Sunday, November 15, 2015

Bihar polls over, it’s time to fix those leaky pipes

The circus is over. Another election has come and gone, and it’s time for bread. “Bread and circuses” is an ancient figure of speech from the Roman Empire when politicians neglected the real issues and diverted the people with cheap entertainment. The Bihar election was important but a huge distraction. India is continuously in election mode, and this delays crucial reforms and executive decisions. For the past month, we have had only a part-time Prime Minister. This is clearly wrong in a poor country where the ethical imperative is to create jobs and fulfill the hopes of the young, and this is why we elected Mr Modi in the first place.

The solution to ending the constant distraction of “bread and circuses” is to go in for fixed term elections as most sensible countries have done, the latest being the UK. We need to restore the balance between giving the executive freedom to act and holding it accountable for those acts via elections. Elections should only be held in two fixed time periods every five years — once at the national level and two and half years later, simultaneously in all the states. Should a government fall between those dates in a no-confidence vote, the House should not be dissolved; legislators should be forced to cobble a new government or face President’s rule.

If India is to create jobs, the Prime Minister must begin to see the world through the eyes of a small Indian entrepreneur. On his or her narrow shoulders rests the responsibility for creating the vast majority of jobs. This is especially true in the construction industry, which is the biggest creator of jobs in every country. A builder took his life in Thane last month, and in his suicide note he complained about repeated demand for bribes from politicians. He said he could cope with the slowdown in his business but not the red tape and official harassment.

India’s problems are administrative and managerial, not so much political. Hence, Mr Modi must focus single-mindedly on the unglamourous work of fixing leaky pipes. Successful auctions in mining and spectrum are an example of fixing the plumbing. So is the creating of conditions for the efficient delivery of subsidies via cash transfers through JAM (Jan Dhan Yojana/Aadhar/Mobile banking). Last Tuesday’s liberalization of FDI, which cut red tape for investors by giving them automatic entry into many sectors, is another example. The Arbitration and Commercial Courts Ordinance is yet another. Yes, legislative reforms are important, but don’t underestimate the power of overhauling the plumbing left behind by the “license, permit, inspector raj”. Remember, India experienced its highest growth in history between 2003 and 2012 without the GST or the reform of its labour and land laws.

India has a lot going for it. Economic growth is up and inflation is down. Foreign investment and government revenues are rising and the current account deficit and fiscal deficit are declining. Importantly, interest rates have fallen and the rupee is stable. All this did not happen by accident. Major manufacturers like Foxconn in telecom and GE and Alstom in locomotives have come in; payment banks will soon enter the scene; telecom companies can now share spectrum; the defense sector has emerged as a major driver of growth. Even the Bihar election, contrary to the headlines, was mostly about development. What made the difference is that Nitish had something to show for it, especially in bringing electricity to villages.

However, there is a long way to go. Uneconomic power tariffs have again put the finances of the State Electricity Boards in a colossal mess. State- owned banks have had to be bailed out yet again. Our tax administration continues to diminish us as a nation. State-owned companies like Air India destroy India’s brand image daily. As did the Maggi saga. There is no effort to tackle the real problems in education and health. And more.

India does well when it bets on its people; it does less well when it bets on its government. Hence, the reform of the state — fixing the leaky pipes is even more important than economic reform. It will cut corruption and bring jobs quickly by making India attractive to the small entrepreneur. To stay focused on this agenda is Mr Modi’s and the nation’s priority.

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