India’s aspirational bottleneck: its private sector

This is one of Shri. Ninan’s best and most thoughtful columns. India’s private sector is part of the problem. I had said so more than once in my columns. It always has been and it still will be. He does not have answers nor do I. But, some of these things are probably evolutionary and that there are no external interventions or neat/magical solutions
that can be applied.

It is a fact, world over, that in the new millennium, cronyism, corporate malfeasance and short-termism had grown exponentially. India is not only not an exception but has also been prominent in displaying such a trend. In the West, we had the financial services industry, predominantly. From Brazil to South Africa to China, businesses have been mired in controversies.

Shri. Ninan mentions the House of Tatas. Accounting and auditing firms and consultancy firms like McKinsey have also been found sorely wanting in their conduct in several parts of the world.

Governance by global (think EU) bureaucrats from remote locations – unaccountable and unelected – combined with brazen short-term greed at the expense of public interest on the parts of businesses have created a governance vacuum that has been filled by politicians that the mainstream is quick to characterise as ‘populist-nationalist’.

But, that glosses over the problem of fixing accountability for the circumstances that created them in the first place. Indeed, to be blunt, that is dereliction. That is why Shri. Ninan’s piece stands out. It is an important first step in identifying and calling out the source of the problem.

But, answers are not straightforward. Clearly, in the Indian context and, may be, in the global context too, a better answer to political funding is the urgent need of the hour. But, we are no closer to it than we were, five years ago. That will break the nexus and dependence of the political class on businesses that make them discriminate between businesses unfairly and discriminate in favour of narrow and private interests over public interests.

Competent and unbiased regulation, regulators and consistent application of those by regulators are necessary conditions but not sufficient conditions. But, that too appears more conceptually sound than being practical because regulators are also gamed by the
same private sector participants. It is a universal problem.

There is a third answer which not many would want to see. Revolutions by those who are shortchanged it by all will be destructive, chaotic and disorderly. Revolutionaries too do not have answers. They know how to overthrow and destroy but not to replace and construct.

Come 2019, India does run the risk of what has happened to Brazil in recent years. That country has lost its way for now. In a way, the combination of the pre-crisis boom, the post-crisis uncertainties combined with the fallout of cronyism have brought them to this pass.

Same is the story with China except that the news is not prominent as in the case of Brazil, India and South Africa. Indeed, it is a travesty and tragedy that the mainstream global media is holding up China as the paragon of so-called liberal values, liberal trade and governance!

So, like these countries, India had a pre-crisis boom which was mistaken to be permanent. The boom covered up the cronyism that was very much in play then. The post-crisis growth stasis was the withdrawal of the tide that exposed the cronyism in the Indian economy. Its most visible manifestation is the banking bad debt crisis that shows no signs of ending.

In the next twelve months, politicians will hardly be focused on addressing this issue. Indeed, if anything, these unholy ties and practices will be more in vogue and invoked more often than during normal times.

Post-2019, depending on the dispensation that comes to office, either the situation gets much worse almost beyond the point of redemption or that there is an acceptance and acknowledgement of the problem leading to concerted, concrete an sustained efforts to move towards a better and fairer governance regime.

It is hard to bet on the latter outcome right now.

One thought on “India’s aspirational bottleneck: its private sector

  1. root cause of crisis is asurity practise by both manmohan govt and modi govt,it was only during vajapee period india showed very fine quality of growth. govt money both debt plus cash in circulation increased to 120% of gdp it has fallen to 80% during manmohan era whichh was further brought down by modi to 60% in name inflation targeting and fiscal prudence.recently at banking conclave piyush goyal said that we will maintain fiscal prudence. this is going to further aggrevate the npa problem in banking system. even great governer yyreddy has also acknowledge that current economic policy of modi govt may have distarous consiquences for indian economy after reading great book on macroeconomics written by leena chakravarthy. i personally propose her name for cheif economic adviser


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