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To ride the 10% GDP growth, we must fight entrenched interests

columns Updated: Aug 08, 2010 21:41 IST
Gautam Chikermane
Gautam Chikermane
Hindustan Times
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Extrapolations are easy. On spreadsheets they are easier. And when you take that ease and look into the future for a decade or two, the results are delightful, optimistic, confidence-inspiring. Take the expected and aspired-for 10 per cent GDP growth of India. At this rate, India’s economy will double in nine years, reach China’s current GDP in 16 years and cross the $10 trillion mark in 24 years.

But Raghuram Rajan, a professor at Chicago’s Booth School of Business, the economic advisor to the prime minister and former chief economist at IMF strikes a warning note. “Too many countries have grown strongly for decades, only to stagnate,” he writes in his latest book, Fault Lines.

So, what can go wrong in this journey of one of the world’s largest democracies, one of the world’s largest economies and one of the world’s poorest in terms of per capita income? A lot. But macroeconomic factors aside, to me the one most important brake will be institutionalised corruption, as the powerful skim the cream off this growth. Everything else will follow.

What we need to remember is that economic growth with institutionalised corruption can only go so far. The huge jump in the number of houses, cars, white goods and so on is riding this growth’s initial momentum. For it to sustain the growth and transfer prosperity down the line it needs a friction-free movement of entrepreneurial energy. India’s growth story, that’s currently running on ticker screens across the world, needs to percolate down the line.

Much of the corruption comes form a lack of information. At five villages in Uttarakhand, I saw how farmers were completely at the mercy of the middlemen. Not only would they pick up the farmer’s produce late, it is segregated and measured without the farmer’s presence. He just accepts what the aarti gives him. This, when information about prices is easily available through the neighbouring NGO. The system, despite the information access, is preventing the benefits of markets from reaching the farmers. Corruption, or let’s just call it the momentum of rent-seeking by the entrenched, is rampant, and showing no sign of easing.

What troubles me is that when a Delhi-based journalist can figure this out in less than a week, why is it that the local politician working in the district can’t? I spoke to two dozen farmers, the local politician deals with that number every day. Could it be that there is a political-economy nexus that keeps this age-old practice of keeping transactions opaque? Does the local leader have an economic stake in keeping this practice going, while promising the farmers a better future to get their votes?

On the industrial front, the large and ambitious projects coming up will help sustain the growth story. The Delhi-Mumbai industrial corridor, for instance, has the potential to completely change landscape between the two cities. Coming 200 km around the Delhi-Mumbai Freight Corridor, this will be a catalyst we’ve never seen. Multiply such corridors across the other three routes — Delhi-Kolkata, Kolkata-Chennai and Chennai-Mumbai — and what you have is an economic potential never imagined. But to translate this idea into reality, it needs transparency in transactions, reskilling of the people around the area and an economic model that turns all participants — the state, the villagers (landowners and workers alike), the transporter. Who is creating the friction against this?

I can count many such stalled projects and behind every one of them you will find an institutionalised network of entrenched interests. Ending that historical momentum of rent seeking needs political courage. If we want a slice of the 10 per cent growth, its politics will need to show some of that sustained courage now.