The role of the government in economic activity has come down substantially in the past two decades. Yet, critical areas of the economy, entirely or in part, remain the responsibility of the state. The Indian state’s inadequacies with regard to execution and implementation could, therefore, hobble the nation in its onward journey.
There is plenty of evidence, both anecdotal and structured, about schools without teachers, huge village clusters devoid of power, primary health centres ailing without medicines and trained doctors, roads that end before they reach anywhere and fair price shops diverting more grain than they dispense. Unfinished irrigation projects, too, make for a sad commentary. The state’s inability to deliver, despite its propensity to spend on these heads, means that inclusive growth will continue to elude us.
Many of the projections of our future, by which the world has started to define us, assume a proactive and efficient state. A GDP growth trajectory of 8-9%, while derived from a combination of savings rate, efficiency and productivity ratios, takes for granted that infrastructure will not be a binding constraint. Growth is predicated on the belief that the state will build adequate roads, ports, power plants and so on, in the stipulated time, to support enhanced economic activity.
The so-called “demographic dividend” that India looks to reap would amount to nothing without education and basic technical skills for all. A higher proportion of youth, if unemployable, will be more of a curse than a blessing.
The Union government monitors the progress of its projects, which require an investment of over Rs20 crore. Its last full-fledged report, in September 2006, shows that of the 860 projects being monitored, as many as 293 are behind schedule. This, after deadlines were extended for many of them. More disconcerting is the fact, pointed out in the report, that for another 232 projects, no completion dates have been indicated at all!
There is too much at stake. Investment in these 860 projects is envisaged close to a mind-boggling Rs385,000 crore. Of this, over Rs145,000 crore has already been spent. More important, they are in crucial sectors such as roads and highways, railways, power, urban development and telecom, where corporates and civil society are looking to the state to deliver, and to do it quickly.
This is the state of projects controlled by the Centre. State governments are responsible for separate sets of projects in areas that are at least as critical: Education, health care, gender and rural development, apart from roads, power, irrigation and others. Their record is more dismal.
Clearly, it is non-performance on a massive scale. The loss in financial terms is significant, but even more in terms of its long term implications on our people and our growth story. Yet, we are unable to resist the temptation to announce and embark on new projects.
How is the corporate sector able to deliver on large and world-class projects? Companies begin any initiative with detailed assessment of feasibility. There is a clear sense of what is sought to be achieved, and what systems, structures and resources are required to fulfil those objectives.
While the project is coming up, there are defined timelines. Much thought and effort goes into forming teams of people from diverse disciplines who need to work together to make the project possible. Resources and decisions are delegated to them. There is regular monitoring and course correction. A matrix of accountability, together with a sense of purpose, holds together the entire effort. This is not confined to private companies. The solid performance of numerous public sector firms, such as Bhel, NTPC and indeed the Delhi Metro, is proof that there is nothing inherent in the system that prevents performance. With leadership and focus, it is possible for government to deliver and execute almost across the board.
Among the various bottlenecks, a critical one is leadership teams in government getting bigger and unwieldy. The size of cabinets is expanding, accompanied by a bloating bureaucracy. Jobs that were handled by one government department are now split among three or four portfolios. It is in these situations of overlap and treading on toes, ironically, that accountability falls between the cracks!
What is the way out?
The political marketplace continues to punish bad governance through the “anti-incumbency” vote. But given the fast pace at which we aspire to grow, the time it takes before citizens can register disapproval is far too long.
Here is my suggestion. Let us resolve to complete all unfinished projects, both at the Centre and in the states, in the next three years. Until we achieve that, let us restrain ourselves, as far as possible, from announcing any new projects in these areas.
How should we go about it? Nothing less than a “mission approach” will do. We need to put in place a suitable structure, like an empowered group at the Centre, to coordinate among various agencies, take decisions on resources, monitor performance and do what it takes to finish these projects.
I can imagine there would be a range of issues holding up projects: Technical approvals, land acquisition, lack of funds, expenditure beyond budgeted amounts, delay in civil work, and so on. There will be projects where substantial cost has already been incurred, but which are languishing because the government system refuses to sanction more funds. The empowered group can take a call in such cases and, where prudent, provide the extra money, complete the last mile and thus make sure that the investment already sunk begins to yield returns.
When the mission concentrates on individual projects, it will find many where the project is better farmed out to the private sector. The latter already plays a major role in developing infrastructure. Private-public partnership here could do wonders. We now have a transparent system of inviting bids, even providing a viability gap. We can encourage foreign investment as well.
There are ways and ways to make governments effective. Most solutions are known. What we need, though, is focused, determined action. This century may well belong to India. But we must make sure that as we step out to own and captivate this century, we do so without any backlog.
Jagdish Khattar is managing director, Maruti Udyog Ltd.