Why we are where we are Part 1

The Economic Times on 28th August 2013 ran a editorial where it asked a question on why we are where we are. This is my response to that editorial as invited by  ET. Part 2 is my further thoughts on the issue and will follow.

Mistakes occur either due to insufficient information,  risk taking,  bad judgement or  due to extraneous reasons beyond our control. Except in the last case every government has the option of making midcourse corrections.  This is exactly where this government has failed miserably  due to arrogance and blind ego apart from lacking in statesmanship. Let us list some correctable goof ups.

UPA was a coalition govt and it was crucial to have a single driver lead it no matter who the driver reported  to. Instead by having a dual power centre between Sonia and Manmohan disaster was guaranteed from day 1. Manmohan was a brilliant economist & bureaucrat but a cipher as a politician. A lamb living amidst lions for decades does not become a lion. Consequently the Congressmen chose to listen to Sonia while the coalition partners went to Pawar, Karunanidhi, Mamta. The result was that there was zero cohesion in decision making, policy framing or even problem solving. The PMO was just a waste bin where the problems landed up finally with no solution possible. For this or whatever reason Manmohan Singh went quiet and stays silent till today.  A large number of scams and issues have their  genesis in this lack of control & direction and once the chains had been removed it has been impossible to bring them back on.

Technology, Global events & Human behaviour  can never be predicted and so events happen that need changes in laws, justice & administration systems &  future strategies. These changes invariably happen AFTER the event. The changes based on learning’s  are a ongoing exercise and  there is no shame in this change.  Global mergers/acquisitions, Ecommerce, Social media,  Arab spring, Sri Lankan war and many such events posed challenges to our existing systems. Instead of responding maturely this govt chose to confront them as if they were a blasphemy. Case in point the Vodafone case where the event was perfectly legal and even the SC ruled against the Govt.  Instead of finding a out of the box, mediated solution  with Vodafone & bringing in fresh legislation the govt instead brought in retrospective change from 1960. This one action did more to damage India’s credibility as a nation more than anything else.

Foreign policy historically has always been sacred and the domain of the central govt which was expected to be above narrow  considerations. Instead we had the mortification of a PM being prevented from  signing  an accord with Bangladesh (which had helped combat terrorism against India), opposing Sri Lanka internationally and in each case a regional  party with a few MP’s decided foreign policy. Consequently the image of India as a banana republic with no driver or leader got reinforced globally and investors became wary of India. While many in public will make the right noises this  writer on his visits globally has found that the reputation of India has nosedived notwithstanding its huge market.

Administrative practices haven’t changed over the years inspite of the economy having changed beyond imagination. The centres of power for decision making remain as it were way back in the 90’s. Consequently a  Jt Secy who handled million dollar decisions now handles billion dollar decisions and the million dollar decisions don’t get focussed attention. It’s natural for any human/ system  to chase the big fish but in the process the dozens of small fish get neglected and  this bad news spreads and affects investment.

The NDA  govt had introduced  market based pricing for fuel,  done the dirty work and lost the election.  This govt changed that policy and the consequent impact due to steeply increasing fuel prices affected the country badly.  This govt is now going back to the old sensible decision of 2004 but 10 years late and after severe haemorrhaging.

Every decision taken has been with good intention, bad planning and poor execution. Consequently whether it is FDI in retail, Insurance reforms or any other policy including the FSB,  decisions have been forced as a fait accompli inspite of their good intent by failing to engage  maturely  with the stakeholders in discussion. The internal lack of leadership & direction has been blamed on the opposition who as is their nature see no reason to bail a govt that is tying itself in knots.

Each of these and  many others were easily correctable problems but for reasons best known to govt they never made an effort to even accept them as problems. Therein lies the rub in our disaster today.