by Vinod Rai
VINOD RAI
AMITENNDU PALIT
SEVEN DECADES of INDEPENDENT INDIA
Thoughts and Reflections
PENGUIN BOOKS
Contents
Preface
Policy, Governance and Institutions: Mapping India after Seven Decades of Freedom
Vinod Rai and Amitendu Palit
I India’s External Security Challenges
Shivshankar Menon
II India in a Globalized World: Maximizing Benefits and Minimizing Costs
Duvvuri Subbarao
III India’s Elections and Electoral Reforms at Seventy
S.Y. Quraishi
IV India’s Media 1947 to 2017
Robin Jeffrey
V India–ASEAN Relations at Seventy
Tan Tai Yong
VI Normalizing the Unique: Explaining the Persistence of Caste
Dipankar Gupta
VII Towards Sustainable, Productive and Profitable Agriculture
Ashok Gulati and Gayathri Mohan
VIII The Rise and Fall of Indian Planning
Pronab Sen
IX Will India Ever Be a Great Power?
Sumit Ganguly
X Non-Governmental Organizations in India: Contribution, Challenges and Future Prospects
Poonam Muttreja
XI Indian Industry: Prospects and Challenges
Rajiv Kumar
XII Land: Finite, Fragmented, Fragile, Fraught
Sanjoy Chakravorty
XIII Healthcare in India: Looking back, looking ahead
A.K. Shiva Kumar
XIV Jobs in India
Amitendu Palit
XV Challenges Facing Higher Education in India
Sumita Dawra
XVI Few Hits, Many Misses: India’s Mixed Record in the International Sporting Arena since 1947
Ronojoy Sen
XVII Civil Service Reforms in India
S. Narayan
XVIII Clean or Not-Clean: India’s Energy Dilemma
Subhomoy Bhattacharjee
XIX Democracy’s Angry Crowds: Civil Society and Legitimacy in India
Subrata K. Mitra
XX India As an Asian Power
Dhruva Jaishankar
XXI Indian Media at Seventy: Five Big Challenges
Nalin Mehta
XXII New India Needs a New Model for Skill Development
Pawan Agarwal
XXIII Corporate Governance in India: A Giant Leap in the Last Five Years
U.K. Sinha
XXIV Tax Policy Design and Development: The Indian Story
Pinaki Chakraborty
Appendix 1
Appendix 2
Appendix 3
Footnotes
Appendix 1
Appendix 2
Appendix 3
Notes
Contributors
Follow Penguin
Copyright
Preface
Putting together a volume on seven decades of independent India might appear a far-fetched notion given the depth and range of issues that the task would entail. As editors, therefore, we began with the assumption that however hard we tried we would not be able to do justice to the scale. Several subjects of significant importance for India would be left untouched by the book as would diverse opinions on the subjects that are included. As we pen these words, we realize the gaps that we were not successful in filling up. We hope there would be more opportunities for us to look back at India and the wonder that she is.
At the same time, we found the journey exciting and pleasant. As we went through the contributions, we realized the richness of thoughts that we have been able to gather. Rarely can one hope to achieve the unique blend of scholastic opinions with practitioner insights that the pages to follow would reveal. We feel elated at having been able to gather expertise across a vast spectrum of subjects for reflecting on how India was, is, and might be, after seventy years of its independence.
The book has deliberately been developed with a broad perspective on the subjects covered. But we had to do justice to a core theme within the broad canvas. As the reader will realize, public policies and institutions have been the implicit, if not the explicit, context of the entire book. All contributors have examined policies and their applications, notwithstanding whether they have been written on economic, social, political, external relations or governance issues. While we expect the book to generate interest among all readers given the issues it covers, we are certain about its contribution to the discourse on policies and institutions in India. Our effort has been to ensure that policy enthusiasts on India should get to consume insights and ideas from a group of experts whose views are not only much sought after, but also unique given their vast experience and knowledge on what they have written.
The idea of this book began from our conversation with Ambassador Gopinath Pillai, chairman at the Institute of South Asian Studies (ISAS) in the National University of Singapore. The book can be rightfully called an ISAS product. As research faculty of the ISAS, we would like to thank all our colleagues at ISAS for their invaluable help that we received at various points in time during the work on the book. Specifically, we would like to thank Ambassador Gopinath Pillai, Professor Subrata Mitra (director, ISAS) and Hernaikh Singh (senior associate director) for their unfailing support and encouragement at all stages. Quite a few of the contributors in the book are either with ISAS, or have been associated with it at various stages. The book is an example of the excellent scholarship and commendable expertise on India and South Asia that ISAS has cultivated over the years and the contribution that it would continue to make in this regard.
We can hardly thank the distinguished contributors of this volume enough for their time and effort. They have been most supportive, diligent and patient in all their responses and communications to our repeated queries. We cherish the experience of working with a wonderful team of authors. We have learnt a great deal from what they have written for this book and we are sure that the readers would benefit as much as we have from their writings.
