The successes of Mao's era - accessible school education,
effective healthcare delivery, and transfer of technology
to rural areas had nothing to do with dictatorship; they
were products of sound and sensible policies.
the Deng era successes are not a consequence of authoritarianism,
but greater liberalization and democratization. Choice and
competition in economic arena, removal of entry and exit
barriers, highly decentralized economic decision making,
effective local governments enjoying functional autonomy,
and in recent days the experiment of deliberative democracy
at local level - all these are symptoms of greater democratization,
not totalitarian control and arbitrary decision-making.
the difference in growth rates and current GDP levels between
the two countries cannot be attributed to Chinese totalitarianism
and Indian democracy. Instead, sound policies and enhancement
of liberty are the two key determinants of economic success.
Despite our democratic system, decision-making is highly
centralized in India. It is said that the United States
has the largest number of final decision-making authorities
relative to any other society. India possibly has the smallest
number of final decision makers for any large society, let
alone a democracy.
too long ago, China's spectacular advances in the field
of telecommunications was a source of global wonder and
admiration. But once Indian policy makers got their act
together, and allowed choice, competition, technology and
investment, we are now witnessing a comparable growth in
this sector. The difference between the two countries is
largely on account of the delayed liberalization in India.
As China, under the redoubtable Deng, changed course in
1978, we waited until the 1991 crisis to allow freedom and
now several states and regions in India are showing great
dynamism and fast growth. All we need to match China's growth
is for the rest of India to do as well as these regions.
China's long-term growth rate since the 80's has been about
9 percent on an average, as opposed to about 6 percent in
our case. Can we match, or surpass, China's growth? Much
of the debate has centered round three issues: foreign direct
investment, privatization of public sector enterprises,
and flexible labour markets. True, the current political
climate does not permit privatization and labour reforms,
and FDI cannot grow spectacularly overnight. Our continued
fiscal deficits and the government's incapacity to invest
in infrastructure and improve the management of power sector
are significantly retarding growth.
can something be done to accelerate growth within these
fiscal and political constraints? In other words, are there
painless, low-cost solutions? Happily, there are at least
four areas improvements in which will raise growth rates
spectacularly. All these are politically feasible, win-win
solutions, which can be implemented within the present or
projected budgetary allocations.
delivery of education - at both school and university level.
Allocations for schools have gone up, and the recent education
cess is universally accepted. But even in this day and age,
our focus is merely on enrolment and retention, and not
on quality. As a result, much of our education is futile.
Functional literacy, communication skills, conceptual clarity,
skill promotion, and creation of meaningful knowledge and
its application form the essence of education.
for a few elite schools and colleges, and a small proportion
of gifted children, most of our education is unproductive.
As a result, millions of unemployable school and college
graduates are churned out every year. Happily, there is
phenomenal demand for quality education. Even the poor are
willing to spend considerable sums for education, in the
hope of a better future for their children. Sensible policies
and non-monetary inputs based on best practices will improve
the quality of human power, and enhance growth rate by at
least one percent.
our healthcare system is in shambles. The government's record
in public health is appalling. A few correctives are being
applied in recent years, and the Prime Minister launched
the Health Mission in April, 2005. But more allocations
and better infrastructure alone are not sufficient. Avoidable
hospital costs and sickness are the chief causes of poverty,
indebtedness and low productivity. Decentralized management,
accountability to the community, integration of various
health programmes and nutrition, water supply and sanitation
at the grassroots level, and most of all, choice, competition
and altered incentives in hospital management are the critical
changes in trajectory in healthcare delivery. If there is
a genuine change of course, even the projected modest enhancements
in allocations for public health will ease the suffering
of the bulk of our people, raise their productivity and
incomes, and substantially accelerate growth.
rule of law is the bedrock of market economy and growth.
Proper land surveys, assured property titles, speedy and
fair adjudication of disputes, swift punishments for violation
of law, quick and effective enforcement of contracts and
non-discriminatory treatment are all critical requirements
to ensure predictability and encourage investment, risk-taking
and hardwork. While normatively we have an independent judiciary
and institutions of rule of law, in reality they are moribund
and ineffective. As a result, there is a growing market
demand for criminals in society, and mafia and musclemen
have become the undeclared judges dispensing rough and ready
justice by brutal means for a price. There are reports of
even a few foreign banks in India hiring musclemen to enforce
recovery of overdues. Clearly such a climate inhibits economic
activity and retards growth. There are many low cost, politically
acceptable, popular mechanisms to improve justice delivery
and rule of law. This alone will enhance growth by at least
one percent per annum.
extortionary corruption and arbitrariness in tax departments
are sapping the energies of small and medium enterprises
and seriously eroding the competitiveness of our manufacturing
sector. The direct taxes have witnessed some measurable
improvements. But the administration of central excise,
service tax, customs and state-level sales-tax are still
largely discretionary, unpredictable and arbitrary. Rent-seeking
behaviour is therefore exceedingly common, seriously undermining
the competitiveness of honest tax payers, and diverting
the precious time and energy of the entrepreneurs. Transparent,
industry-friendly procedures will not only help the economy,
but will also enhance revenues. It costs no money, and yet
in these four sectors cost little, make the government popular,
accelerate economic growth by 3-4 percent, promote investment
and employment generation, and create several virtuous cycles
of growth, savings and investment. All these are eminently
feasible, but require bureaucratic accountability and delivery
of services, sound, self-correcting, sustainable policies,
and display of minimum level of political skills to build
consensus and mobilize public opinion in favour of these
improvements. These are the elements which constitute good
governance, and that is what is lacking now. Freedom is
not a liability; it is a glorious asset for growth. Sound
politics is about making democracy and growth compatible,
not finding alibis for non-performance. We can, and should,
overtake China in long-term growth. But we need to set our
house in order first.