Expert Speak India Matters
Published on Apr 10, 2020
Covid-19: The perfect storm for deep reform

Crises precede reforms. Crises are a precursor of ending festering problems. Crises lift us from legislative-executive-administrative lethargy. Crises clear the ways for higher equilibriums. And crises bind nations.

Crises can be, and often have been, opportunities to move from organic incrementalism to inorganic hyperjumps of efficiency, last-mile governance and economic growth. This has been India’s tryst with big changes, be they economic reforms, geopolitical shifts, or problems putrefying in rubbish bins of the past.

Crises are merciless. They have no sense of time, they don’t care about politics. In the 1991 balance of payments crisis, the Congress was in power at the Centre and initiated economic reforms, the results of which are visible today. In the 2019 Pulwama terror attack, the BJP-led NDA coalition was in power and unleashed a military-diplomatic assault that has permanently changed the country’s foreign policy, the results of which will remain visible tomorrow.

Covid-19 is such a crisis. Once we come out of this human-economic catastrophe, it will be a good time for us as a nation to rethink our notions of policy, our ideas of governance and most of all the vicious capture and abuse of our institutions. This essay examines arguably the most challenging and deepest reforms in the way the Indian state functions.

The post-Covid-19 India will be physically drained, economically weaker, financially frailer. Weeks, if not months, of social distancing and isolation would have protected millions of lives but equally would have financially exhausted several million poor households. The barriers to movement would have resulted in job losses and contractual contractions. Real estate, particularly commercial, would have crashed. Depending on the time taken to recover, stock markets that had fallen by a third are currently down 25%. Getting movement back through manufacturing, services and most importantly, our supply chains,

Although the United Nations is relatively optimistic about India, the economy would stagnate if not contract. And India’s financial system, howsoever loose RBI Governor Shaktikanta Das’s monetary policy or Finance Minister Nirmala Sitharaman’s long-leash fiscal policy, would be teetering on the edge for lack of domestic demand on the one side and a contraction of global trade on the other.

Covid-19 is the perfect storm for reforms.

Economically, Covid-19 is a 1991 moment.

Geopolitically, Covid-19 is a Balakot moment.

Constitutionally, Covid-19 is abrogation of Article 370 moment.

Together, these are examples of India’s rajasic moment.

As an integral unit, the reforms we now seek are not part of economic silos anymore. The usual reforms of land, labour and infrastructure are behind us. Overnight, this troika that was seen to be ‘aspirational’ now needs to be seen as a starting point. Three to six months from now, India and the world should be talking about these reforms in past tense. The circle of logic around these three key reforms is simple. India needs jobs. Jobs are created by private capital. Private capital needs a business environment that is entrepreneur-friendly, or at least doesn’t hate or have contempt for these creators of enterprises and jobs, wealth and value. These reforms are simple to think but difficult to deliver.

In the larger scheme of things, the reforms we are talking about are those around the highly-entitled but zero-accountable institutions, systems and processes that are the biggest barriers to easier reforms.

Our Legislatures have become temples of party interests. Our Executives are bound by electoral considerations – since winning the next election is key, every policy becomes a political investment. Our Judiciary remains unaccountable, interfering in the Executive’s domain on the one side and anchored to ancient laws on the other, self-serving when questioned, closed to all change that democracy demands. These need to reform.

Our civil services and all government jobs have fallen prey to individual entitlements or time-based promotions, embalmed in salaries that are outrageous in relation to per capita incomes, protected by an impenetrable security of term, with no penalties for inefficiency or non-delivery. This entitled group has become an extraction racket, feeding off the exchequer and citizens. The reforms a new India seeks is around outcomes. This one-way, one-exam, one-selection, one-election road to untold power needs to reform.

This sense of entitlement has trickled down to teachers who don’t attend schools: 25% of teachers in government primary schools remained absent from work on any given day, and only 50% of teachers present in schools were actually engaged in teaching. It has infected doctors who refuse to serve in rural areas: only 20% of those seeking outpatient services and 45% of those seeking indoor treatment avail of public services, while nation-wide average absentee rate is 40%. This needs to reform.

Extrapolate with any discounted rate to any other government service and you can see the rot of public servants behaving like kings and chewing the cud of privileges. Institutions have been captured, both directly to become self-serving kingdoms while giving unheard-of protections to individuals running them, and indirectly by becoming ramparts of virtue-signalling and building ecosystems. This needs to reform.

