A padlock on our gates
Photo credit: Liz Jones
I came back from Davos with a fresh appreciation of the challenges that face India with the global downturn. As the US economy continues to falter, India will have to look inward for growth. But in doing that, we do have quite an opportunity before us. We are after all a developing country with a growing middle class and a vast, still-untapped domestic market. We’ve barely skimmed the surface when it comes to what we are capable of.
But then, opportunity has long been knocking on our door, and we have found ourselves locked in from the inside - we have too many interest groups within the country limiting our chance to take advantage.
Recently, there’s been a Tata Tea ad airing on television with the slogan, ‘Jaago re’. It admonishes non-voters, and seems to be a message to the youth to wake up and vote for the ‘change’ they want. The message is certainly laudable. But what about the effectiveness of such voting in India? We seem to have a vast number of choices in political parties at our disposal. But regardless of who wins our elections, how free is even the most well-intentioned goverment to pass reformist policies? How beholden is it to the pressures of our interest groups?
The economist Mancur Olsen (whose ideas also came up in a recent, incredibly insightful article on the US economy) noted that as countries developed, the way their markets functioned slowly corroded. This happened as some groups gained more influence than others - in our case, that would be very large entrepreneurs, rich farmers, labour and teacher unions, and key caste groups. These groups demand policies that protect them at the expense of others - caste quotas trump open access and effective education policy (the Congress party has now included reservation in the private sector in its draft manifesto), public schools limp along as teachers fail to turn up and students drop out, labour unions block reforms that would create more jobs, and loan writeoffs, like the kind Chidambaram offered in last year’s budget, primarily benefit the landed farmers. Olsen called the buildup of such preferential policies the ’silting up of the channels of economic progress’ - as access for all slowly gets cut-off in favour of access for a few groups.
The idea of quotas and favours for key interest groups has only caught on more strongly in past years, as we choose quotas, subsidies and tax holidays over better policy. And if this approach continues to replace our reforms, we are set to throttle our growth before it has properly begun.
Tags: Davos, domestic opportunities, protectionist policies, World Economic Forum
February 3rd, 2009 at 11:26 pm
If reservation in private sector does come up, then I would request you to shift your offices to Singapore, Malayasia, etc. I don’t want Infosys’ quality to go down because of stupid Govt policies.
February 4th, 2009 at 12:45 pm
There is no substitute for reservation. It is one policy that we have to live with. The debatable point however is, reservation to what extent?!
And, for the comment regarding loan write-offs favoring landed farmers, our policy structure in general helps land owners and preventing landless to prosper. This comes directly from the times of British aimed at appeasing land owners.
Can you imagine that I am not even free to buy farming land as I am not not born owning farm land while my friend who ancestrally owns land is allowed. And we call ourselves a free country.
Prosperity and development is direct function of options that we have. And policy should be there to create options and not limit them.
February 4th, 2009 at 8:20 pm
Want a wry smile out of reservation ?
http://prettywoman9.blogspot.com/2006/05/modern-indian-theory-reservation.html
February 5th, 2009 at 9:35 am
Agree wth you
What do you expect in an aristocracy like ours?
We haven’t had a unifying leader since independance
Social justice and fairness is the key to unlock our true potential that requires the overhaul of our bureaucracy(real rulers).
February 5th, 2009 at 11:53 am
Hi Nandan,
A great observation and great post. Is policy being driven more by interest groups today than earlier? Have we had cases where policies have been formulated for the benefit of the vast majority rather than loudest interest group - can you give some examples of such instances? How do common citizens influence politics / policy such that they benefit the vast majority rather than the loudest interest groups? Do you plan to cover these topics in any future posts?
Bhalchander
February 5th, 2009 at 10:01 pm
Nandan,
Very insightful blog that reflects the today’s reality. I am eagerly awaiting for your book release in US. I understand and even experience many times how the big INDIAN INDUSTRIALIST(with few exceptions) takes advantage of the close political class to drive the policies to their advantage. My questions in this regard, what kind of changes & policy will open oppurtunities that will nurture young entreprenurs & small scale businesses. What existing policies should change? What new policy should come to bring this change? If you are little more specifics it will be helpful to create awareness. Even, politicians who don’t know what would be good policy,atleast will come to know there is other policies which drive the 60% of rural population out of subsistance.
Thanks
Selvakumar
February 6th, 2009 at 10:56 am
It is very true,”we’ve barely skimmed the surface when it comes to what we are capable of.” Indian Railways is a very good example for this, the IRCTC is one such application, many such industries/fields remains unexplored, apart from Gov, we have other sectors as well. We should start thinking inwards.
Its nice to see you blogging, it gives a lot of insight to other people on what’s happening in the industry.
February 7th, 2009 at 8:56 am
Hi Nandan, I am living in USA for past 6 years and working for Infosys and love and breathe the same spirit of hard work , honesty and sincerity as almost very other Infoscion but each day as i work to client’s office i feel our leaders our solving just part of the problem and we lead a life more of fantasy than reality as i hardly see any Indian who is able to lead a lifestyle or even have a fulfilling life as compared to US people who know less than us , are less sincere or honest and very manipulative bunch of people . Shuould companies like Infosys and Indian govt do something like buying islands like Hawaii , Mauritus and Latin American nations and spreading our own people there rather than just being manipulated by filthy headed Americans ?? If India has a problem of over ppopulation and limited resources why shouldnt we spread to more friendlier countries who really need our talent and would love us to help them ?
February 8th, 2009 at 10:10 am
So, what actually is you solution Nandan?
I understand that it is election time and everyone is jumping over another to provide freebies: IIT/IIM in so many states, Quota for this and that sections and so on.
Why not the CII, ASSOCHAM, NASSCOM etc put a strong protest against it. Are not the same industrialists who actually fund the elections for the major parties?
Why there is no strong collective voice at all?
February 14th, 2009 at 4:04 pm
Nothing will happen. Enterprise controls the Indian Government and in turn, the Indian Government controls Enterprise. One of the very few out of the vicious circle is Mittal Steel.
That took several decades to achieve.
February 15th, 2009 at 6:11 pm
Very good point on interest groups. What is needed today is a Direct to Citizen platform which cuts through the interest group noise and gives the ordinary citizen the voice. We are trying out one such platform at praja.in
February 22nd, 2009 at 8:10 am
the link to the Olsen article takes me to a piece by David Leonhardt. Was that the article meant to be cited there?
April 6th, 2009 at 10:42 pm
I just wanted to share some info on how foolish, are those loan write offs.. in my region, one person got farm loan of 13 lakhs, and within 3 months, the entire amount was written off..
At the same time, one of my relative, for fearing of insult from banks, pledged her jewels and repaid the farm loan of 50,000…
I believe, this is the case everywhere..
Secondly on the NREGA scheme.. there was balance of job demand and wages in the rural villages.. but NREGA collapsed this balance, and increased the wages to unfeasible amount.. the work given is utter waste, like cleaning the public roads..
The workers come to here for two things.. there is no one to demand work, and the work time is less.. (8 AM to 1 PM) for Rs.80 ..
Because of this, many of the farmers faced lot of difficulties in sourcing labours for harvesting and other agri activities..