The Baffling Politics of Paid Maternity Leave in India

by on March 17, 2017 at 8:36 am in Economics, Law, Political Science | Permalink

Policy makers and intellectuals in India are well informed about politics and intellectual developments in the United States and Europe. Among this group, for example, one can easily strike up a conversation about say Angus Deaton on RCTs versus structural econometric modelling. The similarity in the conversation extends far beyond the scientific, however, in ways that I sometimes find baffling.

When I gave a lecture at a local university, for example, I apparently shocked the students when I said matter-of-factly:

India would be a better country if it were richer and more unequal.

I think India’s extreme poverty makes this obviously true in a utilitarian sense, i.e. better for Indians, but it wasn’t so obvious to the students some-of-whom discussed inequality in terms that could easily have been duplicated at Berkeley. The inequality conversation has jumped the pond in ways that seem to me to be completely inappropriate.

Writing in the Times of India, Rupa Subramanya gives another example, a bill for paid maternity leave that has just passed the Indian parliament (waiting only on the president’s signature). As I pointed out earlier, by far the majority of Indians are self-employed and in the informal sector. The very idea of paid maternity leave, therefore, is bizarre. Is the right hand to pay the left?

As Subramanya writes, even fewer women than men work in the formal sector:

[W]omen’s labour force participation in India is 25% or less, as variously estimated by the International Labour Organisation (ILO) and from India’s National Sample Survey Organisation (NSSO) data. What is more, estimates by MLE and ILO suggest that less than 5% of female workers aged 15-49 are in the formal or organized sector. What this implies is that effectively those covered by paid maternity leave whether the old or the new provision are at best a small number of relatively privileged women working in formal sector jobs. The vast number of women working in the informal sector effectively have no social protections at all, forget about paid maternity leave benefits.

Add to this the well-known reality of poor implementation and even poorer monitoring and the truth is relatively few women benefit from paid maternity leave now, and by definition, therefore, very few stand to gain from the benefits being increased.

…Legislating generous benefits in a still poor country is putting the cart before the horse and is sure to fail. All that will happen are more frustrated women unable to find work, employers unwilling to hire women, and more non-compliance and non-enforcement of existing laws for a state that is already stretched thin trying to do far too many things with too few resources.

So why pass a bill which is so at odds with the real issues facing women on the ground? I think Subramanya is correct:

It’s hard to escape the impression that the main purpose of the increased maternity leave benefits is public relations, either aimed at educated urban women or targeted for international consumption where India is approvingly clubbed with rich countries like Norway and Canada as having the highest paid maternity leave in the world.

1 Anonymous March 17, 2017 at 8:52 am

Your criticism seems reasonable to an outsider, but to generalize, if you want social goods like maternity leave, why put it on the employer? A state sponsored program makes a more uniform benefit and spreads the burden. A sole proprietor could ask for the benefit, if she could somehow show “leaving work.”

In the US, four states have publicly funded paid maternity leave. California, New Jersey, Massachusetts and Rhode Island now have paid maternity leave laws. California offers new mothers up to six weeks, at 55% of their salary. … Rhode Island pays four weeks at 60%.

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2 Andrew M March 17, 2017 at 10:45 am

Quite. If anything, the state should subsidize companies which employ pregnant women, in order to compensate for the disruption caused by having to hire a temporary replacement.

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3 GoneWithTheWind March 17, 2017 at 11:16 am

You are right. Paid maternity leave only makes sense when their is a third party to rob to pay for it. After all it is all about the free stuff and you cannot have free stuff to hand out if you don’t first rob Peter. Hell let’s not stop there. Let’s make companies pay for child care. Why not diapers and baby formula. And toys aren’t cheap either let’s make those businesses buy the Christmas and birthday toys too. The list is endless. It’s really too bad that a country where most people work for themselves has upset the applecart and exposed how stupid this concept really is…

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4 PavJ March 17, 2017 at 1:13 pm

Careful you don’t fall off that slope. It’s mighty slippery.

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5 Anon March 17, 2017 at 12:02 pm

CA’s payment is effectively from the SDI , a deduction from employees’ payroll . So essentially works as an insurance scheme, since others on Disability also can claim from it. I don’t think the State is running a deficit on this specific programme.

