Chanakya's New Manifesto: To Resolve the Crisis Within India (9 page)

It is true that high fuel prices have contributed towards the woes of our carriers. But this only highlights our deplorable track record in boosting crude oil exploration. Almost 85 per cent of India’s estimated trade deficit of $150 billion in 2011-2012 is due to oil and gas imports. We need to import as much as 80 per cent of fuel for our energy needs. The oil and gas sector is, thus, of strategic importance for us. But what has been our performance in this sector? Bombay High was touted as one of our significant discoveries, but its production has been consistently falling. An investor-friendly crude oil exploration regime should have been one of the first priorities of any government in the recent past, but little has been done to set it in place. Even routine decisions like Vedanta’s acquisition of Cairn Energy’s India assets were delayed for almost a year; similarly, Bharat Petroleum’s acquisition of a part of Reliance India Limited’s overseas fields took forever. China determinedly trawled through much of the developing world in a focused bid to secure its mineral and oil requirements. Its oil exploration program within its boundaries is aggressive. Not surprisingly, China produced 203 million tons of oil in 2011, while our tally was a meager 33.7 million tons. Rather than finding foundational long-term solutions, such as a price deregulation policy, successive governments have only been concerned about continuing the expensive exercise of indefinite subsidies. All the country’s major oil-marketing corporations are deep in debt. The Indian Oil Corporation’s borrowings have crossed
73,000 crore. Hindustan Petroleum and Bharat Petroleum lost over
3,000 crore each, in the second quarter of 2011-2012 alone.

The payment of taxes is, especially for middle-class India, a key area of interface with the government, and an important source of much-needed revenue generation. But relative to our taxable population, the actual number of taxpayers is minuscule. One of the reasons for below par tax collections is that our tax laws are not simple and transparent. This only complicates the life for the honest taxpayer, and increases the scope for venality of the tax department. The implementation of a simplified Direct Tax Code has been inordinately delayed. Similarly, the Goods and Services Tax (GST), which will increase revenues, incentivize tax compliance and create a rational common market, has remained on the anvil for years. Commonplace technology initiatives, which can harness our prowess in IT to book tax evaders, are also perpetually in the realm of planning. Vital finance sector reforms which will increase dwindling foreign investment and create jobs have been pending for years. Robust banking and insurance and pension bills can be enacted to improve foreign direct investment (FDI) but it seems likely that only watered-down laws will come to pass. Reforms in Small Savings Schemes, such as the Employees Provident Fund, the Public Provident Fund and the National Savings Scheme, which are popular with small investors and the salaried class, have not fructified either. As has become the norm in decision making, committee after committee has examined the issues. In fact, the R. V. Gupta Committee gave its recommendations as far back as the 1990s. Since then three more committees—helmed by Y. V. Reddy, Rakesh Mohan and most recently, Shyamala Gopinath, have also given their learned advice. The blueprint is in place, but instead of translating it into action, the matter has once again been referred to the Finance Sector Legislative Reforms Committee.

Education is another vital sector that touches the lives of all Indians. Primary education languishes in deep neglect. There is no accountability in government schools, especially in the countryside; teachers are recruited, paid salaries, but routinely do not turn up for work. The Right to Education Act is a laudable goal, but implementation, which requires a concrete plan to reform the working of government schools, and painstaking coordination with the states, is hardly focused, with avoidable ambivalence in terms like ‘local government’ and ‘neighbourhood schools’. As a result, states have not been able to respond with acceptable data, and funds from as many as fifteen of them have been withheld. The blame also lies with state governments, but as the tussle continues, children are missing out on a vital education.

Higher education, which is the nursery for the hopes and aspirations of much of the middle class, is also in shambles, except for a handful of elite institutions, which are themselves less than stellar according to international rankings. A report prepared in November 2011 by Times Higher Education and Thomson Reuters did not feature a single Indian institution in the top 200 universities of the world. Twenty universities from Asia made the cut, including those from Beijing, Hong Kong, Japan and Singapore. Even more damaging is the report of the Programme for International Student Assessment (PISA) 2009 which took education levels in Himachal Pradesh (H.P.) and Tamil Nadu as samples. Seventy-four regions participated in the report. Our two states were right at the bottom, beating out only Kyrgyzstan. In fact, in science education H.P. came in last, and Tamil Nadu was not much better at seventy-two.

Incidentally, in states where there is political stability, which makes it possible for those so inclined to govern, the results can be dramatically different. In Gujarat, the literacy rate went up from 69 per cent in 2001 to 79 per cent in 2011. The female literacy rate rose in the same period from nearly 58 per cent to more than 70 per cent. And the dropout rate has dramatically fallen among students from the first to fifth standard, from about 20 per cent to less than 3 per cent.

