Two very interesting, albeit completely different events, both linked through their connection with renewed burst of judicial activism may be the beginning of new trends in India. Seen separately, each of these events seem unlinked and seem too small to make a real difference to the political economy of India. But, on close scrutiny, it is likely that they will alter the way business and administration are likely to be conducted in India. Only time will tell us, if the changes are for the better or for the worse. While, judicial activism is not new, this time it has linked the business of siphoning money and the bureaucracy simultaneously – probably for the first time.
First, the Supreme Court decision cancelling all the 2G licenses, raises hopes that India will move back towards the liberal state’s (the political institution of the State) central theoretically position: one of neutrality without favouring any group or interest. An extremely optimistic view may be that the Supreme Court decision clearly indicates that cutting corners will not be welcome any more and everybody will have to play by the rules. Lofty intentions, well stated and clearly the need of the hour but, in the real world, such judgements are exceptions rather than the norm and are largely unworkable. Indian business would clearly be the loser if such intentions were implemented and people who are keen in following the rules are allowed to administer. Rajeev Chandrasekhar rejoices the court decision by attempting to day dream the changes the Supreme Court Decision will introduce in a recent article (“SC Judgement shows India ready to battle crony capitalism”, Business Standard¸4/5 February 2012, p.2). Alas! It should probably take at least a few more decades before we reach that stage. There are myriad ways in which public funds have been siphoned off over the last few decades. This is unlikely to stop, since the whole political edifice rests on a continuous cycle of transfer of public resources in a well oiled patronage system – created first by the Mughals and subsequently by the Colonists. Each successive ruling party since independence have succeeded in revolutionised corruption and transfer of public resources to private hands. This transfer of public resources peaked during the period 2004-2008 for the simple reason that the asset bubble had inflated to its maximum possible extent by that time. 2G Spectrum allocation was one manifestation of the problem. The SEZ scam is far larger. The reason why Chandrasekhar may be day dreaming is that the results of the 3G auctions will leave a lasting legacy in the way public resources are transferred in future. Those auctions may have sounded the death knell of free market in India. The cost of allowing a ‘free market’, especially one which transparently welcomes competition is going to be clearly unwelcome. Indian businesses prefer to operate as cartels – cement and steel cartels are the worst kept secret. Cartelisation has reached even the small towns: in AP private educational institutions in the cut-throat coaching market are stated to be the latest group that fix tuition fees and operate as a cartel to keep a lid on the cost of acquiring ‘good’ faculty. In other words, the operation of a ‘free market’ is increasingly becoming an obstacle to Indian businesses, for the simple reason that competition erodes their margins. Moreover, the recent relatively high economic growth rates have increased the cost of quality human resources. Rising global commodity prices connect the dots. Thus, the next phase of auctions, if at all they are auctioned, will invariably witness cartelisation by companies.
A second important issue that is more dangerous are the recent events in Andhra Pradesh. They are problematic as the events may lead to a change in nature and manner in which the Indian State is administered – probably for the first time in more than 200 years. The Indian bureaucracy, especially at the top, was for two centuries the invisible backbone that administered the country. Their role has increased since the 1970s when the criminalisation of politics gathered steam. By the turn of the century, they had become the pivots around which the country was administered. The beauty of the system was that the more efficient members of the bureaucracy could always play on the dread of elections to keep not only keep a lid on the suicidal tendencies of the politicians in check but also frequently temper attempts to blatantly loot the country. Of course, they were not always successful. But over the years, the higher layers of the bureaucracy have been reasonably efficient in keeping a tight leash on the lower layers of the bureaucracy, while keeping the politicians happy enough so that they are not keen to alter the State structure in a manner that it would unleash the fissiparous tendencies that are smouldering just below the surface. Little wonder that even if there is no real government in place, there is no systemic break down and the system continues to function, albeit with a lot of inconvenience. Difficult to accept this contention? A cursory glance at the background and qualifications of our politicians should suffice: our political leaders are either business leaders who think politics is the best way to protect their money, or an assortment of criminals, faction leaders, swindlers, feudal lords who have captured booths, drop outs, liquor and betting syndicate members, etc. The list is almost never ending and there may be an occasional departure in the list: a mediocre teacher or a lawyer who has adroitly exploited the loop holes in the law. Invariably, most of them have no inkling of idea about governance and frankly, they do not care. The great thing about India is that the system survives for the simple reason that the higher layers of the bureaucracy are the only set of people with a permanent interest (and stake) in making the system chug along, if not function very efficiently. Hence, there are always those who stand up to political pressure to refuse to kow-tow.
Unfortunately, if events over the past two days are an indications, things may be about to change in Andhra Pradesh. That is beginning of the bad news. In areas related to politics, society and economy, AP’s past is the country’s future. Take politics, since at least 1994, any party that has ruled AP has ruled India. The economy is even better: AP (along with Tamil Nadu and Karnataka) is invariably the home to innovations of various hues: ranging from innovative frauds to innovative business models. In probably the first of its kind event, the higher layers of the bureaucracy are up in arms over the recent Central Bureau of Investigation (CBI) actions that have led to arrests of individuals in business and bureaucracy for impropriety that led to huge losses for the government during their tenure in certain departments. While wrongdoing cannot be condoned, the laws have to be uniformly applied – at least that is the basis on which the principles of justice are built. It is difficult to conjure up reasons as to why politicians can continue to occupy important positions when their role is suspect – after all probity in public life is often thought to be a theoretical prerequisite for elected representatives. It is even amusing to note that a four time MLA was forced to grant permissions by a middle level bureaucrat.
One can imagine, the problems for governance, if the higher layers of the bureaucracy follows it threats with further action. Any discussion about the scope of the recent actions is not needed, what is worrying is that for the first time, the edifice on which the Indian State has been built has cracked - publicly. A government rules by the legitimacy of what the rule perceive it to be, rather than merely what it is. Invariably, when the edifice cracks, in the not-too-distant future the floodgates may well be opened for other events. Over the past decades, politicians have systematically undermined the governance structures and this clash could not have come at a worse time for the Indian State. The mere thought of the sheer magnitude of problem, if the politicians and the lower bureaucracy are given a free hand is sufficiently scary, especially since the institutional framework is either non-existent or insufficient to deal with the challenges that India faces. If the edifice does crack, the lasting impact will not be in the realm of politics as people expect but it will be more in the sphere of economy, where circumventing the rules the game is the norm, rather than the exception. Unfortunately, the judiciary has little understanding of the nuances of the way businesses break the rules. That will be the tragedy that we may have to deal with over the next few years.
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