and decision making by a regime in control could lead to many socio-economic problems within the country and eventually lead to the downfall of the regime. The government of India is inefficient in controlling food inflation and protecting the farmers of rural India. The corruption as well as inefficient decision making by the government has led to food inflation. Similar to the book, the public of India are raising their voice as the food prices keep rising everyday while more farmers keep on ending their lives. If the government fails to correct its mistakes like Nicole Ceausesu, it may face a similar downfall in the coming elections. While the Indian people suffer from incessantly rising food prices, the Government mandarins are busy celebrating the Indian growth story at the World Economic Forum in Davos. The Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, who was recently in the news for suggesting that food inflation is occurring because people are becoming more prosperous in India and eating more, has stated in Davos that not only are the recent increases in petrol prices justified but diesel prices will also be decontrolled and increased in the near future. Ministers are also suggesting that the solution to food inflation lie in allowing MNCs like Walmart and Tesco to open supermarkets in India. These callous and cruel statements are symbolic of a Government, which has dropped even its pretence of working for the aamadmi.The inflation rate in India as measured by the Wholesale Price Index (WPI) has been rising continuously over the past three years. Inflation in food products has driven overall inflation.

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WPI Inflation (year-on-year) Source: Office of the Economic Adviser, Ministry of Commerce and Industry, GoI
The present steps being undertaken by the Government are inadequate. What they need is a longterm strategy to fight food inflation. The state intervention in the food economy, both in food distribution and production is very inefficient. Our agriculture is in a crisis. We are not producing enough to meet the needs of a growing population. The peasantry continues to be in distress, with 2.5 lakh farmers committing suicide over

2006-07 All Commodities Food 6.51 7.99

2007-08 4.82 5.97

2008-09 8.03 9.07

2009-10 3.57 14.52

the past 15 years. State intervention in raising agricultural productivity has been inefficient. The Government is dithering on the Food Security legislation. The Food Security Act is not being passed causing further delay, to ensure food security and stability in price. The Government is currently holding stocks of nearly 50 million tonnes of rice and wheat, which is way above the buffer norms. . Essential commodities like sugar, pulses and edible oils should be supplied at fixed rates across the country through the Public Distribution System.The Government has manipulated trade policies to allow big traders to make huge profits through export and import of essential food items like wheat, sugar and onions. On the other hand, the Public Distribution System has been weakened considerably through targeting.

The Government has been sitting on the recommendations of the National Farmers Commission

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for the past five years. The Farmers Commission had made several suggestions to make farming remunerative for the peasantry and step up public investment in agriculture, as well as agricultural storage and marketing. Besides supporting farmers, Government agencies, cooperatives and selfhelp groups should be supported to open more outlets to sell food items like vegetables, milk etc. Raising agricultural productivity and modernisation of storage and marketing of agricultural products cannot be left to the private corporates and MNCs. Inflation cannot be controlled with liberalized trade and private profiteering in food items.

The influence of private corporates and traders in the food economy needs to be curbed. For this it is essential for the Central Government to take the State Governments on board and coordinate measures against hoarding and black-marketing. In this regard, it is also important to prohibit commodity futures trading in food articles, because such trading facilitates speculation on food prices. India is a food deficient country. Our productivity levels are low and we are not producing enough to meet the demands of a growing population. Moreover, our agricultural production is heavily dependent on the weather and above or below normal rainfall (floods and drought), significantly affects the supply of agricultural commodities. Storage capacity in India is also limited and many food items cannot be stored because of lack of modern storage facilities. In this backdrop, our government is taking a passive approach with inefficient measures ,thus contributing to food inflation.

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Related newspaper articles: TIMES OF INDIA

India food inflation declines to 11.05 percent on February 17, 2011

NEW DELHI, February 17, 2011: India's food inflation eased to a nine-week low, helped by a steep fall in the prices of vegetables such as onions and firming expectations of a sustained downtrend in overall inflationary pressures. The food inflation rate slowed to 11.05% year-on-year in the week ended Feb. 5, compared to the 13.07% recorded a week earlier, according to data issued Thursday by the Ministry of Commerce and Industry. On a week-on-week basis, the wholesale price index for food articles fell 2.1% to 182.9. This is the second week of a fall in food prices as a series of government measures to augment supplies begin to show effect. The data will cement expectations that price pressures will continue to ebb, reducing the urgency for the central bank to tighten its monetary policy more. Still, economists are concerned about inflation remaining at high levels, and the likely pressure from rising global commodity prices.