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6 Ray Lopez March 17, 2017 at 8:54 am

Alex Tabarrok, the Ugly American. Or Canadian. “Indian would be a better country if it were richer and more unequal.” That went over like a Lead Zeppelin rather than Led Zeppelin.

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7 rayward March 17, 2017 at 9:08 am

Richer and more unequal. I suppose richer would appeal to Tabarrok’s Indian friends, but not more unequal: the top 1% own almost 60% of the wealth. Paid maternity leave is the kind of small bore policy scorned by both the left and the right in America. Forget the American nonsense and ask Tabarrok’s Indian friends if they would accept the China model for economic development, with an enormous public investment in infrastructure, industrial capacity, and education offset by nominal or non-existent investment in social welfare programs. Does Tabarrok believe the China model would work in India? I don’t due to enormous cultural differences. What does Tabarrok say? Cowen is certainly impressed with the China model. Is Tabarrok?

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8 RPLong March 17, 2017 at 9:23 am

Most Indians I know love the idea of implementing the Chinese model. I don’t know why you don’t think it wouldn’t work culturally. Rural Indians are by now quite used to having their property expropriated and developed by elite cadres, to the point that it’s become a cliche in their story-telling.

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9 Careless March 17, 2017 at 10:31 am

What kind of asshole cares how much richer the rich are getting if everyone is getting a lot richer?

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10 Tim March 17, 2017 at 11:07 am

An asshole with a brain cares. Wealth distributions correlate with political power distributions. People want autonomy, not gadgets! You will only ever hear the utilitarian argument from someone in the top global 1% of wealth, because only they could believe that poor people will accept defacto slavery in exchange for economic development.

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11 Slocum March 17, 2017 at 11:47 am

“People want autonomy, not gadgets! ”

Right. You can tell that because poor people in developing countries who get a little more money never spend it on satellite TV or smart phones. And poor women just love scrubbing laundry on a rock instead of popping it in the washing machine:

https://www.gapminder.org/videos/hans-rosling-and-the-magic-washing-machine/

12 Boonton March 17, 2017 at 4:17 pm

Would slavery be better if slaves had washing machines, smart phones and Xboxes to enjoy on their off hours?

13 Cliff March 17, 2017 at 10:28 pm

“de facto slavery” = what exactly? Being wealthy enough to do what you please instead of subsistence farming until a bad famine comes and you die?

14 PavJ March 17, 2017 at 1:18 pm

More unequal doesn’t necessarily mean the poor are getting poorer. This is especially untrue in a high-growth scenario like what India would experience if it got its shit together. Fully developed nations like the US and Western Europe have much slower prospects for growth, so inequality often does wind up squeezing the lower end of the distribution, but in India’s case where poverty generally means privation and indignity at a level that’s hard for most Americans to imagine.

Taking them from $1 a day to $5 represents a massive improvement in living standards, even if that winds up also enriching the millionaires into ten-millionaires. The contexts are different.

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15 albatross March 17, 2017 at 10:58 am

I don’t claim any deep expertise on India, but it seems to me that India would be better off if it were richer, even at the cost of being more unequal. But I also suspect that there’s something else going on here, having to do with our intuitive definition of unequal. I haven’t studied the Gini coefficient or other measures of inequality much, but it strikes me that some ways the society can become more unequal can also be improvements for the people at the very bottom. Right now, I think India has a fairly large population of people who are extremely poor–poor enough they don’t have enough to eat, or a safe place to sleep at night, and that’s probably what most people think of intuitively when they think of inequality. But a change to the society that moved a lot of those super poor people up to the point of having enough to eat and a safe place to sleep at night would be a huge win, even if it made the Gini coefficient look worse.

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16 Larry Siegel March 19, 2017 at 3:02 am

… but it’s right. (Good Pete Townshend almost-quote.)

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17 Rami March 17, 2017 at 8:54 am

Can you specify how many women are gonna benefit from this scheme? 5% percent of working women in India is more than the population of many countries. Such a scheme can help women stay in the workforce and increase their participation, rather than give up on their careers in order to have children.

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18 Axa March 17, 2017 at 9:04 am

India has around 330 million women between 15-49 years old. Alex quotes a guy saying at much 5% of those women have a formal sector job. So, let’s say 4%…..that gives: 12.92 million women. The implicit assumption is that 12 million is just a drop in the bucket of India. But, is it right to say that an important issue for 12 million women is just “public relations”?

