Tuesday, September 17, 2013

The Right To Growth


      Economic growth represents opportunity. India’s Per capita GDP growth was 1.5% during the notorious License Permit Quota (LPQ) Raj from 1950 to 1980 (Nehru, Indira Gandhi 1).  The reversal of these failed policies instituted in the 1980s (Indira Gandhi 2 & Rajiv Gandhi) almost doubled the per capita growth to 3%. This was further raised to about 5% (1992 to 2012) by the reforms of the 1990s (Narsimha Rao, Atal Bihari Vajpayee). The decline of per capita growth to 2% in 2012-13 has come as a shock to youth who have grown up in the decade of 6% average growth. 
    The media exposure of high level corruption at the Center and pervasive governance failure across the country (States) has heightened the outrage against the government for depriving them of this new hope of a bright future. However, it should not be forgotten that corruption at the State level is a much earlier phenomenon and by now is so pervasive and entrenched that even the National media seem to take it for granted.  There is also a perception that the decline in growth is due partly to the indifference of the ruling party and its ministers, to the role of economic growth in creating opportunity for all, including generation of revenues so essential for enhancing opportunities for the poor through supply of Public Goods (public health, basic education & employable skills).  For instance despite decades of talk about supply bottlenecks in infrastructure, lack of productivity in agriculture, leakages in PDS-FCI, abysmal sewage systems there is little public evidence that ministers responsible for areas critical to growth and opportunity, are applying their mind and efforts to solving them.
  We need, “A Right to (8%) Growth Act” to ensure that government at every level from the Asha worker or primary worker in the village, to the humblest Babu in the Block office to the DC/DM at the district level to Chief Secretary of the State and all politicians holding office in State governments or autonomous bodies can be held accountable for economic growth.

China’s Party Led Growth

The Chinese experience suggests that this could be an effective way of achieving sustained development and faster poverty reductions.[i]  Since 1980, when the Chinese Communist Party (CCP) instituted market reforms, China has had an average per capital growth of 8.8 %, double the 4.3% average achieved by India.  One of the major factors has been its primary focus on economic growth for enhancing national welfare. The objective of maximizing economic growth has helped in achieving a very effective governance system that is highly decentralized in operation while maintaining the unchallenged authority of the General Secretary and the top organs of the party.  The basic objective of growth maximization filters down not only to every level of government and party but also to every State & provincial enterprise and party related enterprise. Within this overall objective, party cadres, government officials and enterprise managers are relatively free to experiment on the means to achieve faster growth.  More importantly they are effectively rewarded for achieving growth targets. The intensity with which local officials compete to attract investment and the red carpet they lay out for FDI is apparent to anyone who has visited an enterprise zone in China.  
The higher levels of the party continue to provide overall guidance on the broad directions of growth. For instance the growth objective was achieved by incentivizing overseas Chinese entrepreneurs in Hong Kong and China to shift their entire labor intensive export manufacturing facilities to special zones in China.  When this opportunity was exhausted they turned their attention to more sophisticated FDI from developed countries. When export opportunities in developed countries appeared to flag and the Asian crisis struck, the higher level direction changed to using Infrastructure investment and import substitution of the export supply chain to sustain high growth. Thus the use of growth achievement to measure the performance of party members and bureaucrats and to reward them appropriately through promotion and economic opportunities for their family members has allowed them to develop a unique blend of centralization and decentralization that has sustained growth for a historically unprecedented 30 years.

Growth Objective

    Though it is impossible to replicate the CCP controlled Chinese system in a democratic country, we can and should give much greater importance to the Growth objective and also use it to reward bureaucratic functionaries.  All public authorities responsible for licensing, permits, quotas and inspection would be judged by the growth of economic activity in their area. Electricity department could be linked to the growth of metered electricity sale and consequent increase in production. Similarly public health workers could be held accountable for the no of workers in their area falling sick due to waterborne or communicable disease and thus reducing production and growth.  Education departments would be judged by their supply of job creating skills.


In country whose politicians have always acted as if growth is something to be ashamed of it will not be easy to orient the system towards growth of the economy, jobs and  income and all the inputs that go into their creation. If the Right To Food Act can eliminate leakages, corruption & inefficiency in the PDS/FCI, as evidenced by the government’s calculation of fiscal costs, a “Right to (8%) Growth Act” can achieve wonders in eliminating corruption, improving governance and raising the rate of growth of the economy to its full potential of 8%.

PS: Twitter your support to  #RightToGrowth   @dravirmani .

[i] China’s Socialist Market Economy: Lessons for Developing Democratic Countries,” Working Paper No. 5/2006-PC, Planning Commission, June, 2006. http://planningcommission.nic.in/reports/wrkpapers/rpwpf.htm

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