Food inflation at 9.13% on June 23, 2011

NEW DELHI, June 23, 2011: Food inflation in the country touched a two-and-half-month high of 9.13 per cent in the week ended June 11 on the back of costlier fruits, milk, onions and protein-based items. Food inflation, as measured by the Wholesale Price Index (WPI), stood at 8.96 per cent during the previous week. It was almost 23 per cent during the second week of June, 2010. Food inflation has crossed the 9 per cent mark after a gap of one week. The latest food inflation numbers are the highest since the week ended March 26, 2011, when the rate of price rise of food items touched 9.18 per cent. As per data released by the government today, fruits became dearer by 28.66 per cent year-on-year, while milk grew 15.30 per cent more expensive. During the week under review, prices of onions went up by 11.89 per cent and eggs, meat and fish by 10.56 per cent on an annual basis. Cereals were also up 4.32 per cent and potatoes became dearer by 0.71 per cent. However, prices of pulses, wheat and vegetables went down during the week. While pulses became 10.34 per cent cheaper, wheat was down 1 percent and vegetables 9.27 per cent. Meanwhile, inflation of non-food primary articles stood at 18.43 per cent for the week ended June 11 as against 20.20 per cent during the previous week.

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Chapter 5
Reflected in the title, the predominant theme running through the fifth chapter of the book is that of parenting and the fruitlessness in people s efforts to achieve the state of ideal parenting . The following two excerpts from the text directly throw light on the authors perspective of obsessive parenting. Why Children turn out the way they do. Parents Matter Less Than You Think, And Peers Matter More. The belief stated is that parents are wrong to think they contribute so mightily to their child s personality and that their belief is only a cultural myth . It is explicitly stated in this chapter that though factors like highly educated parents, high socioeconomic status, maternal age of greater than thirty when the child was born, low birth weight, etc.do matter in determining a the child s educational performance, there are several other factors given significance far beyond what is required. These factors include whether the family is intact, the parents recently moved to a better neighbourhood, the mother didn t work between birth and kindergarten, the parents regularly take the child to museums, the child is regularly spanked, the child frequently watches television, the parents read to the child nearly every day. Noting the overgeneralization, Levitt explains that what is important in parenting is who you are, not what you do. There is one basic takeaway and reflection from this chapter that in our lives, we tend to be obsessive or stringent on certain thought processes, events or activities, fearing that the outcome will not be as desired.

Example: Parenting in India is known to be an art well appreciated. Indian parents are known to
closely and carefully monitor their children during the so called crucial years of child development. Unlike only referring the parenting experts as in the United States, Indian mothers revert to their mothers and the past culture & tradition while up-bringing their child. They try to instil values that they believe will last for a lifetime. But the real question here is that are the values instilled at the development phases of child-growth adequate enough to keep the child under good influence, score high grades at school, not be involved in immoral activates andstay out of violence? The hopeful answer that any parent in India would want is an unhesitant Yes! However, what statistics have revealed over the past decade does bring about certain hesitance in being able to answer that question, even in India where parenting is known to be the best of its kind. A Times of India article titled Indian Teens Are Seriously Spoilt Brats, as recent as 12th July 2011 speaks about the increased tendency of Indian Teens to be involved in the consumption of smoking, drinking, drugs and casual sex.

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Indian teens are seriously spoilt brats

Prathibha Joy Jul 12, 2011 If a recent survey is to be believed, Indian teens are seriously bad-ass. They cheat in school, smoke, drink, try drugs and are rather promiscuous. To make matters worse, they won't discuss any of this with their parents. And why would they, ask experts, when they have access to any information they need at their fingertips. According to student counsellorRomilaRodrigues, urban youngsters with working parents spend more time with their cellphones and laptops than they do with their parents. "Youngsters today grow up in a world where information is freely available. There are books, the Internet and satellite television that they have easy access to. If we don't teach them about the cons of substance abuse and casual sex, they'll get information from other sources, which may be convoluted," says Romila. And the problem with young people having sex is that most often, they don't know the consequences. "Though a lot of adolescents experience some form of physical intimacy early on, a majority of them do not know about the effects and consequences of sex. In most cases, they are not even well-informed about the act itself," says Rekha G, branch manager of the Family Planning Association. Her view is endorsed by Dr VinodChebbi, sex and marriage therapist. "Adolescents think they are too young to get pregnant, but old enough to have sex. But the problem is that they are just satisfying their curiosity," he says. With contraceptives available over the counter, youngsters have a false sense of security, adds Rekha. "And when a period is missed, they go into denial and think it's the hormones or stress that's causing the missed period. By the time they realise what it actually is, it's too late," adds Dr Chebbi. But even if it's too late, youngsters these days have a solution. "What's worrying is that there's a growing lack of morality among youngsters, especially when it comes to teen pregnancies. If a girl does fall pregnant, she gets an over-the-counter drug to terminate the pregnancy or goes to a shady clinic to get it medically terminated. And the parents of the girl remain oblivious to what's happening," says Romila.