Sometimes percentages are important, sometimes absolute numbers are important. In this case, which is the better perspective?

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19 Anonymous March 17, 2017 at 9:08 am

Do you think the 318 million women not eligible might see a fairness issue?

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20 kaldc March 17, 2017 at 9:17 am

Maybe. If so, then Alex’s two points in this post might stand in contradiction.

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21 PavJ March 17, 2017 at 1:23 pm

I’d say that’s unlikely. The benefits of being in the formal sector in India already put you into stratospheric levels of privilege over many in the informal sector. In terms of unfairness it doesn’t move the needle that much given how unfair it already is.

The bigger concern is that norms regarding women in the workforce are not as strong or constructive in India as in the US (and the US is no shining example on this either), so raising the cost of employing women could potentially have pretty deleterious effects in the realm of pay equality and the ability of women to get jobs in the formal sector.

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22 Tim March 17, 2017 at 9:10 am

Rupa Subramanya is a female economist not “a guy”.

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23 Thiago Ribeiro March 17, 2017 at 9:18 am

He can be whatever he wants and it is not your business.

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24 Axa March 17, 2017 at 9:44 am

Thanks for the correction.

But, I see this issue as killing the good (12 million) in the name of perfect (330 million). Also, a very short-term way of thinking. What if after a few years the formal economy grows and it’s 50 million women benefited from this law?

Indeed, this opens a very interesting question: should laws be based on the past/present or the desirable future?

Ps. No need to tell I’m an ignorant foreigner. In my own country people tells me that I know nothing about reality. Things have always being like this……thus laws have to adapt to the past instead of beings tools of improvement.

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25 dan1111 March 17, 2017 at 10:14 am

The context is a country where hundreds of millions of people are in dire poverty, and only a tiny portion of people are employed in the formal sector.

In order to alleviate poverty, one of the things they almost certainly ought to do is remove barriers to doing business that prevent the formal sector from thriving.

This puts up an additional barrier.

26 Careless March 17, 2017 at 10:35 am

Alex quotes a guy saying at much 5% of those women have a formal sector job

No, he estimates that of the portion that are employed, with a 25% LFPR that presumably includes women outside of the bracket, 5% have a formal sector job. So probably well under 12 million

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27 Axa March 17, 2017 at 9:30 am

I’d say the people opposing the idea is just recycling ideas from the stereotypical populist strong man handbook. A populist strong man is the “voice of majority”. Why apply idea X, if this idea is not aligned with the best interest of our glorious nation? The problem here is that minorities get screwed, either religious minorities or women working in the formal economy. The other problem is that the “voice of the majority” is just a rethorical tool used legitimate any whim desire of our strong man.

Also, this could be just a business owner’s strategy to deny women’s to employees in both formal and informal sectors. Women in the formal sector ask for rights…..tell them to shut up because poor women have even less. I’ve seen this strategy successfully applied in Latin American countries.

So, I’d be curious to identify where this idea comes from. From the political or business elite?

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28 ¯\_(ツ)_/¯ March 17, 2017 at 9:37 am

You are carrying a lot of baggage. Put it down, and rest a bit.

(If you believe in economics for political economy you will demand the highest ROI for marginal spending by the state (or by mandate). This maternal leave should be more important than any other equal value spending for India. Similarly, America’s new bigger, higher wall should have higher returns than any equal value spending for that country.)

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29 Axa March 17, 2017 at 10:02 am

If that’s the case, I’m a idiot for not being by the lake drinking white wine in a sunny spring day.

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30 ¯\_(ツ)_/¯ March 17, 2017 at 10:15 am

All of us.

We have a new budget proposal In the US. There is a lot of confusion. It cuts Meals on Wheels. It doesn’t. It does, a bit. And so on.

On positive thing to come out of it was that a spokesman for the proposal referred to evidence, and evidence based decisions. That would be a very nice thing to follow up on and support.

Sadly though I don’t think a new rule or budget should be thrown out there in India or the US, and then “evidence fight.”

Countries (and administrations) that put in a continuous process of evidence review and change do better.

