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Economy on a power trip

The 12 essays in this collection are readable as standalones, but don?t really add anything to the book?s title

Economy on a power trip

Madan Sabnavis

WHEN YOU pick up a book called Politics Trumps Economics, you expect to see the darker side of how economic policies are framed and how political forces dominate their making. In fact, there is a growing sense of intrigue when we analyse the whys and whats of economic policies. But if that is the expectation one picks up the book with, one could be in for disappointment. Because when you peruse the 12 essays in the book all written by stalwarts, it appears that they don?t have any connection with the title of the book.

Bimal Jalan starts off this volume of essays with his overview of how the political system has evolved. Being a former member of the Rajya Sabha, he has good insights on how polity works. But this is where his view ends, and while other authors do pay obeisance to the book?s title by mentioning it, they have tended to stray with their thoughts. Yet, if one reads the essays independently without any connection with the book?s title, the articles read very good.

Jalan?s observations on polity are twofold. The first is that we have coalition politics today, where regional parties dominate with their small numbers. Hence, they have a significant hold on the majority party. They can switch sides easily and not come under the anti-defection ruling. This needs to change. Second, criminals get into politics and enjoy immunity, which has led to the quality of our polity deteriorating. The scams in various programmes and policies of the government further buttress this point. Quite clearly, we need to move away from this rot.

Meghnad Desai has a different view on the concept of equity. Rather than economic inequality, he dwells on social inequality, which started with the caste system. His point is that social reforms have never quite been on the political agenda of any party post-independence. Now, new parties have been formed, which are primarily based on caste. And this will be the future, as caste politics will drive the economy forward. Interestingly, he shows that a heartening change has been that, unlike some caste-based parties or politicians like Lalu Yadav who worked only for caste and ignored the economic wellbeing, people like Nitish Kumar have blended the two well to create a stronger society. This could be a winning combination.

Then there is a piece by Dipankar Gupta who, as usual, keeps the reader involved. His take is that things are changing and people are growing less tolerant of the ills around, especially pertaining to political irregularities. The growth of citizen consumerism has been encouraging and the moves by the likes of Anna Hazare have brought issues like corruption on the table for discussion. The Delhi elections were fought not on caste or religion, but on issues of power, water supply and corruption. This will be the way forward for the country in times to come, as these issues would be the primary ones that politicians have to answer for the electorate. Even the BJP has moved on from religion as an electoral issue to governance. The growth of urbanisation has led to this new consumerism, where old themes have given way to new ones.

Poonam Gupta delves more into what kind of persons get elected to Parliament. She has done a study on the 2009 elections in India. Though dated, given that we have just had a new round of general elections, the results are illuminating. Her study shows that voters have tended to vote, in general, for males over 50 years of age who are wealthy and probably have a degree, but who also have a 20% probability of having a criminal record. Further, the performance of their party at the state level has a bearing on the outcome of national elections, which is contrary to the view that people are more discerning and distinguish between two governments while voting.

Ashima Goyal talks of governance and believes that India has been open to change and moved from a socialist to market economy quite smoothly without any major hurdles. The problem is more in the administration, which comes in the way of progress. But she is sanguine that with various institutions like the Comptroller and Auditor General, Right to Information and the Finance Commission, things will change and there will be improvement in overall standards.

Adding a different dimension, Ram Mohan takes a look at the micro level, where he analyses governance standards in companies. He brings to fore the classic conflict of the principal-agent relationship between owners and the management. When shareholders are dispersed, there is no control on the management and when the ownership is held by a group closely, then minority shareholders get overlooked. His conclusion is that the board of directors needs to be more effective, should ask questions and be independent. This becomes difficult because, often, there is a two-way relationship between the board and management, where each one is selecting the other and there is a cozy relationship, where it is understood that the board does not come in the way of the management. If one looks at many Indian companies, one would tend to agree with this view.

Samuel Paul?s piece on corruption is closer to the context of the title and talks of how civil society can bring about change. He talks of three kinds of corruption: first is policy capture, whereby strong interest groups are able to guide policies like taxation; second is procurement, which holds for any government purchase where the process remains opaque, and the third is delivery of public services. The last affects everyone and is coercive in nature, while the first two are collusive and done voluntarily. Greater transparency would address the first two kinds of corruption, though, more importantly, there must be the will to change systems, which is lacking.

Ravi Kanbur focuses on the growth of the informal sector, which is due to two reasons. First, too much regulation shifts activity away from the formal systems, while the other is that the growth process itself, with its focus on technology, has moved labour into this segment. This has created a major schism in the system, which comes in the way of administrative efficiency. There are other thoughts expressed by Sunil Mani on limited innovation in sectors, with pharmaceuticals being the exception, and Balakrishnan on the need to transfer welfare to the poor by making them producers rather than having them rely solely on cash transfers, which are not sustainable.

Govind Rao comes closer to the main subject when he discusses the fiscal dynamics where states manage to get more from the Centre when there are coalition governments, as regional parties are able to extract more to keep the government in power. This is similar to what Jalan puts forward at the beginning.

The articles are readable and interesting as standalones, though they don?t really add anything to the title, which talks about how politics is governing economics in the country. Maybe a title like Politics, Governance and Policies would have been more appropriate. But at the end of the day, it is the prerogative of the authors.

Madan Sabnavis is chief economist, CARE Ratings

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First published on: 27-07-2014 at 02:22 IST
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