The government’s decision, last week, to hold bank boards responsible for large-value frauds instead of the MD and CEO is a great example Indian bureaucracy’s incompetence.
Anurag Thakur is right. Many felt the “goli maaro saalon ko” that the crowd chanted in response to the junior finance minister’s “desh ke gaddaron ko” was incendiary as it painted all those protesting against the CAA as Pakistanis and anti-nationals, but there can be little doubt India needs to take action against anti-nationals. While the jury is out on whether the protesters at JNU/Jamia are pro-Pakistani—as the BJP leaders are alleging—India’s gaddars are really the ones that are hollowing out the country by not allowing it to prosper.
Linking economic stagnation to anti-nationalism seems more than a bit of a stretch, but even those who feel Pakistan’s raison d’être is trying to destabilise India agree that the real danger comes from China and its military might. Twenty years ago, India’s defence spending was around two-thirds that of China; today, it is a fourth. Convert that into troops on the ground or aircraft in the air, and the impact of a $200 bn difference in annual defence spending—it will rise even more soon—is truly huge. Add to this the probability of China getting more drones or even robots to fight wars, and its might gets even more frightening.
If China’s defence spending has risen so fast, it is because its economy, which was 2.4 times India’s 20 years ago, is now more than five times as large (see graphic). Along with the military spending, this also means a phenomenally larger investment in education, which, in turn, improves China’s prospects that much more; just one of the world’s top 500 universities is Indian as compared to China’s 58. In such a situation, if India’s GDP continues to slow, or doesn’t grow at a blistering pace, not only will the technology/military gap with China keep increasing but also India’s ability to even defend its borders will get compromised.
While prime minister Narendra Modi has been focusing on getting corrupt bureaucrats out—his government retired 312 officers prematurely in its first term, and has already retired around 65-70 in the second—roads minister Nitin Gadkari probably hit the nail on the head when he said, a few weeks ago, the government should sack deadwood officers who “neither take decisions nor allow others to take decisions, and sit on a file for years”. There are scores of examples of such bureaucrats, and, more important, of how, deliberately or otherwise, the bureaucracy just can’t seem to get it right.
The government’s decision, last week, to hold bank boards responsible for large-value frauds instead of the MD and CEO is a great example Indian bureaucracy’s incompetence. Instilling confidence in bankers is critical if loan flows are to rise, but the government said it had changed the Prevention of Corruption Act for precisely this in 2018; this was then followed by setting up an advisory board last year to probe graft allegations, and only when the board okayed it, would the CBI proceed against the banker. There was, however, a loophole, which is why, last month, the order was reissued with some changes. If the new system is foolproof, why did the government come out with yet another plan last week?
It was similar bureaucratic bungling that ensured Arun Jaitley levied a MAT tax on FPIs, and Sitharaman put a surcharge on them; both were withdrawn when FPIs started pulling out, but a system that allows bureaucrats to push such disastrous decisions without taking any action against them is a system asking for trouble. Saturday’s budget clearly wanted to cut tax rates, instead taxes went up. The FM wanted to give ESOP relief to all startups but, as it happens, just a few of the 50,000+ startups qualify; indeed, even after three iterations to fix the angel tax, experts say the problem hasn’t really been fixed. And, surely it wasn’t the FM’s intention to tax Indians living in Dubai on their income there, but that is what the notification suggested before the clarification.
Given all this slows investments in country—and there are instances in every major sector of the economy—if those causing the problem aren’t desh ke gaddar, it is not clear who is. If prime minister Modi is genuinely interested in getting the economy to shift gears, he needs to have a crack team looking at just this, the follow-up of proposals, and a mechanism to ensure mistakes that impact investment don’t keep recurring.
While keeping a check on bureaucrats—and weeding out the non-performers—is important, far greater damage is done by the political class. The CBI booking a bank official or a PSU manager for corruption is fine, but thanks to the government not coming up with a plan to allow PSUs to function freely, or to privatise them, the country has lost over `20 lakh crore of value since Modi first came to power (bit.ly/2U4XRH3); this is a political call, bureaucrats can’t be blamed for this.
Not giving concessions to Apple and Samsung to shift a large part of their operations here will slow India’s ability to boost exports—Apple’s exports are $150-200 bn while India’s are $300 bn—and manufacturing, but the decision is a political one, so why blame the babus? Similarly, there is no point discussing how the babus aren’t fixing FCI’s inefficiency when the real decision—of shutting FCI, and giving cash transfers to citizens and PM-Kisan-type payouts to farmers—is a political one. Bringing the flourishing telecom industry to its knees or not freeing oil/gas prices—and lowering the exorbitant government levies—to boost the sector can hardly be blamed on bureaucrats as these are political decisions …
There are scores of such examples, and to the extent they lower India’s potential growth, India gets weaker vis-à-vis a China, and has a reduced ability to even deal with a Pakistan; indeed, the ability to deal with internal threats, and, more important, to give the population better health and education gets compromised. Whether the Shaheen Bagh protesters pose a threat to India’s security is not clear, but anyone who thinks this is not compromised by poor economic growth is smoking something illegal!