Public-private & other divides

Public-private & other divides

Farmers and tribals have beset India with protests for more than a decade over land rights. There is some truth in their assertion that land is being “snatched" from them without proper compensation. The protests in Lanjigarh in Orissa and Tappal in Uttar Pradesh are two recent examples.

There is, however, another face to these protests. Farmers in Tappal, for example, were protesting that the government was acquiring land for private firms in the garb of public interest. Most protests over land have this undercurrent running through them. It is a misguided view that is also a very different political problem from the ones that our leaders have been accustomed to solve.

Since 1991, India has moved in the direction of a free market economy where individuals, as consumers and producers, take economic decisions. At the same time, our political system is based on collective identities, be they of caste, region or religion. This produces a political world view in which the government is held to be the ultimate arbiter of life chances—educational, economic, social and political. There is little space, or legitimacy, for individual firms, especially if they are viewed as owing their fortunes to “new money" or as being upstarts.

This creates curious problems. For example, if a government acquires land to build a road, it is acceptable if it builds the road on its own. But if it transfers land to a private developer, there is no legitimacy even if the end result is a road that can be used by everyone. What is ignored here is that governments today have little money left for investment in public projects. At the state government level, almost the entire revenue is eaten away by committed expenditures (salaries, pensions and interest payments, among other demands) and subsidies. There is no money for investment. The private sector enters the picture because there are no other options. If governments had money, one can be sure there would be no private sector involvement in the infrastructure and mineral extraction sectors.

The other side of this picture is an “agency problem": Even if the government decides to make developmental interventions in the economy, it does not have the instruments to do so. The one tool that India had for this task, a law-and-order bureaucracy turned into a developmental one, was blunted a long time ago. States such as Bihar and Uttar Pradesh, where demand for such state intervention is the highest, have the weakest civil service in the country. This, perforce, leaves no option but to involve the private sector. The public-private distinction is built on a lag between economic realities and outdated politics.

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