I
ndia is going through a most exciting transition. A confluence of good fortune on many fronts has created a range of opportunities for Indians to benefit from. There is the large and increasing population of working age, combined with low dependency. The monsoons have not failed for many years running. An ongoing electronic communication and IT revolution is making it possible for individuals, firms and countries to respond rapidly to changing circumstances. Then there is the recognition internationally that India is an important market to invest in, export to, and import from. And since the government had started a process of openness a decade and a half back, many of the markets that were missing in the pre-1991 era are working efficiently enough.Given such conditions, how has this government been? Well, quite good on maintenance—and extremely poor on preparing, repairing, and creating. As inheritors of the 'India Shining' story, the UPA government did a great job of maintaining the sheen. The budget was (at least initially) kept somewhat in check, macro-economic management was decent and minor tinkering continued. Partly because of decent maintenance, India continued to sparkle—tax revenues were looking up like never before, investment spiralled like never before, and it seemed everyone in the world wanted to be in India. This was great fortune indeed, for it meant that the government was relatively flush with funds.
But did the government build great infrastructure beyond what was already in motion? Did it provide relief for the highly strained environment? Did it do something about meeting the educated manpower shortage—and tackling the poor quality of education in government schools and other institutions? It did none of this. Instead, it set the stage such that all governments will have to give hundreds of thousands of crores in schemes that will not build anything of lasting consequence. The UPA has been great in giving away money, and admittedly quite good at doling it out to all kinds of people—not just the rich, but the poor as well. But such lavish largesse does not make great countries.
Preparing for the future requires building infrastructure. The rural roads scheme was started during the nda regime—an indubitable fact, for it was not named Rajiv or Indira or Jawaharlal. Bharat Nirman was a non-starter. JNURM ended up being merely a transfer of funds—strengthening the internal working of urban local bodies just did not occur on a scale required. E-governance remained paper-bound, because the co-synchronous administrative reforms required for it to work were not thought through. Indian educational institutions cannot hire international faculty—and our doctoral programmes are in a shambles. On the environment front, water levels continue to fall, we continue to discharge tonnes of sewage into our rivers and keep on building coal plants while natural gas lies unused.
This government talked a lot, high-minded commissions were set up and provided very well thought out recommendations. But in the end, the government did zilch.
Repairing will be critical for restructuring the economy. Repairing on the educational front requires ensuring that our educational institutions start to work properly. Universities continue to teach content that is many decades old. Faculty rarely publishes and do not have adequate incentives to do so. Our government schools now have large attendance, but the teachers there are just not used to, or interested in, teaching. We feed children (thankfully with low leakages) in primary schools, but most drop out soon after. Our legal structure is extremely dated, our justice mechanism is unable to handle the load, and our police are still living in the age of the lathi The government's own internal administrative mechanism has no IT backend, and it is still run in the same way as in 1950.
What has this government created, where has it innovated? Well, it has maintained and created greater incentives to consume, not to save and invest. Prices of expensive commodities such as energy were deliberately kept low. Interest rates first went up steadily and then went down dramatically. It has created conditions whereby rich and poor alike have lower incentives to save and greater to consume. Large deficits have been created and will continue for some years in the future. In the current risk-averse environment, investors will tend to prefer low return-low risk saving options. And the government will borrow large amounts from investors to give it away for its various schemes.
How is it that such a phenomenally talented group achieved so little?