Shankar Acharya: The Future of India

A PIECE OF MY MIND

That's the modest title of Bimal Jalan's new book on the politics, economics and governance of this country. It's a serious book by a serious man who has been a senior economic mandarin for decades, including most recently as governor of the Reserve Bank.

The book's scope is broad, but it has a clear unifying theme, which resonates throughout the volume. That theme states that India's economic performance is still constrained below potential, mainly by the dysfunctional working of the political process, the failures of governance and pervasive corruption in politics and administration.

Yes, the reforms of the 1980s and early 1990s brought renewed hope and lifted the trend rate of economic growth from below 4 per cent before 1980 to about 6 per cent since.

And yes, like many others, Jalan believes that India has the skills, the experience and the comparative advantage to grow at 8 per cent on a sustained basis if some major reforms can be carried through.

But, as he states at the outset, there is a "nagging doubt whether there will in fact be a sufficient change in our political vision, economic policy and administrative system to seize the opportunities that lie ahead".

The doubts stem from Jalan's candid and probing analysis of three major sets of interlinked impediments to development-friendly economic policies.

These are: the subversion of democratic processes by "distributional coalitions" of vested interests and the erosion of accountability to the people, Parliament and the judiciary; the ongoing crisis in administrative governance; and the pernicious impact of pervasive corruption.

In each of these, Jalan provides lucid and persuasive diagnoses of the ailments. He also prescribes remedies, which are not always equally compelling. Let's consider some examples.

Jalan's indictment of India's administrative system is quite damning. "As the administrative system became less efficient and more complex, requiring more and more public servants to perform the same tasks, it acquired a momentum of its own.

With rising wages, periodic Pay Commissions and judicial pronouncements in favour of government employees, the so-called public servants soon became their own masters, with little accountability to the people or their representatives....

Over time the creation of government jobs became an end in itself and administrative salaries and pensions became the main component of most schemes".

Jalan points out other well-known ills, such as the ubiquitous use of transfers/postings by short-tenure governments to emasculate civil servants and earn "rents", the skewed pay scales which over-pay clerical staff and under-reward managerial cadres, the proliferation of government departments and offices and the continual complication of procedures.

He concludes: "There no doubt that India is now facing a crisis of governance. By any criterion, the administrative system is now largely non-functional and unresponsive to the economic and social priorities of the country."

What are his solutions? First, at a general level, he makes the unexceptional recommendation to reduce the role of government in the country's economic life (incidentally, the UPA government seems to be moving in the opposite direction by vastly expanding government expenditure programmes and stalling privatisation).

Second, recognising the low returns from "reforms from within", he recommends much greater recourse to outsourcing of public services along the lines of successful examples such as Public Call Offices and Saulabh Suchalayas.

Third, to improve independence and motivation at the higher levels of the civil services, he repeats the well-known calls for "transparent ground rules" for transfers and postings (a call repeated by the Prime Minister last week).

Fourth, he asks for greater authority for civil servants through self-regulation instead of total dependence on ministers for even routine administrative matters.

All this seems sensible enough. More revolutionary (and also more dubious) is his recommendation for jettisoning the established doctrine of "collective responsibility" of cabinet government in selected areas ("such as rural development, primary education, employment and infrastructure, etc.") and replacing it by the notion of "individual responsibility" of ministers.

The recommendation is motivated by Jalan's assessment that individual ministers often wield disproportionate (and unaccountable) authority over major economic and social programmes, especially in "coalition governments of disparate parties with a thin majority in Parliament or legislatures".

Given the multi-departmental and multi-layered responsibility for most large economic and social expenditure programmes, it is hard to see how a doctrine of "individual responsibility" can be made to work.

It reminds me of the prolonged and fruitless efforts to improve the performance of public enterprises through detailed MOUs with the government.

Besides, almost by definition, powerful ministers could surely evade the fixing of responsibility for under-performance on them. Moreover, the explicit dilution of the established (though weakly functioning) doctrine of collective responsibility is fraught with wider issues.

Jalan also suggests reforms for the diagnosed weaknesses in the political process and the problem of corruption.

Their range is wide, including specific legislative reforms to deal with the problem of small parties exercising disproportionate influence over national policies in coalition governments, reforms to improve the actual functioning of the Houses of Parliament, state funding for elections to curb the "supply" of corruption, amendments to Article 311 of the Constitution and the Official Secrets Act (1923) to reduce the unduly high legal protection currently enjoyed by corrupt bureaucrats, and so on.

The suggestions span the gamut from well-known, sensible ideas (but blocked by prevailing interests) to the novel and the unworkable. One can question the merits of some specific recommendations (and I do).

But one cannot fail to admire the sincerity of purpose which infuses the endeavour. Here is a respected economist-administrator grappling with the large issues of governance in as practical and down to earth a way as he can.

In three important areas the book disappoints. First, the angle of vision is too strongly anchored to the central government, the arena of Jalan's distinguished public service.

This is a pity when one reflects that the average citizen's encounters with public services and their alleged providers are mainly in the domain of state governments.

This is true for education, healthcare, roads, water, sanitation, electricity""you name it. Second, little is said about how the entropy in governance is undermining basic law and order across increasingly wider tracts of contemporary India.

Apart from discouraging fresh investment, growth and employment, the absence of basic public security bears heavily on the welfare of the poorest and most vulnerable sections of our society.

Finally, the book offers no magic bullet (or even a couple of arrows) for the restoration of high moral purpose, values and probity in public life, without which governance might remain an empty shell.

Although the epilogue talks of "A Resurgent India", the reader senses that Jalan is far from convinced about the acceptability and efficacy of his proposed reforms.

The "nagging doubts" with which he begins have not been dispelled. Yes, given the likely condition of our polity and its demonstrated preference for fiscal laxity over "second generation reforms", 6 per cent growth is a safer prognostication for the future.

It may be "now commonplace to project India as one of the three most important global economies by 2020 or 2025", but I share Bimal Jalan's nagging doubts.

Indeed, if the entropy in governance is not arrested, I wouldn't even take the 6 per cent for granted for the long run.

The author is Honorary Professor at ICRIER and former Chief Economic Adviser to the Government of India. The views are personal