India: Learning to Collaborate, Learning to Implement

This is part three of a four-part Globalist Paper on India’s future. Return to part two.

The first requirement for faster action for change in any direction is the recognition of the need for change in that direction. The second requirement is to have the means to accelerate the action.

Like the appearance of the green shoots of grass beneath the early morning frost that poet Iqbal evoked so eloquently, change is appearing around the three leverage points of governance that the India scenarios have analyzed.

Now Indians must walk more firmly and faster along this path. Will they? Or will India’s policies and projects be mired in contentiousness and confusion?

Nobel Laureate V.S. Naipaul’s early books were acidic and despairing commentaries on India, such as An Area of Darkness and A Wounded Civilization. However, when India’s economy began to be opened in the late 1980s, Naipaul wrote a book with hope for the country’s future, with the title India: A Million Mutinies Now.

What Naipaul heard then was a new awakening of India’s democracy and its economy. 25 years have passed since that awakening. If Naipaul were to write another book on India now, the title could well be India: A Million Bottlenecks Now.

A million bottlenecks

Contentiousness among stakeholders has stalled many economic reforms and large projects in India in the last five years. Reforms to allow more foreign investments in the retail and financial sectors have not progressed. Plans for steel, power and aluminum mega-plants are stuck.

With investments drying up, a high-level Cabinet Committee has been set up very recently to unclog bottlenecks for major projects. Investors have welcomed the government’s efforts, though many say these efforts are too little and deeper reform is necessary.

Coordination between the government’s many departments is tied up in red tape — literally, in paper files tied in red tape, moving up and down ministerial silos and back and forth across them, as they used to 100 years ago.

The Indian government’s excruciatingly slow decision-making processes must be reformed. They need to be re-engineered to fit 21st century global realities. Who will be the best reformer and the best manager? Who can get things done?

Shaking up government

This will be a key focus of the next general elections. The brake on India’s growth is being highlighted in the public discourse. The electoral process will judge different parties by the solutions they offer.

Buried within the clutter of schemes, numbers and budgets in India’s voluminous 12th Five Year Plan is a remarkable plan to create an India Backbone Implementation Network (IbIn).

This plan modeled along the lines of the Total Quality Movement (TQM) that transformed Japan after the Second World War from a nation that produced shoddy and cheap products to the hallmark of quality in most industries.

The TQM movement disseminated techniques for people to improve systems they were a part of. Application of these techniques enabled a nation-wide transformation within a few years.

Similarly, India’s IbIn will propagate techniques to convert contention into collaboration and confusion into coordination, thereby enabling intentions of Indian leaders to convert into implementation. IbIn is an innovative idea and has grown fairly rapidly since its launch earlier this year into a few healthy saplings. It must spread and grow into a national movement.

Now to the numbers

There are many early signs that the Indian system has begun to turn around the critical leverage points that will make the economy grow. However, economists want numbers. They want to know what will be the growth rate of India’s GDP for the next ten years.

The Planning Commission asked the National Council of Applied Economic Research (NCAER) to use the insights from the scenario analysis to calculate what would be India’s growth rates in the 12th Five Year Plan in the three different scenarios – The Flotilla Advances, Muddling Along, and Falling Apart.

Economists find it difficult to include the quality of institutions and the pace of implementation of change into their calculations, even though these are two fundamental dimensions on which the three scenarios differ. Institutions and Implementation are concepts that are not easily quantifiable. Therefore, economists invariably exclude them from their econometric models.

Economists may be aware that the outcome ‘e’ is the result of variables ‘a’, ‘b’, ‘c’ and ‘d’. If variables ‘c’ and ‘d’ cannot be quantified, they are left out of the equation. No wonder predictions of what ‘e’ will be can be quite wrong.

Including more variables

NCAER found some ways to adjust its models to include the influence of Institutions and Implementation on the purely economic numbers — investments, savings, outputs and GDP growth.

NCAER predicted that in a worst case scenario, the growth of India’s GDP would fall below 5%, if India’s institutions were not reformed and implementation of policies and projects was not improved. It has fallen to 5%, partly due to the global downturn, but largely due to the internal constraints that the government is now trying to address.

It is noteworthy that NCAER had made this prediction even in 2005 when it was asked to estimate the economic consequence of another set of scenarios of the Indian economy.

At the time, those scenarios were prepared by the World Economic Forum (WEF) to respond to the needs of some of its members who were skeptical of the BRICs forecasts. These members felt that the BRICs predictions of China’s and India’s and other countries’ long-term growth did not factor in the effects of political and social changes.

Therefore, the WEF produced three scenarios of India in 2005 considering social and political developments in the countries also and published them in a document called “India and the World: Scenarios to 2025.”

Rising and falling growth

The WEF (and NCAER) forecasted that India’s GDP growth rate would rise to over 9% within three or four years (as it did). They also predicted that the growth would fall back towards 5% within seven or eight years (as it has) – if institutional reforms were not made in time.

The 2005 WEF scenarios were built upon insights from another set of India scenarios prepared even earlier, in 2000. Those foundational scenarios had examined more deeply the effects of different models of large systems’ governance and leadership in India.

These scenarios were summarized in a report, “Scenarios for India 2010: An Invitation to Make a Difference, published by the Confederation of Indian Industry (CII)”.

New governance structures

The strong threads running through all three sets of scenarios are the calls to ‘re-form’ structures for the governance of democratic, diverse, demographically endowed India.

Governance structures must be reoriented from centralization to localization; from silos divided by sectoral and organizational walls to laterally linked partnerships across them; from systems designed principally to monitor and control to systems that enable more innovation and learning; and from governance by pronouncements from the top to governance by listening to voices within.

The need for reforming governance is now appearing center stage in the national political discourse from the shadows in the wings. The process of reform will now gain speed.

Continue to part IV.