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Thursday, December 26, 2019


Job Opening

The Esya Centre is inviting applications to join the Centre as a full-time Fellow (Economist - Research and Policy).

The Esya Centre aims to generate empirical research and inform thought leadership to catalyse new policy constructs for the future. It simultaneously aims to build institutional capacities for generating ideas which enjoin the triad of people, innovation and value, consequently helping reimagine the public policy discourse in India and building decision-making capacities within government. Esya invests in ideas and encourages thought leadership through collaboration. This involves curation of niche and cutting-edge research, and partnerships with people, networks and platforms. Moreover, it prioritises multi-disciplinary research to engender "research clusters", through which practitioners and researchers collaborate.

Some recent examples of our work:

  1. Shohini Sengupta and Aishwarya Giridhar, Contemporary Culture and IP: Establishing the Conceptual Framework
  2. Megha Patnaik, Policy Uncertainty in Indian e-commerce

The Fellow is expected to undertake research that informs policy. The broad areas of research towards which the Fellow will contribute are: innovation, competition, copyright and IPR; labour and productivity; technology regulation; and online markets in India. The Fellow will work collaboratively with other research staff at Esya and the Esya network, which connects diverse specialisations. The primary goal is to provide an economic perspective of the themes being explored. The fellow is expected to activity participate in disseminating research output and leading new research initiatives and collaborations.

Preferred skills and qualifications

  • Master's in Economics with at least four years of experience or a PhD;
  • Demonstrable interest (as ascertained from high-quality published articles or working papers) in network and platform markets, economics of innovation and technology policy;
  • Excellent writing, analytical and communications skills;
  • Proficiency in computer skills, information databases;
  • Ability to mentor juniors and work in a team; and
  • Ability to work under time pressure and to juggle multiple tasks within tight deadlines.

How to apply

Please email your CV, covering letter, and a writing sample to with the email subject heading, "For the Fellow (Economist) Position".

Wednesday, December 25, 2019

A glitch in the payments at the U2 concert, and lessons for design principles

by Sanjay Jain, Rajeswari Sengupta, Ajay Shah.

On 15 December 2019, for the first time, U2 was to perform in Bombay. The organisers of the concert came up with an elegant vision for how 50,000 people would be fed: This would be done through an all-electronic payments process.

It was supposed to be all pretty and perfect. Along with the tickets, everyone got a card that contained an RFID tag. The card had to be activated by scanning the inbuilt QR code using the android QR code app. This took customers to a URL. On the website customers were required to register (with a name, phone number etc) and then pre-load the card. It was announced that the pre-loading could be done exclusively via a particular payments app. Once this step was completed, customers would need to tap their cards at any of the physical kiosks at the venue in order to update the card with the online balance.



Customers were informed that food and beverages could only be purchased at the concert venue using the RFID card, no refunds would be available and that there would be physical kiosks at the venue for topping up the cards. While those counters would accept both cash and cards for payment, the food and beverage sellers would only accept the RFID card.

Thus, a key part of the design vision was coercion of the customer by forcing all payments for purchases to be done only through one mode.

Failures in consumer protection

The cashless monopoly electronic payments mechanism had unhappy features from the viewpoint of a consumer. The design was complex, requiring customers to first do an online transaction for loading the RFID card and then a physical transaction at the venue for getting the amount to the card, even before the card could be used for purchases. In other words, two additional steps were required to potentially save time during a future purchase transaction.

The minimum recharge amount for the card was Rs.500. Customers were forced to do this without any upfront knowledge about the prices of the goods sold at the venue.

To load Rs.1000 into the wallet, the customer was charged a fee of Rs.100. On this fee, there was a GST of 18%, so the payment went up to Rs.1118. This was a total cost to the consumer of 11.8%, as compared with paying cash.

To add insult to injury, the money left on the card was not refundable. What was not spent would be confiscated by the payments vendor. Customers were thus required to estimate their expenses without knowing the prices of the goods up front. This disrupted the biggest benefit of digital payments i.e. the ability to make a purchase without planning for it beforehand.

