The Indian media, analyst community and various other frequent providers of sound-bytes think and operate in waves; a couple of months ago, the wave was “fractured mandates”, then it was the IPL and now, the new buzz-word seems to be “Reforms”. Reforms are the flavor of the season, these are acts that shall spectacularly take India to eternal greatness. But it you ask people, what exactly do they mean by reforms? One doen’t get very clear answers. One usually hears specific steps like allowing or increasing FDI limits in a few sectors like retail and insurance, allowing foreign banks in India and/or allowing firms to “hire and fire”employees at will. While these might be important (and that is a matter of debate), these are all specific steps that a government could decide to take in order to build investor confidence or improve efficiency in specific sectors. These answers don’t go anywhere towards elaborating on the concept of reforms.

A government aspires to (atleast should) increase economic growth, improve access to social infrastructure like education and healthcare, build physical infrastructure like roads, ports and airports and largely, facilitate improvement in the standard of living of each of its citizens while controlling inflation, maintaining fiscal discipline and safeguarding the environment. This goal of achieving so as to say, a “higher state of development”  is the end.

Reforms, on the other hand, are specific measures that a government takes to move towards this end, in other words; these are the means towards that end. What should be a government’s objective is an important question, one which many in the domain of economics and politics have tried to answer. Should it be GDP growth? Should it be a reduction in inequality? Should it be  increase in employment? Is growth the same as development? These are all important questions for a government, and the answers it chooses should dictate the course of “reforms” for that government. (I personally favor the “Capability” approach pioneered by Amartya Sen, which says that the purpose of government should be to increase “capabilities”, capability being defined as the ability of each individual to live a life that she aspires to) But that’s a separate subject.

In our public discourse, we seem to have taken reforms itself as the end, so you hear about all the specific steps, but not about what objective they should serve. Also, reforms have taken on a very economic meaning- almost everyone you ask will mention specific economic measures, be it for increasing investment or efficiency. As if, all that is wrong with India can be fixed by allowing FDI in a few sectors. This is a classic case of confusing the means with the end. This confusion is good for the government as it allows the government to use opposition to these measures as an alibi for not taking any action. It allows governments to say we couldn’t do anything because our allies opposed it. And because the public completely buys this theory of reforms being these five or six measures, it doesn’t think too much further about it.

However, if one were to look at reforms as steps to achieve a broader end objective, one would realize that a government could do a lot more; measures which would go a long way in improving the condition of the people, measures which will not be opposed so strongly and measures which do not need the support of allies (because these would be executive steps and not legislative ones). All that these measures require is political will.  These measures broadly come in the following categories:

1. “Measures which increase the quality of interaction of citizens with the government”: Lets face it, we hate interacting with the government, primarily because that interaction leaves such a bad after-taste; be it the neighbourhood policeman or somebody in the district collector’s office or the municipal authorities. Corruption is a key reason. We don’t get affected by corruption in mega deals so much as we are affected by this day-to-day corruption in small amounts. Measures which could come in this sphere include police reforms, administrative reforms by improving the functioning of the public service, a more stronger anti-corruption law and steps towards making the bureaucracy more responsive to the needs of citizens.
2. “Measures to improve the sanctity of the rule of law” : Our courts take ages to decide a case, the probability of being convicted during one’s own lifetime is so low that the threat of conviction is hardly a deterrent. The courts at the lower level suffer from corruption, enforcing contracts can be a pain thereby increasing transaction costs at every level. Measures that need to be taken include judicial reforms by increasing the number of fast track courts, putting a limit on the number of hearings for a case, a mechanism to allow out of court settlements and more accountability on the members of the judiciary.
3. “Measures to enable optimal use of land”: Land is a key resource which needs to be deployed to its most efficient use. But the obsolete and oppressive nature of laws surrounding tenancy, land acquisition, land ceiling are hindrances to the efficient use of land. Land reforms therefore, are a key area for action.
4. “Improving the quantity and quality of our education system”: In India, too few people have access to basic education, there is a huge gap between our elite institutions of higher education (which again, seem to be too few in number) and the rest of our institutes and the quality and relevance of our vocational education is abysmally low. It is horrendous and shameful that Indians are subject to racial attacks in Australia; it is equally shameful that they have to go there in thousands to second rate institutes at high costs. Measures to improve the quantity of our basic education and the quality of higher education, therefore, are key.
5. “Measures to improve the functioning of our economy and financial sector”: These include steps to improve the functioning of our delivery sytems, to improve the functioning of the Public Distribution System and to remove leakage from the system (remember the famous 15 paisa argument). These also include steps to boost specific sectors such as improving generation capacity in the power sector, going further in separating transmission and distribution from generation. Financial sector reforms like improving access to formal banking in rural areas, promoting microfinance, taking steps to reduce political interference in the granting of loans by public sector banks, taking steps to reduce the cost of debt for Small and Medium Enterprises are equally important. Financial reforms should not just imply allowing M&A in the banking sector and allowing foreign banks to set up shop.

This is not an exhaustive list, maybe there cannot be one. What is important is that one should look at reforms as means to the end of providing every Indian with a decent and respectable life. Reforms are not an end in themselves and they certainly should not be actions taken just to keep stock markets and a few investors happy.

(Over the next few articles, I shall be talking about specific reforms – some which should be given more importance than they are, some which should be looked at with a lot more circumspection and caution than they are and others which should be outrightly rejected. These include judicial and police reforms, reforms in administration and bureaucracy, reforms in education and economic & financial reforms)

If you like your posts, do become our facebook fan. Thanks for visiting!

Related posts:

1. “Real” reforms: Delivering justice in India
2. Eradication of Urban Slums in India: A Pipe Dream?
3. A Holistic Approach towards Educational Reforms
4. When the Left is sometimes right…
5. Issues of today’s India