Why India functions the way it does
Ever wondered who gains from the way we work?
It’s not obvious why we function the way we do in India, and who gains from it — considering that we are able to go just about anywhere in the world and thrive, but unable to manage too well on our own shores. Could it be because of the operating conditions here apart from the facilities, the prevailing systems and procedures in our environs, and the organisation, structure, and processes? When we go elsewhere, those places have their own systems and procedures, and it appears we are able to adapt and function well. In India, our constraints of systems and procedures in our environs include the full range of our population, just as elsewhere. The sheer number of people with varied levels of education, competencies, process orientation, and expectations is something that those who go away to other environments are not constrained by.
There are other easily recognisable elements of constraints. There are the post-colonial institutions, structures and methods that have been retained in government without modification for a self-governing, democratic society. Another set consists of the underpinnings of a feudal structure that manifests strongly in political processes. The predominant motivation of both is, to put it crudely, exploitation for the governing entity’s gain. Historically, the gain has been for imperial/colonial/exploitative ends, and after the first, largely well-intentioned postIndependence phase, appears to be focused on perpetuating the power of incumbents, or the position of those controlling government (barring exceptions). The fact of governing entities being locally elected does not appear to make any difference. The essential attribute is of otherness, of “us” (those in power) versus “them” (those governed).
The laws and the justice system
Latterly, our preoccupation with economic, social, and political pressures has left the serious institutional constraints of our legal system somewhat unattended. There are several dimensions of reforms needed in the legal system. One of these pertains to aspects of law and changes to them, another to the judicial system and its dilatory responses. There is also a third aspect, of approach and motivation, i.e., of a systemic perspective and philosophy, which can be minimalist or the opposite, or something in between.
Too many laws
A major encumbrance is the plethora of laws. In December 1993, the Ministry of Finance undertook a project with the United Nations Development Programme on economic and commercial legislation, to make it more market friendly. Called Project LARGE (Legal Adjustments and Reforms for Globalizing the Economy), the first phase from December 1993 until December 1997 dealt with central government legislation comprising about 450 of around 3,000 central acts. The second phase was on state legislation concentrating on government orders, rules and regulations relating to land and labour, and other matters such as dispute resolution and competition policy.
While the material is in the public domain, in practice, it is a bear to find it. For those who want to track it, the reports were published in September 1998 as the “Report of the Commission on Review of Administrative Laws”, Volumes I and II. 1 Three articles by the Director of Project Large Bibek Debroy sum up the process, including the later work of the Ramanujam Committee and successive Law Commissions. They are epitomised by his quotation of Tacitus: The more the corruption, the more the laws. The articles are:“why We Need Law Reform”, “Justice For All: Need Better, Fewer Laws”, and “Old But Not Gold” (links below). 2 Another by Vagda Galhotra rounds out the set: “Why We Need To Repeal More Criminal Laws”. 3
Too much government litigation
Government litigation expenditure increased threefold from 2016 to 2018, with government being a party to around 46 per cent of lawsuits in July 2018, despite its stated intent of reducing litigation. Quite apart from this, government litigation and some of the disruptive rulings have created chaotic conditions in the economy, such as in coal mines and spectrum after the 2G licence cancellations. This has had a chilling effect on policies facilitating resource use, whether it is coal for electricity, or spectrum for connectivity at a time when there is global advancement in high-speed wireless shared use. The most recent shock to India’s economy was the Supreme Court’s reversal of previous rulings on telecom companies’ adjusted gross revenues. Other disruptive claims, without going into the merits, have been the retroactive tax case against Vodafone, the Tamil Nadu government’s tax claim against Nissan, and the earlier dunning of Nokia.
In 1998, there were an estimated 25 million cases pending in various courts, each taking up to 20 years for resolution, and this increased between 2006 and April 2018 by over 8 per cent. Much of government litigation apparently comprises appeals against lower court judgments, with decisions to appeal taken at the lowest levels of government, whereas decisions to not appeal have to be at the top.
There are many areas we have to work on to move from our present level to being able to grow at a sustainable high rate for any length of time. Beginning from early school, with systems thinking for every child, process discipline and standards, and collaboration and teamwork in lesson plans and play, continuing into work life and polity. Equally, there is a real need for establishing sound institutions. Included in these is a functioning, efficient set of laws and justice system. The discipline and efficient enforcement of contracts, payment terms, and delivery standards to ensure smooth cash flows is critical for markets to function well. This is why reforms on systematic rationalisation of the laws and justice delivery are essential, although such activities do not lend themselves to hoopla and staging events with popular appeal. The talent and experience availablecan contribute significantly to systems and organisation in the public interest. The constitution of the 22nd Law Commission is long overdue, with the 21st Law Commission having ended in August 2018.