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31 Thomas March 17, 2017 at 10:21 am

Afterschool meals because they improve grades -> they don’t improve grades -> who cares? we never cared about the grades, we lied.

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32 ¯\_(ツ)_/¯ March 17, 2017 at 10:28 am

I am sure some people don’t care, but I think most do. Or at least more generally about life outcomes.

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33 albatross March 17, 2017 at 11:02 am

Well, subsidized school lunches and breakfasts were sold (I think) as a way to improve the grades of the poor. I have no idea whether that succeeded (probably not), but it surely accomplishes the goal of making sure pretty much every kid in the country gets at least a couple decent meals per day for nine months out of the year, and it doesn’t actually cost very much. Of all the things you could use my tax dollars for, feeding hungry kids is about the *least* offensive of them.

34 A Definite Beta Guy March 17, 2017 at 10:40 am

Justin Wolfers Twitter-trolled yesterday and said he wouldn’t feed his kids because there’s no evidence they improve grades.

Which I think misses the point: if you spend OPM, you need to have evidence it helps. That the political left misses this point entirely depresses me.

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35 albatross March 17, 2017 at 11:05 am

Once someone is trying to sell a policy, though, they come up with a whole long list of plausible-sounding arguments for what they want to do, and they lean most heavily on the ones that resonate with voters, not the ones that are the most defensible.

Universal pre-K as a way to make the kids smarter sounds great, even though it’s pretty implausible and not supported by much evidence. Universal pre-K as a way to provide free daycare and make sure kids from the very worst homes get some kind of decent civilizing influence isn’t as easy a sell, even though it’s a lot more plausible.

36 FWIW March 17, 2017 at 11:14 am

That the political left misses this point entirely depresses me.

Obama’s Budget Lays Out an Ambitious Evidence-Based Policy Agenda

37 Gerber Baby March 17, 2017 at 11:33 am

“Women in the formal sector ask for handouts…..tell them to shut up because poor women have even less. “\

Fixed it for you.

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38 RobZ March 17, 2017 at 9:34 am

Sometimes it’s useful to look at (presumably/possibly) unintended consequences. If this becomes law, not only does it serve as good PR, it makes it significantly less attractive for a company to hire women. All of the Indian men I’ve spoken to (when away from their wives) have been unambiguously opposed to women working. (Well, their kind of women, anyway. It’s apparently fine for the “lower” classes)

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39 prior_test2 March 17, 2017 at 10:30 am

‘The inequality conversation has jumped the pond in ways that seem to me to be completely inappropriate.’

I’m sure that the Indians just love having a North American lecture to them, in English, about what they are doing wrong. Have another gin and tonic, Prof. Tabarrok, and let the Indians know what else they are doing wrong. After all, it isn’t as if they aren’t familiar with that experience.

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40 Careless March 17, 2017 at 10:57 am

Indeed, the Indians sure showed us they know how to run things better than we do.

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41 Alex Tabarrok March 17, 2017 at 11:47 am

They invited me. All their lectures are in English. We had a good discussion.

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42 Zach March 17, 2017 at 11:19 am

“employers unwilling to hire women”

That’s a dumb concern. India has better anti-discrimination employment laws than the USA. Whether they actually work in practice, I don’t know, but anyone ignoring anti-discrimination laws is going to ignore maternity leave laws as well.

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43 Gerber Baby March 17, 2017 at 11:34 am

And we all know how well India enforces it’s laws…..

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44 Jay March 17, 2017 at 1:22 pm

Funny you say “better” and “whether they actually work..I don’t know” in the same sentence.

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45 lemmy caution March 17, 2017 at 11:55 am

India basically has the same Gini coefficient as Canada so I don’t know what the hell this post all is about:

http://www.indexmundi.com/facts/indicators/SI.POV.GINI/rankings

Increasing inequality is a lot easier than getting rich so it is unsurprising that Indians would not be excited to turn India into Haiti or whatever.

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46 Jay March 17, 2017 at 1:23 pm

I think that’s a knock against the Gini as anything useful in discussion more than anything else.

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47 lemmy caution March 17, 2017 at 1:56 pm

I am not the one with the “inequality is good” hot take. Maybe Alex can come up with inequality statistic where high values are good rather than a sign of big problems.

