Kanika Datta: The canker of petty bureaucracy

SWOT

At the start of a week last month, I sat in on a sophisticated discussion on the wisdom of discouraging companies from borrowing money overseas as a means of curbing money supply to manage inflation.

This was followed by another learned discussion on the impact of the Reserve Bank's inflation management on economic growth. Would growth slow as a result of the higher cost of funds? Was the economy overheating? After years of trying to stoke India's economy to China levels, this was a novel problem to have.

The next day, the Percy Mistry committee report on developing India as an international financial centre was released, with its abundance of recommendations. This provoked more earnest discussions and analyses of Mumbai's potential as the future London of Asia.

All in all, two days of armchair discussions made it easy to think that India was "in the zone", as the Americans like to say. And certainly, the laudatory remarks of visiting CEOs around the time""such as Rick Wagoner of General Motors to launch the Chevy Spark""reinforced this idea.

By the end of the week, though, I was disabused of this notion. The disillusionment stemmed from the simple need to acquire a Delhi driving licence to replace an expiring Kolkata one.

A driving licence can hardly be considered a document of stunning importance like, say, a licence to set up a new factory. It is a routine requirement that any citizen who drives a motor vehicle has to fulfil. Yet, as anybody can testify, it is a long-drawn and traumatic experience that displays Indian officialdom at its very worst.

Over two days a month apart, I watched a well-oiled mafia of touts operate to secure licences for their clients from police officials who were happy to dispense with identity checks and driving tests in return for a small per capita compensation.

This operation in itself seemed to be fraught with tension. Was the receiving clerk in honest mode that day? Would the official concerned find some minuscule error to reject the application?

All these quirks mattered because they raised the premium on these "services"""which the taxpayer finances in any case""and eat into the touts' margins since competition forces them to keep customer charges constant.

For those who chose to acquire a licence without private intermediaries, the trauma index was even higher. With no money to oil the wheels of petty bureaucracy, the process could entail multiple full-day visits.

The sheer unpleasantness of the experience was unleavened by an environment that would give Mumbai's slums some stiff competition. Delhi is India's largest market for passenger cars; so it follows that its motor vehicles department gets a high number of applications for driving licences. Yet the licensing authority is housed in a series of numbered rooms scattered in no particular order in an unbelievably dirty and fly-blown industrial complex.

The contrast with my time-table in the earlier part of the week was stark. Here, bunched together with other fellow sufferers from all walks of life in the filthiest of surroundings, urbane discussions about the progress of the Indian economy seemed almost bizarre.

Overall, a process that should have taken not more than half a day cost me two days of work time plus an incapacitating migraine. In Delhi's context, the near-absence of a robust transport system makes a driving licence an essential productivity tool""it helps get me to work everyday in a reasonable frame of mind.

Yet, this experience with entrenched petty corruption is only a small example when set against with the daily harassment that businessmen face in trying to do business. Economic liberalisation may have freed corporations from the larger bonds of governmental control. But at micro-levels, where official intervention is still required, India lags its Asian counterparts""no paragons of honesty themselves.

It is significant, for instance, that in the World Bank's annual "Doing Business" rankings India slipped a rank from 154 to 155 in terms of dealing with licences and five ranks, from 128 to 133, in terms of closing a business""both of which entail government intervention (China and Indonesia seem to be worse off, though the costs imposed are significantly lower).

I suspect these rankings actually present a better-than-average picture since the World Bank's tests are conducted in Mumbai, which has a relatively efficient local administration. For the "dealing with licences" parameter, for instance, it tracks permissions required from the Mumbai Municipal Corporation for building a warehouse.

To be fair, India has improved its position in the global "Doing Business" rankings. This is notably so in terms of ease of doing business and starting a business (a respectable 14-point jump in the latter case).

This improvement reflects the inherent strengths and opportunities in the economy that could easily be unleashed if businesses were freed from endemic petty corruption. These, mostly dismissed as irritants, nevertheless detract from our competitiveness by adding to the costs and risks of investing in India. Without them, India could pull itself out of the "developing country" ranks far faster than China.