Competition for Inefficiency:An Indian Perspective

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Competition for Inefficiency:An Indian Perspective
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  8/26/2014Competition for Inefficiency: An Indian Perspective - Mainstream Weekly M AINSTREAM , VOL LI, N O  43, O CTOBER  12, 2013 Competition for Inefficiency: An Indian Perspective Monday 14 October 2013 by Abhishek Kumar and Sreekutty MohandasThe 1980s were a decade of memorable incidents for the world in general andIndia in particular. The efficiency of the market economy, propagated byThatcher and Reagan, was receiving immense political popularity and around thesame time Eugene Fama’s efficient market hypothesis received rave academicacceptance. Margaret Thatcher popularised the idea of TINA (There Is NoAlternative way, so far discovered, of improving the lot of the ordinary peoplethat can hold a candle to the productive activities which are unleashed by a freeenterprise system). TINA formalised as the Washington Consensus by JohnWilliamson (1989) was offered as a policy prescription to the developing world toachieve sustained growth.The Indian economy during the eighties was growing but was held back by theshackles of a closed economy and an inefficient, mono‑polistic public sector,which virtually throttled competition. Rajiv Gandhi, with all his vision andawareness of world affairs, introduced the reform process with an aim to achievehigher growth through competitive efficiency. The reform process wassubsequently forwarded under the stewardship of Dr Manmohan Singh as asolution to the crisis of 1991 and hence India formally moved towards acompetitive economy based on unfettered markets. However, the sad fact is thatthis idea of competition did not get itself confined to our economic systemalone. As extra competition could lead to highly inefficient market equilibrium,in the same manner the percolation of competition in other aspects of our societyhave led to quite inefficient outcomes, and hence the competition forinefficiency.Competition for AppeasementThe late eighties and early nineties brought the true result of JP and Lohiamovements, when the Congress became a minor player in the Hindi heartlandand regional parties took the centre‑stage with the BJP rising on the strength of the Ram Mandir issue. The emergence of new parties reduced the vote‑base of the Congress, infused enormous political competitiveness and expedited thesocial reform process, but this led to a sense of assertiveness among thosecastes which have recently found political identity. The politics of appeasementbecame handy for exploiting this newly‑found identity and sense of assertiveness, and thus consolidating the vote‑bank.The behaviour of a majority of our political parties is akin to noise‑traders in thestock market as they flock into the political system expecting a bounty in the  8/26/2014Competition for Inefficiency: An Indian Perspective - Mainstream Weekly form of vote‑bank in return for appeasement. Minorities may need a preferentialtreatment so that they are not left behind when compared to the majority. How‑ever, the gradual metamorphosis of this preferential treatment to appeasementhas become a bubble, which has been subjected to inflation since the reformsera. Rajiv Gandhi’s government overturned the Supreme Court’s verdict on theShah Bano case through legislative action for appeasing Muslims and later wenton to establish the Ram Lala in Ayodhya as a balancing act. The sociallyimportant Mandal Commission recommendation was viewed from a casteistangle and with that the political debate in this country became increasinglyaligned to caste and religion. Hence, division on the basis of caste and religionbecame imperative for obtaining a consolidated vote‑bank.Helplessness on certain issues often results in the institution of commissionsand committees to pacify public anger. The government constitutedcommissions likes the NCSC, NCST, NCBC, NCM, NCLRM, NCW and finally anNHRC (for the rest of gender, caste, community and religious groups). Whatcould possibly be the rationale behind creating multifarious commissions? Arewomen, SC/STs and minorities not human beings or do they need some above‑human treatment by creating the respective commissions in their names? In fact,multiplicity of commissions without enough teeth portrays the government’sintention of appeasement rather than action.The planned Equal Opportunity Commission is a welcome move by thegovernment to substantiate Articles 15 and 16 by leaving no room for nepotismeither in the public or private domain. However, restricting the Commissionexclusively for a particular community negates the very basic idea of equalityand leaves the imprint of appeasement.Competition for IdentityToday, the political discourse in India has become so competitive that it has lostrelevance in the areas of utmost concern. If we go into deeper analysis of ourpolitical system, we find that there is a stark ideological void as well as anineffective performance appraisal in the very foundation. The ideological voidhas led to the creation of cadres on the