When Crime Pays

by Milan Vaishnav

  When Indira Gandhi reemerged as prime minister in 1980, she began to align herself closer to private sector interests in an effort to revitalize the foundering economy. Under her watch and that of her successor, son Rajiv Gandhi, India undertook a series of pro-business reforms in the 1980s, granting more space for the indigenous private sector. A balance-of-payments crisis in 1991 empowered reformers to take drastic steps to reorient India’s economic model, both domestically as well as with the external world. These pro-market reforms reduced trade barriers and opened India up to foreign capital.44

  The fruits of India’s liberal economic reforms were considerable. In the decade of the 2000s, the economy’s annual growth rates often touched double digits, second only to China among the world’s major economies during this period. In a marked shift, India had abandoned its decades-long dalliance with socialism and moved toward a more market-friendly approach that brought it squarely into the global marketplace. The “triumph of liberalization,” as economist Arvind Panagariya has dubbed it, produced remarkable material gains for the country in relatively short order.45

  Society

  A third transformation involves social relations. Historically Indian society has been highly stratified thanks to the entrenched nature of the Hindu caste system, a ranked system of social hierarchy that has structured social order on the subcontinent for centuries. Caste, dominant within Hinduism but present in other religious communities as well, has colored nearly all forms of social life, from shaping occupational choices, to determining spousal selection, to regulating prosaic forms of basic social interaction. Caste is, of course, not the only cleavage that structures the wide diversity of everyday social interactions, but it has arguably been the most powerful and pervasive of these cleavages.

  Our modern understanding of caste is heavily shaped by the way in which the British Raj repackaged it for modern consumption and deployed it to effective use as a tool for maintaining order in the colonial period. At its core, the caste system consists of four overarching categories known as varnas, listed in order of ritual status from high to low: Brahmins (priests), Kshatriyas (warriors), Vaishyas (merchants), and Shudras (backward castes). While these ritually based categories retain salience in contemporary India, albeit at a diminishing rate, caste has also assumed a distinctly political manifestation. The Indian state has used the divisions inherent in the caste system as a basis for developing affirmative action schemes, employment and educational quotas, and even political reservation. The government formally recognizes three groups on the basis of their caste identity: Scheduled Castes (SCs or Dalits, and formerly referred to as “Untouchables”); India’s tribal communities, known as Scheduled Tribes (STs); and Other Backward Classes (OBCs), a vast group initially defined mainly as not belonging to any other category. Upper castes, made up of Brahmins and other elite castes, make up the fourth community—although not formally recognized by the government as a discrete category.46

  While there is no clear mapping between caste and class, the upper castes have traditionally comprised the best-off segments of society, occupying the most sought-after jobs in the public and private spheres. Perhaps not surprisingly, then, it is the upper castes that have historically dominated political life in India, although there has been significant regional variation.47 For instance, in parts of south India where anti-Brahminical movements gathered steam during the colonial period, upper castes have largely been bit players in politics. In the northern “Hindi belt” states, in contrast, upper castes enjoyed political superiority for far longer.

  Over time, even in the north, caste groups situated toward the lower rungs of the hierarchy began asserting themselves, no longer content to live in the shadow of those deemed to be superior in ritualistic terms. The lower castes mobilized, launched political parties, and contested the glass ceiling under which they toiled—spurred by Congress’s failure to adequately represent lower-caste interests. Propelled by gradual improvements in economic status, the lower castes successfully pushed back against elite domination.

  The genuine opening up of the economic and political systems in India further fueled the awakening of the backward castes and other disadvantaged groups. This “silent revolution” irrevocably altered the makeup of India’s political class.48 In India’s first general election in 1952, 65 percent of north Indian (“Hindi belt”) MPs hailed from the upper or intermediate castes; by 2004, their share was cut to 40 percent (figure 2.5).49 For the first time in India’s history, OBCs and Dalits (SCs) had a greater share of north Indian MPs in the Lok Sabha than the upper/intermediate castes. By 2009, the two groupings would again switch position, but India’s representative picture stood irrevocably transformed.50

  Figure 2.5. Caste identity of Hindi belt Lok Sabha MPs, 1952–2014. (Data from Christophe Jaffrelot and Sanjay Kumar, eds., Rise of the Plebeians? The Changing Face of Indian Legislative Assemblies [New Delhi: Routledge, 2009]; Christophe Jaffrelot and Gilles Verniers, “The Representation Gap,” Indian Express, July 24, 2015)

  In contemporary India, while caste has not disappeared, in many contexts it now functions more as a marker of difference than of hierarchical rank.51 Although social biases still loom large, there have been quantum improvements in the economic and political lives of the traditionally disadvantaged lower castes. A vivid study of the well-being of Dalits by a team of researchers led by Devesh Kapur and Chandra Bhan Prasad found massive shifts in the status of India’s lowest castes in the period after 1991. From asset ownership to grooming practices and eating habits, Dalits have notched impressive gains over the past two and a half decades.52 While the success of low-caste politicians has not always easily translated into material gains for their communities, research has found that political power wielded by members of the lower segments has had an influence on the psychology of caste relations, reducing discriminatory behaviors.53

  Unfinished Business

  In reviewing the meaningful transformations marking India’s political, economic, and social landscapes, one must not overstate the case. The remarkable change India has experienced uncomfortably coexists with a great deal of continuity.

