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Effective governance — The missing link

By S. Swaminathan

It may be too premature to celebrate but the current trends in industrial production tend to induce some optimism. The index of industrial production has registered an increase of 5.7 per cent in August this year as compared to the growth in August 2001 of 4.9 per cent. This is, by no means, a real turnaround in industrial production but it does indicate some revival of demand and a consequent mitigation of over-supply.

There are two factors which lend support to the view that at long last, industry is looking up. First, the improvement in manufacturing output at 4.7 per cent as compared to August 2001 (2.4 per cent) second, the increase in capital goods at 10 per cent in August this year as compared to a decrease by 7 per cent in August last year. Although consumer durables are yet to emerge out of the recession, consumer non-durables have shown an impressive increase of 13.9 per cent in August 2002 as compared to a growth of 5.5 per cent during the corresponding month last year.

There is every likelihood that these trends would be reinforced during the rest of the year. That apart, there are serious questions on how the overall growth rate of the economy could be increased, at least to the level reached in 2001 (5.5 per cent).

Agriculture of course, remains an unpredictable segment of the economy. If the contribution of the services sector (IT, real estate and construction) — which has its own dynamics virtually "autonomous", were discounted, it would be logical to suppose that governance, as an input for higher growth, is yet to assert itself. Liberalisation, it is sometimes argued, has put the ball in the court of industry and that except for the need to remove obstructionist administrative procedures, there is little that the Government can do. How erroneous this view is, can easily be established. It is well-known that the infrastructural inadequacies have operated against the utilisation of resources and that the limits to growth have been ordained by such factors as power shortages, and unreliable roadways in most parts of the economy. Two issues here have not been addressed. First, the new investments which are needed but which are not within the fiscal capacity of the government.

Another aspect of the problem is that with all the easing of restrictions on foreign direct investment, money is not flowing in for projects in this area. Second, whatever infrastructural resources have already been built up, (in the power sector around 1,00,000 MW capacity exists), the operating efficiency is at a low level.

There is no plough-back given the continued syndrome of subsidies. And then there is the area of human resources development — educational development, skills formation, toning up the technological capability at different levels and so forth. All these are basically within the domain of government. There are states such as Jammu and Kashmir, the North Eastern states, Bihar, and even Uttar Pradesh, where the menace of terrorism and lawlessness keeps governments on their tenterhooks.

How can the growth process be stimulated in these states, if at all? And then there are the so-called progressive states such as Tamil Nadu and Karnataka where governments seem to be so embroiled in "manufacturing" agitations that they are in danger of suffering economic retrogression.

This is the worrisome context of governance. In the perceptive recent publication "Towards Good Governance", the Associated Chamber of Commerce and Industry (Assocham) points out that despite having adopted a democratic polity, India has faired poorly in promoting participative people's power.

Although democratic institutions have been created by the constitution, most of these have become atrophied over time.

As the ASSOCHAM puts it, the crises of governance in India manifests\fests itself through pervasive nepotism and corruption, misappropriation of state funds for personal or familial or sectarian purposes, absence of transparency and accountability in public administration, lack of respect for the rule of law, and ethical behaviour in public life, a reluctance to delegate administrative or financial powers to grassroots organisations, crumbling of democratic institutions and alienation of minority populations.

The indictment of governance in India can hardly be considered too harsh or as an expression of cynicism. The problem is desperate and the remedy has to be radical and necessarily long drawn out.

The paradox is that while we need less of party politics in public administration, we also need more of politics (people's participation) in the sense of commitment to development with justice. In the ultimate analysis, it is this process of fumigation of the political system which will release the enormous dormant strength of the economy.

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