Reforming Red Tape

1991 was a watershed. That was the year when India was in a serious foreign exchange crisis. The Narsimha Rao Government changed the policy by 180 degrees. From a permit licence raj we shifted towards a policy frame work which was more market friendly. Of course, it was also aided by the global change in the ideologies of the governments. The Soviet Union had imploded, the Berlin wall had come down and the second world of communist countries also opted for a market friendly policy paradigm.

The first question is: Has the Indian bureaucracy managed the transition from socialist planning to economic liberalisation? The answer is `partly, not fully’. In fact, whatever progress is being made after 1991 as reflected in the annual rate of growth escaping from the Hindu rate of 3.5% to a 6 to 7% shows that some change has taken place. Most obvious are the abolition of the offices of the Controller of Capital Issues, DGTD as well as reorientation of the Chief Comptroller of Import/Export to that of DGFT.

Ofcourse, mere change of labels does not bring a change of mind set. Nevertheless, the physical removal of the licensing has had its impact and to that extent the animal spirits of the Indian enterpreneurs have been released. The mechanism of the FIPB to attract foreign investment also has instituted a system by which there is, at least to the limited extent of foreign investment proposals, is a single window approach.

We have a long way to go. I have been connected with the two sectors of electronics and telecommunication I think the manner in which the Dept. of Electronics established a strategic alliance with the industry and helped in the process of liberalisation, has by and large been welcomed by the industry. It is not surprising that software exports are one of the most vigorous part of the Indian economy.

So far as telecom is concerned, our experience is an excellent example of how there could be resistance by the bureaucracy for the liberalisation process. The century old monopoly mind set in the DoT was strengthened further by the provisions of section 4 of the Indian Telegraph Act 1885. Even though on 13.5.1994 the govt announced the National Telecom Policy, when it came to implementation, the monopoly mindset intervened. If we see the debates going on about the conditions of licensing and the perenial negotiations between the service providers and the DoT, it is obvious that the DoT has been emphasising the need for generating maximum revenue. Many a time the conditions have been one sided, loaded in favour of DoT. However, there is a healthy developmentthe setting up of the TRAI which among other things , can settle disputes between the DoT and the service providers. The decision taken by the TRAI regarding cellular licence fees and on with the arbitration are happy augries to show that even if the bureaucracy is not able to shift very fast, external mechanisms like TRAI are going to bring in the requisite change in the mindset or at least the operational culture of the bureaucracy. The next question is the average civil servant professionally and ideologically equipped to handle the transition? The answer is: `it all depends’.

We have to use only these who are already part of the system to manage the transition. Even in Russia or any other country which had shifted towards liberalisation, it is existing system which is being utilised, to operate the change. The common feature in all these countries is the presence of some committed leaders at the political level. It could be Dr Manmohan Singh or Dr Chidambaram in the Indian context, Mr Chubais or Nemtsof of Russia. The fact that an important aspect like disinvestment is being looked into by another senior civil servant Shri Ramakrishna shows that the bureaucracy can throw up people with the right mindset who handle the problem of transition.The third question is “Will the importance and relevance of bureaucracy decline in the future as the government role in economic activity recedes? The answer is `partly, not fully’.

One basic fact we have to remember is that the India has a large population and 36% of the people are below the poverty line. So, in the social sector definitely, the bureaucracy’s role is going to become even more significant. Experience in developed countries shows that when it comes to public health and infrastructure, the government has a definite role to play. Government may not directly involved in PSUs, or be in the process of manufacturing or services but in the area, of infrastructure and regulatory bodies, its role and consequently, the bureaucracy’s, will remain. Infact, greater economic liberalisation and market computation may call for greater number of independent regulatory bodies.

We are passing through interesting period as we celebrate the golden jubilee of the Independence. Let us hope that the policy shift from the permit licence raj to a market friendly policy will lead India to a golden future.The author is Chairman, Public Enterprises Selection Board.