Even in the best case scenario where the design envisioned by the organisers worked, customers were left with an experience worse than a cash payment, for a significantly higher price. Even in its conception, this was not a very attractive grand scheme.

Failures in system operation

In the event, the grand scheme collapsed because it just did not work. There rapidly emerged two classes of customers at the venue.

One class was represented by customer X who had pre-loaded the RFID card with Rs.500 using the app before arriving at the concert venue. At the venue she found that her F&B spend would be (say) Rs 1000. Despite having taken the trouble of registering and pre-loading the card prior to the concert, she now had to stand in two long queues at two separate kiosks: one to first update the card so that the online transaction of Rs 500 was fed into the card, and the other to top-up the card with Rs 500 so that she could make her F&B purchases.

There were thousands of such customers who went from one queue to another even before their registered cards could be used. The queues at the payment counters soon became longer than the queues at the F&B counters.

The other class was represented by customer Y who had not registered or activated her card before the concert. At the venue she had to first activate her RFID card using mobile data connectivity, load the minimum amount of Rs.500 online, and then stand in the queue to update the card so that she could use it for purchases. In case she wanted to top-up the card, she would have to stand in the queue again.

Given the large fees (11.8% plus the possibility of non-refund), users were careful to avoid putting too much money into the card, and thus ran the risk of undershooting.

At first the hassles were only about standing in multiple queues. Things got worse when the systems at the kiosks for updating the registered RFID cards stopped working. This meant that thousands of customers who had pre-loaded their cards could neither use their cards to make purchases nor get refunds.

The venue was swamped with a large number of queues for one thing or another.

The mobile data network crashed at the venue with thousands of people trying to access it. This meant that thousands of customers who had not pre-activated their cards, were unable to do so, let alone update the same and use for purchases.

Despite the utter chaos, the merchants inside the stadium stood firm, in unison, in refusing to sell goods to the customers using any other payment mechanism.

The net result was that thousands of people were left without food and beverages despite possessing all reasonable modes of payment and despite there being multiple merchants selling the desired items. Money -- the bridge between buyers and sellers -- broke down due to the framework of coercion around only one technical standard that was permissible.

This was a mess-up at multiple levels:

  • Poor product experience, requiring multiple redundancies such as to transfer from online payment to the RFID tag,
  • Poor planning on the part of the organisers and not factoring in the possibility of collapse of data network at a venue filled with thousands of data users,
  • Fleecing of the customers with a steep 10% load charge and forfeiting unused balances,
  • Coercion of customers by not giving them alternative payment options.

Learning about design principles from this episode

Many an engineer can come up with a grand scheme that sounds nice. For an engineer, it is easy to build, and easy to work with simple monolithic systems that are designed by someone and imposed on everyone. The engineer's job is easier, operating in such a world, than in the messy real world of multiple technologies. However, social systems and the interactions of a large number of people are complex, and the best laid plans of designers are likely to go awry.

We are in favour of innovation, and trying out shiny new ideas. Offline instant digital payments through RFID tags sounds like a great idea, particularly when you anticipate a crowd and poor network conditions. However, innovations can and do fail. The wise path is to never have a single point of failure, to always ensure that customers can access other options, that the failure is not as damaging as it was at the U2 concert. Payment is an enabler, and not the final product, and when the payments system actually hampers transactions, it is a tragedy.

The problems of a single centrally planned solution, inside one stadium, help us in thinking about central planning more generally. Each new innovation must face the market test. It is always better to have organic evolution, where many rival solutions slug it out in the marketplace, with no coercion that helps or hinders any one solution. This will give more robust solutions (no single point of failure), let the market evolve towards numerous solutions that fit numerous work environments (e.g. decentralised data works better when communications systems break down, centralised data has its own advantages for certain situations, etc), and prevent any one vendor from ripping off the consumer. It is good to have competition between multiple technologies, and multiple technology choices that fit the very diverse array of use cases that are seen in India.

