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Governance and growth

Governance and growth
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First Published: Wed, Sep 28 2011. 10 00 PM IST

Jayachandran/Mint
Jayachandran/Mint
Updated: Wed, Sep 28 2011. 10 00 PM IST
In his speech before the United Nations last week, the Prime Minister spoke of the balancing role India’s growth (8%, he said) may play in helping a slowing global economy. The fact is that Indian growth has slowed for five successive quarters, and may well fall further. The Index of Industrial Production remains soft: indeed, it may fall further as corporate investment growth continues to fall (Reserve Bank of India study), as, for environmental reasons, ore and coal mines are ordered closed affecting steel and power output and exports have shown a large jump, but the veracity and sustainability of the numbers is questionable.
Jayachandran/Mint
While much is made of the lack of policy reforms, to my mind, the most important problems are improving governance and accountability. The problem starts right at the top with an unelected and non-accountable body (the National Advisory Council, NAC) acting as a super-cabinet, which loads ever greater social responsibilities on a government machinery unable to deliver even basic services—road maintenance for example—with a modicum of efficiency and honesty.
Indeed, we have made governance and decision making so complex as to almost ensure that decisions from the purchase of new dustbins by the Mumbai Municipal Corporation to the installation of CCTV cameras around the Delhi high court, get delayed, and nobody is responsible for the delays. (Would a Lokpal only worsen the situation further, as the Right to Information seems to be already doing?) Economically, far more important issues likewise get referred to so many august bodies that nobody can be held accountable for anything. The Comptroller and Auditor General (CAG) criticized both the merger of Air India with Indian Airlines, and the huge order placed for the expansion of the fleet. At last count, the bodies of learned men involved in the decision-making processes included the boards of the two companies, the ministry, the Planning Commission, the Project Investment Board, committees of secretaries, the cabinet committee on economic affairs, etc. How can poor Praful Patel be blamed for the decisions?
But to come back to the NAC, at a time when we need to increase investments to create jobs, ever more resources are spent on social programmes. God alone (hopefully!) knows the proportion of “outlays” leading to lasting “outcomes”. No wonder jobs growth dropped to just 2 million in the last five years! The number of people with no stake in the proper functioning of the economy is rising rapidly, even as we talk of “inclusive” growth. Farmers are revolting against land acquisition—40,000 farmers in Andhra went on a crop holiday in 2010-11, protesting against the minimum support price, and the agitation is likely to spread to Tamil Nadu, Karnataka, and Maharashtra (Business Standard, 27 September).
At one level, security forces are becoming ever more brutal and extortionate—a truck driver in Uttar Pradesh was murdered by the police because he refused to pay the demanded bribe! At another, their working conditions are becoming more intolerable every day, despite any number of commissions and pious platitudes about reform. If the police and paramilitary forces join the farmers in striking against the way things are, where will we be?
Another sad trend one is witnessing lately is the reversion to leftist rhetoric blaming “neoliberalism” for all the ills—from the obiter dicta in Supreme Court judgments, to Annaji and other social activists. They forget that it is only the “neoliberalism” of the last two decades that has allowed the huge increase in social spending! On the other hand, they also overlook that lasting outcomes at the village levels come from “bottom-up” actions, facilitated by the government, and not top-down handouts—as any number of examples, from Ralegan Siddhi to many, many others, manifest!
At a different level, within the BRICS (Brazil, Russia, India, China and South Africa), we come out weakest in macroeconomic comparisons of the current account and consolidated fiscal deficits—and the highest in inflation. Five years ago, the World Economic Forum gave India a competitiveness score of 4.3, one notch below China’s 4.4. The latest scores were 4.3 for India and 4.9 for China. From being ahead of the average for 80 emerging and developing countries, up in these five years from 4.1 to 4.4, India has fallen behind (Business Standard, 10 September). In the Global Innovation Index, developed by INSEAD, India’s ranking has slipped from 23 in 2007 to 62 now, while China remains in the top 30. (The Economic Times, 22 September 2011). We rank equally low in the World Justice Project’s latest Rule of Law index. But then, who has time (or inclination?) to think about, to debate, to rectify such issues? Our political masters often behave, and act, as if 9% per annum of real gross domestic product growth has become the “new Hindu rate”—persisting whatever we do or do not do. Is this a valid assumption? I for one would not be surprised if, following the fortunes of the Indian cricket team, we register a sharp fall in our global ranking. As Pratap Bhanu Mehta asked in a recent article (The Indian Express, 22 September), “Is India an ungovernable economy now?” The answer, sadly, seems: “Yes!”
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First Published: Wed, Sep 28 2011. 10 00 PM IST
More Topics: The Other Side | AV Rajwade | India | UN | Growth |