The institutional way

With EU in turmoil and global markets roiled,India cannot muddle along

Written by Arun Maira | Published:June 20, 2012 3:18 am

With EU in turmoil and global markets roiled,India cannot muddle along

The decline of India’s GDP growth to 6.5 per cent in 2011-12 was a shock. However,scenarists had foreseen this in 2005. Scenarists can sense what many economists cannot because scenarists consider the whole system,and analyse the interplay of all forces within it,including social and political forces,not just economic numbers. But their analysis was not seriously considered then,with Indians basking on stage in international forums,reassured by the BRICS projection of their country’s inevitable rise to a global economic power.

The scenarists had foreseen a plausible “Atakata Bharat” scenario emerging,with growth first rising to 9 per cent,then sliding down towards 6 per cent. The leverage point on which scenarios of India’s growth would pivot,they said,was trust in institutions. Institutions are like ships,invented by humans,to advance their progress. Like ships,institutions need maintenance too. And when the environment in which they must sail becomes more turbulent,stronger ships and institutions are required. Sensible citizens will refuse to come on board a creaking old boat when the seas become rough. The scenarists noted the tensions building within India as its economy surged to 9 per cent growth. They saw the rising mistrust in institutions of government,big business and political decision-making. And they anticipated the logjams in policy and implementation caused by ideological and political conflicts.

A nation’s economic numbers are an outcome of the quality of its institutions. Institutions channel energy and guide decisions that result in inclusive growth. The architecture of institutions follows from “theories-in-use” of how things should be organised and done. By 2005,the ideological divide between pro-market and pro-government ideas of managing human affairs had widened in India,as it had in the Western world. Moreover,markets or government is not the only institutional choice. Market institutions come in many forms. For example,the northern European model of inclusive capitalism provides institutional roles for labour and civil society for holding capital to account. Democracy requires strong institutions too. The ability to conduct elections is only one. Democracy also needs good institutional capabilities for dialogue and collaboration among diverse stakeholders at many levels of society,national and local.

The scenarists pointed to the urgency for India to build an inclusive version of capitalism,and the imperative to strengthen local governance. They noted,in the churn within India,positive forces pulling in those directions. However,these forces were sidelined by the premature celebration of India’s inevitable success. The scenarists noted that the public discourse in India was becoming shriller with tensions within the country needing resolution,as well as shallower in public debates designed to entertain rather than resolve. The quality of public deliberation,it was feared,could prove to be India’s Achilles’ heel. In a democracy with great diversity — economic,social,and political — and with an enormous development agenda ahead — not only economic growth but also improvement of human development indicators — the ability of people to participate effectively in decisions regarding their future is the key to progress. The scenarists forecasted that if India undertook the reforms in the institutions that their analysis pointed to,it would not only maintain 9 per cent growth but,with favourable global conditions,exceed it.

Political will is required for big ticket economic reforms. Political will in a good democracy resides in the people. Leaders must have the ability to persuade them. India is a flotilla of ships and boats: many communities,many political parties and much diversity. They must come together and sail together for India to advance. India is not a naval fleet in which captains of all ships will say “aye,sir” when the admiral commands. The captains and crews on the many ships must want to cooperate with the leader and go along with the fleet. They need a vision of the future into which they are sailing. A number — 7 per cent GDP or 9 per cent GDP — cannot explain what really matters to people. What matters to them is: what sort of country will we become? What will be the experience of daily life for our families? What opportunities for livelihoods will our children have?

When outcomes that were expected,such as growth rates,are not achieved,attention turns to what went wrong and who to blame. Therefore,these have become subjects of acrimonious public debates in the country in recent weeks. While we expend energy and time on the blame game and the past,the children and the youth of India — its future — are growing. They will not wait. They need education now. They need jobs now. We must move with concerted action to make up for time already lost. To return to its growth trajectory and sustain it,the next 10 years must become India’s decade of collaboration and implementation. What is our plan?

As the 12th Five Year Plan was taking shape,many Indians from diverse walks of life voluntarily came together,in a flotilla,to supplement the official planning process. They used the scenario process to get to the heart of the matter. The scenarios explain the choices people must make,the strategies the country must adopt and our leaders must commit to. Unlike economic analysis,scenarios are expressed in terms that people understand. They provide seeds for dialogue across the country about how we can shape our future democratically. The scenarios reveal that the keys to India’s sustainable progress are governance and administrative reforms for competent and trustworthy institutions. With the EU in turmoil,and global markets roiled,we cannot muddle along any longer. It is time to batten down the hatches so that the Indian flotilla can advance amidst the storm. Internal institutional reforms have become even more urgent.

The writer is a member of the Planning Commission,

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