Milan Vaishnav :
(From previous issue)
Although the prospects of a non-Congress, non-BJP-led government appear to be weakening as the BJP’s popularity increases, it is a certainty that any government formed in 2014 will have to include some key regional players. This puts them, in turn, in prime position to extract concessions that could dampen any push for reform.
Finally, there’s the new party on the block, the Aam Aadmi Party, whose economic vision seems to be in sync with its acronym-aap means “you” in Hindi-and with its apparent economic slogan, “You, not us.” On economic matters, activist-turned-Chief Minister of Delhi Arvind Kejriwal has been more than willing to give the people what they want-generous subsidies for public services-without worrying too much about sustainability. The AAP government in Delhi has, in just one month, cut electricity tariffs in half and guaranteed generous free water quotas for all. The beneficiaries of these schemes are not necessarily the have-nots (after all, if a household does not have a water connection, it cannot receive free water).
In the end, AAP’s greatest impact on India may be in the realm of ideas, rather than electoral politics. The party’s obsession with cleansing the government forced the established parties to finally legislate the creation of a federal anti-corruption ombudsman (a task that they had long delayed) and to articulate their own anti-corruption platforms. Although it is too soon to tell whether corruption has decreased, it is no coincidence that the Congress Party’s first campaign advertisements featured the image of party scion Rahul Gandhi next to a list of six anti-corruption bills that his party had long ago introduced but only recently rediscovered.
But AAP’s ideas, particularly its populism, aren’t all good. Its recent moves in Delhi may have triggered a competitive race to the bottom: the Congress government in Maharashtra, the second most populous state, slashed power tariffs by 20 percent and some BJP leaders are touting a proposal to eliminate India’s income tax. Just when politicians in India were finally getting accustomed to the notion that good economics can make for good politics, AAP’s agenda could undo everything.
None of the contenders in India’s upcoming election provide much real reassurance that they can revive India’s long-run economic growth rate. To do that, they would have to grapple with India’s institutional malaise. What the country so badly requires, but does not yet have, is an election manifesto pledging to invest in building up India’s woefully inadequate state institutions.
Such a manifesto would focus on rebalancing an Indian state that is grossly over-bureaucratized but also severely understaffed. On average, according to the World Bank, it takes 168 days and 35 applications, licenses, and certificates to obtain a construction permit in India. And India’s inability to deliver services is linked to endemic manpower shortages. In 2012, the judiciary’s vacancy rate topped 20 percent. It comes as little surprise that the courts face a backlog of 32 million cases. When private firms must spend years to enforce simple contract terms thanks to a clogged judiciary, investment inevitably suffers.
A sensible, long-term economic vision would also be motivated by a desire to attract new forms of human capital and skills into public service. Regulatory agencies, for instance, should no longer provide sinecures for retiring bureaucrats or judges; they should become magnets for specialized experts. When regulatory agencies are largely staffed by former public servants, officials are less likely to rock the boat while in the final years of the tenure for fear of losing their golden parachutes.
The BJP hopes that the Modi’s “Gujarat model,” in which a CEO-style executive can discipline the bureaucracy and offer investors personal attention to their demands, can be scaled up. But that model is heavily reliant on one man’s charisma. The Congress Party has tried to expand the reach of the state through a new set of rights-based entitlements-access to education, employment, and food-without investing in a corresponding increase in state capacity. Regional parties are more concerned with consolidating their power than with building lasting institutions. And AAP has reduced the issue of state capacity to rooting out venality. India badly needs the government to holding bureaucrats to account. But renovating its institutions requires building up competence as well.
Confronting India’s institutional challenges will be a long, unglamorous slog. Indeed, the very mention of reforming civil administration can make even the most hardened Delhi policy wonk’s eyes glaze over. In the short run, India can enjoy a rebound in its economic fortunes with “good enough” governance. For instance, the next government will likely enjoy a modest economic rebound as the global economy strengthens, India’s economy bottoms out, and investors cheer the demise of a rudderless incumbent Congress Party. But in order to materially improve long-term growth, “good enough” governance is simply not good enough.
(Concluded)
(This article was originally published in Foreign Affairs.)
