Quick-fix failures

The governance logjam, declining growth and public clamour is putting pressure on government. Properly channelised, these could lead to interesting legal and institutional reform. But alas, there is a danger that the urge to be seen to be doing something rather than actually carrying out sensible reforms will subvert the possibilities of this moment. Impatience will push the government less in the direction of intelligent reform and more in the direction of Humphrey Appleby's immortal line "Something must be done. This is something. Therefore this must be done."

This is evident in the way in which the discourse on breaking the governance logjam is ignoring the administrative demands of the time. A whole range of proposals, from the cabinet committee on investment to PPPs, are like short-term band aids that do nothing to address the infectious sore that administration has become. The government is ignoring basic lessons we ought to have learnt by now.

The first lesson we are ignoring is this: as K.P. Krishnan of the IAS once memorably put it, the long term has caught up with us. Almost all our problems, whether in law enforcement, the justice system, administrative capacity or planning for natural resources, have their origins in the fact that we kept ignoring them on the theory that these are "long-term" problems. So our reforms were like a Ponzi scheme, where you hope you can just postpone the day of reckoning on fundamental issues. In limited contexts, short cuts that bypass structural reform can work. But if experience is any guide, gains from short cuts will be shortlived. This is because nowhere in our system do we have strategic administrative planning. I have not seen one government document or plan that intelligently assesses the administrative requirements of a programme, plan, institution or legislative intervention. Neither the Planning Commission nor the ministry of personnel has an analytical assessment of state capacity. State capacity is temporarily created in response to pressure or a crisis, usually as a form of redirection rather than genuine augmentation of state strength. All we do, therefore, is make an intervention in one place while the bulge shows up elsewhere.

Government still does not get the basic point that we need to move from arbitrary discretion to public reason. Nowhere is this confusion more palpable than in the newly modified rules on the cabinet committee on investment. Some of these modifications are defensible. But fundamentally, the mandate of this committee reflects a confusion that will haunt government. Government has been consistently tripped up because it has not justified its use of discretion with public reason. It was precisely the government's tendency to run with the hare of independent regulation and hunt with the hound of arbitrary discretion that landed it in so many legal quagmires, from land acquisition to the 2G case. A lot will depend on what the committee actually does, not on its formal mandate. But there is no denying that the terms of reference give the impression of a vote of no-confidence in existing ministries and the desire to create a mechanism to bypass them. In a well-functioning system, you need environmental regulation that is effective, speedy and gets all the trade-offs right. It is fair enough to have an empowered mechanism to ask ministries or regulators if there are inordinate delays in decisions and to occasionally review the functioning of ministries. But this should not shade over a fine line to give the impression that it will bypass existing institutions if the need arises.

The government is shooting itself in the foot if it thinks it can create a structure that can somehow bypass the need for sensible environmental regulation. It has simply got the narrative wrong. Anybody looking at India's air, water, coastline, natural resources would be hard pressed to sustain the claim that overzealous environmental regulation is the cause of our slowdown. Empirical assessments done by Manju Menon and Kanchi Kohli show that securing environmental impact assessment clearances has, in general, hardly been the problem. To be sure, some recent decisions, either from the courts or regulatory bodies, have affected certain projects. But rather than conclude that what we need is a bypass mechanism, the government should heed the advice that a stitch in time saves nine. The reason many projects are held up is because of prior failure to build a sensible environmental regime endowed with technical and administrative capabilities. Even land acquisition was stalled because the legacy of past distrust created such an environment that a backlash became inevitable.

In this environment, executive discretion at the expense of transparent mechanisms will be vulnerable to legal challenge, creating even more uncertainty. How would an empowered committee justify overruling the ministry of environment when it does not have the capacity for technical assessments and so forth? Legal complexities will mount rather than diminish as a result of trying to do a quick fix. Multiple points of discretionary negotiation will create far more legal uncertainty around projects than well thought through and implemented regulation. Indian industry is naive to think it can conduct business as usual through short cuts, even if it has the cabinet's imprimatur. It will set itself up for a bigger fall if it does not understand the requirements of public reason.

Third, the government is sending confused signals. On one hand, it wants independent regulation in areas ranging from environment to coal allocation. On the other hand, it keeps sending the signal that it wants to accumulate more discretionary power even in areas where there is a regulatory framework. But more insidiously, it sends the signal that if you are a big company, the cabinet might come to your rescue; if you are a small guy, forget it. There may be a practical exigency behind this favouring of big investment. But it sends a disastrously wrong signal about the rule of law.

All the short-term quick fixes are unravelling. PPPs are not a bad idea. But it is becoming increasingly clear that in many places PPPs are unravelling, with promoters increasingly wanting to exit, as we have seen in recent weeks. Yet the Twelfth Plan continues to tick off the PPP box as if it were a magic wand that will fill in all other shortcomings. Our public universities are struggling because so much of what passes in the name of reform is about being seen to be doing things rather than concentrating on the basics. Too many short cuts have short circuited the system. It is time to stop peddling illusory quick fixes.


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