Election phase 2004 ended, Sonia Gandhi came to power. Far from viewing liberalization as a major success, she portrayed India as tarnished, not shining, under Vajpayee. Her focus shifted from liberalization to welfarism. Bureaucrats got the signal, “Don’t liberalize more”. Thanks to earlier reforms and global buoyancy, GDP growth soared to a record 8.5%/year, but Sonia de-emphasized this.
Next came the financial crash of 2008-09 widely blamed on excessive deregulation and corporate greed. The world over, an outcry began for stiffer regulation and more controls. This had strong echoes in India too. Liberalization was seen as having gone too far, even though it was half-baked in India compared with the Asian tigers.
Chidambaram and Manmohan Singh endeavoured mightily to revitalize decision-making since late 2012. They devised the Cabinet Committee on Investment to spread the responsibility for decisions among relevant ministries, reducing risks for any one minister or bureaucrat. But though they cleared a mammoth Rs 6 lakh crore worth of projects, there is still no boom in capital goods or construction. Implementation paralysis continues because bureaucrats still find political signals mixed, and political protection inadequate.
By itself, the May election will not be a game changer. A fragile coalition won’t have enough unity of purpose to provide clear signals to the bureaucracy. Ministers in a fragile coalition may seek quick money in the short time available.
A new government with a substantial majority and clear policies is required to send bureaucrats the signal: “Fast implementation is safe, will be rewarded.” The new government must be seen focusing on economic revival, not black money: that itself will curb court activism. It must protect bureaucrats not guilty of personal gain in scams. It must promote decisive bureaucrats and sideline ditherers. That will end implementation paralysis, and revive fast growth.
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