Bastion of Free Speech
Mohan Guruswamy
It follows that our economic programmes must be aimed at the upliftment of the majority of our people who are poor. In the last ten years of the various governments the economic debate has been focused on the supposed industrial and infrastructure development of India that is supposed to be spearheaded by foreign capital. The budgetary allocations for most development programmes have been slashed. The development of human resources has been largely ignored. If India is ranked 39th in terms of competitiveness or more accurately the lack of it, the fact that almost 50% of the population over the age of six is illiterate or that expectancy of life is a mere 58 years also has got a lot to do with it. We do not seem to be learning even now that no economic development is possible if the capability of the majority of the people continues to be sub-marginal.
Very clearly there is no money in the kitty to make any meaningful allocations for real development. Each year we go through a budget exercise, which generates a lot of hoopla without making a whit of a difference to how the country’s finances are being managed. After making provisions for interest (Rs.105000crs); Defence (Rs.70000crs); salaries (Rs.450000crs); direct subsidies (Rs.28000crs), there are hardly Rs.20-30000 crores available for any development related expenditure. What happens in practice is that each year draws to a close the Finance Ministry realizes that its expenditures have once again been out of control and its revenues and collections have fallen behind. So every year the provisions for development are drastically slashed. As a result the ratio of capital expenditure to the budget has been showing a declining trend for each of the past ten years. What generates the euphoria’s or moan’s that follow after a budget is proposed are the marginal changes that give or take goodies away from the only people who matter in this country. People like us, the ones with the decibels.
If money has to be found for development, then clearly something must be done to break the fiscal logjam. Either expenditures are cut drastically or money be found out of the system. The total cost of government employees – central, state and local – is a whopping Rs.180, 000 crores or almost 10% of the GNP. At times the only reason we the people exist seems to be to support the colossal number of people who are notionally in our employment. But we are unable to even contemplate this problem given the manner in which the political economy has loaded the electoral dice. So we will waste money on government employees and not have money for schools, hospitals, roads, canals and whatever else is so essential for or well-being.
This is why the longing for foreign capital. But not much of that is going to be forthcoming till we get our act together. Then what will come will be a fraction of what we need. In any case no foreigner is going to invest on roads, canals, dams, lift irrigation, primary schools, public health centers and the like. They will, but naturally, look for quick and easy pickings. Money to transform India radically must come from within. That means releasing capital locked in the unproductive public sector, slashing subsidies and cutting governmental expenditure. Implicit in this is that the role of the state in arranging our lives must reduce. Not only has government no business to be in business, it has to grow smaller to become more effective. The public administration paradigm is as much to blame for our dismal performance. Yet no debate has taken place on restructuring government. Power to the people must no longer be a mere slogan and the power to manage assets like schools, hospitals and local infrastructure administration must be given to smaller administrative units like districts and municipalities. No process of liberalization will succeed if we cannot get government off the people’s already overburdened backs. Liberalization not only means less government but more local government.
Ten years after Manmohanomics this process has yet to begin. What then did happen? It would seem that the more things seemed to change the more they remained the same and so living got more expensive. For instance much song and dance was made about dismantling the Industrial Licensing regime. This was long overdue, not only because of the rent collecting proclivities of the decision-makers, but because we saw many other countries doing better and we thought that it was the existing regime that was slowing us down. There might have been truth in this. But what happened in reality was that only the rent collection centers moved. With industrial licensing gone “allocation” became the domain of the financial institutions meaning that the rents are collected in a different set of building. So how have things really changed?
But is there anything positive one can say about the liberalized era? Well GNP it seems grew ever so slightly faster at 5.8% p.a. as opposed to 5.46% p.a. in the previous decade. While that is something to cheer about, did anything trickle down at all? Report No.19471.IN of the World Bank has pronounced that poverty levels have remained constant at about 33%. In other words the numbers living below the poverty line have swelled by 46.7 million to 326.04 million in 2000. The question now is are we going to do any better after Phase II Reforms?
It’s very unlikely. First, and this is very important, neither are Atal Behari Vajpayee and Yashwant Sinha with the intellectual resources or with the burning ambition to transform this country. On the contrary there is much that indicates that they are quite satisfied with the existing arrangement that allows them and their cohorts to make a few personal pickings and give them a few more days to “enjoy power”, which is an uniquely Indian phrase.
Copyright(c) Mohan Guruswamy, 2001. All rights reserved.