Where the economy is being chained

In a special report on Indian business in its June 3-9 issue, The Economist asks: ?Can India fly?? The answer is that it has taken off, but its people could fly much higher without the fetters imposed by poor policies and incompetent government. Most objective observers share this view. Policy is mired in politics and populism. But Indian entrepreneurs and workers have a way of boosting production and productivity despite policy errors. The real problem areas are infrastructure, education and healthcare.

Power sector problems are wellknown, but half-hearted attempts by the Union, and populism, and incompetence and corruption in states are severely undermining growth. When there is will, there are clearly ways to improve the situation. Witness much-maligned Gujarat. Three years before, losses in the power sector were Rs 2,500 crore. In a bold initiative, the Gujarat government separated agricultural feeder lines from domestic supply. Farm power is charged at Rs 850 per hp (at 1,700 units consumption and Re 0.50/unit). Today, all villages get 24-hour domestic supply and the power board is making a tidy profit!

The Union itself is guilty of disjointed policy and incoherent implementation. Take energy. We have several players? ministries of oil and gas, power, coal, mines, non-conventional energy, nuclear energy, and several public sector behemoths. Each functions as an isolated, vertical silo, with no integration or convergence. This when dramatic changes are sweeping energy globally and vital new initiatives need coordination. Health provides another example. Nut-rition, water supply and sanitation?three key determinants?are each managed in splendid isolation. Within health itself, the various disease control programmes function as separate empires.

In states, the situation is at times worse. Often, key positions are filled routinely, with square pegs occupying round holes. The tenure of key public servants is usually under a year and in many cases, below six months! In this merry-go-round, there is neither authority to deliver nor accountability. Everybody complains against everyone else. A system of plausible excuses is created, in which we have only victims and no villains. Not surprisingly, corruption is rampant.

In general, delivery of services, apart from a few notable successes, is poor. Education and healthcare are two important failures. At the policy level, there is welcome recognition of past follies. More attention and money are now allocated to these sectors. But in the absence of real reform in delivery, more funds would lead to more leakages and dissatisfaction.

We needn?t live with this. The Indian economy can be unleashed and poverty ended if only public money is put to good use and services delivered properly.

We need comprehensive political reform to change incentives in public life and eliminate corruption. Equally, we need rational, growth-oriented, wealth and job-generating policies. Past orthodoxies need to be given up. But our economy need not be held back till these political and policy failures are addressed. Competent delivery can still be ensured within the political constraints, accelerating growth and reducing the burden of poverty.

There are four broad approaches which can yield significant results in delivery. First, we need effective convergence of key sectors and services at all levels?Union, state and local. The fact that there are about 70 ministers in the Union shows how disparate the functioning of departments and ministries is. Significant restructuring at every level is both necessary and feasible. This better coordination alone will improve both policy making and enforcement.

Second, a rational personnel policy is needed at all levels. Development of domain expertise, selection of the right person for the right job, a guaranteed tenure, clear mandate and adequate resources should be the key elements. No elected government can ignore compulsions of politics, ideological affinity and personal chemistry. But it is possible to improve performance, even within those constraints, by sound management. Such management requires parallel recruitment for a tenure, competition, and honourable retirement for those whose strengths do not match the requirements of a growing economy. The barriers between public and private sectors should be lowered and mobility encouraged.

Third, we need fusion of authority with accountability. The bane of our administration is complete divorce between the requirements of a job and the resources at the command of key functionaries. Mistrust, inadequate delegation, over-centralisation, excessive procedural rigidities and low risk-taking capacity are characteristic of most public servants.

As a result, most functionaries tend to take the line of least resistance. Routine files and meetings account for over 90% of the time and neither innovation nor actual outcomes are pursued with vigour. We need clear lines of accountability and to clothe functionaries with commensurate authority and resources.

Finally, the focus must shift from spending and outputs to outcomes. Even physical targets are meaningless, except in infrastructure. For instance, educational attainments, health status, out-of-pocket expenditure, economic burden of disease and skill levels can all be measured through random surveys with sufficient granularity to make assessments at district and block levels. We have impressive capabilities in organisations like NSSO and they need strengthening to measure and assess outcomes in key sectors and programmes at the grassroots. Such feedback would be a tool for midcourse corrections, as well as monitoring. The additional cost would be marginal, considering the vast outlays now proposed in key sectors of education, healthcare and social security.

?The writer is coordinator of the Lok Satta movement, and VoteIndia, a national campaign for political reforms