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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Is India Too Corrupt to Become Powerful?



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The celebrated Indian historian and public intellectual Ramachandra Guha argues that India is too corrupt to become a superpower, and he makes a number of decent points. This passage might be of particular interest:

Surging growth is another proximate cause. Economic liberalisation has created wealth and jobs, and a class of entrepreneurs unshackled by the state. But its darker side is manifest in rising income inequalities and sweetheart deals between politicians and favoured businessmen, leading to the loss of billions of dollars to the public exchequer.

Was this necessary or inevitable? Perhaps not. The truth is that since 1991, the word “reform” has been defined in narrowly commercial terms, as meaning the withdrawal of the state from economic activity. The reform and renewal of public institutions has been ignored. It is this neglect that has led to a steady corrosion in state capacity, as manifest in the growing failure to moderate inequalities, manage social conflict, and enforce fair and efficient governance.

I don’t think that moderating inequalities per se is a sensible goal. If Gujarat continues to boom, it does not do a disservice to India’s poorer regions; if wealthy Indians choose to live and pay taxes in Mumbai rather than emigrate to Singapore, Dubai, or London, it’s not obvious that this is a disaster, etc. I would argue that tolerating income and wealth gains at the top end is essential to achieving material progress at the bottom end of Indian society. Moreover, I think that one of the central problems with reform defined in narrowly commercial terms is that there hasn’t been nearly enough of it, and this has contributed to the persistence of extreme deprivation in India. 

But Guha is right to observe that, with a few small exceptions (e.g., in Gujarat and Bihar), the reform and renewal of public institutions hasn’t been pursued with appropriate vigor. Consider the following from a survey in The Economist circa 2008:

On coming to power in 2004, Manmohan Singh, the prime minister, said that administrative reform—“at every level”—was his priority. Some economists see India’s malfunctioning public sector as its biggest obstacle to growth. Lant Pritchett, of the Kennedy School of Government at Harvard, calls it “one of the world’s top ten biggest problems—of the order of AIDS and climate change”. Yet it is hard to find progress on Mr Singh’s watch. Perhaps the best that can be said is that a policy of the previous government, a hiring freeze on two-thirds of vacant civil service posts, continues: since 2001 around 750,000 jobs have been left vacant. A right-to-information law, passed in 2005, also contains at least a promise of official accountability. But a more seismic reform, a 16-year campaign to decentralise power from the states to local elected bodies known as panchayats, cutting out much of the bureaucratic cancer altogether, has hardly moved. [Emphasis added]

Little has changed since then. 



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