As editors, we owe large debts of gratitude to some without whom this book would not have been seen the light of the day. Our colleague Faiza Saleem, research assistant at ISAS, has worked on the manuscript with precise care. Her rigour and attention has gone a very long way in giving the book its final shape. Indrani Dasgupta, copy editor at Penguin Random House India, has been prompt and detailed in scrutinizing the book as thoroughly as possible. Last, but not the least, in our list of those to whom we are deeply grateful is Lohit Jagwani, commissioning editor, Penguin Random House India. Right from the beginning, Lohit has tended the book with great affection and has spared no efforts to ensure its timely evolution and progress. Finally, like in all our other endeavours in life, this work too, would not have come to fruition without the support and encouragement of our respective better halves—Geeta and Parama. All the lapses and lacunae in the work remain entirely ours.
Vinod Rai and Amitendu Palit
Introduction
Policy, Governance and Institutions: Mapping India after Seven Decades of Freedom
Vinod Rai and Amitendu Palit
Public policy discussions on India present formidable intellectual challenges given the great variety of issues and perceptions involved in their objective analysis. The challenges become more daunting given the expansive backdrop of a few thousand years, over which India has produced individuals and ideas—Aryabhata in space exploration, Chanakya in governance, emperor Akbar in religious coexistence, Ramanujan in mathematics, Gandhi in ahimsa, Tagore in humanity—to name only a few. They have become examples for the world
to emulate and admire. The world has kept looking at India for new sources of admiration even after Independence, notwithstanding the substantive changes in its sociopolitical and economic context.
Comprehending India’s journey over the seven decades that it has travelled since 15 August 1947 is not possible unless contextualized in the light of the pain and the trauma characterizing the milieu in which independent India took its first steps. Partition sowed seeds of hatred to a great depth among the country’s major religious communities. The animosity, which was difficult for the young country and its new leaders to contain, remains a significant challenge even today with communal harmony a major governance goal for political leaderships and administrations across the country. The importance of building a secular, independent India and making its institutions work in a fashion uninfluenced by religious tensions and biases have been a key objective of Indian public policies. Most of the public policy is shaped by the tenets of the Indian Constitution.
India chose to go down a path like most other countries at the time, which were emerging from and embarking on independent futures. Providing effective governance and building efficient institutions were major public policy challenges that India encountered upon becoming a sovereign republic. The intensities of these challenges were, in many respects, more for India than its peers given its remarkable decision to grant complete political freedom to all in the country. The grant of democratic liberty, along with a series of Constitutional rights guaranteeing freedom of speech, opinion and religious practices for individuals, wasn’t accompanied by a similar freedom for economic activity. For four decades after Independence, India relied on the state as the main driver of economic growth. The seeds of state-led economic development sown in the Industrial Policy Resolution of 1956 were carried forward over the next decades into greater dominance of the public sector and contracting role of private enterprise. By then, India had nationalized its banks, insurance companies and coal mines, and regulated private capacities in heavy industries through licences. The government was steering towards reaching the overarching goals of tackling poverty, reducing unemployment and ensuring self-sufficiency in food production. The way it decided to do it was through greater state control, which then laid the foundation for a ‘licence and inspector raj’ through the regulatory apparatus it spawned. In a sense, it created more governance and institutional challenges for India, primarily by generating bottlenecks in economic expansion and efficient delivery of public services, which the country could have well avoided. Most of the economic reforms that India effected since the early nineties were aimed at undoing the deeds of the past four decades. The energy and time spent in creating unproductive regulations and disbanding them were costs that the country could have well avoided.
Politically, the wheel appears to have turned the full circle in India. The tallest leaders at the time of Independence—Mahatma Gandhi and independent India’s first prime minister, Pandit Jawaharlal Nehru—represented the Congress party that dominated Indian politics. Nehru was succeeded by Lal Bahadur Shastri and Indira Gandhi, prime ministers who ensured political sustenance of the Congress well into the decade of the seventies. Imposition of an internal emergency by Indira Gandhi during the mid-seventies (25 June 1975 to 21 March 1977) was responsible for changing the character of India’s politics as a disillusioned electorate voted out Congress in the elections that followed to usher in a non-Congress government for the first time in the history of independent India. Though the Congress rebounded to regain primacy in the eighties, the general elections to the Parliament held in 1989 marked the onset of multiparty coalition governments in India. Regional parties began occupying prominence in the governments at the Centre as the Congress realized the inevitability of aligning with smaller parties for mustering numbers in the Parliament.