The system of all-pay-and-no-work, all-perks-and-no-accountability and all-privileges-and-no-penalties has to end. Using taxpayers’ resources to protect and serve this elite has created dynasties in Legislatures from which the Executive derives power, dynasties in Judiciary, and down the line. Some of it has permeated into non-state actors such as non-governmental organisations and the media that have been co-opted into this mesh of privileges through a mix of grants, distribution of large plots and farmlands at below market prices, influence, Padma awards and access to power. This needs to reform.

Individuals from such an inheritance of entitlement are making laws, executing them, delivering justice. What sort of policies can such individuals design? Ensconced within the protected confines of extreme power and comfort, they draft anti-poverty programmes. Having visited not even one school, a state education secretary designs education policy, impacting the future of millions of children. With no experience of what it means to not have cash flows, to be jobless, to worry about the next payment or contract, a finance joint secretary tells those who do how to run their enterprises.

Finding archaic clauses in laws and accompanying rules, the Inspector continues his Raj of harassment. Tax bureaucrats change the rates of goods and services tax every now and then, create forms that complexify the filing, have the temerity to term it simplified, and yet seek more simplification. Indians aren’t dumb that they can’t figure out a form. This is not illiteracy or lack of knowledge or awareness. This is capture and administrative unwillingless to let go of personal revenue models outside taxes paid. Some term it tax terrorism. This needs to reform.

Reforms will shake the status quo, hurt incumbents. On their part, incumbents will fight back to protect their turfs. Cynics will scream about the end of institutions (the same institutions that they claim are failing). And political lobbies and institutional dynasties will get in the way of any serious structural change. This tiny group of power mongers has to be neutered and reformed.

An aspiring 21st century India needs 21st century thinking, 21st century institutions, and a 21st century state. We may be a $3 trillion economy going on $5 trillion but our per capita income stands at $2,000. Even at a GDP of $10 trillion India’s per capita income will be $7,700 – way behind what China’s is today. We must not rest until we reach a per capita income of $20,000 by the middle of this century.

For this, India needs deeper reforms. A more participatory governance. A more responsible state. A sharper delivery on outcomes-based education and healthcare. A policy incentive system that turns agriculture productive. A better planned more orderly urbanisation. An attitude that looks at private enterprises as temples of future jobs and growth, value and wealth. Above all, a less entitled army of rent seekers masquerading as ‘public servants’.

The Covid-19 crisis has provided us with the impetus, the reason, the moment to make it all happen. We believe that in fighting this virus, all arms of the state are on board for now. What we now need is a consolidation such that this urgency stays for good. We need engaging conversations of action between the three pillars of democracy – the Executive, the Legislatures and the Judiciary – that are geared towards listening to the voices of a younger and more aspirational new India and bringing reforms such that the Indian state listens to, facilitates and powers Indians and not incumbents.

Being a democracy, the currency of engagement will be talks. But conversations must lead to action; and as a corollary, action must determine the course of these conversations. And while the three pillars will play their part, their intellectual support structures in the form of think tanks need to ideate harder, more creatively and with deeper research. The media needs to brush off its ideological or political slants and do what it ought to: report the truth. Reform is now an imperative – but piecemeal incrementalism will not work. Either everything changes, including not just what we do but how we do it. Or else nothing will change.

For a start, the Executive must focus on outcomes rather than on the next State or municipal election. The Legislatures must think India, serve India, put the nation before the party. And the Judiciary must focus on doing its own job, and not try and usurp powers and pretend to run the nation as an unelected Executive or playing to the gallery through virtue-signalling.

The time for dragging committees, commissions and task forces is over. We are in a 21st century Kurukshetra and all negotiations are behind us. Action is the only way forward. And as the head of government, the conch of declaring this war on the past and ushering in a new and reformed India is in Prime Minister Narendra Modi’s hands.

We must turn Independent India’s biggest challenge, Covid-19, into India’s biggest opportunity. We must act today so future generations benefit from our policy signature through the rest of the 21st century.

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Gautam Chikermane

Gautam Chikermane

Gautam Chikermane is Vice President at Observer Research Foundation, New Delhi. His areas of research are grand strategy, economics, and foreign policy. He speaks to ...

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