A right to growth

Written by Arvind Virmani | Updated: Oct 21 2013, 16:35pm hrs
Economic growth represents opportunity. Indias per capita GDP growth was 1.5 per cent during the notorious Licence Permit Quota (LPQ) Raj from 1950 to 1980 (Nehru, Indira Gandhi 1). The reversal of these failed policies in the 1980s (IG2, Rajiv Gandhi) almost doubled the per capita growth rate to 3 per cent. This was further raised to about 5 per cent (1992 to 2012) by the reforms of the 1990s (Narasimha Rao, Atal Bihari Vajpayee). The decline of per capita growth to

2 per cent in 2012-13 has come as a shock to the youth who have grown up in the decade of 6 per cent average growth.

The media exposure of high-level corruption at the Centre and pervasive governance failure across the country has heightened the outrage against the government for depriving them of this new hope of a bright future. There is also a perception that the decline in growth is due partly to the indifference of the ruling party and its ministers to the role of economic growth in creating opportunities for all, including the generation of revenues so essential for enhancing opportunities for the poor through the supply of public goods (public health, basic education and employable skills). For instance, despite decades of talk about supply bottlenecks in infrastructure, lack of productivity in agriculture, leakages in PDS-FCI and abysmal sewage systems, there is little public evidence that state and Central ministers responsible for the areas critical to growth and opportunity are applying their minds and efforts to solving them. Dont people in a democracy have a right to good governance

Perhaps we need a Right to Growth and Good Governance Act to ensure that government at every level from the ASHA worker or primary worker in the village to the humblest babu in the Block office, to the collector or magistrate at the district level, to the chief secretary of the state and all politicians holding office in state governments or autonomous bodies can be held accountable for economic growth.

The Chinese experience suggests that this could be an effective way of achieving sustained development and faster poverty reductions. Since 1980, when the Communist Party of China (CPC) instituted market reforms, China has had an average per capita growth of 8.8 per cent, double the 4.3 per cent average achieved by India. One of the major factors has been its primary focus on economic growth for enhancing national welfare. The objective of maximising economic growth has helped in achieving an effective governance system that is highly decentralised in operation while maintaining the unchallenged authority of the general secretary and the top organs of the party

The basic objective of growth maximisation filters down not only to every level of government and party, but also to every state, provincial and party-related enterprise. Within this overall objective, party cadres, government officials and enterprise managers are relatively free to experiment on the means to achieve faster growth. More importantly, they are effectively rewarded for achieving growth targets. The intensity with which local officials compete to attract investment and the red carpet they lay out for FDI is apparent to anyone who has visited an enterprise zone in China.

At its higher levels, the party continues to provide overall guidance on the broad directions of growth. For instance, the growth objective was achieved by incentivising overseas Chinese entrepreneurs to shift their entire labour-intensive export manufacturing facilities to special zones in China. When this opportunity was exhausted, they turned their attention to more sophisticated FDI from developed countries. When export opportunities in developed countries appeared to flag and the Asian crisis struck, the higher-level direction changed to using infrastructure investment and import substitution of the export supply chain to sustain high growth. Thus, the use of growth achievement to measure the performance of party members and bureaucrats, and to reward them appropriately through promotion and economic opportunities for their family members, has allowed them to develop a unique blend of centralisation and decentralisation that has sustained growth for a historically unprecedented 30 years.

Though it is impossible to replicate the CPC-controlled Chinese system in a democratic country, we can and should give much greater importance to the growth objective, and also use it to reward bureaucratic functionaries to promote good governance. All public authorities responsible for licensing, permits, quotas and inspection would be judged by the growth of economic activity in their areas. The electricity department could be linked to the growth of metered electricity sale and consequent increase in production. Similarly, public health workers could be held accountable for the number of workers in their respective areas falling sick due to water-borne or communicable disease, and thus reducing production and growth.

If the right to food act can eliminate leakages, corruption and inefficiency in the PDS/ FCI, as evidenced by the governments calculation of fiscal costs, a Right to (8 per cent) Growth Act can achieve wonders in eliminating corruption, improving governance and raising the rate of growth of the economy to its full potential of 8 per cent.

The writer, a former chief economic advisor, ministry of finance, heads chintanlive.org