The Indian Economy Blog

January 2, 2007

What Happened To Government Reform?

Filed under: Infrastructure,Politics,Regulatory reforms — Nitin @ 3:35 pm

TCA Srinivasa-Raghavan puts Prime Minister Manmohan Singh in the dock:

It is also useful to dwell on the imperatives that have been at work. Basically, the public and private thing, for instance in infrastructure, is the result of bad governance. The governments transfer the little money they collect from the cities to the countryside because the votes are there. The cities suffer. The government doesn’t have the money to improve things, so they turn to the private sector, which makes the investments and hopes to earn a profit.

In a sense, then, the surplus that should have accrued to the government goes to the private sector. In due course, this means the government will have even less to transfer from the cities to the countryside. Not just that either, because even the little that is transferred out will end up in the pockets of politicians and bureaucrats.

This is what has been happening till now and that is why we need good government. This is what makes Dr Singh’s strategy so vexing, especially when he talks of the need for government reform, if only to deliver public services better. [Business Standard]

1 Comment »

  1. But isn’t the current government hamstrung by needing the support of the communists to stay in power?

    Comment by Watcher — January 2, 2007 @ 10:05 pm

  2. Watcher,

    It is. But the author argues that it is Sonia Gandhi lack of enthusiasm for further economic reform that is restraining Manmohan Singh.

    Comment by Nitin — January 3, 2007 @ 8:09 am

  3. Does the governments really transfer the little money they collect from the cities to the countryside? I beg to differ here.

    A real life example could be the pathetic situation of vidarba farmers committing suicide. Maharashtra government collects all sorts of taxes (read octroi, tolls etc.) from people in Mumbai. Where does the money go? Can I safely assume that the government does the worst management of money?

    On the other hand, you can see the status of villages that have been adopted by corporates (e.g. ITC e-choupals and other IT companie’s initiatives). These villages have already started a growth trajectory.

    It is widely in media circulation that we need thousand of crores as capital expenditure for development of infrastructure and welcome FDI in these areas. But till a time, a reasonable level of homogeneity is not reached vis-a-vis development of rural & urban areas. Right now, the balance is heavily skewed in favour of urban india, which, if not corrected, will cause large socio-economic disturbances in short to medium term.

    Comment by Sandeep Kriplani — January 3, 2007 @ 2:41 pm

  4. Article 311 of the Indian Constitution?

    Is there a successful modern economy that doesn’t have an entrenched government bureaucracy?

    Comment by alphie — January 3, 2007 @ 2:49 pm

  5. >>>It is widely in media circulation that we need thousand of crores as capital expenditure for development of infrastructure and welcome FDI in these areas. But till a time, a reasonable level of homogeneity is not reached vis-a-vis development of rural & urban areas. Right now, the balance is heavily skewed in favour of urban india, which, if not corrected, will cause large socio-economic disturbances in short to medium term.

    Comment by ASMitra — January 3, 2007 @ 11:50 pm

  6. hmm my comments never did show up. will try later

    Comment by ASMitra — January 3, 2007 @ 11:51 pm

  7. “Right now, the balance is heavily skewed in favour of urban india, which, if not corrected, will cause large socio-economic disturbances in short to medium term.”

    Agreed. This thread once again raises the need for good governance even in the freest of economies. Infrastructure development has always been the government’s job, and most of us would prefer that it be the government’s only job.

    When I think of how rural America started to advance economically after WWII, I can only attribute it to the Federal and state governments’ enterprise, such as the massive construction of roadways (Eisenhower’s Interstate initiative), heavy investment in power, huge subsidies to corporate America for relocating to rural areas, even to the extent of relaxing tax rules and envirnomental controls.

    As bullish as I am about India, my biggest fear is that free market, unless aided and abetted by a good government, does not work in the long run.

    Comment by Floridian — January 4, 2007 @ 3:24 am

  8. Yes, we are in a skewed economy. Sectors like agriculture which constitues as main source of income for many people, doesn’t get any attention in the Government reforms.

    Comment by Harish Babu — January 4, 2007 @ 6:38 am

  9. The govt. should take care of primary education, built a faster and more efficient legal system, improve hospital quality. We have 1 billion people in the country do we enough of these?

    As for agriculture there are too many people in it clamoring for an ever shrinking pie. If we build more metros and move to a more healthy rural:urban population ratio that would help. Sad it is that even today the best built cities are British.

    Comment by Sridhar Jagannathan — January 5, 2007 @ 9:25 am

  10. Hey Nitin,

    Manmohan also wants the private companies to build public-private partnership in higher education, see his address in Goa:
    http://pib.nic.in/release/rel_print_page.asp?relid=17488
    I was there and was heavily disappointed. It appears like the government just wants to share responsibilities and not the taxes it collects. Where does the government money go? How is allowed to abdicate (if I may say that, since there are not visible results) all responsibilities?

    Comment by Ashish — January 6, 2007 @ 7:44 pm

  11. It is completely a failure of the government. It is not correct to blame the government for everything which is wrong. There are many examples where people self-help groups have done wonderful works without government aid. People should understand now that they should take the initiative first and then ask for the government aid.

    Comment by Deepali — January 17, 2007 @ 3:32 pm

  12. Here’s a story thats a pointer to badly aimed govt. aid. Theres a maid in my colony who gave up her shanty to the Slum Rehab Authority to move to a distant suburb where she was allotted a pucca house and a water tap in the house. Now the maid’s made her son and his family move to the suburb but the lady herself moved to the servants quarters at her employers (of 20 yrs) home.

    Now, this lady continues to hold both a ration card and a voter id card of her old home and NOT of either her new home (its in her name jointly with her son) or her employers home . Its been 2 years now and the lady recently voted in a booth of an area she does not live in anymore with no one questioning her. Did the SRA write to the Elec Commn. to cancel or transfer her voter id ? And did they inform the Rationing Office? This lady collects her kerosene entitlement from the ration shop as usual and then sells it in the open market.

    Sure this lady makes a little extra money that is welcome relief and i dont blame her for not bothering to inform any regulatory authority. She (and i !!) probably figures they’ve given her enough grief of the past 30 odd years !

    But net net, some really destitute family somewhere is missing out. And this is why its better to pay cash to the needy rather than spread the subsidy across the board !

    What say Dr. Singh ??

    Comment by Ila — February 13, 2007 @ 9:13 pm

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