Are civil servants justified in believing that the recent campaign by Arvind Kejriwal will have a disruptive influence on the government’s decision-making process? That is the charge some within the government are levelling against the series of revelations that Kejriwal has made in the last few months.
An additional point being made by those unhappy with the Kejriwal campaign is that he is not revealing anything that is substantially new. Connections between Robert Vadra and DLF, Nitin Gadkari’s business empire or the relations between Reliance Industries Limited and the Union petroleum and natural gas ministry have all been written about in the past in sections of the media. But those issues, even after their disclosure, were generally ignored by political parties and most media groups. The difference Kejriwal has made is that he is again bringing those issues to the fore, and is trying to make them a subject of political debate. Therefore, to say Kejriwal’s allegations are not new is to offer a specious argument, since the lack of novelty does not take away the irregularities, if any, that they point towards.
There are also those who believe there is an urgent need to revive the animal spirits in the Indian economy through higher growth. It is a goal, they believe, that has been thwarted by Kejriwal’s allegations, since they have given rise to an all-pervasive environment of negativity. There is, of course, some truth in the assessment that Kejriwal’s charges have adversely affected the feel-good factor. But to believe that a system can create a feel-good factor by only feeling good is to live in a fool’s paradise. You have to be good before you can feel good. What Kejriwal has done is to point out instances that suggest governance is not in good shape. So, where can the feel-good factor come from?
This is not to say the Kejriwal factor will have no impact on the government’s policy-making ability. Remember that the telecom spectrum scandal and the controversies surrounding the allocation of coal blocks did contribute to policy paralysis for much of the first three years of the current government. It was only in September this year that after considerable effort and internal conflict resolution the Manmohan Singh government managed to shake itself out of that policy stupor.
Make no mistake, however. The steps that were taken hardly signalled the return of the reforms raj. At best, the steps could be described as half-hearted attempts at making partial amends for past mistakes and negligence. Diesel prices were raised, but not freed from the government’s administrative control. Foreign direct investment in multi-brand retail was allowed with a rider — a decision that was kept in abeyance for almost a year. A cap was imposed on supplies of subsidised cooking gas for domestic use, a move that is now likely to be relaxed. A new fiscal consolidation map has been prepared, although several experts wonder if the implementation of the plan is feasible. Even Reserve Bank of India Governor Duvvuri Subbarao was not adequately impressed, as he appeared to have postponed a cut in interest rates to his next policy announcement.
To be sure, the Kejriwal campaign should not give rise to any fear of a slowdown in reformist measures on the fiscal consolidation front. What could derail the government’s plan to relax norms for foreign investment in pensions and insurance sectors? Even allowing foreign direct investment in multi-brand retail has not been a target of the Kejriwal campaign. If the Competition Commission of India’s jurisdiction of control is strengthened and made transparent, could the Kejriwal campaign weigh on the minds of the government policy makers? Not really.
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So, macroeconomic reforms are likely to remain largely safe. But problems would arise in sectors such as real estate and energy, where the government in the last few years has either encouraged more investments through policy changes or allowed a host of public-private initiatives. It is also in these areas that politicians in ruling parties, at the Centre and the states, are seen to have tweaked policies and regulations to offer special concessions to favoured business houses and secure for themselves some benefits. Coal block allocations have already come under attack. Land deals are now being probed more minutely by various state governments and the Centre. Special economic zones may be the next target of such scrutiny.
Civil servants, therefore, are likely to be extremely wary of taking decisions in all these areas. The Kejriwal campaign has already secured a commitment from the government that it would not review the KG-D6 gas prices before 2014 — a demand that could well have received favourable treatment if no such noise was made in the last one week. The administrative processes for transferring land to industry are likely to become more slow and complicated, given the civil servants’ desire not to get caught in any controversy.
Will the decision-making process suffer? Yes, of course. But if the government draws the right lessons from the Kejriwal campaign and plugs the policy gaps that result in such undue benefits for politicians and businesses, governance may actually improve and, with time, even the decision-making process will become robust , quick and smooth. So, why blame Kejriwal? Instead, civil servants would do well to use him to clean up the system. It is an opportunity for change as the politicians, already under tremendous pressure, are unlikely to create roadblocks to such reform moves.