Something’s got to give

Also read | Anil Padmanabhan’s earlier columns

According to Ganesh, there is a simple logic to why Indian business is losing out to countries such as the Philippines in outsourcing work: The things you take for granted, that is, the basics of governance, are available in the Philippines while in India the entrepreneurs have to provide for them.

“In India we have to bus them (as there is no alternative reliable public transport), feed them and now also ensure their security (because the local authorities can’t do so)," Ganesh said. Add to this the responsibility of generating a power supply back-up, the competitive advantage of the Philippines is apparent.

What he didn’t say is the growing unemployment that this trend, if unchecked, is going to generate in urban pockets. Call centres and other outsourcing efforts have emerged among the fastest growing service sectors that have absorbed a significant chunk of increasing numbers of urban youth. The new jobs that have come along with decent money and a casual lifestyle has only further stoked their aspirations. Choking that off so abruptly is unlikely to go down well with them. And, unlike their older generation, they are not patient, and hence, less accommodating of a system that is seemingly so helpless.

Earlier, we knew no growth. Change was far and between. Standing in queues for paying utility bills, getting rations from the public distribution system, for buying a train ticket was a way of life. All that changed with liberalization. Now, owning a landline is a luxury, while a cellphone (over 700 million connections) is not. Technology and competition together with a better standard of living has brought a material lifestyle within reach. Now it is a case (to steal a title from Bollywood) of Yeh Dil Maange More.

While Indians have changed, the basic system that evolved around command and control has not. As a result, the delivery system simply fails to cope. Faced with a cash crunch, both the Centre and states, have chosen to cut back on public spending on public services such as police personnel and refrained from taking tough decisions to overhaul the system. So while the old system has begun to fray, little has been done to invest in an alternative.

Consequently, the system and all its institutions, whether it be government, police, judiciary and media, are beginning to look helpless and gradually losing credibility. Take, for example, the current bout of inflation; every step of the way public policy planners have been exposed for their claims that inflation would ease off—strangely it has accelerated every time some functionary argued that the worst is behind us.

Similarly, the outing of conversations recorded during the phone tap of lobbyist Niira Radia showed the media in poor light. Worse, their largely defensive response only compounded the cynical perception and eroded credibility. Similarly, the Congress-led United Progressive Alliance (UPA) has unleashed a deplorable defensive response to the charges of misuse of public office; the effort to correct its public image through a cabinet reshuffle has fallen flat given the piecemeal nature of the changes and failure to even voice the structural fault lines leave alone address it.

This systemic malaise, together with growing public unrest, could turn out to be an explosive combination. Across the Middle East the anger boiling over on to the streets has been triggered by economic depravity and rampant food prices.

At the moment almost everyone is living in denial of this growing redundancy of the existing system and the increasing disconnect with people. Searching questions are already beginning to be asked. Unfortunately, since elections are held only once in five years, it will be awhile before we know what the country thinks. Some indications may be apparent in the elections to the state assemblies of Kerala, Tamil Nadu, West Bengal and Assam.

In a story in today’s Mint, a colleague has detailed the growing demoralization among Congress cadres as its government gropes its way through what is an incredible second consecutive term in office. If not set right, it could be bad news for India’s oldest political party as it has the chance to retain power in Tamil Nadu and Assam on the one hand, and return to power in Kerala and in West Bengal (after a lapse of 30 years).

Interestingly, while the country continues to drift and the governance deficit widens—something that has been flagged repeatedly by everyone’s favourite political writer, Pratap Bhanu Mehta, in his weekly column in The Indian Express newspaper—the rest of the world is beginning to get apprehensive. Rightly so.

After all they have huge investments in what they perceive to be the next big growth centre in the world. This was the untold story at the just concluded gathering of the super-rich in Davos where Indian panellists were repeatedly queried by the concerned about the rapidly sinking governance standards.

The warning signs suggest a build-up towards a perfect storm. Status quo is no longer feasible; something’s got to give. It may, as an erudite and passionate India observer said, “The beginning of the end of the First Republic (as we know it today)."

Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com

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