All going for it but culture

SR Kasbekar

The most dangerous fallout of the tehelka tapes expose is a frightening cleavage between the economics of growth and culture of administration, with serious implications for business confidence. Investment and growth may suffer. Mr Yashwant Sinha, undeterred by the recent developments, is resolved to push second-generation reforms to prop up growth. But he duly worried that the US slowdown has serious implications for the Indian economy. His fear is not unfounded. The Centre for Monitoring the Indian Economy has scaled down GDP growth to 5.7 per cent in the third quarter of 2000-01.

There is a glimmer of hope.The UN’s Economic and Social Council for Asia and the Pacific (Escap) in its Economic and Social Survey of 2001 is hopeful of India attaining 7 per cent GDP growth during 2001-03. Yet these forecasts are qualified by a few caveats. The 7 per cent growth is underpinned by a projected growth of 3-3.5 per cent in agriculture, 7-8 per cent in industry, and 8-10 per cent in services, more or less realised between 1992-93 and 1999-2000. In the same period economic growth was close to 6.5 per cent a year. So the 7 per cent target is attainable.

Let that not generate smugness. The Escap survey has rightly stressed a need to invest in physical and social infrastructure to prop up growth. It is this weak area that needs to be boot-strapped through sustained investment, aided by foreign participation. The survey rightly points to other favourable factors such as foreign investment inflow, relative stability of domestic currency, broad-based industrial growth, external debt and debt-service ratio, comfortable foreign reserves and easing of economic sanctions.

However, weaker stock exchanges and lower business and household confidence may undo much that is positive.

Even the most favourable economic factors may prove ineffectual in the absence of the right culture, particularly among the elites, as exposed by the tehelka tapes. Mismanagement of public resources, little accountability of public servants, the erosion of the authority of governments and their declining capacity to implement social sector programmes are symptomatic of a fast decaying culture with dangerous implications for the pace and quality of growth.

Yet few doubt India’s long-term growth potential. Well-known economist Kirit Parikh says, “It is possible for India to have a per capita income of US $30,000 by 2047,” subject to the assumption that the Indian economy does as well as others or better. Another estimate by a US economist says that by 2025, India’s GDP would exceed that of Japan, making it the world’s third largest economy after the US and China.

Even if we succeed in realising half this potential over 20 to 25 years that should rid the country of poverty. Sadly, poverty of culture, as seen in all-pervading corruption, seems set to ensure that India remains caught in perpetual poverty.