India’s half-baked reforms
The governance outcomes will remain below par till structural transformation is implemented
Politicians have the luxury of choosing their performance metrics because the scope of their work is so vast. In business, shareholders buy or sell based purely on the existing or the future bottom line. The current prime metric for political performance is jobs. This may become a self-goal for the Bharatiya Janata Party, because it is a universal concern with few, near-term solutions.
Prior to jobs, in the noughties, it was all about boosting economic growth — where again headwinds have built up. Before growth, it was about ending poverty in the 1990s. Earlier, in the late 1960s and till the mid-1970s, it was about boosting agriculture, becoming self-sufficient in food and avoiding famines. Even further back, heavy industrialisation and infrastructure was the mantra in the 1950s.
Seventy years on, we are only narrowly competitive in manufacturing; our infrastructure is shoddy; agriculture has low productivity levels; 40 per cent of us are either poor or are vulnerable to poverty; we are still stretching for sustained high, real growth; unemployment is high and the participation rate in the workforce is a low 48 per cent, with women faring worse than men.
This is not to trash what we have achieved. But it is useful to look beyond the efforts made by the successive governments, at the outcomes and ask the question, why are the results always worse than expected?
First, transformative change is disruptive. But we have been slow in embedding credible instruments to mitigate the cost of disruption. This increases the risk perception of change, leading to a public pushback on reforms.
Consider how poorly we acquire land in public interest. The instruments for identifying, determining and managing the acquisition are so poorly supervised, for ensuring equity and transparency, that massive amounts of mineral resources continue to lie buried in tribal areas, whilst tribes prefer to eke out a subsistence level traditional life, rather than participate in the process of development. The overriding fear of every property owner, or occupier, is of being gypped in the process of acquisition, by forces beyond their control.
Second, managing change successfully requires a governance system good at modern parenting rather than a patriarchal approach to directing and controlling people and events. Our governance systems still follow the colonial legacy of collaborating with entrenched elites to get things done somehow. Those affected at the bottom become a hindrance rather than participants. There is very limited institutional appetite or capacity to deal directly, as a change agent, with those who are most affected by change. Even when specific processes, like consultation are provided for, the approach degenerates to ticking the box, rather than using the opportunity to gather feedback on the process, test assumptions and obtain buy-in for the way forward.
It does not help that there is a near ubiquitous ban on the transparent use of executive discretion — prompted by misuse of the privilege in the past and a judicial preference for impossibly rigid rules, regardless of their negative impact on implementation.
Consider, for example, the burgeoning non-performing loans of banks. The rules for providing secured loans hardly permit any latitude to a manager for exercising discretion on the nature and quantum of collateral. The focus is on achieving secured lending targets rather than adding economic value. This makes gold plating of projects, to increase the notional value of an asset, a mutually convenient tactic between the lender and the borrower, even though it can adversely affect the project’s viability and thereby the repayment capacity of the borrower.
Third, we have succumbed to the insidious temptation to effect instant change at sub- continental levels, rather than build change, bottom upwards, block by block. India is heterogenous without parallel. For us, the political model should be Europe, rather than China. Multi party politics in India requires sufficient elbow room for diverse political ideologies. The political architecture must be flexible in implementation but prescriptive on the objectives and principles of public management.
Our constitution reflects the challenges faced at the time of independence rather than today’s priorities. Integration fears led to a centrist constitution. This is what enabled the Union government in 1959 to dismiss the first elected E M S Namboodiripad government of Kerala. The governor of a state, appointed by the President, acting on the advice of the Union government, is another centrist feature. The capacity constraints existing at that time shaped the lop-sided division of mandates between the Union and the state governments, with the former unduly burdened. The substate or local government came into existence only through a 1993 constitutional amendment.
Defining inter-governmental mandates more strictly will force governments to work within their mandates. Consider that Members of Parliament get elected by getting drains made and Members of Legislative Assemblies by promising higher prices for agricultural products or by proposing a separate flag for their state — all areas outside their mandates.
The officials must be recruited and managed by the level of government they serve. Fiscal resources, at every level of the government, must be aligned with form, which should fit the functions executed at that level. The governance outcomes will remain below par till structural transformation is implemented. The top-down approach has the disadvantage of an overblown apex crushing the little people below. Remember, nothing grows under the Banyan tree.
Change, sensitive to mitigating the costs thereof, flexible implementation of norms driven from below, with primacy for real value addition can deliver 100 per cent results in reforms.