Form & Reform

Dutiful Governance and the Responsible Citizen

Bibek Debroy is chairman of the Prime Minister’s Economic Advisory Council
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In the beginning is the definition

I SUSPECT MOST PEOPLE will not have read a book titled Reform and Progress in India. Since the author preferred not to reveal his/her name, it is credited to ‘An Optimist’. The subtitle reads ‘A Few Thoughts on Administrative and Other Questions Connected with the Country and People’, and may give away the vintage. This book was published in 1885. I mentioned this to illustrate a simple point. There are many books, monographs, academic papers and media articles on reforms, understandably more since 1991. They assert, ‘The Government is reforming’ or ‘The Government is not reforming’. Implicit in that assertion is some kind of take on what constitutes reforms, and by its very nature, that take is a subjective value judgement. Though one person’s ‘reform’ may not necessarily be another person’s ‘deform’, a list of ‘reforms’ will vary from one person to another. Think of the etymology of the word ‘reform’. It is re + formare, with a sense of bringing back to the original shape. We will therefore have to take a view on which shape is right: the original one, the present one, or some alternative. You will argue there is a reasonable degree of consensus on what are reforms—agriculture, industry, services, infrastructure, labour, land, dispute resolution, financial markets, taxation, public sector enterprises, subsidies and so on.

At one level, you are right. But these are examples of ‘reform’. In texts that seek to describe the Brahman, the expression ‘neti’ is often used. Neti = na + iti. ‘Neti’ means ‘not this’, while ‘iti’ means ‘this’. In foreign trade policy, before 1991, the Commerce Ministry used to have positive lists and negative lists. (Such lists still exist, but they have become far less important.) A negative list is little more liberal, so to speak, than a positive list. Unless an act, including an act of importing, is explicitly prohibited by a negative list, the presumption is that it can be undertaken. With a positive list, unless an act, including one of importing, is explicitly permitted, the presumption is that it cannot be undertaken. ‘Neti’ is like a negative list, while ‘iti’ is like a positive list. Imagine a situation where Open is nationalised. Most people will shake their heads and say ‘neti’. This is not reform. However, cast your mind back to the late-1960s or early- 1970s. Most people would have nodded their heads and said ‘iti’, this is reform.

Let me give you a quote. ‘Hast thou appointed to high offices ministers that are guileless and of well conduct for generations and above the common run? …Is any servant of thine, who hath accomplished well a particular business by the employment of special ability, disappointed in obtaining from thee a little more regard, and an increase of food and pay? I hope thou rewardest persons of learning and humility, and skill in every kind of knowledge with gifts of wealth and honour proportionate to their qualifications. …O lord of Earth, art thou equal unto all men, and can every one approach thee without fear, as if thou wert their mother and father?... Do the accountants and clerks employed by thee in looking after thy income and expenditure, always appraise thee every day in the forenoon of thy income and expenditure? Dismissest thou without fault servants accomplished in business and popular and devoted to thy welfare? Are the agriculturists in thy kingdom contented? Are large tanks and lakes constructed all over thy kingdom at proper distances, without agriculture being in thy realm entirely dependent on the showers of heaven? Are the agriculturists in thy kingdom wanting in either seed or food? Grantest thou with kindness loans (of seed-grains) unto the tillers, taking only a fourth in excess of every measure by the hundred? O child, are the four professions of agriculture, trade, cattle-rearing, and lending at interest, carried on by honest men? Are thieves and robbers that sack thy town pursued by thy police over the even and uneven parts of thy kingdom? Consolest thou women and are they protected in thy realm?’

Some of you may recognise this quote. It is from Sabha Parva of the Mahabharata. Just before the royal (rajasuya) sacrifice, the sage Narada arrives and asks Yudhishthira about the welfare of the kingdom. I have deliberately not quoted from my own translation, but from Kisari Mohan Ganguli’s. That explains the slightly archaic English. There is a similar incident in the Valmiki Ramayana too, where Bharata is asked such questions by Rama, who has left on his exile. The king’s responsibility in that day and age is the Government’s responsibility today and that overall goal of governance hasn’t changed. Narada or Rama may not have used the expressions ‘inclusive growth’ or ‘Sabka Saath, Sabka Vikas’, but the developmental goal of governance was precisely that. So too in the present. It will be no different in the future.

Every once in a while, in India or abroad, someone will wake up and discover that Gross Domestic Product (GDP) is an imperfect measure. Why is the Government equating success of reforms with GDP growth? What does GDP mean for citizens? It is only a number. Does it capture well- being and happiness? Does it capture environmental costs? Does it include contributions made by housewives or house-husbands? If an infant is born, everything else remaining the same, GDP per head declines. But if a goat is born, everything else remaining the same, it increases. There must be something wrong with this strange measure. Accordingly, critiques will be written in the form of newspaper articles, academic papers and even books. The father of modern national income measurement is Simon Kuznets, who won the Nobel Memorial Prize in Economic Sciences in 1971. Numbers like GDP and GDP growth emanate from national income accounts. In the Indian case, this work is undertaken by the Central Statistics Office. Kuznets wasn’t the first person to try and measure national income. However, he is the one who made the work systematic. Hence, he has every right to be called the father of national income measurement. After this exercise had been done for the US economy, Kuznets wrote a report for the US Senate. The year was 1938 and every criticism now voiced against GDP was anticipated in that report. It is not that economists don’t know about the problems with GDP as a measure. However, it is the best aggregate measure that exists, and I emphasise the use of the word ‘aggregate’. Therefore, GDP is supplemented by other indicators and measures, like the UNDP’s Human Development Index (HDI). GDP, which measures income after a fashion, is a means to an end, not the end in itself. The end is a better quality of life for every citizen of the country, of the kind Narada and Rama had in mind. The end is a better environment for entrepreneurship to flourish. But it is also true that these ends tend to be correlated with GDP. Tracking its growth also ensures the Government has the resources needed for it to do whatever we expect it to.

If we are going to use the expression ‘reforms’, presumably we are not happy with the way the present formation is delivering on that objective. Several years ago, in the former Soviet Union under Mikhail Gorbachev, terms like ‘perestroika’ and ‘glasnost’ were in currency. Perestroika means reconstruction and was used for reconstruction of the political and economic system. Glasnost means openness and was used for the rights of Soviet citizens. I have brought these in because I find a lot of facile generalisations about reforms. If Chapter V-B of the Industrial Disputes Act has been repealed, there have been ‘big bang’ reforms. If not, reforms have been a damp squib. This is a blinkered view of reforms; reforms are much more than that. If government has become ‘smaller’, there have been ‘big bang’ reforms. If not, reforms have failed. Government becoming smaller—what does that mean? There are villages in India where, seven decades after Independence, government hasn’t existed. If that village now has electricity, courtesy the Government, it may have become ‘bigger’, but in my definition, that constitutes reforms. Expressions like perestroika and glasnost, though Russian in origin, have that broader nuance. The three organs of government, as laid down in the Constitution, are the executive, the legislature and the judiciary. Reforms are about examining these and their functioning. Indeed, reforms are also about questioning the Constitution. Reforms are about generating a consensus on what we expect the Government to do and what we don’t. Reforms are about deciding which level of government (Union, state, local) should perform a specific task. Reforms are about agreeing on how that level of government generates resources to accomplish that task. Perestroika was about structures of party and government, glasnost was about citizens. Our reforms should also be about responsibilities of citizens, not just their demands.

There is a very broad canvas.