Governance in India is based not on its impact on the country but how it may affect a particular group of the population. The state of mediocrity has now permeated all aspects of our lives.
The coming to power of the National Democratic Alliance (NDA) government had enthused people immensely about the future of the country. It seems as if the ‘ache din’ of the mid 2,000s are back and back for good. By nature, Indians are prone to excesses. We do not believe in underplaying. Nothing can take away the future we are “entitled” to.
A significant component of this narrative is the increase in growth rate that is likely to ensue in our path to becoming an economic superpower. Economic theory tells us that the growth rate of an economy depends on the investment rate and the incremental capital output ratio (the ICOR) in the economy.
Investments depend primarily on the domestic savings and what we can attract from the rest of the world. For an economy like India, while investments from abroad are certainly important, these can never be very significant and we need to primarily rely on our own domestic savings. Fortunately, Indians have always had a propensity to save and in this respect, we compare favourably with other countries. A red flag in this respect is the fact that these savings have shown a declining trend in recent years, something we need to urgently arrest.
What is more critical is the efficiency with which these savings are allocated to various projects since the efficiency of allocation determines the ICOR. The ICOR refers to the amount of additional capital required to produce one unit of additional output. Lower the ICOR, or in other words, less the capital required to produce one additional unit of output, more efficient the economy. The growth rate of the economy effectively equals the investment rate divided by ICOR. An efficient allocation of resources reduces ICOR and increases the growth rate.
Broadly speaking, there are two strands of thoughts on how allocation of funds should be undertaken – a planned economy and a market determined one.
After independence, India started on the path of a planned economy, with a few officers sitting in Mantralaya and the Planning Commission dictating the flow of funds into different projects. A planned approach, based on the wisdom of a few armchair experts, had disastrous consequences for the country over the next four decades. Our ICOR remained high, starting with about eight and then going down to about six.
With a savings rate of 20%, the Indian economy grew at, what the economist KN Raj termed, the Hindu rate of growth, amounting to 3% to 3.5% per annum. With a population growth rate of about 2.5%, there was very little room for improvement in per capita income. Consequently, the living standards remained low.
It was only with the liberalisation of the Indian economy post 1991and the consequent reliance on the markets, that decisions relating to allocation of investment came to be based, largely, on the principle of value accretion and not on someone’s whims and fancy. Consequently, ICOR came down to four and even less. Lower ICOR pushed growth rates to higher levels, which at one point in time threatened to touch double figures.
India is an insular country and change is anathema to the Indian society. The liberalization in 1991 was carried out because our hands were forced by the International Monetary Fund (IMF), which agreed to bail us out only if certain minimum reforms were carried out. There was no conviction in the liberalisation process that was initiated. No wonder, the moment the crisis eased, all attempts to reform were halted. The consequent supply constraints have brought down the growth rate to what is reminiscent of the pre-liberalisation days rather than the galloping pace of a surging economy.
There has been a significant increase in ICOR resulting from typical Indian mediocrity. Pride in our work is completely absent in the India mindset. The roads we build do not last long, any project undertaken comfortably exceeds the original timeline, delivery of services by the government is pathetic, teachers have neither the requisite knowledge nor the desire to teach, law and order is a mess and citizens are scared to approach the police, preferring to suffer in silence.
Meritocracy becomes the first casualty. Your likelihood of getting a job depends more on who you are and the community or group you belong to rather than your capabilities. The race to the bottom is a never-ending one and it is sad to see communities competing with one another, even resorting to violence, to be classified as backward for the sake of reservations. Governance all around us is based not on its impact on the country but how it may affect a particular community. The state of mediocrity has now permeated all aspects of our lives.
The worst is that we seem to have accepted this institutionalized failure. When scenes of parents climbing four outer floors of a building to help their children cheat through examinations, does not arouse the consciousness of a nation, which otherwise is intolerant of even a minor transgression of perceived religious, cultural or language related indiscretion, these are certainly alarming signs for the country. When 97% of the teachers most of whom are B Ed qualified failed the Teachers Eligibility Test in the most advanced state in the country, the demographic dividend, upon which we pin so much of our hopes, cannot become a reality.
Despite failures on such massive scale, we have a sense of entitlement and strong belief in a future preordained towards India’s greatness. Prerequisites to such greatness never seem to bother us, blithely believing that India’s pre-eminence is inevitable.
Our attitudes in this regard are our biggest limitation. Japan last year celebrated the golden jubilee of its bullet train network. This network runs at an average speed of 175kmph, has recorded an average delay of 54 seconds (Indians will, in general, find it hard to believe that it is possible to achieve such exacting standards of punctuality!) and has witnessed zero fatal accidents in these 50 years. And, we take pride in the fact that both Japan and China are competing with each other to offer technology for our proposed bullet train linking Ahmedabad to Mumbai! (We have now chosen Japan for collaboration in this venture, for reasons that may not be entirely economic.) Unless we think big and raise our standards manifold, there is no hope for the country, a few decimal points here or there in our GDP growth notwithstanding. Lack of basic standards and absence of quality in our day-to-day functioning will prevent us from reaching our full potential and the pre-eminence we so fervently desire in the global arena.
Our generation has failed, and failed miserably. The younger generation, with its irreverent attitude, is our hope. How soon we empower them will determine, when and if, we get out of our current state of morass. We cannot wait for a generation for that to happen. We do not have the luxury of waiting that long.
(Sunil Mahajan, a financial consultant and teacher, has over three decades experience in the corporate sector, consultancy and academics.)