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July 01, 2007
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July 01, 2007




Page: 2/42

Home > 2007 Issues > July 01, 2007

Administrative authoritarianism is back
Licence, permit raj make a return under UPA

By M.D. Nalapat

THE discretionary powers of government are being expanded and deepened under the UPA so that now, in place of 10, nearly double that number of officials are involved in a decision involving sanction of a project. Once again, the system is becoming unfriendly to those who avoid paying bribes, and resort to other ?traditional? ways of doing business in India.

The effect of this retreat from the liberalisation of the 1990s has begun to bite by 2007, and will openly exhibit its malign virulence by 2009, the year when the UPA seems on course to lose power. It is the successor government that will get the blame for this slowdown, just as it is Manmohan Singh who is now claiming credit for growth that has in fact been created despite the efforts of his ministers to retard the country. Each ministry has multiplied the regulations that it enforces, so that all down the line, functionaries may be given an opportunity to share in the loot.

This is decentralisation, yes, but of corruption. Unfortunately, seeing the goodies that are flowing into the hands of a few because of the return to administrative authoritarianism, several state governments are following in the same route. Once again, unscrupulous private players are using the lure of cash to block competition. Our judicial system needs to come to terms with the reality that a crook in government service can make more money stopping a project than in sanctioning one. They need to examine closely cases where permission has been denied, even though the projects are top grade. If favouring the bad is a crime, then so is rejecting the good.

The steady multiplication of regulations and controls that is taking place under the Mainos can choke the channels of growth in India. The people of this country are an evolved civilisation, with the ability to take their own decisions about almost any matter. They can be trusted with discretion, in the same way as the citizens of the US, Canada, the EU or Australia are trusted by their governments.

While measures against terrorists have been scrapped, those against ordinary citizens have been brought in to a scale that brings back memories of the 1970s. Although there is little in common between Sonia and the rest of the Nehru family?perhaps an explanation for why her contact with them is relatively scanty?there is one thing on which she has outdone the Nehrus, and this is to fashion a skein of administrative controls that are slowly making India a difficult place to do honest business in as it was during the years when her role model, Indira Gandhi, was in office.

What needs to be remembered is that it is only economic growth that can alleviate the tension within society, faultliness that is most recently being seen in Rajasthan. If growth slows down to the miserable level that it was during the 1950s, then this tension could become impossible to staunch. Only a further liberalisation of economic activity can generate the growth needed to ensure a stable society. The rate of growth has to climb to 12 per cent for this to happen, rather than fall further. Each control that is introduced to ?check? inflation has the effect of fuelling it, an example being the rise in interest rates, a policy designed to make India uncompetitive internationally.

Manmohan Singh who had introduced reforms under Narasimha Rao would be remembered in the decades ahead as the Prime Minister who once again tied India down by a colonial mindset that sees the people as unworthy of the discretion and respect that freedom implies.

It can no longer be called an accident that the three years of UPA rule have witnessed a frenzied effort to eliminate the few pools of excellence in the higher education system, to destroy India?s energy future by choking indigenous nuclear technology through the India-US nuclear deal, to hand over to the generals in Pakistan Sir Creek, Siachen and a goodly share of sovereignty in Kashmir, and to systematically use instruments of economic policy to hobble India?s competitiveness so that the country can never match China for economic pre-eminence in Asia. Small wonder that the country has become a plaything of international chancelleries and an ineffective giant in its neighbourhood.

When India got a timid Prime Minister in 1992, the country?s institutions began to develop a backbone. Whether it is the Election Commission or the media, it is during the Narasimha Rao period that they began seriously challenging the government. True, the past had witnessed individual examples of defiance?as for example the civil servant A.D. Gorwala against Jawaharlal Nehru and journalist Arun Shourie against Indira Gandhi. But overall, institutions were cowed by the power of the administration. However, during the 1990s, genuine checks on state power began to form, and not coincidentally, the economy began to expand. Those who have studied India?s history? the real past, not the fairy tale version found in textbooks still tethered to the colonial mindset?would not be surprised.

If centuries of Mughal rule did not devastate India economically despite the loot, it was because substantial discretion remained at the lower levels, and with the individual. Only when Aurangzeb launched a genocide against the people of India did a revolt blossom, led by the Marathas, who themselves allied with both Hindu and Muslim nobles in their war against the tyranny of the Mughal despot. However, things changed with the coming of the Europeans, specifically the British. They saw Indians as a lesser breed, unworthy of the freedoms enjoyed by normal human beings, and began to lock into place an administrative system that took away discretion and enterprise, reducing much of the economy to dust.

Much has been written by colonial-mindset historians about the ?steel frame? that allegedly kept India together. In reality, this all but destroyed the people?s livelihood. The simplest of tasks needed official permission, so that at each level of administration, those manning the system on behalf of the British had the final say. The Mughals had no economy back home to nourish at the cost of India. The British did, and drained India so thoroughly that in the 90 years since 1857, India?s share in world output fell from a quarter of global production to less than two per cent.

Jawaharlal Nehru was British, in the mind, and he clearly saw Indians the same way as his native-born classmates in Harrow did, as morons unable to handle tasks unless given directions. The ?steel frame? was retained and in many respects strengthened, the process taking its most virulent form in the 1970s, when tax rates and the quantum of regulations rose steeply, causing misery all round. When South Korea, Japan and later China began to ascend the economic ladder, India remained anchored to poverty. The only group that benefitted were those close to the rulers, who became wealthy through bribes. Businesspersons would pay bribes to prevent competitors from getting permission to set up factories, and would seek to ensure abysmal quality and low output, for even these ensured sufficient undeclared income to put away in foreign banks, which are reported to hold $280 billion of money from India.

Under the neo-British, the undeclared economy overtook the legal, and even the lowliest of functionaries was given sufficient discretionary power to make money. To set up a company in the 1970s, 46 officials needed to be convinced, mostly through the provision of cash. The process was such that few bothered. The economy continued to limp. It was only in the 1990s that the system was changed, and discretion at the base reduced. Train tickets, for example, could now be purchased without bribes being paid. Of course, most state governments refused to let go of reliable bribe generators such as urban land, which is still the source for several political fortunes. Despite such gaps, overall the situation improved, so that by the end of the 1990s, rather than 40, only around ten officials needed to be ?convinced? before a project got approved. As a result, more entrepreneurs came forward, expanding employment and income. The number of those under the poverty line began to decline in the tens of millions. With each lowering of the threshold of officers needing to be dealt with before a project left the drawing board to become reality, more individuals outside traditional business families came forward. The Narayana Moorthys and other IT tycoons are the children of this trend. Infosys would never have been possible in the 1970s or even in the 1980, it was only with the liberalisation of the 1990s that the company was enabled to take off, to the benefit of hundreds of thousands of shareholders.

Corrupt officials were?and are?unhappy about economic reform. They would prefer to retain discretion in their own hands, so that a steady flow of bribes can continue, some of which can be shared by politicians. However, the national interest mandated that rather than increased regulations, what was needed was to cut the layers of decision-making, so that finally, in place of 10, only one or two officials and ultimately none would be needed before an individual or company implemented a project.

It is the successor government that will get the blame for this slowdown, just as it is Manmohan Singh who is now claiming credit for growth that has in fact been created despite the efforts of his ministers to retard the country. Each ministry has multiplied the regulations that it enforces.

Once again, unscrupulous private players are using the lure of cash to block competition. Our judicial system needs to come to terms with the reality that a crook in government service can make more money stopping a project than in sanctioning one. They need to examine closely cases where permission has been denied, even though the projects are top grade.




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