Bimal Jalan at IIM-A on the inter-relationships between economics, politics and governance in India’s national life

Economics, Politics And Governance

The problem with the Indian economy is not that its market is less or more free, but that its freedom is in the wrong domains

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In my previous positions in government and the Reserve Bank of India, I had the opportunity to participate in the process of economic policy making and administration. More recently, I have had the privilege of witnessing the political process, at close quarters in Parliament. I would like to share some thoughts on the inter-relationships among three important elements of economics, politics, and governance in our national life.

Ever since independence, India has been fortunate in having top economists to advise the government in the process of planning and economic policy formulation. On the political side, we can rightfully take pride in our vibrant and functioning democracy. India was ruled by a single party with repeated mandates from the people for nearly 50 years after independence with some brief interruptions. During this period, these were a number of shortlived governments with varying mandates, but which nevertheless did their best to serve the country under difficult circumstances. Now, we have a multi-party coalition government, with vast differences in ideology and political beliefs among its constituents, which has been in power for six years.

In respect of governance, the administrative structure of India, with the so-called “steel-frame” of a permanent bureaucracy, has been the envy of the post-colonial developing world. Even after allowing for a considerable rusting and weakening of the frame, the governance structure at the Centre, states, districts, and panchayats remains largely intact.

Thus, we have had a fine combination of good economists, an operational governance structure, and a fun- ctioning democracy — all working together. Yet, the res-ults on the ground in terms of social or economic development since independence — leaving aside the most recent period — were rather disappointing. For the first 50 years after independence, India lurched from one crisis to another. We also had low growth, low literacy, and an abundance of poverty. The vision outlined in 1956 of a poverty-free India with full employment in 25 years, ie by 1981, still eludes us.

The question which puzzles me is why this combination of economics, politics, and civil service did not lead to the kind of results that the people of our country could have legitimately expected.

My feeling is that, while on the surface, three elements were working together, in a more fundamental sense, the reality was vastly different. There was, in fact, a substantial gap between what was considered to be economically sound and what was found to be politically feasible. Eco-nomic strategy seldom ref-lected our political or social realities or, if you will, real political considerations. Similarly, the administrative implications of policies were seldom considered or, when considered, did not affect, the actual evolution of economic policies or programmes on the ground.

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