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No governance, no growth

N J Jhaveri

Pervasive corruption and democracy are often touted as the explanation for India's stagnant growth rates (5 to 5.5 per cent) since the eighties. But these are, at best, partial explanations.

To rectify below-potential performance, incompetent governance and poor quality leadership have to be tackled: these are key to the most effective solutions for transforming India's environment from one in which frustration and alibis abound to one of motivation and zeal.

Take corruption. If one goes by the findings of Transparency International, the agency that prepares the corruption perception index, India's score of 2.7 points in 2001 - the most corrupt are rated zero, while the least corrupt are given a score of 10 - was not very different from that of China (3.5), Brazil (4.0) and South Korea (4.2). But the telling evidence is in the difference in the performance of these countries.

When adjusted for purchasing power, South Korea's per capita income in 2000 was 7.5 times that of India, 3.1 times that of Brazil and 1.7 times that of China! Between 1990 and 2000, India's economic growth was around 6 per cent, that of China was over 10 per cent a year.

While research findings attempting to correlate democracy and economic growth are inconclusive, India's democracy is only in form. Its feudal style lacks substance and spirit.

For example, which democracy accepts the appeasement of political supporters through the allocation of licences and chairmanships, or tolerates nepotism and corruption as its integral part? Winning elections with ill-gotten wealth stalls reform measures such as the compulsory disclosure of assets and sources of finance.

Scoring electoral victory by exploiting the gullibility of the poor through populism and separatist tendencies by exploiting caste, religion and so on is by no means democracy. If family successions in public companies are wrong, every politician grooming his or her offspring for office is, veritably, feudalistic.

Indian pride is insulted neither by Coke nor by McDonald's, but by the insistence of our politicians to receive expensive medical treatment abroad or from foreign doctors for ailments that scores of Indians suffer from.

The conclusion is inescapable. India's fatal growth handicap is non-performing political governance bereft of ideology, commitment and competence.

Indians have to either struggle or manipulate if they are to perform in their own country. This has created an environment of frustration and defeatism. The zeal to transform, lead by example, the willingness to stretch and work hard, barring a few exceptions are, sadly, missing.

Unfortunately, our intellectuals do not help. Objective analysis is conspicuous by its absence. Our establishment economists identify the same culprits time and again: fiscal deficit and inadequate reforms. They eloquently explain away non-performance by creating the façade of maintaining an arms' length relationship and preach what the ideal course of policy should be.

For good measure, they highlight industry's ills. On their part, industry economists underplay the shortcomings of business and take digs at the government. If all of them mend their respective houses, India's growth performance would be rather different.

Another popular hobby is belittling China's growth performance. But how does this browbeating the Chinese help the ordinary Indian on the street? In any case, it would be foolish to overlook the increasing value and sophistication of Chinese exports and its high-quality, low-cost manufacturing base.

These can be easily verified in the Indian, Asian and western markets. China's trade surplus is impressive and its foreign exchange reserves, despite some circularity in Chinese "capital inflows" is, nevertheless, formidable. With the American economy in distress, China is carrying the load of Asian growth by sucking in its imports! India's steel industry, whose fortunes have brightened, is a beneficiary of this.

There is a growing consensus about the need for and the capability of India's achieving a higher growth rate. Bureaucrats here and there have indeed transformed the quality of administration.

Some ministers practice and propagate transparency and integrity. Several Indian companies have remarkably improved their performance and are willing to conform to the spirit of regulation.

What will improve India's overall performance will be more such people and our discarding the "second class mindset" which is responsible for our alibis and excuses.

India must focus on its own problems and generate its own solutions. Targetting corruption, without improving our democracy, will not create the environment for bearing pains equitably, which is a cardinal requirement of managing the "turnaround" from a mess.

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