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The above article is the ideal example to display, that despite such close and monitored parenting within Indian families there is only a marginal influence parents on the children above and beyond the 50% of behavioural patterns passed on as genes. The external environment, primarily the behavioural activities of peers, matters far beyond our imagination, even in India. Beside immoral activities of underage smoking, drinking, drugs and sex, Indian children being involved in several forms of crime has also been on the rise. The article below (sourced from a publication namely A viewpoint of ManoharLuthra)

School Going Kids Becoming Spoilt Brats. Who Should be Blamed?

Three 17-year-old girls in Indore were caught drinking Vodka from their water bottles when one of them vomited in the class room. This could be just an example of urbanized kids falling for vices too early in their life. Breaking rules and social norms make them important in their own eyes and amongst their fellow students. Cell phones are not allowed in schools, but the students carry them in their Tiffin box. Circulation of porn MMS of girl students have become common. Children are losing innocence at very early age. They are now involved in all forms of crimes: theft, knifing, drugging, kidnapping and murder. Last year a class IX student shot dead his classmate with his uncles pistol in the school premises. A 15- year-old student raped his neighbourhood girl student in Kanjawala. Crime by juveniles across the country is on the increase. In our times too students used to play pranks on teachers and classmates, but this was pure fun, no limits were crossed. With the shift in the value system at home and society at large, kids are showing growing signs of rebellion against the standard norms. They no more see their teachers as respectful gurus.

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The above article and the attached statistics obtained from the National Crime Records Bureau simply show us a mirror, displaying that despite all cultures and traditions that we have managed to retain in our nation and despite having organizations such as the National Indian Child Welfare Association, the external influences on the youth of the nation has nullified most attempts of ideal parenting thus completely turning down the thinking of obsessive parents .

Some more Examples:At first, we discussed that the primary concept that was reflected from
this chapter that in our lives, we tend to be obsessive or stringent on certain thought processes, events or activities, fearing that the outcome will not be as desired. On parallel lines, we can observe an example back home in India. It is a preconceived notion and an orthodox thought that the only path to success in career is to score high grades at the school and the college level. Despite having been proved wrong multiple times with success stories of today s top businessmen who were not necessarily scholars at the time of their school examinations, however were passionate about what they undertook. Parents in India tend to give far more significance to high grades during school days, to what is required. Very often such pressures on students at young ages cause them to be rather de-motivated towards what they were doing, losing further interest. In Chapter 5, Lewitt also mentions how parenting experts only make money out of the fear prevailing amongst parents. One fear spoken about is that of guns in a home as against a swimming pool in a home. The authors state facts & statistics of cause of death of children below the age of 15, and it is evident that the chances of drowning in a swimming pool is over 100 times higher than that of dying by a gunshot. One similar example of fear in the minds of people in India is that of death by road accidents as against death by an aircraft crash. What seems to be in our control makes a person believe that it is a safer option. This fact is clearly proven wrong when looking at the statistics of the deaths due to road accidents vs Deaths due to aircraft crashes. While over 118,000 people died due to a road accident in 2008, the average annual deaths due to an aircraft crash in any year in India does not even touch a 3-digit figure.

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Chapter 6
In this chapter, the authors extend the discussion of parenting with an overview of more economic aspects of parental choices. Specifically, they focus upon the economic implications of children s names, especially the overtly ethnic African-American names that have become common over the last several decades. The authors tied this issue to a larger question about contemporary black culture in the United States: is distinctive black culture merely a reflection of the economic gap between whites and blacks, or has it actively caused the gap to widen? Using several decades of name data drawn from California birth certificate records, Levitt s analysis revealed a number of interesting trends. The authors cite previous research that has shown that similar rsums with white and distinctively black names result in job offers being extended to the white-sounding applicant far more frequently than the black-sounding applicant. Among other things, it was determined that having a distinctively black name was linked to lower attainment and negative life outcomes in terms of employment, income, and education. Levitt then turned to the question of how names become popular among white Americans. In addition to the general trend of increasingly unique names for white children, Levitt describes a pattern by which highly educated parents popularize obscure names, gradually compelling the names to achieve broader popularity. Finally, after a period of several years, white parents from lower socioeconomic classes adopt the names, prompting a selection of new names among highlyeducated white parents, and the repetition of another cycle.