The 1989 election also marked the emergence of the Bharatiya Janata Party (BJP) on the national political scene. The growth of the BJP underscored the resonance of a right-wing nationalistic political agenda with a significant section of the electorate. This was in marked contrast to the centrist political posturing of the Congress and the left-of-centre positioning of the Left, comprising mainly the Communist Party of India (CPI) and the Communist Party of India (Marxist) (CPI-M). The BJP went on to displace the Congress as the leading political party of India and formed coalition governments at the Centre with regional parties in the late nineties under Prime Minister Atal Bihari Vajpayee. Coalition governments refused to fade away as the Congress under Prime Minister Manmohan Singh stitched multiparty alliances to run governments at the Centre for most of the last decade and into the current one. The 2014 elections again marked a watershed as the BJP under Narendra Modi came to dominate the arithmetic in the Parliament with an absolute electoral majority of its own. While the BJP still has some regional parties supporting it as part of a broad alliance at the Centre, the last Parliament elections, and the electoral success of the BJP in most state elections held thereafter, marks its emergence as the most prominent political party in the country. While still not as overwhelming as the Congress was in the first four decades after Independence, the BJP’s electoral success at both national and sub-national elections has enabled it to significantly reduce political opposition in various legislatures of the country, making both regional parties and the Congress struggle for political survival.
While it might be adventurous to correlate the economic and political transitions, the fact that state control of the economy was the highest when the Congress was the undisputed political authority in the country can hardly be overlooked. Generational changes in leadership did impact Congress’s views on economic management with Prime Minister Rajiv Gandhi being among the earliest to visualize economic liberalization. But it was actually a Congress government supported by some regional parties that implemented the most decisive economic reforms in the nineties under the leadership of Prime Minister P.V. Narasimha Rao. Some of the politically sensitive reforms were facilitated by the prospects of the country defaulting on external payment obligations due to paucity of foreign exchange arising from precarious balance of payment conditions. But the Rao government and its successor coalition counterparts kept working on reforms even after economic conditions improved. Challenges in this regard have often been significant for various governments given that they needed to muster sufficient numbers in the Parliament for legislating major economic policies. Lack of adequate numbers often stifled the pace of reforms, like in the early years of the current decade when ‘policy paralysis’1 afflicted the Manmohan Singh government. Indeed, this was the time when the political economy of the country began showing stress with intra-coalition relations becoming tenuous leading to dissensions and tensions within the government. Turf issues began emerging with regional parties that were exercising influence disproportionate to their strength in the coalition. Quite often regional interests dominated national interests perpetuating policy paralysis. This was in marked contrast to the leverage enjoyed by the current Modi government. The latter’s political authority enabled it to implement the rather audacious ‘demonetization’ of more than 80 per cent of the Indian currency in circulation on 8 November 2016. Political goodwill for the Prime Minister and for his party following the resounding electoral victory little more than two years ago, helped the government to push ahead with the measure despite the hardships it created for people and the setbacks it meant for the economy, at least in the short term.2 While the benefits of demonetization in terms of its impact in making the economy less cash-intensive, more digitized, flushing out ill-gotten wealth and counterfeit currency will require to be examined over the long term, the importance of solid political authority in administering ‘bitter’ economic pills was evident from its implementation.
The extent by which the changing character of the polity and visions of political leaderships has impacted the quality of governance and the functioning of institutions—India’s major challenges that she inherited and continues to live
with—is not easy to answer. But some vital institutions are worth taking a close look in this regard. Notable among these are Indian banks. Prime Minister Indira Gandhi nationalized fourteen banks in 1969 on the pretext of breaking their control and ownership by a few business families, to mobilize savings from the masses and to cater to priority sectors of the economy like agriculture and small enterprises. The move resulted in more than 80 per cent of Indian banks coming under government control. This also set in motion lending among banks, in particular public sector banks. While private banks came up after the economic reforms of the nineties, state-owned banks remained the major entities in the sector, handling both government and private corporate businesses. Financial difficulties of public sector banks were usually rationalized by political parties and governments as inevitable side effects of their role in aiding the development of priority sectors, where lending decisions were not guided by the principle of maximizing returns.
Indian banks were also praised for being relatively immune to catastrophic developments in the global banking industry, notably the global banking crisis of 2008, as they were not plugged into the toxic assets circulating in regional financial markets. However, Indian banks began experiencing their own crisis of existence soon after as they became inundated with non-performing loans due to excessive lending to businesses lacking domain experience in building infrastructure assets. They also borrowed heavily from markets for maintaining their lending and became financially overleveraged. This factor got further compounded by inordinate delays in projects being given statutory clearance, leading to time and cost overruns and thus defaults on advances from banks. Build-up of stressed assets of around Rs 6 trillion has eroded the capital of Indian banks.
The situation reflects the failure of not only vital state institutions like public sector banks to manage their capital and lending, but also the political reluctance of decades to reform banks. This could also be since banks have been performing politically ‘important’ functions such as lending to electorally important constituencies like farmers, small businesses and scheduled castes and tribes, as well as large businesses that are major funders of political parties. Indeed, fear of persecution has made executives of public sector banks slow in resolving or restructuring stressed assets, leading to a huge amount of capital remaining locked up in defaulting accounts.