Can We Regain Lost Momentum?
It is possible, provided the government is not held back by ideology, not held to ransom by vested interests, can educate and keep all Indians healthy, make benefits reach the intended people and fight corruption institutionally
In the wake of economic liberalization, “Vision 2020” became the buzzword for obvious reasons—the allegorical meaning of perfect vision, the excitement of freedom and competition, the hope and desire to catch up with China and fulfil our destiny, and the inspiration and imagination provided by eminent Indians like Dr A.P.J. Abdul Kalam. Nearly 20 years have passed since those heady days, and once again much of this time has been squandered. So, what can be realistically done in the next five years to set India on course to achieve the desired greatness?
First, in order to have a real sense of what is desirable and doable, we should focus on the role of government. Much of our debate is derailed because of the confusion about why we elect a government, pay taxes and obey its lawful commands. Clearly, throughout history, the first task of government (after defence of the realm) is to maintain order and render justice. In the modern context, this means rule of law and harmony in society. Once society is orderly and peaceful, the next key task is to provide the public goods so vital for a society’s pursuit of prosperity and happiness.
No individual, however exalted, can build roads, ports, electricity infrastructure, drinking water and sewerage networks and storm water drainage on his own. Government is the organization we have created to meet these collective needs with our tax money.
Once order and public infrastructure are in place, the third, more modern task of government, is to ensure quality education and healthcare to every citizen irrespective of her circumstances of birth. Only real education and healthcare give every child an opportunity to fulfil her potential. We cannot have growth for the few while millions lead lives of quiet desperation for no fault of theirs. Only after these three tasks—order, infrastructure and human development—are fulfilled does any government have the moral authority to take on itself other tasks, or commit public resources to other purposes. It is time we established this foundational principle firmly in statecraft so that the period leading up to and beyond 2020 is not once again squandered.
It is obvious that India today has a window of opportunity to accelerate growth and become a major economy next only to China and the US. China, on account of long implementation of a one-child norm, is losing three to four million people of working age every year. And the remarkable Chinese prosperity has driven up wages, making the country less competitive in low-end manufacturing. If we put our house in order, India is well-placed to occupy the space vacated by China. But we need to do it coherently, consistently, speedily and visibly.
Or else, nations of South East Asia, Africa and Latin America will occupy some of the space China is vacating, and India will be left by the wayside. Therefore, the present government’s emphasis on growth and jobs is timely and sensible. Clearly, our relentless, unwavering focus in the next few years should be on sensible fiscal and monetary policies, infrastructure (especially power—we are the only significant economy in the world with serious power shortages), labour reforms, ease of doing business and ending crony capitalism. There seems to be a broad consensus on most of these issues among policy makers and economists. But short-term political games and parliamentary paralysis can easily derail this process.
Then we must focus on the true meaning of welfare. A democratic, humane, just society must do everything to end poverty and create equitable opportunity. Therefore, welfare of the poor is a critical democratic function, especially in a desperately poor society like ours.
The crucial question is: What is the meaning of welfare? It took us over four decades of License Raj to rebel against state control and monopoly, and move towards economic freedom and competition. Meanwhile, India lost priceless opportunities. South Korea, Taiwan, Singapore, Malaysia, Indonesia, Brazil, Mexico and now China have all passed us by as we were too preoccupied with outdated ideological battles and power games ignoring the lessons of post-war history.
Should we waste another four decades before we realize that free power and water, free rice, loan waivers and other consumption subsidies do not constitute true welfare; nor do they help end poverty? The evidence is compelling and conclusive: decades of doles did not enhance real incomes or reduce poverty; they only perpetuated dependence and deprived us of much needed resources to build infrastructure and guarantee education and skills. The result is perpetuation of poverty, even as the public exchequer is under great stress.
Our education and healthcare are appallingly poor. ASER surveys and the 2009 PISA survey show how most of our gene pool is wasted because of poor education despite the phenomenal hunger for schooling and willingness of the poor to sacrifice for their children’s future. Similarly, India has the worst healthcare outcomes among all significant economies in the world. Both can be radically improved because the demand side is very strong, and we have the technological and managerial capabilities and resources needed to undertake such a task.
In the next five years, India must, and can, build a robust system to vastly improve outcomes in both education and healthcare without any quantum jump in expenditure. In education, we can accomplish a lot by restructuring current public expenditure; and in healthcare, we need to enhance public spend from the current 1.1 per cent of GDP to about 1.8 per cent over time. But we need to rebuild both systems based on choice, competition, outcome measurements, accountability, flexibility and decentralization. It is eminently feasible; all we need is will and leadership.
Then we need to decentralize power in an innovative, accountable manner to ensure outcomes. Even with the best of intentions and great ability, we cannot improve delivery and outcomes in a centralized, inflexible system. Fusion of authority with accountability at local level should be the guiding principle. There is a priceless opportunity now.
The Swachh Bharat Mission has captured the imagination of the people. Central devolution to states is increasing greatly. In the current year, Rs 778,000 crore is sought to be transferred to the states. With the government’s acceptance of the 14th Finance Commission’s recommendation enhancing states’ share of central taxes up to 42 per cent, and the abolition of Plan assistance and many centrally sponsored schemes, there is now space to transfer a part of the funds to the third tier of government. Even if a sixth (17 per cent) of the transfers go to local governments directly, there will be Rs 1,000 per capita available in every local government.
Our cities are growing; urban citizens are increasingly conscious that they are tax payers, and are restive at the poor services and amenities. This gives us great opportunity to empower citizens and urban local governments, transfer Rs 1,000 per capita, and build accountability systems to prevent abuse. It will release great energy and transform delivery and outcomes.
Finally, many instruments of the rule of law and the fight against corruption are in the pipeline. The Lokpal and Lokayuktas, ombudsmen at local level, service guarantees in government offices, autonomy to crime investigation and prosecution, creation of local courts for speedy and efficient justice, improving higher courts’ appointments and Indian Judicial Service—all are in varying stages. They all should be fully institutionalized swiftly. These steps will go a long way to curb corruption, enhance accountability, delivery services, and restore citizen’s trust in government.
All these are eminently doable within our current fiscal compulsions. There is also a broad consensus and significant, but inchoate, demand in favour of them. There are bound to be many vested interests that will try to impede progress on each of these issues. But there is a great opportunity to move forward on all these issues. We need leadership at all levels with skill, determination and vision. If we accomplish much of this by 2020, we may not have reached the heights we hoped for two decades ago, but we will have built a superb launching pad to soar to great heights. The time for resolute action is now.
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