Example: The first Indian example that comes to mind on reading a chapter about the significance
of names is that of the prevalent caste system in India. Today, there are numerous perceived characteristics that go hand-in-hand with belonging to a certain caste. Well, these characteristics do not always hold true. In this globalizing world that we live in, times are changing and the newer generations in India too no longer directly relate themselves to the traits that they supposedly imbibe automatically because they belong to a certain caste. However, stereotypes do yet exist and are taken into consideration while taking decisions as important as a wedding. The excerpt from an article published in the Wall Street Journal, as recent as when I type this 8:35am of 25thJuly, 2011 has been attached below. This article displays the wide prevalence and the significance of the castes in our nation, and the replications of the same.

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Economics Journal: Indias Opportunity Gap

JULY 25, 2011, 8:35 AM IST

By RupaSubramanyaDehejia If youre poor and underprivileged in India today, how likely is it that youll have access to opportunities to improve your lot in life? To what extent does where youve come from determine where youll end up? And will your children have opportunities that you didnt? In this 20th anniversary year of economic reform, which has given us an annual economic growth rate currently at about 8.5%, millions have been lifted out of poverty. The flip side is that growth has also led to an increase in inequalities in wealth and income. In simple terms, the pie is getting bigger, but some people are getting a smaller share of that bigger pie. A recently released UNDP report puts things in perspective, by highlighting the many facets of inequality that characterize India today. The studys headline finding is that Indias ranking in the global human development index would fall by 30% if inequalities of income, education and healthcare were accounted for. To put things in concrete terms, with no adjustment, India is already ranked at 119 out of 169 countries, worse than Namibia and Vietnam and better than Pakistan and Congo. Even Indias best performing state in this index, Kerala, ranks below Sri Lanka and the Philippines. Gujarat, often cited for its economic success, ranks slightly below India as a whole, and like India would lose about 30% of its ranking when the inequality adjustments are made. To some observers, higher inequality at least for a while is the price we have to pay for higher growth. They would cite the famous Kuznets curve, a staple of development studies which claims to show that inequality first rises and then falls with economic development. What this misses is that unequal outcomes in areas such as income may be the result of underlying inequalities of opportunity, such as access to education and health. Unequal access could also be the result of belonging to an underprivileged group, such as a religious or ethnic minority, or in the Indian case specifically someone belonging to a Scheduled Caste, Scheduled Tribe and Other Backward Class. Lets take inequality of opportunity as reflected in unequal access to education. Even with the deck stacked against you, a good education has the potential to open doors and take you places. Conversely, its common sense that someone less educated wont do as well in the workforce and therefore will earn a lower income. While inequality of access to education in India is well-documented

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by scholars and one of the highest in the world, what is less understood as yet is how to quantify the impact on outcomes such as wages and income. A few recent statistical studies have begun to plug the gap. Ashish Singh of the Indira Gandhi Institute of Development Research in Mumbai finds that the percentage of total wage inequality that can be accounted for by inequality of opportunity, including education, is anywhere from 13% to 34% on average. This means that someones wage could be up to one third lower because they lacked access to opportunity, in particular education, compared to someone who was educated. At least in theory, you have some control over how much education you seek, assuming you get access. But an inherited social hierarchy, such as caste, creates a problem of a different order of magnitude, since theres nothing you can do about this. Further, while the impact of access to education on income is pretty straightforward, the effect of caste is more difficult to pin down. Since belonging to an underprivileged community tends to go together with other deprivations such as lack of access to education, health or land, its very difficult to isolate the effect of caste per se. A recent joint study by researchers at the University of Maryland and the National Council of Applied Economic Research in India, found that caste matters. They find in particular that lower castes have less land, lower educational status, poorer nutrition and health care, and fewer social connections to get help when needed. This results in lower income and poor social outcomes. For instance, in villages with predominantly lower-caste inhabitants, the average consumption expenditure per person is on average 2,200 rupees less per year compared to someone whos upper caste, adjusting for differences in education and landownership. Without this adjustment, the actual difference is 9,019 rupees, strongly suggesting that belonging to a lower caste and the other inequalities of opportunity tend to go together. Overall, while educational differences can explain away some of the difference in outcomes, about half of observed income inequality seems to be caused by a difference in caste. Lets come back to the questions I started with. The answer to the first question is unequivocal: if youre from an under-privileged background, chances are that youll do less well than someone whos not. Likewise, the answer to the second question to what degree does where youre from determine where youll go is it matters a great deal.

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Bibliography
y Times of India, Bennet Coleman & Co.; Publication dated July 12th 2011
y http://manohar.instablogs.com/entry/school-going-kids-becoming-spoilt-brats-whoshould-be-blamed/ y National Crime Records Bureau

y http://www.politicalbooks.us/2011/03/01/book-summary-freakonomics/

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