  Regarding the economy, while some of the worst excesses of the License Raj have been dismantled, many remain and new manifestations have cropped up. There has been liberalization in product markets but much less progress in factor markets (such as land, labor, and capital). Private investment in India is still stymied by a raft of regulations and permits that can depress even the most gung-ho entrepreneur, and state-owned enterprises remain dominant in many lucrative sectors of the economy, from mining to petroleum.

  Politically, there can be no doubt that voters today have an expanded menu of parties and candidates to support. Yet, as two astute observers of Indian politics noted, the opening up of robust multiparty competition “has not led to greater and more meaningful political choices for the citizen.”54 Parties have, by and large, not distinguished themselves on the basis of programmatic policies or divergent ideologies. Internally, parties remain the province of a small coterie of elite bosses, often a single political family or just one charismatic individual.

  The declining relevance of status markers in society has also not followed a linear path. Discrimination remains a mighty challenge for Indian democracy in myriad ways—whether in the labor, housing, or even marriage market.55 Inequality in opportunity, as well as outcomes, also remains a major public policy concern. Across a broad range of metrics, from educational attainment to wages and consumption expenditure, there is evidence of “clear disparities in virtually all indicators of material well-being” over the 2000s, largely breaking along caste lines.56 While status hierarchies built around caste may have diminished, research shows that inequalities remain deeply entrenched.57

  INSTITUTIONAL STAGNATION

  Arrayed against the backdrop of multiple remarkable, if incomplete, alterations to India’s domestic landscape, the lack of change that characterizes India’s institutional core is
all the more striking. Of the many challenges that confront India’s democracy, governance is arguably the most vital.58

  Before proceeding, it is important to separate the evaluation of the durability of India’s democracy from its effectiveness. Any discussion on India must acknowledge the admirable fact that India’s post-independence democracy has shown surprising resilience against formidable odds. Despite its diversity, poverty, population, and sprawling size—and in contrast to the predictions of many analysts—India has thrived both politically and economically.59 With the exception of the brief period of emergency rule under Indira Gandhi, India has remained fully committed to a democratic form of government. According to the 2008 State of Democracy in South Asia Survey, India’s citizens stand out as being the most consistent in their support of democracy (and opposition to nondemocratic forms of governance) of all their South Asian peers.60 As a form of governance, democracy enjoys widespread legitimacy as the only game in town.

  Although the resilience of India’s democracy is thus rarely called into question, the ability of Indian democracy to deliver for its citizens is in doubt. Despite impressive rates of economic growth, many of India’s poorest lack access to basic forms of social protection. Perhaps as a consequence, India’s populace has not perceived the country’s economic rise as unambiguously positive.61 A 2014 Pew survey found that 70 percent of Indians felt that the gap between rich and poor was a “major challenge” for the country.”62 The state’s ability to deliver basic public goods, raise adequate revenue, provide security, and enforce the rule of law is badly wanting. In the words of Ashutosh Varshney, “India’s democracy has become Janus-faced. Political power is used at the time of elections to please citizens. Between elections, it is often used to treat citizens in an unfeeling manner.”63

  The state’s inability to carry out its essential sovereign functions is historically rooted. As Francis Fukuyama has pointed out, unlike China, India never had a centralized state that concentrated power and effectively deployed it to penetrate and thoroughly reshape society. The British Raj, despite its tyrannical underpinnings, ruled India with a relatively light footprint and never fully conquered the subcontinent, having followed a policy of indirect rule in a substantial portion of the region.64

  The failure of the state to keep up with India’s rapid transformations points to two important realities. First, as the economist Lant Pritchett has argued, India defies easy categorization: it neither lives up to its reputation as the poster child for booming growth and development in the third world nor belongs in the category of weak and failing states in which some of its conflict-ridden South Asian neighbors are often placed. Rather, Pritchett argues, India is best thought of as a “flailing state”—one in which certain elite institutions function at a high level but are surrounded by political and administrative failures that impede overall developmental progress. The government can conduct elections for over 800 million voters, but it can’t stop millions from dying every year due to a lack of access to proper sanitation facilities.65 The government can provide one billion people with a unique biometric identification number, but it struggles to enforce basic legal contracts. This duality has been a defining feature of independent India; it is what Lloyd and Susanne Rudolph once referred to as the paradox of the “weak-strong” state.66

  There is a second reality, however, one that has received far less attention. In many ways, the Indian state suffers from an identity crisis: its presence is oppressive in places where it should not be, and it is nearly absent in places where it should.67 The end result is two distinct pathologies: India has far too much procedure, and far too few personnel.68

