Unchangeable India

It happens only in India, says an advertisement. All good and bad things keep moving the mighty civilization called India. Common people's confidence to survive under any circumstances is the real force behind the marching India. Political representatives, bureaucrats, media and other vital organs of the Indian society are the disappointing figures in the upward trajectory of the nation. Sadly these forces cannot be changed or removed. The tragedy of India continues to haunt the bottom of the national pyramid. Ironically the top of the pyramid exploits the bottom by bringing in the sufferings again and again. As long as poverty is there politics will be there. It is a mutual survival policy.

Dr.P.C.Alexander writes in The Deccan Chronicle on 5 January 2011

As we enter the second decade of the 21st century the issue that dominated the political debate of the late 1940s — the system of government best suited for India — is being raised again in certain intellectual circles.

The main problem before the framers of the Constitution was how to devise a Constitution best suited for both stability and accountability and also one which would help lift the vast masses of people stuck in ignorance, illiteracy, ill-health and poverty as a result of a century-and-a-half of colonial exploitation.

B.R. Ambedkar had explained to the members of the Constituent Assembly that they had two options before them: One, the presidential form of democracy as prevalent in the US, and the other the Westminster model of parliamentary democracy as prevalent in Britain.

The Constituent Assembly came to the conclusion that the Westminster model was the best suited for effectively tackling the problem of underdevelopment and at the same time providing for accountability and gave us the present Constitution, which in spite of a 100 amendments retains its basic features without any change. Let us examine how far the objectives of the founding fathers of our republic have been fulfilled under this Constitution.

While assessing the progress made in poverty eradication we have to acknowledge the fact that the lot of the poor today is much better than what it was at the time we achieved Independence. But what should cause serious concern is the fact that a large number of people still live in abject poverty in India, though the country has emerged as one of the top economic powers of the world.

What has gone wrong is not in production of wealth, but in distribution and in ensuring that all those who create wealth pay the taxes due to the government. Quite a good part of the wealth created has flown to tax havens in foreign countries and successive governments at the Centre have failed to plug such leakages.

According to a Swiss bank report of 2006, India topped the list of depositors of wealth in banks in Switzerland to the extent of $1,456 billion compared with Russia’s $470 billion, UK’s $390 billion, Ukraine’s $100 billion and China’s $96 billion. Deposits of Indians are thus more than the deposits of all the other countries, and this shows the extent of wealth owned by Indians, but which has escaped taxation. Many Indians have earned the distinction of being billionaires, but unfortunately India has not produced a Bill Gates or a Warren Buffett, who have made big money in a honest way and are spending the bulk of their wealth on deserving charities in countries all over the world, including India.

We have to admit with shame that hunger is still a major problem in our country and a large number of people in different parts of the country — both urban and rural — die of malnutrition and hunger.

According to the Global Hunger Index published by the Washington-based International Food Policy and Research Institute, India ranks 66 among 88 countries with 23.7 points on a 100 point scale. (Zero is the best score, indicating no hunger while 100 is the worst.) India’s Constitution and the laws made under it have never stood in the way of coming to the help of such people, but poor enforcement by the government has resulted in continued misery for such people.

On the criterion of education, fairly good progress has been made after Independence but the situation remains dismal because of the inadequacies of these institutions in both quantity and quality.

The condition of public health facilities, particularly in rural areas, is as bad as that of educational facilities in these areas.

The size of the population in 2,86,469 villages is less than 500 each and in 1,45,180 villages it is between 500 and 1,000 each out of a total number of 6,22,621 villages in India. There are serious problems in setting up proper health and educational institutions in such very small villages and the government has so far failed to devise suitable techniques to solve them. Instead, the government follows the traditional practice of establishing health clinics and primary schools in a few villages and appointing teachers or doctors for such places.

Now let us turn to the quality of the institutions of democracy in India. Whenever we speak of India’s achievements we pat ourselves on the back by claiming that we are one of the successful democracies. No doubt, compared with most other such newly-independent countries in Asia and Africa, we can legitimately claim that democracy has been stable, but, based on the criterion of quality of the institutions of democracy, India is still classified as one among the 50 “flawed democracies” of the world. According to the democracy index published by the Economist Intelligence Unit, 30 countries are full democracies, 50 “flawed democracies”, 36 hybrid regimes and 51 authoritarian regimes out of a total 167 countries. At the rate at which we are abusing the forum of legislature for staging protests and neglecting its primary duties, we may even slip below our present rank in the list of “flawed democracies”.

From the above assessment of the progress in programmes undertaken in the last six decades it is clear that the Constitution, which has been adopted by India, has in no way prevented it from improving on its performance. On the other hand, the manner in which the programmes have been implemented, the intolerable long delays, and, above all, the corruption associated with implementation of programmes, have been responsible for the shortfalls in performance.

