The Incheon pinch

So the poor will benefit if we don8217;t host Asiad? And it8217;s better money goes to a South Korean city, not Delhi?

BBC8217;S Yes Minister and Yes Prime Minister find immediate resonance in India. When Jim Hacker was first being introduced as minister, Bernard Woolley said, 8220;It used to be said there were two kinds of chairs to go with two kinds of ministers: one sort that folds up instantly, the other sort goes round and round in circles.8221; Unfortunately, ministers aren8217;t quite Victorian children. They are not only seen and heard, they also formulate policy. In the Incheon versus New Delhi contest for the 2014 Asian Games, now settled in favour of Incheon, we have the ministerial quote, 8220;Whether you organise the Commonwealth Games in New Delhi or in Melbourne, the state of people living in colonies right opposite the Games site will remain the same.8221; And there are related quotes about 2010 Commonwealth Games having no relevance for the 8220;common man8221; or one billion dollars sanctioned for Commonwealth Games having opportunity costs in terms of money not being spent on social development. Had such statements sounded implausible, no great damage would have been done. It is because they sound plausible that they are dangerous. Simple and neat generalisations are almost always wrong.

First, there is a presupposition that an omniscient planner knows what is good for the poor. Forget the cliched example of washing machines used for making lassi. Since 1991, several apparently elitist items have figured in consumption baskets of the relatively poor 8212; mobile phones, LPG, TV sets, fans, dairy products, toiletries, privatised health and education. Second, benefits of income growth, and better infrastructure, do trickle down. India8217;s poor don8217;t live only in Kalahandi. They also live in Delhi and urban India. We don8217;t have firm estimates on what 2010 Commonwealth Games will do to Delhi8217;s economy. But we know that preparing for 2008 Olympic Games has added between 2 to 3 per cent annually to Beijing8217;s not China8217;s GDP growth over a seven-year period. For urban poor, lacking high-level skills and migrating from rural areas because of lack of employment in Bharat and better physical and social infrastructure plus subsidies in India, construction employment remains the easiest entry route. For the 2012 Olympic Games, 35,500 construction jobs will be created in London between 2005 and 2012.

Admittedly, these are Olympic rather than Commonwealth Games estimates, but they draw on the Manchester experience of 2002 and similar forecasts exist for Melbourne in 2006. With more labour-intensive techniques, employment creation is likely to be greater in India. And these are just direct employment creation estimates within construction alone. Tourism and related hospitality segments bring more jobs and indirect employment creation is typically two to three times the direct impact. More important than pre-Games and during-Games impacts is what is called the legacy effect of better physical and social infrastructure, an important point to make, because in a short-term most Games are financially loss-making barring Los Angeles in 1984. For several years, Delhi8217;s physical infrastructure roads, flyovers, stadiums, hotels, the Asiad village, even colour TV meant what was created by 1982 Asian Games and let us not forget Rajiv Gandhi8217;s role in pushing for success in 1982.

There is an issue of integrating a sporting event-specific infrastructure development into broader urban planning for the city concerned, but that8217;s a separate point. Let8217;s also not forget the role of the 1982 Asiad in pushing for rights minimum wages of migrant labour, through a landmark PIL.

Third, let8217;s not forget the counter-factual point. Are we better off with these multiplier benefits occurring in Incheon rather than Delhi? It is important to distinguish private resources from public ones. Can we, and should we, control private expenditure? Let8217;s take a perverse, but not unrealistic, example of a private organisation deciding to build toilets in Delhi. Is this a bad thing, in the sense of disparities between Delhi and rest of India increasing, because toilets are not built elsewhere? Do we want these toilets built in South Korea instead? There are various reasons that attract private investments into specific locations. Improving facilitating environment in host regions is one argument, controlling private investments is another.

Fourth, around 1.1 billion will be spent on 2010 Commonwealth Games and we are aghast that cost has increased from the initial budget of 335 million, even though cost escalation and time over-runs are the norm in all public programmes, and have a lot to do with non-reform in government accounting. Should we spend this amount a little over Rs 4,000 crore on social sector development instead?

Just so that we have numbers in perspective, we spend Rs 80,000 crore a year on the social sector. That8217;s a Central expenditure figure. Including states8217; expenditure, the figure is Rs 100,000 crore. Social sector non-development isn8217;t a fallout of scarcity of resources, but inefficient expenditure. If it is equity we are after, we may mean equity within Delhi, or equity between Delhi and rest of India.

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Within Delhi, why focus on money alone? There are opportunity costs of other resources too, land, for instance. Ministerial bungalows, for instance, prime real estate sitting as dead capital, to use Hernando de Soto8217;s expression. Each can sell for Rs 100 crore. I don8217;t know how many such high-end bungalows exist in Delhi total housing stock administered by Directorate of Estates is 64,190, but the mind boggles. On Delhi versus India, Delhi8217;s citizenry is certainly pampered. There is no other city with comparable levels of subsidies, but this isn8217;t an Asian Games-specific point either. Let us certainly end special dispensation. But no politician will want that, since politicians too are beneficiaries of these Delhi-specific subsidies. In the last resort, is this fracas about economic rationale or demagoguery? Perhaps it is neither 8212; simply a turf battle between politicians.

The writer is an economist