When the UPA came back to power in 2009, with what seemed to be a stronger and more reasonable coalition structure, I was very optimistic. The global economy had dodged the bullet that might have wounded it critically. India had managed to grow robustly, even in the throes of the global crisis. There was a chance for experienced leadership to return and continue its work. Halfway through the government?s term, things appear much less rosy. What has happened and why?
The private sector has done its part. India?s entrepreneurs seem to be exhibiting a dynamism that thrives in the face of adversity, trying to innovate and grow in an often hostile business environment. Households have done their part. They save and consume in reliable ways, seeking better lives for their children through thrift and hard work. It is India?s leadership that has failed.
Some of the problems were created before the current government?s term, most notably the 2G scandal. They were a function of an inordinately corrupt coalition partner, pursuing the kind of overt family-led corruption that ruined Indonesia?s growth story. Other problems have come from adverse global economic developments, hangovers from the 2008 crisis as well as new negative shocks. In all cases, however, the government response has been anaemic and defensive.
The US, Europe and Japan have all been struggling with economic problems and their decision making has also left much to be desired. But in each of these cases, there has been more of an excuse. The US and Europe are dealing with internal heterogeneity and political polarisation at levels that are unprecedented for them in the recent past, in the context of an era of constrained public resources. Japan had less excuse, until the devastating earthquake and tsunami that hit it. India, on the other hand, has shot itself in the foot.
A fast-growing economy, especially one that needs to invest heavily in infrastructure, is a magnet for corruption. Corruption was rampant in the US just over a hundred years ago, as it emerged as an industrial giant. So India?s corruption scandals should not come as a surprise. Precisely for this reason, they should have been dealt with earlier. The 2G allocation was obviously flawed from the start, but no action was taken. The corruption around the Commonwealth Games preparations was common knowledge long before any response was made. It is a reasonable inference that the political leadership deliberately turned a blind eye to problems.
This view is reinforced by the government?s reluctance to act on demands for greater accountability. Rather than being proactive and responsive to the concerns of citizens, the leadership allowed a showdown to develop, with citizens having to resort to tactics that might have been appropriate for dealing with an imperial power that disenfranchised them, rather than a government ostensibly of the people.
Much of what we have seen in the last few years, then, is the vestiges of an old India, of patronage and petty power games of insiders. India?s current leadership cannot help build a new India without rebuilding itself. The reason that the government has a hard time admitting mistakes, fixing them, and moving on, is that at the heart of its leadership is a flawed model of decision making and choice of decision makers, based on loyalty and connections, rather than competence and probity.
When the leadership suffers from these problems, the rest of society also tends to get corrupted. Business people and individuals who go along with this ethos benefit at the expense of those who have more scruples. The discipline of competition stops working when the playing field is not level. The honest majority?s frustration boils over into the streets and the maidans.
What can be done? The small ruling elite can step back and realise that its hold on power will not be preserved by doling out favours?small ones to the rural poor and large ones to its inner circles. My sense is that India?s voters have understood what is achievable through competent and relatively honest government, and will not hesitate to ?throw the rascals out? as soon as they get a chance. After this realisation must come steps to rebuild the leadership. This cannot be done at once. Political leaders, in particular, must work their way up the ranks. However, the existing leadership can make itself more open to new ideas, by allowing more regular channels for the transmission of ideas from outside the government into policymaking.
This government is showing the classic signs of what happens when a ruling group starts to close itself off from external criticism and stifle internal dissent and debate. This closing off is a sign of insecurity, but ultimately brings about precisely what it fears ? loss of power. Whether the leadership can rebuild itself will be the surest sign of whether it has the ability to lead in building a new India.
The author is professor of economics, University of California, Santa Cruz