The Four Imperatives For Faster Growth

Updated: Oct 19 2003, 05:30am hrs
How many in this century remember VI Lenin Lenin believed and declared that two Es were imperative for building a modern and a mighty state education and electricity. He was absolutely right. Though Communism collapsed by the end of the last century, the Soviet Union (or Russia) remains a political power. I was told that even during the crisis years, the school system and electricity supply did not break down in the Soviet Union.

Developing countries face multiple challenges. The most formidable challenge is the presence of a handful of countries that are economic powerhouses and have the capacity to impose their will on the developing countries. Cancun was an example: it is a tribute to the developing countries that they did not bend or buckle under pressure. However, there were no winners. Cancun simply highlighted the fact that we live in an unequal and cruel world.

For a developing country like India, it must acquire the muscle and strength to challenge, or at least do business on fair terms, with the entrenched economic powers. Like education and electricity, what are the new imperatives for building a modern state Any list would still leave education and electricity at the top. And to those must be added what I would call the four Is infrastructure, investment, information technology and international trade.

Our education system is still in a mess. We may have some of the best schools in the world, but we also have a large proportion of the worst schools in the world. A typical primary school in a small village in one of the backward districts of any state will be the following: single teacher, sans library, sans lavatory, and sans community participation. The absence rate of teachers in primary schools varies from 15 percent in Gujarat to 39 percent in Bihar.

Our electricity sector is also in shambles. About 27 percent of all electricity produced is lost. Both subjects, education and electricity, require separate treatment. My focus is on the other four imperatives and to explain, briefly why each one of them is crucial for rapid development.

Infrastructure is a catch-all word. Given the context and stage of the countrys development, infrastructure imperative begins with road and rail. The condition of our road and rail networks have, instead of improving, deteriorated over the years. While the golden quadrilateral and the North-South, East-West corridors are ambitious programmes, they also shine in contrast with the parlous state of the roads within a state, especially roads that connect the villages. The culprit is the public works department. If all the money that has been spent by all the PWDs over the past 50 years is added up, we should have built roads of twice the length that we have today and of a quality that rivals the roads in Germany and the US. The same goes for our rail network. Just add up the crores of rupees that have been spent over the last 50 years. What is there to show in terms of better rails, higher safety, better carriages or faster travel Our railway system is at least 30 years behind comparable systems in France or Japan.

The next imperative is investment. If you want a slogan here it is: Invest or perish. States like Bihar and Orissa are on the verge of perishing because of lack of investments. It is aggregate investment that has pushed up the growth rate in Karnataka, one of the most advanced ones. At the disaggregated level, the lack of investments in the crucial power sector has inflicted a high cost on Karnataka. The lesson to be drawn is that the country must sharply increase its investment expenditure as a proportion of total expenditure and the investment must flow into crucial areas where there is a huge gap between the resources needed and the resources available.

In earlier columns I have argued for rejecting the phobia about foreign money. I wish to make another controversial suggestion. Perhaps, for a certain period, we should be colour blind to black money too, if invested in certain sectors. Consider tourism. This is one sector that has almost infinite potential. Every additional tourist who comes here has the potential to create at least two additional jobs. Can we not agree on a policy that allows for a period of 10 years new investment in the tourism sector hotels, luxury coaches, spas and treatment centres, sports facilities for skiing, sailing, surfing, hiking, mountaineering and golf and promises that no questions will be asked about the source of funds Agreed, there is an element of inequity in this proposal and the means are somewhat dishonest, but this is perhaps one of the better examples where the ends would justify the means.

The third imperative is information technology. It is a tool for governance. Its value lies in its capacity to enhance efficiency, quality and speed. Corporates have realised this. But nowhere is it more important than in government. Why are governments essentially antagonistic to the use of IT Because it tends to guard information, and IT believes in disseminating and sharing information. Governments work on a vertical (and hierarchical) model, whereas IT has the capacity to create a horizontal (and egalitarian) network for decision-making. The primary function of governments is the delivery of public goods and services, and IT can bring about revolutionary changes in this arena. Yet governments are loath to adopting IT in a big way. The use of IT must find a place in the minimum programmes of the governments when they assume office.

The fourth imperative is international trade. Our attitude to international trade is ambivalent. We seem to have less faith in WTO than in free trade agreements (FTAs) and regional trading agreements (RTAs). FTAs and RTAs are useful but have severe limits. At best, they are building blocks. Besides, FTAs will extract a price. The proposed Indo-Asean FTA will not be launched unless we agree to bring its tariffs on par with Asean tariffs. The better course appears to be to renew our faith in WTO and work towards reaching global agreements.

Having said all this, I wish to add that the most demanding imperative is that we devote sufficient time and attention to the four imperatives for building a modern and strong nation.

(The author is a former Union finance minister)