India - Reform needs some 'vested interests'

Kanika Datta

The same week that Singapore hosted the first Formula 1 race under floodlights and on its city’s streets, Indian newspapers carried more depressing reports and photos about the state of the roads in Gurgaon. Yet, this satellite city to national capital New Delhi was once touted as the Singapore of India, a claim that is truly laughable today.
The difference between Gurgaon’s roads and Singapore’s — in fact, almost no Indian road would stand up to comparison — is also a measure of the distance India has to travel to bridge the gap in corruption, and, importantly, how little India’s political system has perceived the true benefits of economic reform.
Since it is unfair to compare Singapore — the size of a medium-sized Indian district — with a country as large and diverse as India, the analysis here has been restricted to Gurgaon. Gurgaon’s administrators seem to perceive no benefit in improving the quality of life and of doing business in their city. Singapore’s rulers and citizenry are almost obsessive about the optimum delivery of public services. They are attuned to this way of thinking because they have clearly enjoyed the benefits of vibrant business activity.
Gurgaon, with its sophisticated glitz-and-glamour apartment buildings and malls incongruously lining rural-quality roads, probably has more foreign headquarters per square km than almost any city in India. Like Bangalore and, increasingly, Pune, it truly represents the opportunities thrown up by economic liberalisation. The fact that its infrastructure would put a sub-Saharan African city to shame demonstrates that its administrators see little gain in turning this fast-developing conglomerate into a showcase for global investment (the argument applies no less to Bangalore and Pune).
Good roads and highways are the most potent symbol of a nation’s progress — a fact that US President Dwight Eisenhower understood well in the fifties with his enormous inter-state highway system project, and China grasped two decades ago. Conversely, bad roads are the most open manifestation of corruption in the public domain.
Poorly-built roads that get washed away by the slightest rain and that are repaired in the most rudimentary way brazenly show that some people in the PWD department and elsewhere in local government are making a lot of money. That no move is made to remedy this grotesque state of affairs implies that those in authority don’t particularly care who notices. And that’s simply because “wealth creation” from corruption still outpaces the prosperity that accrues from foreign direct investment. In short, India’s political system has no vested interest in economic reform, other than as a means of rentiering.
This anomaly showed in this year’s global Corruption Perceptions Index brought out by Transparency International. At a time when we hear overseas investors talk about the “India growth story”, the country has slipped down the rankings and is now at 85 — in the Asia Pacific region alone it ranks at 14 out of a sample of 32. In last year’s Global Corruption Report, India together with the Philippines stood out as the two countries in which corruption was expected to increase — 79 per cent of respondents polled by TI felt this way.
Scaled up to a national level, this lack of engagement with economic reform represents India’s biggest challenge. Though the government has moved out of large swathes of industrial activity and simplified approval procedures for foreign and domestic investors, the change has not taken root deeply enough to demonstrate that people — and politicians — stand to gain much more wealth if they improved the enabling conditions for industry and trade to flourish.
Indian states need to move faster with second-generation reforms to weed out the petty corruption that continues to make the nitty-gritty of doing business in India so frustrating. It doesn’t need a dismal ranking in the World Bank’s “Doing Business” ranking — India has slipped from 114 to 121 — to explain why so many domestic investors are looking outward for revenues and expansion or why outward FDI is outstripping inward FDI.
Singapore’s stunning exhibition of its capabilities on the Marina Bay Street circuit last weekend stands in dismal contrast to India’s inept attempts to persuade Formula 1 to stage a race. Singapore has the capability to host a race for the world’s most temperamental cars travelling at speeds of up to 300 km an hour on roads its people use everyday — and under floodlights. India’s largest cities struggle to provide its denizens with usable, adequately-lit roads for ordinary vehicles.
Singapore’s founder Prime Minister and current Minister Mentor Lee Kuan Yew and his family can certainly not be counted as saints. But this former socialist did fully grasp one practical fact: that in the long run, endemic corruption brings far fewer gains to anybody (his family included) than booming business activity. In contrast, India’s political class, mired in its confused ideologies, still doesn’t get it. The trouble is, only faster reform will correct this outmoded view of enrichment.