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48 Cliff March 17, 2017 at 10:35 pm

Did you miss the “richer” part?

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49 A Definite Beta Guy March 17, 2017 at 12:48 pm

Cool post! Appreciate the insight on this. I figure this would be pretty devastating to the overall economy: can’t even form small firms. It might very well create a more unequal economy by preventing small firms and only enabling huge firms (especially foreign firms) that can afford this package.

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50 Viking March 17, 2017 at 2:17 pm

India is the only country I know about that inflation index capital gains.

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51 Cliff March 17, 2017 at 10:35 pm

That’s a great policy, good for them. You wonder how other high-inflation countries can survive without that

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52 polyglot March 17, 2017 at 2:50 pm

The number of women covered in the private sector would be smaller than might appear because most young workers are on temporary contracts.

Still, a lot of young women in the public sector will benefit from this without changing incentives for employers so ‘no harm, no foul’.

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53 gbz March 17, 2017 at 3:38 pm

There is no shortage of positively meaningless laws in india, and reasons for it are vast. One reason that is often ignored is that the indian state has completely divorced law making from law enforcement. So even the lawmakers know they can create laws for vote winning and then not ask anyone to actually enforce them. Once the lack of enforcement produces a backlash, the parliament responds by making existing laws more draconian which only ensures they will never result in conviction. So you have an entire corpus of laws that exist purely for vote catching but with no enforcement intent. At the limit this produces another understudied paradoxes of democracies — the state that is scared of its citizens. In india, many laws are never enforced because govt’s fear losing power for enforcing the law. Which makes the Modi phenomena that much more extraordinary. More broadly, so many of india’s problems really relate back to its original sin, premature universal suffrage. But that was also a sin it could not avoid, there really was no other way. India has to work through 10,000 yrs of historical baggage before it can move forward. Its probably worked through good part of it already. Not everyone gets a clean slate like the american republic.

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54 Boonton March 17, 2017 at 4:18 pm

What if the 1,000 richest people in India doubled their income? India would be richer but would that be better?

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55 Thomas Sewell March 17, 2017 at 9:26 pm

Can you come up with a way that the 1,000 richest people doubled their income, but had no inclination to actually invest or spend any of it? If they invest or spend any of it, it’s going to end up benefiting others as well, right?

Anyway, I think the point is that if everyone in India’s income increased 5x, then while the distance from the poorest to the richest would also be multiplied 5x, wouldn’t the poorest be better off being 5x more wealthy than they are?

As for the maternity leave issue… I’ll just sarcastically comment that of course India is looking for ways to subsidize increasing their tiny population. I’m ok with that, but the typical supporters of government interventions like this may want to rethink it in accordance with their other typical beliefs.

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56 The Lunatic March 17, 2017 at 10:36 pm

Forget the everybody 5x scenario. Imagine a quintile-adjusted scenario. Everybody in the bottom quintile gets a real 2x, the second-lowest gets a 3x, the middle gets a 4x, the second-highest gets a 5x, and the top gets a 6x. Inequality increases not just in absolute terms, but in relative terms, too. But the poor still have twice as much as they had before.

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57 Boonton March 18, 2017 at 8:33 am

“Can you come up with a way that the 1,000 richest people doubled their income, but had no inclination to actually invest or spend any of it? If they invest or spend any of it, it’s going to end up benefiting others as well, right?”

It’s abstract but not at all impossible. The 1000 richest could import goods from abroad….or money they spend on people outside the 1000 could be offset by other declines in income for those outside the 1000 leaving you with a net case where India’s top 1000 double their income but no one else does.

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59 Troll me March 19, 2017 at 5:26 am

When you say “more unequal” people hear “the poor will be more poor”.

If you mean “richer, but more unequal, but also with an at least marginally better material situation for the poor”, then I think you have to be specific about this additional fact.

E.g. “more unequal due to income growth being slower in lower income groups” then implies that everyone is experiencing absolute material gains. Whereas “more unequal” suggests that some will experience absolute deteriation in material conditions.

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60 blah March 19, 2017 at 5:41 am

“When I gave a lecture at a local university, for example, I apparently shocked the students when I said matter-of-factly:”

Is there any way I can get to know of your lectures in Mumbai? I occasionally check your twitter feed, but couldn’t find any announcement.

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