basis of caste and religion, which can beeasily mobilised for appeasement and raising the communal temperature on theeve of elections (as seen in the Muzaffarnagar riots). In the political arena, theperformance appraisal of leaders is reflected in the voting pattern of the masses.Voting on the lines of caste and religion has been posing a serious setback onthe real issues of governance and development. Hence, even while reeling underthe pressure of an economic crisis, the so‑called servers of the common manfind it appropriate to revive the Ram Mandir issue (Chaurasi Kos Yatra), a replicaof Babri Masjid etc.Competition for Numbers  8/26/2014Competition for Inefficiency: An Indian Perspective - Mainstream Weekly Political parties woo voters by taking numerical credit rather than focusing ondevelopment with a vision. In a country where lots of colleges and institutionsare dysfunctional due to lack of finance and regulatory oversight, ourgovernments take pride in announcing the number of universities they havestarted. In our establishments, where the performance appraisal system isineffective, the only way forward to move up the ladder is through networkingrather than working. This kind of competition does not in any way lead to thebest performance but is resulting in an overall underperformance.The debate on education in India is mostly concerned about the number of literates, number of graduates etc. but the question of real value added at eachof these levels remains behind the shadows of these numbers. This is evidentfrom the trivial difference of Rupees sixtyfive in the wage rate prescribed by theGovernment of Delhi for non‑matriculates and graduates and above (328 rupeesper day for non‑matriculates and 393 rupees for graduates and above). [Source:Labour Department, Government of NCT of Delhi]It would be incorrect to forecast that India poses a skills threat to the developedWestern world. As per the Mckinsey Report (2005), only 25 per cent of ourengineering graduates and only 15 per cent of our general graduates are globallyemployable. India graduates millions, but only a few are fit to hire. (WSJ) This isbecause there exists a serious gap between education and performance in ourcountry. Apparently, this terrible degradation of academic environment is as aresult of competition for inefficiency. Divergent thinking, innovation, creativityand academic entrepreneurship are either ignored or hardly given legitimateencouragement at a majority of our educational institutions. Hence,transformation of our economy into a knowledge economy is still a far cry!Competitive CorruptionEconomic reforms in this country were based on the virtue of competition thatwould lead to an efficient use of scarce resources and will thus bring highereconomic growth and development. The ill‑effects of competition have graduallyseeped deeper into our economic system as most of our entities in collusion withgovernment establishments are competing to grab scarce natural resources likespectrum, coal, natural gas etc. for rent‑seeking, thus giving way to cronycapitalism. The rent‑seeking behaviours certainly decrease the pace of innovation and efficient utilisation of resources. Crony capitalism also paved theway for large‑scale corruption leading to subsequent judicial overturns of government decisions. The impasse on the Lokpal Bill has questioned the will fortransparency, thus diminishing the credibility of our political class leading to aloss in investor confidence and stalling the growth process. At a time wheninvestors like Jim Rogers are shorting India, it would be unjustifiable to blameglobal problems in their entirety as the obvious reason for our slowdown  8/26/2014Competition for Inefficiency: An Indian Perspective - Mainstream Weekly Our economy is again in doldrums. Many Asian countries in general are facing adepreciation of their respective currencies, thanks to the Fed Reserve’simpending withdrawal of quantitative easing. This economic mess is largely ahomemade disaster as ever increasing corruption and an extremely hostilepolitical environment disrupted the business in Parliament leading to a completepolicy paralysis. The parties’ reliance on appeasement for elections has keptthem away from due reforms and measures needed for enhancing the growthprocess. It is a well‑known fact that in the later stages of the growth process ascatch‑up growth dries up, knowledge in the form of innovation becomesinevitable to sustain that momentum. Unfortunately, for all practical purposes,our education system is not in that design for generating ideas that furthergrowth.In the long run, laissez‑faire alone would not sustain growth as is evident fromthe recent financial crisis. Unfettered reliance on the market without the stateplaying a responsible role has led to economic disaster everywhere. And whatcan possibly be expected if the state itself is shirking away from itsresponsibility?Abhishek Kumar is an Assistant Professor, Shivaji College, University of Delhi andSreekutty Mohandas is an Assistant Professor, Motilal Nehru College (Evening),University of Delhi.
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