Sunday, August 28, 2011

Anna’s struggle should be seen as the 2nd economic freedom struggle….

Anna himself called his movement a 2nd freedom struggle raising the hackles of many. What freedom struggle? Aren’t we free enough already? Don’t we breathe free air? Aren’t we allowed to express our views freely? Does anyone monitor our emails, Facebook updates and twitter tweets? Not at all. In fact, many have said that India perhaps needs less freedom, not more. What India really needs is a freedom from economic deprivation. Freedom from poverty. Freedom from hunger. Freedom from inequal distribution of wealth. The first economic freedom struggle was launched in 1991 by Dr. Manmohan Singh. Now, its time for the 2nd one….hopefully before Anna goes again on a fast-unto-death!

1991 was perhaps the turning point in the Indian economic story. Again, it was not voluntarily that we acted the way we did. We were forced into it. When our forex reserves were down to just 2 weeks of imports; when we had to surrender our gold reserves to get a temporary loan; the government had NO CHOICE but to do something. The same way that the government had no choice but to discuss the Lokpal Bill in Parliament. That’s the way we Indians work! Fortunately, the actions taken in 1991 were, generally speaking, very good for the country. The shackles of the License Raj were removed. Entrepreneurs were freed up from arbitrary restrictions. The private sector was unleashed. The Indian economy was integrated more strongly with the world. Import duties were slashed; exports encouraged.

The 20 years since 1991 have unleashed tremendous economic growth. Average GDP growth in the ten years prior to 1991 were under 5% per annum. In the ten years post 1991, the average growth rates have been 8-8.5%. Since some people do not know this, it’s worth mentioning that these growth rates are real growth rates – after removing the impact of inflation. India’s per capital income (simplistically GDP per person) has increased from some 300$ in the 10 years before 1991 to some 1200$ now. The Indian GDP today is the 10th biggest in the world in nominal terms (exchange rate terms) and 5th largest in PPP terms (on basis of ability to buy goods). Our exports have soared – touching nearly $250 billion in 2010 – 21st in the world. Our forex reserves are $319 billion as on July 2011. We also received nearly $36 billion in FDI in 2009-10. Whichever economic parameters we look at at an an aggregate level, we do exceedingly well. Take electricity production. At 723 billion kwh, we are the world’s 6th largest producer of electricity (yes….in spite of all the shortages!). In terms of oil consumption, at 3 million barrels a day, we are the 5th largest in the world. In telecom, we are the 2nd biggest and so on and so forth.

The first economic freedom struggle has gotten us so far that we have started getting included in the world’s best and biggest economic groupings. A place in the G20 was but obvious. An important part in the global environment control talks equally so. A place in the UN as a permanent member of the security council – give it another five years and it could be a reality. India is the “vowel” without which BRICS would have no meaning left at all!

The deficiencies of the first economic struggle are there for all to see. Primarily, we suffer from huge distribution of wealth problems. The lowest 10% of our population consumes just 3.6% of our production; the highest 10%: 31%. This income disparity is captured in the Gini coefficient. India with a score of 36.8 is rated 79th in the world. This is why almost 30% of the population continues to remain below the poverty line. The unemployment rate as measured by the government is upwards of reality, if disguised employment were taken out, this number could be much higher. Job creation is inadequate, even though the numbers released recently by NSSO have been debated furiously. Infrastructure in India remains woeful…..the most common symbols of inadequacy being the potholed roads and the bursting train compartments in Bombay during peak hours.

Much of the 1st economic freedom struggle has been waged by the private sector. The entrepreneurs of this country. In fact, the last 20 years have resulted in a major shift in the economic hierarchy in the country. A Sunil Mittal, a Narayanmurthy, a Tulsi Tanti, a Kiran Majumdar Shaw, an Anand Mahindra are all creations of the 1st economic freedom movement. While it is true that the economic growth has been led by the private citizens of this country, it is a shade unfair to say that the government had no role to play. It acted as a facilator of growth…..encouraging the private sector to perform. It’s because of government policies that the IT industry became the showpiece of economic progress for India.

However, the 1st economic freedom struggle failed to directly impact  the government sector. It can be safely said that wherever government is involved, it is fully drowned in inefficiency and corruption. Since huge parts of our economy are still dependent on the government (two of the top three most valuable companies on the NSE/BSE are government companies), its creating a severe drag on the overall economic performance of the country. The biggest casualty of course is what is commonly known as “governance” – the ability to efficiently govern a country.

The only real adjustment the government has done in the last 20 years has been in developing the framework of a PPP model (Public-private partnership). Essentially, this allows the government to allot contracts that they should have been doing in the first place to the private sector. Allowing them to sit back and relax. The private sector brings in the efficiency, capital mobilization and execution capabilities; all sorely lacking in the government sector. As a result of this model, we have seen progress in roads (yes, our highways have become better), city infrastructure, airport infrastructure, power supply etc. However, whichever sector the government is involved in directly continues to suffer. Take Railways for example. The quality of service is pathetic; the stations dirty; the journeys unsafe; the maximum speeds a shame. Take public education. Again, the quality sucks. Anyone who can afford it wants to go for private education – where also quality sucks but is much better than the public sector. Take ordinary municipal services – pathetic. Take the police force – riddled with corruption; misplaced priorities; uncouth behavior towards the public; pathetic. Take any interaction point with the government – Income Tax, Land Registration, Passport office, driving license issuancing authority, gas supply – anything that the government does on its own is in extremely miserable condition. And fully corrupt. This was the basic driving force behind Anna’s corruption struggle too.

The real gains of Anna’s struggle should be seen through a wider lens called economic freedom; rather than the narrow one through called removal of corruption. Sure, removal of corruption will be a big step in achieving stronger economic freedom. But the real objective should never be lost focus of. What Anna has launched hopefully is the 2nd economic freedom struggle. Hopefully, after 20 more years, we will be able to show an efficient, responsive and non-corrupt government sector. Should that happen, the economic growth of India would shoot into the 10% + domain and stay there for the next 20 years. That’s what the real importance of Anna’s struggle should be seen as. The government sector has to reform itself totally. Not only should it become less corrupt, it should become highly efficient. The best people must go back to working in the government. Projects must be completed on time. Thinking must be big. Quality of services should improve. Education, public health, hygiene, medical facilities…..all should improve dramatically. Poverty alleviation schemes should work efficiently…..subsidies must reach the people in their hands; not get eaten away by middlemen. The roads must be roads; not an apology. Raising efficiencies in the government sector should be the real focus of Anna himself going forward….

The real truth is that we will all be doing justice to Anna only and only if we keep our goals clear. Our goal is economic progress and a decent life to all our people. If we can treat Anna’s movement not merely as an anti-corruption crusade, but as a government-efficiency building one, then we would be doing great justice to him. This is a much bigger canvas than merely eradicating corruption…..I think its best we call it the 2nd economic freedom struggle rather than the just the 2nd freedom struggle….

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