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Narendra Modi: Revisiting The “Toilet Test”

Business, China, Company Strategy, Economics, India, Indonesia, US
By John Richardson on 17-Sep-2015


By John Richardson

LAST year I set India’s Prime Minister, Narendra Modi a “toilet test: Would he be able to fulfil his promise of giving every Indian access to a toilet by 2019?

I should have actually qualified this question by pointing out that access wasn’t enough, but instead has to be accompanied by a change in social attitudes leading to many more people being prepared to use toilets. I should equally have also pointed out this very obvious fact: There is no point in installing toilets unless they actually work.

Sadly, by this wider and more sensible measure than just looking at the actual number of toilets so far installed, Modi may end up missing his objective.

On the surface, more than a year on from the launch of the “Clean India” campaign, the statistics look pretty impressive as the government claims that every schoolgirl and schoolboy now has access to a toilet. It also claims that 800,000 new toilets have been installed in rural India.

But a guy worth listening to is Dr Bindeshwar Pathak – founder of Sulabh International. Dr Pathak has been helping to change social attitudes since the 1970s, ever since he launched his NGO. As this interview Dr Pathak reveals, changing attitude is proving to be a long and difficult process.

It fantastic that Modi is on board with this long term push, but I worry that, with so many other challenges confronting him, he might lose focus on what I think is one of the, if not the biggest single challenge facing India. One of the other big challenges India has to deal with is providing people with enough access to safe food and drinking water.

What about the issue of installing toilets that actually work? Not surprisingly, perhaps, Modi’s political opponents are pointing out that he has fallen short here. For example, opposition MP Dr Shashi Tharoor wrote the following:

It is not just that the government needs money to actually build the toilets, install the dustbins, and improve the drainage facilities it is supposed to establish. It also needs money to ensure that there is water in the toilets it builds, so the toilets are worth using. Studies suggest that most of the toilets built since Mr Modi announced his scheme are unused or unusable because they have no water to flush or clean them.

But we obviously need to keep a close eye on this issue.

As I said, I worry that Modi will lose focus with so much else going on, including, for example, the Digital India initiative. This involves connecting rural areas with high-speed internet connections, whilst also delivering government services digitally.

I am not saying that this is not important. Of course not, but first things first as Chandran Nair of the Global Institute for Tomorrow wrote in this FT  Beyondbrics blog post:

Internet and the smartphone are no cure for a society unable to provide universal access to basic needs, such as safety, clean water, good nutrition and health care.

These connective technologies are also rarely the most effective way to improve standards of living. India’s government may hope to spread its fibre-optic network to millions of rural Indians, even as many still lack access to basic sanitation.

Expanding access to clean water will have a much greater impact on India’s poor, through reduced child malnutrition and preventing water-borne diseases, yet remains ignored by both markets and a massive challenge to governments.

So why are the issues of sanitation and safe drinking water not gaining enough attention? There are two reasons, I think:

  1. I don’t  envy Modi’s job at all. He has a huge task in dealing with all the competing challenges in a wonderful, but yet chaotic, democracy. India has made fantastic social and so economic progress over the last few decades, but this progress has sometimes involved one step forward and two steps back. So Modi needs to be a “class apart”, a politician that rises above the all the distracting background noise, so he can maintain a razor-like focus on the things that really matter.
  2. The word “markets” in the quote above is hugely important. We have seen waves of harmful capital flowing into India, thanks to the Fed’s hopelessly misguided stimulus programmes, the third phase of which is now being unwound. So the local stock market has on occasion soared, as real-estate values in the big cities have gone through the roof. This has made so many more people rich that some of those people have lost their focus on the real, longer-term challenges. Unfair? Maybe. If so, apologies in advance. But what I think is certainly right is that this obsession with Western capital flows, and the Western financial system, is bad for developing countries in the long term. Capital can flow in, and it can flow out again, as might happen if the Fed raises interest rates this week. But always left behind, regardless of capital inflows are outflows, will be the long term challenges – such as providing enough decent sanitation and potable water.

I had an interesting discussion with a contact yesterday about my yesterday’s post on Indonesia. He saw helping to satisfy these “basic needs” as merely a nice thing for chemicals companies to do, as it would fulfil their corporate responsibility missions.

I am sorry but this misses the point.  The point is that in today’s New Normal, helping satisfy these basic needs is the only way that chemicals can be commercially successful in emerging markets.

It might not boost the share price of your chemicals company over the short term, and some of your investors could even start wondering whether the CEO of your company has lost  her or  his senses.

But like the tough job that Modi faces – and I continue to wish him every bit of success – it is now time for good CEOs to also ignore all the harmful background noise, so enabling them to direct all their focus on what really, really matters.

My logic for this? Let’s take polypropylene (PP) as an example, where, as you can see from my chart above, we expect China to have consumed around 21 million tonnes of the polymer in 2015 versus India’s 3.7 million tonnes.

As you can also see from this chart, China’s consumption has soared over the last 15 years, whereas India’s consumption in relative terms has only slightly increased.

You can of course argue all sorts of reasons for this, including China’s far-better infrastructure that has enabled it to become the “Workshop of the world” – and the Western demographic sweet spot that China benefited from in the early 2000s.

But China dealt with its basic needs first before its economy really took off. India has to do the same thing. Why?

Because the value of good internet connectivity, better roads and ports, better education and vocational skills training will be largely lost if hundreds of millions of Indians remain too sick to even attend school. Two of the biggest causes of childhood illnesses, and infant mortality, remain lack of access to decent sanitation and drinking water.

So, unless both chemicals companies and the Indian government work together to get the job done of satisfying basic needs, it is hard to see how PP demand in India can ever even approach China’s levels.