T N Ninan: Terms of engagement

WEEKEND RUMINATIONS

The votaries of a larger role for government invented and expanded subsidies, refused to levy user charges that would recover the cost of public utilities, and embarked on state enterprises that bled white. The result was fiscal deficits and impecunious governments. In the national accounts, this showed up as the public sector accounting for a steadily reducing share of national savings; more and more savings were therefore in private hands""either individuals or companies. In the five-year Plans, what this meant was that the "public sector Plan", from being close to 60 per cent of the total Plan, shrank to barely 35 per cent. Indeed, individual enterprises now have annual investment plans that are larger than those of state governments""and the truth is that the governments have only themselves to blame.

This has converted India from the politician's socialist dream into a capitalist's delight as one Nehruvian "commanding height" after another has been ceded by the government to private enterprise. Everyone knows the list: telecom, airlines, hotels, power distribution, port handling, airport management, road construction, housing (DLF could build Gurgaon, for instance, because the Delhi Development Authority went bust, and Delhi-ites wanted homes to live in). For the most part, this privatisation has led to better efficiencies, faster growth and often lower costs, and thus served the public good""though there are sectors where the results are decidedly mixed: corporate hospitals that fudge records or make patients do superfluous tests in order to increase revenue are not necessarily a good thing, though everyone would be worse off if the only alternative was the equivalent of Sadarjung Hospital in Delhi.

The problem with this process is that governments that are not competent enough to manage their own finances, or deliver governance, may not even be competent enough to work out good terms on which they can engage with private enterprise. Think Dabhol. Some clever people thought up independent regulatory bodies as an answer, but these can be (and have been) by-passed by ministers, or the regulator himself is available for sale; sometimes, power goes to the regulator's hand and he becomes a modern-day Caligula.

Among the other systemic safeguards, audit processes are slow and deliver reports long after the loot has been counted and stashed away. Judicial correction happens sometimes, but not most of the time. The freedom of information law is good in principle, but civil society is easily thwarted by a determined bureaucracy. And the big newspapers don't care much for anything beyond advertising revenue. As for the leaders of political parties, they are often busy running private family enterprises of their own. Insofar as they have a public role to perform, they depend in no small measure on corporate funding""and we know that he who pays the piper calls the tune. When this process goes far enough, we begin to get scams coming out of land deals, SEZ contracts, mining leases, privatisation bids and even policy decisions (think of recent headlines and you can put names to all those categories). "Public-private partnership" thus takes on an unintended meaning.

This might sound like a needlessly pessimistic or cynical view of the current state of affairs, when India is "shining", and becoming the toast of the world. And the truth is that many things are improving all the time, both systemically as well as for individual citizens. But Jeff Immelt of General Electric put his finger on the spot when he said on his recent visit to India that the micro-story here is good, the macro is not. The many failures of governance have to be addressed, and it needs to be done on multiple fronts""which is what makes the task complex. But one of the most important, at a time when the role of private enterprise is expanding, is to make sure that the public good is not sacrificed at the altar of illegitimate private benefit""lest the general public come to the conclusion best summarised in a statement that you hear often enough: Sab chor hain (everyone is a thief).