Delhi’s metro stations have been a boon for fuel-driven and pedal-pushed rickshaws as disembarking commuters pay a tidy sum for a short ride to their destination. But business at a “hospital station” was rudely interrupted by the arrival of battery-operated rickshaws that ferry visitors for a much lower fare. That forced pedal pushers to slash rates by half for the kilometre ride. Even autorickshaw drivers complained that their earnings had dropped and little was left after paying monthly loan installments. At several other places, e-ricks are now swarming dense city pockets, uncontrolled and unregulated.
Indian rulers have responded in the only way they can, staying comatose. The state government did not take notice till it got a rap from the Supreme Court after which it notified that e-ricks were illegal. And now, competitive populism has taken over—out of power in the province for four terms, the central government has vowed to exempt them from law. Its principal opponent says this is a ploy to grab its supporters. In this political grab-fest, the real issues are obfuscated.
On the other hand, how would a right-of-centre, rules-based and market-oriented system respond? First, it would welcome e-ricks as a smokeless alternative. It would prescribe and enforce their areas of operation, the minimum speed and safety standards. Norms for engine efficiency would be set and the sale of those which do not meet the grade would be blocked. An enlightened government would coach drivers in traffic rules and courteous behaviour, especially with women. Manual tricycles would be replaced over time, and their operators given cheap loans on easy installments to upgrade. Such a system does not drip with breast-beating “compassion”, but would be more respectful of the dignity of the individual and his desire to do well in life, than the one that governs us, which oozes “care” and “concern”, but robs those it is meant to serve.
The same analogy would apply to street food vendors, who make the streets of East Asian cities like Saigon (Ho Chi Minh City) and Shanghai so vibrant. A right-liberal establishment would recognise their activities as incubators of enterprise. It would demarcate hawking areas, set and enforce hygiene standards, and provide electricity, water and garbage disposal options. At the moment, hawkers are at the mercy of municipal and police officials who make their livelihoods very uncertain despite generous pats of palm grease.
I give these earthy examples to dispel the notion that advocacy of a right-liberal policy shift is an invitation for a crony-capitalist takeover. Rather, it is meant to encourage people’s initiative. Most political outfits across the country are left-of-centre believers in a strong, meddling state. They may be pro-business, but not necessarily pro-market. When in power, they frame the terms of engagement in such a way that discretion is the rule, not the exception.
Corporate groups themselves have done much to sow suspicion of the private sector. The way cronies manoeuvred to capture 2G telecom licences, grab coal mines, usurp farm land for special economic zones or game infrastructure projects has eroded public trust. Corporate avarice makes political and bureaucratic corruption a less intolerable evil. We need more business leaders who regard enterprise as an endeavour for the common good. Wealth should be regarded as a marker of achievement.
The motive force of liberalism is individual initiative. This presupposes personal liberties, the rule of law and an enabling state. Implicit in this is freedom of enterprise, the right to own property and limited government. Liberalism is a sensibility, not an ideology. It does not operate through formulae. There is no mould that all nations must fit into. The size of government and the latitude given to individual enterprise depend on national contexts, with the caveat that there should be no concentration of power—whether in the state or business corporations—that threatens personal liberties or social good.
India was conceived as a liberal democracy. The Constitution promises every person an even chance to prosper through dint of talent and effort in a society, free, fair and just. In the years since Independence, these principles have been continually tested and at times, even threatened. While the country remains united and democracy has held, the Constitutional promises have not been redeemed in full measure or even very substantially. Liberalism, which underpins the Constitution, has been knocked off its perch; liberals have become endangered species. They have been squeezed by identity politics, and the economics of patronage.
In present-day India, there is no investment quite like politics. Those who serve stints in Parliament or the legislatures have their wealth magically leavened by wielding power or having access to it. The transformation began benignly. In the initial years of Independence, it was thought that the state, through Soviet-style planning, could rapidly pull up a poor country to prosperity by concentrating resources on backbone infrastructures and industrial assets. Reservation of industries for the public sector would not lead to wastage of scarce resources, which would result in competition and creative destruction. Bureaucracy thrived under the cover of this mindset. As it expanded, it perpetuated itself by impeding private enterprise even as it got flabby and enervated and was unable to perform sovereign or commercial functions efficiently. With the economy not producing enough for everybody, rationing had to be resorted to. Even groups that were not historically disadvantaged got reservations in education and jobs. By stifling the market economy and depriving us of the skills to profit from it, illiberal economic policies have turned us into a society of supplicants.
Among the current political leaders, Prime Minister Narendra Modi has been an evangelist of private initiative. In his election speeches, he has been urging the youth to aspire to be job creators and not job seekers. In his budget speech, Minister of Finance Arun Jaitley announced many measures to attract investment. The investment cycle is reviving despite the quibble that the budget was not reformist enough. Investors expect Modi’s government to play facilitator and continually reduce the difficulty of doing business. It is this trust that inspires confidence.
Modi’s promise of ‘minimum government, maximum governance’ will not become meaningful to a large number of Indians unless he liberalises agriculture. “A livelihood in agriculture does not have to be a promise of poverty,” says this year’s Economic Survey. It will be so long as “the most comprehensive central planning system is in the market for cereals.” Modi must set the farmers free—to buy and sell to whoever they want, across the borders of the country or their own states—and to get market prices. The farmer’s job is to produce. It is the state’s duty to make food affordable to the poor. So the current procurement system must be replaced by one that does not impound grain in excess of requirements, or drives away private trade.
A facilitative government will encourage contract (not corporate) farming so that farmers are assured of price and purchase, make productivity-enhancing investments, and learn improved farming practices. It will shift to electronic payment of cash subsidies wherever possible, so that those entitled to them can choose what to buy. A right-liberal policy shift will allow longer leases, so that farmers can hire out uneconomic land parcels instead of leaving them fallow for fearing of losing title. It will recognise that the laws enacted in the decades after Independence, which made tenants owners of land have played themselves out and it is time to once again recognise informal tenancies, so that those actually cultivating land get the benefits that cultivators are entitled to.
A right-liberal policy shift will reinvent government for outcomes. I endorse the Survey’s suggestion that allocations should be on the basis of targets met as verified by third-party auditors. I like its idea of a Productivity Commission that will establish metrics for the measurement of outcomes. It will review laws, regulations, organisation structures and process designs. Developed countries do this continually; administrations need to adapt quicker in a fast-growing economy.
Modi’s Cabinet has fewer ministers. For a small government, he should have even fewer ministries. Air India should be privatised, or at least its management hived off to a joint venture partner; its budgetary allocation should be given to the railways instead, which should be corporatised. The steel, civil aviation, telecommunications, textile and information ministries can be abolished and the money saved used to modernise the police force and to make justice available within a short time. The ministers displaced can share the workload of those who are burdened with too much.
The government must do only those things where market failure is likely. It should not be running enterprises. During his campaign, Modi said he believed in nursing public enterprises to profitability. But turned-around state corporations have a habit of turning back! If the government cannot privatise, it must hand them over to a holding company, backed by law and mandates written into it.
As we celebrate Independence Day, I am reminded of former finance minister SB Chavan’s 1989 budget in which he created a Rs 500 crore employment guarantee fund for 120 backward districts. Thirty-five years later, the Rangarajan Committee has estimated that a third of India is poor. If more than three decades of state effort have not lifted people out of poverty, perhaps, it is best to trust them to get out of it themselves. For that, we need a state that will not get in their way as they try to get on with life. (The Delhi High Court has recently directed the state government to stop the e-rickshaw service)
(This story appears in the 22 August, 2014 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)