India At 71: Policy Chasing Consequences, Causation In CasualtyBloombergQuintOpinion
The frustrating thing about India, the legendary Cambridge economist Joan Robinson once said, is “Whatever you can rightly say about India, the opposite is also true.” As India celebrated the 72nd Independence Day a review of its spectacular successes and many inadequacies validated the profound observation.
In his speech from the ramparts of the Red Fort on Independence Day, the Prime Minister introduced a new pride factor – a manned space mission. India is justifiably proud of ISRO, frugal innovation and the fact that it can deliver a Mars Mission at a cost less than what it cost to produce the movie Gravity. There is no escaping the striking contrasts.
- Indian scientists can perfect a slingshot itinerary for the Mars Orbiter. On the ground, the system flails at delivering potable water or pothole-free roads.
- The Forbes billionaires list features 121 Indians on the list and India ranks second among countries with extreme poverty.
- India’s education system churns out millions of graduates. And half of those enrolling drop out without completing schooling.
There are many popular notions, even hardened beliefs, about the root source of the many failings – ranging from too many people, too much democracy, to a vague allusion to culture. Fact is, democracy cannot be a gloat and a gripe factor. Similarly, demography cannot be a disability and a dividend. Angus Madison’s statistical studies show this very ‘culture’ controlled a 22 percent share of global trade in the 1700s.
To paraphrase Cassius, the Roman nobleman, the fault dear Brutus lies not with democracy or with demography or with culture, but with a peculiar approach where hyper-politics of consequences result in hypo-cognition of causation.
Public policy is defined by the decibel level of politics of consequences and the case for addressing the cause is left languishing on the ventilator of governance.
Yes, political expediency demands that consequences be addressed and immediately. The United Progressive Alliance government pushed legislation for food security, an employment scheme and the right to education. All the interventions were consequence-facing. Have the causalities been addressed? Pain calls for an analgesic. But equally, pain is also a symptom of a larger malaise and that must be addressed. The history of India’s political economy is replete with instances of paracetamol politics and policy. Consider issues in agriculture, human development, public sector enterprises, law and order, basic infrastructure and urbanisation.
The continued distress in agriculture for decades underlines the persistence of the politics of consequences. The charade of concern dates back several decades. India witnessed many famines in the 1800s and 1900s. Independent India should have inducted technology and invested in agriculture.
The distress of farmers does call for a soothing salve but equally, it demands solutions to long-pending issues.
In the last 25 years there have been sequels and variations of loan waivers – from VP Singh’s waiver of Rs 10,000 crore; to UPA’s 2008 announcement of a Rs 72,000 crore waiver; and since 2017, state-wise waivers estimated at Rs 2.5 lakh crore. Every year, Government of India claims expenditure of over Rs 70,000 crore on fertiliser subsidy, and over Rs 1.5 lakh crore on food subsidy. Add the rhetoric about the minimum support price, an economic measure converted into a slogan.
The optics would suggest that these have flowed to the farmer. The reality is different. Successive regimes have succeeded in building a narrative of the farmer as a ‘free-loader’. Agriculture, which is India’s largest private sector is shackled by the terms of trade.
Farming is a business like any other and needs backward and forward linkages – access to inputs, affordable credit, autonomy to price and market connectivity.
The design of policy suggests that the sector is being treated as a case for political charity whereas the sector calls for liberation – to produce, price and prosper.
- India’s expenditure—centre and states—on the social sector, has shot up from Rs 1.3 lakh crore at the beginning of the new millennium in 2000-01 to Rs 10.94 lakh crore in 2017-18.
- Within this, the spending on education has increased from Rs 32,370 crore to Rs 4.41 lakh crore and that on health services from Rs 14,135 to Rs 2.25 lakh crore.
- India’s Human Development Index ranking was 128/174 in 2000 and 131/188 in 2016.
- There have been three national policies, each, in the education, and health sectors.
Poor outcomes stem from the divorce of authority from accountability – every regime waxes about delegation and in practice, further centralisation follows.
Investment fuels growth but investments are stalled by red tape. In 1991, India dismantled the licence raj. The establishment, though, ensured the continuance of permission raj.
- An investor funding a power project must get over 90 clearances from the centre and the state.
- Anyone aspiring to set up a hotel or a residential complex would require between 120 to 140 clearances.
The promise is about ease and therefore the question to be asked is the need for many of the clearances. Why can’t the centre leave it to the states?
This week the President gave assent to the Criminal Law (Amendment) Act, 2018 that provides for the death penalty for rape of a minor girl. In the last few weeks, there has been a scandalous upsurge in revelations of sexual abuse of children in shelters across states which government funded but are unaudited. What about prevention? Over 4 lakh police vacancies across states and recruitment have to be prodded by the Supreme Court, over 1.3 lakh rape cases are pending, every hour four rapes are reported and only 3 percent of rape cases result in a conviction. Deterrence demands enforcement of the rule of law.