Time is of the essence in the educational sector. India is demographically one of the youngest countries in the world, and the numbers of those scrambling to get proper education is increasing by the day. As Governor Subba Rao of the Reserve Bank of India (RBI) points out, the skills gap in our country ‘is no longer a handicap; it is turning out to be a crisis... India churns out 350,000 engineers a year, but barely a quarter of them are employable. We have 7,000 Industrial Training Institutes (ITIs), but their curriculums are woefully outdated’.
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The agenda for governance is clear. We have to bring in legislation allowing foreign universities. We must allow ‘for profit’ education. We must de-license education. But none of this is being actualized. In August 2012, for example, a presentation to the Consultative Committee of Parliament by the human resource development (HRD) ministry admitted that 6,542 positions out of the 16,602 sanctioned for the faculty in forty-two central universities lay vacant. Shockingly, our fifteen Indian Institutes of Technology (IITs) have 1,611 vacancies against the total strength of 5,092 faculty positions. Our thirteen Indian Institutes of Management (IIMs) have yet to fill 111 positions in a sanctioned teaching strength of 638. The educationist Kanti Bajpai has put it bluntly: ‘Let’s face it. Our school system, vocational education, colleges and universities are in shambles.’
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The long drawn out battle to allow FDI in multi-brand retail is yet another classic example of the functioning of the coalition era. The bill was sought to be taken up in the winter session of Parliament in 2011, but was deferred because the Opposition blocked it. The union cabinet finally cleared the proposal through an executive decision in September 2012, allowing states the freedom to implement the proposal or not, along with other qualifications, such as local sourcing. Allies of the government were, however, at the forefront of those rejecting the measure. Given the rigidity of political divides, there was no objective nationwide debate that preceded the decision; in the ensuing political din the merits of the proposal did not get the attention they deserved. Several qualified observers believe that there is a strong case for FDI in retail, which has been a success in many countries, including China and Brazil. Its benefits to the farmer and the consumer have been summed up succinctly by the noted economist, Jagdish Bhagwati: ‘The evidence is extremely strong that the productivity in agriculture, and attendant prosperity in the countryside follows the entry of such retailers who can introduce refrigeration, storage and other productivity enhancing changes, that small retainers cannot manage.’
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Even the propaganda that small retailers would suffer is not entirely borne out by global experience. In any case, even if this were hypothetically true, at stake is the interest of half-a-million traders against sixty crore farmers and 120 crore consumers. However, whatever the merits of FDI in retail, there is little doubt that by ham-handedly introducing a contentious reform measure at the fag end of its second term, the UPA government did not cover itself with glory in handling the proposal.

It has been argued by some that whatever the faults in the system, the key lies with the individual at the helm. Indeed, it is true that individuals can make a difference. We have evidence to this effect in many states, notably Gujarat, Bihar, Delhi, Madhya Pradesh, Chhattisgarh and to some extent, Orissa. It is on account of the personal track records of the chief ministers of these states that they have been reelected on more than one occasion. However, it is instructive to note that in all these instances, the ruling party has an absolute and safe majority, thereby guaranteeing a stable tenure of governance. In Bihar only two parties, the BJP and the Janata Dal (United) (JD-U) are in a coalition, and fortunately it is a politically secure tie-up, with the joint numerical tally of legislators comfortably above the danger mark of perennial threats to the government. In such situations, leaders committed to a proactive governance agenda can and have made a difference. However, all available evidence suggests that governments at the Centre will necessarily be an aggregation of multiple parties, and majorities even then will be fragile. If one of the major coalition partners defects the government’s survival will be at stake. If one coalition partner refuses to cooperate, the governance agenda can be derailed. And, given such a state of affairs, the Opposition will forever be looking to seize power. The best individual talent will then be held hostage by the system of which it is a part. The search, therefore, must be for a system that functions to give individual talent the space to govern. Without that space, individuals alone cannot make much of a difference.

But authoritarian rule is not the answer to this problem. Governance without democracy would usher in an authoritarian state. Such a state may give the impression of being more efficient in the short run but will inevitably become impervious to the real interests of the people. Equally, democracy without governance would be a betrayal of the very reason why people elect a government in the first place. Both democracy and governance are essential. Both must work in a manner complementary to the other. Keeping all this in mind,
Chanakya’s New Manifesto
states:

1.1    Good governance must be the first priority of a democratic polity.

1.2    Given the magnitude of India’s urgent governance priorities, any form of democratic functioning that impedes or obstructs the project of reaching promised or required deliverables to the people needs urgent course correction.

1.3    Our current system of democratic functioning has visibly become an obstacle to governance objectives. Multi-party coalitions with unstable majorities at the Centre have focused all energies on the politics of survival, thereby marginalizing the imperative of governance.

1.4    Our Constitution cannot provide a solution to the present impasse because it was premised on a different set of assumptions. Chief among these was that democratic elections would throw up secure majorities which would then have the possibility of a stable period to govern. For successive recent elections this assumption has been dramatically proved to be wrong.

1.5    Multi-party coalition governments may somehow complete their five-year term, but the political instability inherent in their mandate seriously dilutes the space for governance, and incentivizes the pursuit of short-term populist policies.

1.6    There are no credible indicators that the currently flawed nature of our democratic polity from the point of view of governance will change on its own.