Licence raj gone. Now, get rid of permission raj

Licence raj gone. Now, get rid of permission raj

It is said that nothing wilts faster than laurels that have been rested upon. On the anniversary of the crisis-compelled 1991 reforms, amidst the ring of congratulatory applause and certification of successes, it is essential to assess if the political imperative for transformation has been influenced at all by the experience of 1991, if there is systemic change and, if indeed, the laurels are for real.
The narrative of the post-1991 era is a mix of the good, the bad and the ugly. The good news is there has been no reversal. The bad news is that regardless of necessity, every major reform has taken a decade to fruition. Conviction rests on convenience — political stand depends on where political parties sit. The need for GST, which every party has endorsed, was first expressed in 1999 and is yet a proposal. The ugly side of the saga is that the much-vaunted strong consensus is mostly about weak reforms.

Incrementalism, indeed, has been the signature tune. The big story about the 1991 reforms was the dismantling of licence raj. The political class, however, kept permission raj alive — new projects need between 90 and 140 permissions, and the consequence is reflected in India’s ranking on ease of doing business. The debate is about speed when it must be about the very need for many of the clearances. Growth demands liberation of factors of production. Land and labour are burdened by archaic rules that kill job creation, and cost of capital is prohibitive thanks to high government borrowing. In theory, there is consensus about the need for FDI — India’s savings aren’t enough to fund aspirations of high growth. In practice, the politics of vested interests dictates policy, and liberalization appears only at the brink of a perceptible crisis or contagion.
The crux of the issue is what constitutes big reforms. The harsh truth is that the trajectory of reforms has missed the interests of the masses by a mile. Agriculture, which is the largest private sector, is also the most shackled sector. The farmer who is at the frontier of risk entrepreneurship suffers multiple handicaps — poor irrigation, availability of credit, supply of inputs and access to markets.
Unsurprisingly 60% of Indians live off less than 14% of the national income — the Socio Economic Census reveals rural households live off Rs 5,000 per month. Every year India loses over Rs 90,000 crore to electricity theft, every day 17 people die in road accidents which cost the GDP nearly 3% a year, every hour over 100 children die of malnutrition and nearly 30% of grains do not reach the intended beneficiaries, PSUs lose around Rs 25,000 crore a year and have accumulated losses of 1.19 lakh crore.
Indeed, an estimated Rs 1.5 lakh crore of taxpayer monies is lost annually in theft, wastage and leakage. The poorest of the poor are forced to send their children to private schools and depend on private healthcare.
The average Indian yet awaits the much-needed paradigm change on the very basic issues of living and livelihood. The many failures that afflict the political economy reflect flailing political will. India and China were similarly placed in 1990. China’s GDP is now over five times that of India and what’s more significant is that it does better on education, skills, nutrition and life expectancy — what more can one say when data reveals that an autocracy has done better than a democracy on human development indices.
Governance is affected by the architecture of government — the hijacking of authority by Centre and the colonizing of states. There is talk about ‘Smart Cities’ but states have crippled local government. The Concurrent List has divorced authority and accountability, but even the thought of restoration of Ambedkar’s Constitution is off the table, thanks to fear of vote bank politics. There is lip service to the size of government even as the nanny state is expanding. Governance is also impacted by an absence of performance orientation in the pay structure of babudom. Yet recommendations for performance-related pay by three successive Pay Commission Reports in two decades have been binned.
The tragedy is that status quo does not disrupt the business model of politics and political parties have come to believe that reforms do not deliver electoral dividends. This is because the discourse has often been steered into narrow interest ghettos and the larger questions that must be addressed wilt for want of decibel power. The crux of the issue is what constitutes big reforms. The fundamental question that India and Indians must engage with political representatives is about the approach of reforms — on delivery of public services, on tangible outcomes for public spending, on what government must do and what it must stay away from. Or else be resigned to crisis-driven reforms!
(Aiyar is the author of Accidental India: A History of the Nation’s Passage through Crisis and Change)

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