We have traditionally extolled the role for cash as a way to protect individual privacy and freedom. We must also respect the remarkable UX of physical cash transactions, and contrast this with the hoops that many digital schemes want to force consumers to jump through. The cashless dystopia of the U2 concert teaches us that cash has one more important function: In a disaster zone where IT infrastructure has broken down, cash is the way to get transactions done. Physical pieces of paper will be important for a long, long time.

Sanjay Jain is at CIIE.CO, IIM Ahmedabad.  Rajeswari Sengupta is a researcher at IGIDR, Bombay. Ajay Shah is a researcher at NIPFP, New Delhi.

Tuesday, December 24, 2019

Chennai 2015: A novel approach to measuring the impact of a natural disaster

by Ila Patnaik, Renuka Sane, Ajay Shah.

In November and December 2015, the city of Chennai in the Southern Indian state of Tamil Nadu, got heavily flooded owing to unprecedented rainfall. With a population of a little more than 7.1 million people, Chennai is one of the major urban centers of South India, and one of the four important metropolitan cities in India. The flooding is estimated to have led to the loss of more than 500 lives, and damages of about US $3 billion, making it the world's eighth most expensive natural disaster in 2015. In this paper we evaluate the impact of this event for households in Chennai.

Natural disasters, such as the Chennai floods, are important shocks which can influence all parts of the income distribution. In the aftermath of such a natural disaster, the issues of consumption smoothing, liquidity constraints and financial resilience play out. Natural disasters are important in their own right, as we need to understand more about the turmoil faced by households in such states of nature. All governments engage in redistribution in the aftermath of a natural disaster. This motivates research on studying the impacts of natural disasters. Natural disasters are also an opportunity to obtain insights into the economics of household, through observation of households when confronted with such a large shock.

Many researchers have gone into the field after a natural disaster has taken place, and produced evidence about health, income, consumption, and financial conditions in the aftermath of the disaster. But such research does not offer insights into the causal impact of the event as adequate information gathering about baseline conditions, before the event, is lacking.

When panel data about households is present, we observe households before and after the natural disaster. This makes possible the analysis of the adverse impact upon affected households, while additionally observing controls. The constraint in such research has been the time elapsed between two consecutive observations of each household. As an example, even if a panel is measured once a year, there would be many months of elapsed time between the two measurement dates that bracket a disaster event.

In a new NIPFP working paper, Chennai 2015: A novel approach to measuring the impact of a natural disaster we exploit the new opportunities for measurement which flow from the CMIE Consumer Pyramids Household Survey ("CPHS"), which measures a panel of 170,000 households across India. Each household is met with three times a year. There is thus a period of four months, across which the household is measured twice, within which each natural disaster lies. We setup difference-in-difference estimation where households in Chennai are the ``treatment'' group and unaffected households in the rest of the state of Tamil Nadu are the ``control'' group. As households in Chennai are among the more affluent ones in Tamil Nadu, the raw dataset has poor match balance, and we address this problem by also performing matched DiD analysis.

We investigate three questions. First, we evaluate the impact of a flood on household income and consumption expenditure. It is possible that a disaster leads to declines in household income and expenditures owing to the destruction. However, it is also possible that households increase their spending to cope with the disaster, or replace capital stock. For example, some household activities, such as cooking, would shift from internal production to purchases from external providers, which would augment demand for certain goods and services. Households would start buying goods and services for reconstruction almost immediately after the destruction. Large scale expenditures on relief and reconstruction by the Indian state would bolster the local economy.

We find that there was no statistically significant impact on household income during the flood months. Households in Chennai, however, saw a 32% increase in consumption expenditure relative to the non-affected districts. The largest percentage increases in expenditure were seen on health, and power and fuel.

A key figure is shown above. The dotted line is for the controls and the deep green line is for households in Chennai. In both cases, what is shown is the monthly expenditure per person. The vertical black lines bracket the flood events.

