The Indian Economy Blog

August 16, 2007

Incentives vs Exhortations

Why strive for excellence when mediocrity will suffice?

You can’t blame Dr Manmohan Singh for telling us what the problem is. Soon after he took office, he told us that fixing the bureaucracy was crucial for India’s development. Last year, he said that the Naxalite insurgency is the biggest threat to internal security. And, now, in a Rediff article he tells us:

We cannot afford a ‘business-as-usual’ approach to any aspect of life. The world is changing rapidly and we must learn to keep pace. We have to do more to increase the productivity of every Indian, the productivity of our land and of capital.

Each one of us must set our sights higher and aim to be the best in what we do. Our schools and colleges must aim to be the best in the world. So too our businesses and laboratories. So too our services and utilities. I despair of the ‘chalta hai’ attitude of so many of our people. [Rediff]

It’s quite likely that his record on this front will be as dismal as on civil service reforms and the war on the outlawed Communist Party of India (Maoist), otherwise known as the Naxalites.

Here’s why. Because his government has done nothing to improve the incentives for excellence. Why would a marginal student aspire to be in the top 5% of the class if reservations guaranteed that person a place in an engineering college as long as he made the ‘cut-off’ for his community? And why would the marginal student in the engineering college attempt to score top grades, when quotas guarantee a government job? And why would the marginal government employee strive for excellence if promotions can be had with far less effort, as long as there is a quota?

Mercifully, there is no ‘chalta hai’ attitude in the private sector, especially in those segments that have been opened to global competition. That’s one part of India that is indeed striving for global excellence. But why would a marginal employee in a private sector factory strive for excellence when he knows that it’s virtually impossible to sack him for underperformance. Far from easing labour laws that not only stifle excellence but also prevent millions of people from securing employment, Dr Manmohan Singh’s government wants to introduce job quotas in the private sector.

Dr Manmohan Singh’s rhetoric does not square with the reality of his government’s policies: far from creating incentives for excellence, it is determined to creating an entitlement economy.

In a recent op-ed in Mint (via India Uncut), Ramesh Ramanathan, calls for “a national campaign that gets to every movie theatre and television channel, autorickshaw and truck, tea shop and paanwala, a campaign that exhorts individuals to think differently about how they approach their work”. But just like prime ministerial platitudes, mere exhortations are unlikely to do the trick. If excellence is what we seek, we must organise our society around merit. That will require the right incentives. It would be a much better idea if the national campaign is directed at the government instead.

No Comments »

  1. I dont think so that Our PM is only responsible of what govt does, its an team work.Its the ruling party ideologies that rules over the affirmative action.

    Being an democractic society our only and powerfull tool is to elect whom we think can do good to our society and not on the basis of personal selfish motives.

    Thus what is needed is to think nation as whole.

    Comment by Viplav Dave — August 17, 2007 @ 4:37 pm

  2. Viplav,

    I suppose you didn’t notice the irony of saying what you did in a post that says incentives matter, platitudes don’t :-)

    Comment by Nitin — August 17, 2007 @ 6:47 pm

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