Today there are many countries that have Constitutions combining some of the features of the Westminster model and some of the presidential system, but one doubts whether this type of combination will suit India.

I can do nothing better than quote Dr Larry Diamond, a reputed authority in the world on democracy and at present professor of political science and sociology at Stanford University, when he said after his recent visit to India, in the course of a question and answer session, that if India wants to improve its democracy, it must create stronger institutions that allow for horizontal accountability. Also, I strongly endorse his suggestion that India needs a “counter corruption commission”, like the Election Commission, which should be fully autonomous in its authority to check efficiency and punish corruption.

Statistics contrdicts reality

The forecasts by economists provide feel good statistics about the economic health. But on the ground nearly two-third of the citizens feels the heat of economic crisis. They do not have enough means to sustain their lives. Inadequate food, clothing, shelter and other essentials frustrate them. Without taking common people’s living standards economic data simply bracket them into Purchasing Power Parity and bundle them into the larger GDP dimension. The result of macro definition of the economic health without fine tuning the problems on the surface twists the tale and offers it all rosy. Countries like Bhutan define human happiness index along with the GDP. It is a tiny mountainous nation with no big income. People in Bhutan are bubbling with happiness despite low incomes and no skyscrapers to boost. France is trying to redefine its economic outlook. It is high time that all nations go beyond GDP and bring out the crux of the crisis and minimize people’s problems.

Sanjeev Sanyal writes in The Times of India (10.2.2009, p.14) “The world is reeling from two major crises, the financial/economic crisis and the crisis of climate change and ecological collapse. Both are a result of the same human error, a colossal misallocation of resources, financial capital in one case and natural capital on the other. A combination of counter-cyclical policies and time will eventually get us out of the financial mess. However, climate change and catastrophic environmental degradation threaten human civilization as we know it.

Many blame globalization and capitalism for the large-scale misallocation of resources. However, isolationism and socialism provide no alternative we tried them for decades with disastrous results. A market-based system is clearly more efficient. The problem is not with the tools of capitalism but the failure to define its goals. The power of the markets is being harnessed to maximize the wrong paradigm.

The most commonly used paradigm for measuring human progress is provided by national income accounts and, more specifically gross domestic product (GDP). Virtually all economic policy-making is oriented directly or indirectly towards maximizing GDP growth. It is so ubiquitous that people forget it as an entirely artificial construct created in the 1940s as part of the war effort.

Of course, rulers from ancient times have kept some record of economic activity for taxation purposes. National accounts as we know them were created during World War II by Richard Stone and James Meade with support from John Maynard Keynes, as a way to keep track of war-time economic activity. Given the circumstances, their framework was necessarily ‘industrial’ in its essence, without space for niceties like environmental degradation and socio-demographic developments.

Post-war, this framework was adapted to create the GDP number now used. Unfortunately, the system remains an arbitrary way to measure value creation, especially in areas relating to externalities and natural capital. For instance, if we cut down a pristine rain forest we are destroying value in terms of biodiversity, watersheds, carbon sequestration, flood control, non-timber forest produce and so on. Yet, in the current system, destruction of value will show up as GDP growth from logging!

This does not mean the creators of GDP were unaware of its limitation. In his Nobel Memorial Lecture in 1984, Richard Stone stated, “The three pillars on which analysis of society ought to rest are studies of economic, socio-demographic and environmental phenomena.” He added that his work had focused mostly on economic accounting and he had not spent much time on environmental accounting even though “environmental issues, such as pollution, land use and non-renewable resources offer plenty of scope for accounting.” In short, the creators of GDP thought of it as work-in progress. Unfortunately, the world has continued to focus much of its energy on maximizing an incomplete and out-of-date paradigm.

There are ways to adjust for the short comings of GDP. One is to create additional matrices for measuring progress. The Human Development Index and Carbon Footprint are concepts that can be used to enhance the raw GDP approach. Unfortunately, they failed to gain a serious following beyond the world of activists and conferences because these measures lack the simplicity of a single GDP number.

The only real alternative then is to recalibrate GDP itself to reflect genuine value generation. This can be done by assigning monetary values to things like water pollution, deforestation, land degradation and other changes in the stock of natural capital. Similar adjustments can be made to account for changes in human capital stock (health, education etc). The result would be a new GDP number more closely reflecting true value generated by various human activities.

Economists should redefine GDP and incorporate ground situation. They should make economy fly in the air when there is no possibility of sustaining its stay on the sky. By infusing a course correction they can perform a social reengineering which is need of the hour. Poor must get the attention and priority. Simply giving the number of poor people is not sufficient. Using the latest technological prowess economists should filter down the most needy people and those in the seat of power should help those identified poor people to improve their lives. There is no alternative to this model.