At the outset, the households observed in Chennai are, on average, more affluent than the controls. Roughly speaking, we do have parallel trends in the period prior to the flood. During the flood, there was a large surge in expenditure which runs for many months. After that, consumption went down, to a point where the Chennai households were now comparable with those seen in the rest of Tamil Nadu.

Second, we evaluate the variation in the change in expenditure for different households. The adverse impact upon persons who live in structures with inferior structural strength is likely to be larger. We categorise households as more vulnerable, or more financially constrained, through various characteristics such as not having a concrete roof, or not having modern finance (such as life insurance, mutual funds, equity market participation), or not having durable goods (such as ACs, refrigerators etc). We find that the consumption expenditure of the these weaker households increases by a smaller amount than those not financially constrained. This might mean more hardship, and a higher inability to cope with catastrophic events.

Third, we evaluate the mechanism that households use to finance the higher consumption. Households could either draw down their savings, or increase their borrowings to finance expenditures. Our analysis suggests that relative to the control group, fewer households in Chennai saved, borrowed, or purchased assets, in the period after the floods. This suggests that reduced savings and reduced purchase of assets was the channel through which the consumption surge was financed. In our data, after about a year, the consumption surge ended, and was followed by a further decline in consumption. This may be consistent with households refocusing on repairing their balance sheet.

Natural disasters kill around 90,000 people and affect close to 160 million people worldwide. The frequency and intensity of disasters are expected to increase with global warming. Greater understanding is required about how natural disasters impact economic outcomes, so that better public and private responses may be designed. The contribution of this paper lies in bringing new tools of measurement (panel data, three times a year, matched DiD) to bear on an important problem (natural disasters) and discover the phenomena that are at work. The novel estimation strategy shown here can now be applied for many natural disasters in India. Over time, a body of work can develop of this nature, through which more abstract insights can be obtained.

The authors are researchers at NIPFP.

Thursday, December 05, 2019


Call for Applications

Ashoka University is inviting applications for the China-India Visiting Scholars (CIVS) Fellowship program.

CIVS is an opportunity for academics, policy experts, and professionals who are interested in expanding their current research to include China. The fellowship is aimed at creating more knowledge about China in India and encourage academic exchange of early- and mid-career scholars. This is a fully-funded fellowship that will provide 10 Indian scholars, who have had limited to no experience with China, the opportunity to develop an understanding of China’s experience and include it in their research.

The theme for 2020 is Economics and Development. This fellowship is ideal for scholars who are researching or working under the umbrella topic of economics and development, including (but not limited to) agricultural, urban development, education, vocational training, energy management, governance and performance management, rural poverty alleviation, food security, environment, public health, innovation infrastructure, and other similar areas, and are interested in developing a deeper understanding of China. Fellows can partner with an institution of their choice, or tap into Ashoka's network of institutions, which includes the National School of Development (Peking University, Beijing), Institute of New Structural Economics (Peking University, Beijing), Center for China and Globalization (Beijing), NYU Shanghai (Shanghai), HSBC Business School (Peking University, Shenzhen), Tianjin University of Finance and Economics (Tianjin), and the Hong Kong University of Science and Technology (Hong Kong).

The fellows will be guided and mentored by a Fellowship Committee, which includes top economists and China Studies scholars in the country. The fellowship runs for 9 months, includes a visit to China where fellows will work with a counterpart who is researching in a similar area of study, and concludes in a seminar in December 2020. The fellows have the flexibility to continue working at their current position while pursuing this fellowship.

More details about the fellowship and application available on the link above. Applications will be open until February 15, 2020.

Why China

The partnership between China and India is arguably becoming one of the most important partnerships of the 21st century. Both countries, with their massive populations, economies, and environmental impact, have outsized effects on the trajectory of global affairs. Given all of this and the shared 3,380 km border, there is still little understanding in India about China, and in China about India. If there were a prime moment to understand each other, this would be it.

For any questions, contact