FROM THE TELEGRAPH
By S.L. RAO
(Forwarded by Gorkhs Daju)
Government decisions were based on deep-rooted leftwing ideology, lack of foresight or practical experience, and self-enrichment.
They have led to consequences that the nation has suffered for years. With difficulty it is trying to reverse some.
Jawaharlal Nehru’s overwhelming dominance over Indian public opinion for most of his time in power muted any opposition to his policies. Policies might have been better with debate and dissent.
Some of them were non-alignment in foreign policies; the desire to acquire Kashmir; taking the Kashmir issue with Pakistan to the United Nations; industrialization as the key to take India out of poverty; more emphasis on higher and professional education than on schooling; priority given to curative health over public health (safe drinking water, sanitation, and so on); dependence on an inherited administrative service for execution of all government policies; unlike with the defence forces, not insulating police functioning from political interference; making government-owned enterprises subservient to the civil services; not setting standards of accountability and penalties for non-performance on government functionaries and so on.
In recent years, adverse consequences or present-day irrelevance of these policies have sapped the country’s strength. Many are being questioned and reworked, though there is resistance.
I think that the seeds for large-scale corruption in the government were sown when Nehru did not insist on strict penalties for venal officials and politicians (unlike Singapore).
The root of the problem of corruption was Gandhi asking the first Congress ministers to live simply and serve the people. Nehru in response got all ministers to “voluntarily” cut salaries. This sowed the seeds for many of them earning much more by illegal means ostensibly to feed visiting constituents, fight elections, contribute to the party, and also build post-retirement estates.
At Independence, the best organized among labour were the industrial unions, controlled by different political parties. Media and elected representatives of every political party gave trade union concerns an importance out of proportion to their share in the population or the economy.
Agricultural policies were founded on the need to ensure that the urban industrial worker got foodgrains at low prices. The plight of farmers and landless labourers depending for incomes on agricultural produce was ignored.
Distortions in agricultural policies today are the results. We pretend to support the farmer through minimum support prices that are the same as procurement prices; fertilizer subsidies that actually mostly benefit the fertilizer manufacturers; and declining public investments in real terms in building assets for agriculture.
Distorted policies and inadequate investment have lowered agricultural productivity and impoverished the farmer. Farmers have reacted by substantially increasing production of horticulture, milk, and so on.
The Food Corporation of India is believed to be the most corrupt among public enterprises. Many dip into its revenues — politicians, FCI officers and other intermediaries. Some farmers pay bribes to procurement officers. Many FCI officers pay more for lower quality, showing it as higher quality.
There is also much illegal income from contracts for transportation, handling, storage and so on of the procured grain. For years now, governments have ignored suggestions to change from physical procurement and delivery to, instead, the giving of cash or “stamps” to farmers (or poor households) who have to be supported. Alternatives have yet to be even tested.
In many cities, ration cards meant for the very poor to get grains at cheap prices are in excess of populations. Many deserving poor do not have cards.
Bogus ration cards enable the transferring of substantial quantities of cheap foodgrain for sale in the open markets. Various intermediaries rip off public money during procurement, handling, transportation, storage, identification of the poor, and distribution of the cheap grains. Vested interests prevent changing a proven inefficient and corrupt system to the detriment of the poor and the farmer. No alternative is in place.
Kerosene is given to the poor at very cheap rates at government cost. Repeated studies show that at least 40 per cent of such kerosene is diverted into the market, and adulterated with diesel by truck operators who make extra profits. No alternative to physical delivery of ration kerosene has been permitted by politicians (many own carriers) and administrators.
Similarly, lower priced fertilizers for farmers to improve their earnings mostly benefit the manufacturers. There is no sign of government finding alternatives. Misguided politicians thought they would get farmer votes by pricing urea especially low. While urea is used most, it has to be balanced, depending on the soil and the crop, with phosphatic and potassic fertilizers. These are expensive. Farmers overuse urea and damage land and crops. Now the government is trying to restore the price balance but may not undo the damage of years of fertilizer imbalances.
George Fernandes as industries minister in the Janata government reserved over 800 products for small-scale industry. He did not know that industry is a spectrum from tiny to the largest industries that exist to satisfy market demands.
They succeed when they are efficient, produce high quality products, service customers to their satisfaction, and meet market needs.
Reservations placed a heavy burden on Indian industry and exports because of higher costs and poorer quality. Studies showed that reservations benefited only the well-placed producers. The majority of small-scale producers did not get any advantage from reservation. In recent years, governments are gradually removing reservations. But India lost out in competitiveness.
Many labour-intensive industries like garments, leather, toys, were reserved for the small-scale industrial sector. India, with similar advantages to China in these industries, is a small exporter of these while China dominates world markets.
Chinese factories employ thousands, while Indian factories are small in scale because of reservations. Gradual rolling back of this policy is inevitable to counter vested interests that include politicians.
Indian labour laws emphasize employment irrespective of the viability of the industry. So employment cannot be reduced if markets go against a product. Employers are unwilling to employ large numbers, fearing unaffordable wage bills when demand declines.
A social security system should have been created to protect such displaced workers instead of making the employer bear a burden he cannot afford.
Every ministry has public enterprises under its control. Ministers and officials avail themselves of many perquisites from these and are the super-bosses of public enterprises, with major decisions requiring their approvals. Disinvestment and privatization have now begun, albeit slowly.
The Indian stock markets have witnessed major share price fluctuations. Foreign institutional investors sending funds from Mauritius are exempt from capital gains tax and send money in and out as they book profits.
This results in large inflows and outflows of foreign exchange, making for fluctuations in the exchange value of the rupee. Mauritius is the largest foreign investor in India, said to be the repository for politicians and others sending funds by the havala route, laundered through the stock markets. No government has taken action.
For some, the motivation behind power is the wish to do well for the nation. For others it is to acquire wealth. There are too many ministries at the Centre and states. Subjects are broken into components to create more ministerial berths for politicians.
There is little coordination and holistic decisionmaking. Interrelationships between components and subjects are neglected; for example, health (spread among the ministries of health and family welfare, chemicals and fertilizers and water), or energy, (spread among coal, oil and gas, power, renewable energy and atomic energy).
The country has paid a high price in poor health status, deaths, fake drugs, and so on, and half the population is without safe and affordable energy in order to create jobs for politicians.
In India, politicians aided by the bureaucracy have held the country back by thoughtless decisions based on poor grassroots knowledge and poor implementation. In many sectors we need technocratic decisions to implement political objectives.
What we have is politicized implementation of unclear political objectives.
(The author, S.L. RAO, is former director-general, National Council for Applied Economic Research)