न्यायालयों में सभी स्तरों पर मुकदमों के अंबार हैं और जजों के पद खाली हैं। आंध्र प्रदेश उच्च न्यायालय के न्यायाधीश वीवी राव ने 2010 में टिप्पणी की थी कि लंबित मुकदमों के निस्तारण के लिए न्यायपालिका को 320 वर्ष लग सकते हैं। एक अध्ययन के अनुसार अदालतों में लंबित मुकदमों की संख्या तीन करोड़ से भी अधिक है, जबकि अकेले उच्चतर न्यायपालिका में यह आंकड़ा चालीस लाख के आसपास है। जाहिर है, हर स्तर पर मुकदमों के अंबार हैं, लेकिन जजों की कमी ही इस अंबार का कारण नहीं है।

Jobs not Quotas

Expanding quotas will not address frustrations arising from jobless growth

Gujarat’s announcement of a 10% quota for economically backward classes in education and government jobs represents a misdiagnosis of a pressing problem. The proposal is bound to be challenged legally as aggregate quotas will overshoot the permitted 50% mark. Moreover the agitating Patels, who the announcement sought to pacify, have dismissed it as “another lollipop from the BJP factory”.

The reality is that government cannot expand jobs fast enough to address contemporary society’s malaise: joblessness. Myriad agitations are only symptoms of the frustration among young Indians. If our demographic transition, where there is an ongoing surge in the working age population, is to translate into a dividend and not a nightmare, governments must address the challenge of joblessness. Over the last 15 years millions have moved out of agriculture, with only construction expanding noticeably to absorb the influx. Worryingly, manufacturing and services have not pulled their weight in job creation. For this, governments’ counterproductive policies must take the blame.

The nature of government intervention needs to be radically transformed. Right now, at both central and state levels, we are witnessing more government and less governance. In a complex world characterised by rapid changes in technology and trends, governments are not in a position to pick winners. Entrepreneurs are best placed to make these choices and governments need to get out of their way by removing barriers to economic activity. Simplification of regulations needs to be complemented by smarter regulation.

Enhancing the quality of public education, dismantling the licence raj shackling private education, skilling and physical infrastructure will help India grab opportunities. As wages in China increase, it opens the door for India’s export-led apparel industry and other labour-intensive industries, which can generate millions of jobs. A World Bank report, entitled “Stitches to Riches?” estimates that even a 10% increase in Chinese apparel prices can be leveraged to create at least 1.2 million jobs in the Indian apparel industry. This would be particularly good for women who are prolifically employed by the apparel industry, addressing India’s appalling gender inequities. But the government’s approach must be tailored to capitalise on available opportunities. For example India’s ruinous labour laws, which create a new caste system whose Brahmins are organised labour and whose quasi-untouchables are roughly 93% of the labour force consigned to the informal sector, must be reformed to give a better chance to the rest.

All elections together. Why not?

The Congress has the problem that it is still furiously in denial about its defeat. On the idea of simultaneous elections, it again stirred up Uttarakhand.

Prime Minister Narendra Modi has reiterated his suggestion that Centre and state elections should be held together. This is an idea whose time has come and we need a widespread and serious discussion in legislatures and in civil society about it.

The Congress has the problem that it is still furiously in denial about its defeat. On the idea of simultaneous elections, it again stirred up Uttarakhand. If anything, Uttarakhand has shown how much more mature Indian democracy has become. Thus a routine exercise of Article 356, like Indira Gandhi used to make, is no longer acceptable as states are jealous of their own democratically elected parliaments. Anyway, Modi would need four terms as PM to break Indira Gandhi’s record on Article 356.

The beauty of the proposal of simultaneous elections is that it may also solve the anomalies created by Article 356. As I have argued just recently, the idea that the Centre can overrule state governments is anti-federalist. If the Central government cannot similarly have President’s Rule imposed, then why should any state suffer the burden?

Simultaneous elections assure that the Centre and the states are on a par. Of course, it will revolutionise politics since India will not be in perpetual election mode. That will allow governments at all levels to concentrate on policy-making.

It is however not easy to accomplish. Indian democracy is built on the Westminster model where governments can be removed on a no-confidence motion. That is a guarantee that the government enjoys the confidence of Parliament, which represents the people. If the government does not have the confidence of Parliament, it has to resign and new elections have to be called.

Simultaneous elections can work only if each and every government lasts five years regardless of confidence. This seems to contradict the very principle of democracy. However, in Westminster itself, there has been legislation during the last coalition government of Conservatives and Liberal Democrats which offers a way out. The Liberal Democratic Party as a minority party has been always radical on political matters, especially voting systems and the quality of democracy.

Thus in 2011, soon after the coalition government was formed, Parliament passed Fixed-Term Parliament Act 2011. The Act stipulates that elections will be held every five years on the first Thursday in May. A government in office can only be removed and fresh elections called if either by a two-thirds majority of all members, including absent members, Parliament decides to advance the date of election or if by the same sort of two-thirds majority, Parliament passes a no-confidence motion. If this motion is not reversed within a fortnight by the sitting government, also with a two- thirds majority, then new elections have to be called.