  This state of affairs has resulted in all sorts of suboptimal outcomes. Although more than three-quarters of India’s banking system is controlled by the public sector, tens of millions of rural Indians lack access to basic banking facilities. On several indicators of socioeconomic well-being, such as malnutrition, India fares unfavorably even when compared to the poorest countries of the world. Yet India does not suffer from a lack of food production; rather, half of the food grains procured by the government intended for subsidized ration shops never reach their final destination.69 As one scholar put it, “Like Sisyphus the Indian state appears condemned to incessantly launch poverty programs and then with little to show for its efforts begin the process all over again.”70

  Excessive Procedure

  Despite proclamations to the contrary, many of the bad habits and customs of the License Raj remain deeply entrenched in India. Indeed, what frustrates those who interact with the Indian state the most is the incessant red tape its bureaucracy dispenses and the seemingly endless ways in which it inserts itself into people’s ordinary lives. The courts regularly opine on issues that are not matters of law, the police harass students for posting messages critical of political leaders on Facebook, and opening a simple checking account at a bank can require a battery of forms and approvals from multiple agencies.

  The quintessential example of the suffocating nature of the Indian bureaucracy is its regulation of private business activity. Each year, the World Bank carries out an exercise to rank countries on how onerous their requirements are for businesses wishing to start operations. In the 2016 edition of this “Doing Business” index, India ranked 130th out of 189 countries. This was marginally below the South Asia regional average (128/189) but well beneath fellow BRICS economies, Russia (51), South Africa (73), China (84), and Brazil (116). Among “lower middle income nations,” the category to which India belongs, it ranked just below war-torn West Bank and Gaza and just ahead of Egypt. For instance, in Mumbai obtaining a construction permit involves 40 discrete procedures that take, on average, 147 days at an expense equal to one-quarter of the overall project cost.71

  Given India’s historically fraught relationship with private capital, perhaps focusing on the business environment is unfair. Yet such realities persist in even the most mundane aspects of day-to-day life, such as obtaining a driver’s license. A team of economists that followed 822 applicants in Delhi who were looking to get their driver’s license found that Indian bureaucrats artificially restricted the number of licenses given and created excessive red tape in order to secure bribes. Many applicants paid bribes and/or sought private agents to assist them in their quest. What is even more troubling about this are the social costs; nearly three-quarters of those who successfully obtained a license did not actually take the written examination and almost two-thirds failed an independent driving test.72 Unsurprisingly, India has among the highest number of road deaths in the world.

  A plethora of comparable examples could be mentioned, ranging from the surreal (regulations on the color and type of pen to be used when making notations on government files) to the inexcusable (the lengths to which impoverished households must go to obtain a Below Poverty Line card).73 Indeed, India’s stifling regulatory burdens have become the stuff of legend. The economist Bibek Debroy wonderfully documented the poignant example of the Uttar Pradesh Association of Dead People (Uttar Pradesh Mritak Sangh), established to convince the Indian bureaucracy that many of its members were much alive, despite being ruled dead according to official government records. At one point, the association was said to have more than 20,000—living, but pronounced dead—members.74

  Insufficient Personnel

  Given India’s extreme overbureaucratization, there is a widely held view that the powers of India’s public authorities must be dramatically curbed. It is hard to quibble with those who advocate curtailing the worst excesses of the state, especially where the state’s heavy-handed role distorts economic and social freedoms. Yet here one must separate bureaucratic proceduralism from bureaucratic personnel.

  Due to endemic shortfalls in human resources, the capacity of the Indian state to perform its essential functions is wholly inadequate. Although this runs counter to the popular perception of a bloated bureaucracy desperate to be cut down to size, the problem with the Indian state is not
that it is too big; it is that its functioning is too bureaucratic. To be sure, the weak capacity of the Indian government is only partially about having the requisite number of warm bodies—it is also about having personnel with the rights skills and training in the right places. Nevertheless, employing adequate personnel is a necessary, though perhaps insufficient, starting condition.

  Figure 2.6. Public employment in G20 countries, 2010. (Data as of 2010 or most recent year available from International Labor Organization, Saudi Arabia’s Ministry of Economy and Planning, China’s National Bureau of Statistics, World Bank)

  Despite the fact that politicians regularly treat public sector employment as a method for rewarding supporters and trading favors, India has one of the lowest rates of per capita public sector employment of any Group of 20 (G20) country (figure 2.6).75 For every 10,000 residents, India has approximately 146 public employees. On the opposite end of the spectrum, Russia has more than ten times as many government employees on a per capita basis, and the United States has five times as many employees relative to its population.

  Furthermore, while it is true that public sector employment in India—across all levels of government—nearly doubled between 1971 and 1991, that number has steadily declined since then, to around 17.6 million in 2012 (figure 2.7). In a major committee report, the Indian government revealed that, as of January 2014, central governmental departments faced as many as 729,000 outstanding vacancies.76 While some of these positions could potentially be filled by temporary workers and others could be eliminated altogether, it is clear that adequate staffing is a serious challenge for the public sector.