Paradox of Governance in India

A unique aspect of the present crisis has been that at every stage it has created, reinforced and then busted a series of false, exaggerated hopes and expectations. The next two years will literally be the end of an era in the way governance systems work in India. These hopes, claims and expectations were created and nurtured for over thirty years and we have now reached a terminal point where what preceded these claims, hopes and expectations are likely to be ‘lost in transmission’ from societal collective memory. Take for instance the institutional collective memory that policy makers of yesteryears had of the economic conditions in the 1960s and to the events leading up to the 1991 crisis has been mostly lost or will be lost due to demographic changes. This is particularly relevant for the western countries. In the case of India, where we are relatively lucky, because there remain some remnants of the older generation amongst the policy makers, the structural changes in the economy mean that their memory has only limited application. Even that limited application is often constrained due to the nature of our political society and the exigencies of governance and democratic politics.    

Theoretically, a natural corollary of the process of liberalisation and structural change inaugurated in 1991 should have culminated in the economy and the society to become less dependent on the government largesse. In reality, the process seems to have been the reverse, where a complex relationship of dependence on the government seems to have increased rather than decreased. Interestingly, this increase becomes progressively greater at the higher levels of the economic pyramid. Hence, while we have witnessed industrialisation and the growth of a dynamic service sector dependent/oriented economy, unlike most of the industrial societies, there are no processes to distribute risks. Therefore, the risk is transmitted back to the government and then repackaged and passed on back to the people. Such a blatant system has served to automatically restrict the development of institutional mechanisms that facilitate the transmission of risks to those who claim that they are willing to assume them in the first place: there is a complete lack of trust in any other institution except those that are owned and manned by the government. An excellent example is that of deposits in the banking system: people prefer to deposit their money with the public sector banks due to the perception that their money is safe. Thus, the dependence on the government is not simply economic, but one that is socially ingrained and it runs deep. Despite the inefficiencies that may exist in the practical working of the governance structures, they carry a remarkable ability to convince people. It is probably one reason why even those who blatantly break the law seek government intervention to slime their way out of their problems. Little wonder that the best insurance that smart business houses (especially the more leveraged ones) prefer is be appointed as directors of the Reserve Bank of India.

This symbiotic relationship is here to stay and the longer the crisis drags on, the more entrenched it becomes. That indeed is the paradox of India’s governance.