Thus every government can last full five years unless it has a two-thirds majority against it. This is a tough but fair rule. In Indian conditions, one could modify it by putting the bar at 60 per cent. But the idea is that elected governments should not be lightly dismissed.

The UK has not extended this principle to the regions as Parliament at Westminster does not have the power. For India, any such Act would require re-examination of Article 356. That cannot be a bad thing.

Cart Before the Horse?

The easier option of consumption-led growth may not be best for Indian economy

Post the global financial crisis, received wisdom has it that while China needs to rejig its growth model away from excessive dependence on investment towards more consumption, India needs to focus more on investment. But eight years after the crisis, what we are seeing is more of the same.

According to Singapore-based financial markets consultant Anantha Nageswaran, the rebalancing from investment to consumption-led growth that the Chinese leadership vouchsafed in the aftermath of the crisis has not happened. Instead, loans to the property sector are driving economic growth in China.

A Pinch of Ajinomoto

Given how little the outside world really knows about developments in China, any statement about Chinese growth must be taken with a pinch of salt. Nonetheless, the reality is China has shown a unique ability to tide over crises, and by that logic, it should be able to tide over the next one too. The same cannot be said with equal vigour about India.

Not only are we much poorer — the average Chinese is four times richer than the average Indian — but the difference in our political systems and the underlying tensions in our social fabric raises stakes much higher. Hence the need to pause and reflect on the wisdom of pinning our hopes on a consumption-rather than an investmentled model of growth as a means to sustained, higher economic growth.

What is the difference and why is it important? Consumption-led growth relies on higher consumer spending — via the Seventh Pay Commission largesse and one rank, one pension payout, for instance — to raise aggregate demand and lead to higher investment and faster economic growth.

Investment-led growth, in contrast, relies on investment to create new capacity. This, in turn, creates more employment and hence higher demand, while simultaneously, increasing productive capacity. As supply rises in tandem with higher demand, growth picks up.

That’s in theory. In practice, things may turn out a bit different. But both in India as well as globally, experience has shown that in the long term, economic growth is likely to be higher and more sustained if it is investment-rather than consumptionled.

In the short term, moreover, consumption-led demand could result in an increase in imports (in response to higher demand) and, possibly, a higher current account deficit as well. In the long term, it could also lead to inflation, unless there is sufficient spare capacity in sectors where there is more demand or where investment has created additional capacity.

Else, as economic recovery begins, demand pressures from rising incomes and the sudden release of pent-up demand could, in the absence of an adequate supply response, lead to overheating of the economy and inflation. As we in India discovered to our cost earlier when we tried to put the cart before the horse.

The trick, therefore, is to ensure that supply rises in tandem with demand — a tall order at best of times. In a large, complex economy, it is incredibly difficult to fine-tune demand and supply. While demand increases almost instantaneously in response to higher salaries, for instance, supply increases after some time. Leads and lags are inevitable.

Banks, Lend Me Your Money

The job of policymakers, therefore, is to keep an eye on both demand and supply-side dynamics to reduce the gap as far as possible (read: ensure investment picks up). Given the government’s limited ability to invest in view of its fiscal compulsions, this means investment must come from corporates. Which in a bank-driven economy like ours means credit must flow from banks to corporates.

And in the absence of term-lending institutions like the erstwhile Industrial Development Bank of India (IDBI), to infrastructure as well. It is naïve to expect that corporates will be able to source all their needs from the corporate bond market.

Unfortunately, bank credit data shows most loans going to retail consumers, not corporates. During April 2015-February 2016, retail loans grew close to 20% while total lending grew at barely 10%. This might keep individual balance sheets in pristine shape but does very little for the macro economy — questioning, as State Bank of India chairperson Arundhati Bhattacharya pointed out, the wisdom of the push to retail lending.

With overleveraged corporates, unwilling to invest, and bank credit not forthcoming, gross fixed capital formation has fallen to new lows. From a high of 33% in 2007-08, gross fixed capital formation is now less than 30%. This must be reversed if higher consumption is not to lead to overheating and inflation.

Both government and RBI have a role to play here. Government by facilitating policy and removing bureaucratic hurdles. RBI by ensuring that credit to industry is not hindered by short-sighted directives that could have unintended consequences.

Possibly, by also revisiting the advice Prime Minister Manmohan Singh had given D Subbarao when he took over as RBI governor, “[In the RBI], one runs the risk of losing touch with the real world.

With your mindspace fully taken up by issues like interest rates, liquidity traps and monetary policy transmission, it is easy to forget that monetary policy is also about reducing hunger and malnutrition, putting children in school, creating jobs, building roads and bridges and increasing the productivity of our farms and firms.” Amen.