Addressing the causation is obviously arduous and it is much more seductive to proffer new laws.
Electrification and water supply are essential for human and economic development. Thousands of schools and hundreds of primary health centres lack electricity and water connection despite a series of plans, missions, and spending. This government had made electrification of villages a focal point of its agenda. So far so good, but it is also a fact that homes and offices are wracked by outages caused by the inability of state electricity boards to pay generating companies. Since 2000, governments have bailed out SEBs three times, directly and through interventions, worth Rs 3 lakh crore. Nearly a fifth of the power produced is lost in transmission and distribution – the euphemism for theft and leakage. Thanks to the fragile fiscal state over Rs 4 lakh crore in power debt is on the brink of turning NPAs.
The solution is a parallel national distribution grid, the introduction of competition to give consumers choice but governments have balked at dismantling the monopoly of politics over the power tariff.
Last week Indians were aghast to know over 23 percent of Air India’s fleet is lying idle. The national carrier has losses of over Rs 50,000 crore, has defaulted on payments, is unable to pay pilots and staff on time and even the attempt to sell it has found no takers. The mess symbolises the decay of public wealth.
The number of loss-making enterprises has gone up from 54 to 82 in ten years, the average annual loss is around Rs 22,000 crore and totally, the PSEs have lost Rs 2.22 lakh crore between 2007 and 2017. Ideally, the government must get out of managing businesses and professionalise them. Instead, even the disinvestment process has been converted into an annuity scheme for governments where enterprises are buying other enterprises enabling payoffs to the government to plug deficits.
The popular narrative has stereotyped the phrase Nehruvian economics. Interestingly in his book The Discovery of India, Nehru says “In regard to the agency in state-owned industries it was suggested that as a general rule an autonomous public trust would be suitable.” This “would ensure public ownership and control and at the same time avoid the difficulties and inefficiency which sometimes creep in under direct democratic control.”
A majority of the PSEs came in the post-Nehru period—the number of PSEs has gone up from 68 in 1970, 170 in 1990, to 331 in 2017—over 150 were set up post-1991.
On Monday, the Housing and Urban Affairs ministry released the ‘Ease of Living Index’. On Tuesday, August 14, The Economist released its ranking of the world’s most liveable cities. No Indian city figured in the ranking of 140 global metros – not even at the bottom of the rank! In March, another survey of quality of living found India’s best entry, Hyderabad, was at number 142. A recent Boston Consulting Group - Uber study put the economic cost of traffic congestion in four cities, Delhi, Mumbai, Bengaluru and Kolkata, at 1.54 lakh crores ($22 billion).
How poor is the state of affairs? The 111 cities which participated in the ease of living survey barely passed muster with an average of 35.6 -- Pune ranked number 1 scored 58.11 -- out of 100 reflecting the gap between what is, and what should be!
No city can boast of 24x7 water-supplies and no metropolis, bar Mumbai, can assure 24x7 electricity.
The BJP promised 100 new cities in its 2014 manifesto. In June 2015, Government of India announced the ‘100 smart cities’ initiative which has morphed into a dumb policy without funding and delegation of functions. A quarter of a century after enabling amendments in the Constitution, city governments are dominions of the politics and colonies of state government and no political party wants to bell the cat.
The total spending of governments of India, at the centre and in states together in 2007-08 was Rs 13.15 lakh crore. In 2018, the centre and the states will together spend just over Rs 60 lakh crore. To get a sense of proportion, that is over Rs 16,400 crore per day, and over Rs 685 crore per hour. Much of this goes towards mitigating distress and ensuring development. Where this is spent and how it must be spent needs to be appraised.
Who will bell the cat? The political executive is wedded to the calculus of electoral politics and expedient policies. It is for the legislatures and both the houses in Parliament to raise the bar of discourse to enquire about and ensure outcomes. Earlier this month Akali Dal Member of Parliament Naresh Gujral moved a private member’s bill in the Rajya Sabha to legislate that parliament met for at least 120 days. It may be a good idea to devote a fourth of this towards enabling systemic change.
The question is not whether action or inaction confirms to Benthamian utilitarianism or Kant’s categorical imperative. The quest should be about extending political piety beyond electoral hedonism to enable a sustainable future.
If India is to deliver on its potential and ensure demographic dividend it must migrate from the consequence-based action to cause focussed long-term policy that enables systemic change.
70 years back, during the debates of the Constituent Assembly, BR Ambedkar warned: “There is a great danger of things going wrong.” People are moved by new ideologies, they are getting “tired of government by the people. They are prepared to have governments for the people and are indifferent whether it is government of the people and by the people.”
Shankkar Aiyar, political-economy analyst and Visiting Fellow at IDFC Institute, is the author of Aadhaar: A Biometric History of India’s 12-Digit Revolution; and Accidental India.
The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.