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Time to change lanes

Venugopal C. Govind on rejuvenating the country and reorienting the profession.

WE are at one of the most difficult times in the history of our nation. The value systems we have built over centuries seem to be cracking. The identity, unity and integrity of our country tend to be in peril. Many of our well-meaning instit utions seem to be slipping. The Constitution, the legal system, the political set-up, the bureaucracy, have all failed us. The much-lauded economic reforms have not made the expected impact. Dr Manmohan Singh who anchored the reforms, said recently: ``The economic situation in India is far from what we had aspired it to be...The investment rate has been going down continuously...and there is no assurance from any quarter that it would look up in the near future. The only hope lies in agriculture growth...But that is not what a country like India can rely upon. Sustenance of agricultural growth is far from reality due to the discouraging efforts in modernising industry and creating the support infrastructure...I believe t he worst part of our economy is that the business confidence is at the lowest ebb...First and foremost, we need to improve the quality of governance in this country. Making a mockery of the system, not enforcing the law, letting respec tive State governments play havoc with law and order, having non-uniformity in implementation of law depending on the status of the persons involved and letting loose an era of extortions either through direct ransom or through bribery in e very field of life, including the judiciary, have played havoc on the minds of the people...I have a strong belief that politicians, bureaucracy, judiciary and labour union leaders that constitute a very small fraction of Indian population, ha ve failed this largest democracy in the world, both in economic as well as social terms.''

Pandit Jawaharlal Nehru spoke of India's ``Tryst with Destiny''. Gandhiji dreamt of an united India, where all the people, irrespective of their caste, creed or community, lived together in harmony, amity and peace. It continues to be a long dream, of al l of us, even today!

India through Socialistic planning

We made a fairly good beginning. We laid a strong foundation for economic advancement through well-laid Plans, with centralised planning and due emphasis on development of basic infrastructure, core and heavy industries to form the backbone of industria l growth; we laid adequate focus on agricultural and rural development, irrigation and power. In the first decade or so after Independence, India made good strides in getting into grips with its serious problems of poverty, hunger, malnutrition and absen ce of essential basic amenities of heath, hygiene, sanitation, water, clothing and housing. The Nehruvian era witnessed the emergence of a socialistic pattern of society founded on Mahalonobean economic principles.

But from the 1960s, India stopped growing at the desired levels. The annual economic growth hovered around low levels. The resource mobilisation as also investments in core and vital sectors, such as industry and infrastructure were inadequate. India fac ed mounting fiscal deficits year after year, external borrowings increased steadily, foreign investments were far below required levels. Absence of investments, modern technology, advanced equipments and tools, lack of quality, standards and automation, low productivity of labour and machine, introduction of controls, licences, permits and regulations leading to lack of private enterprise and initiative, failure of public sector -- wherein there was concentration of core and heavy industries -- to perfo rm and deliver, wasteful red tape and incompetence of bureaucracy, degeneration of political leadership failing to deliver efficient, and successful governance -- all found India struggling hard, as one of the least under-developed nations in the world b eset with multifarious problems leading to sub-human living standards for the poor millions.

Economic growth in the 1970s as also the 1980s continued to be unsatisfactory. There was been no significant accretion to the wealth of the nation with the GDP growing at a slow pace of less than 3 per cent annually. Exports did not grow in real terms, w hile there was marked increase in value of imports in dollar terms. The trade deficit continued to widen. The oil crisis brought the foreign exchange reserves tumbling down, external debt recorded constant increase, the heavy debt-servicing resulted in m ounting fiscal deficit. The management of the economy left much to be desired. Added to this, the concerns of internal and external security had become serious, involving heavy expenditure on Defence. Internal disturbances and political problems, coupled with the worst forms of insurgencies and terrorism, hampered all constructive economic activities. Corruption at practically all levels of Government raised its hood of menace in dangerous forms and developmental projects and programmes failed to impac t, with far too insufficient allocation of funds and serious instances of misappropriations and diversions. Inflation reached double-digit levels, foreign exchange reserves dropped to dangerous ebb, exchange value of rupee was depreciating fast and inter national credibility and rating of the nation and its economic institutions received heavy beating. The survival of the nation itself was becoming a big question mark: Will India fall apart ?

International scene

Almost during the same period, the world economy was recording a fair measure of stability and growth, barring certain exceptions. The advanced industrial nations -- US, UK, Japan, Germany, France, Canada, Australia and most other European nations were o n a path of steady growth. The US led the remarkable economic resurgence of the West, with its economy growing at a commendable pace. The 1970s and 1980s saw many backward countries moving over to liberalisation and globalisation by opening their economi es to global trade and initiating privatisation and encouraging private enterprise -- China, South Korea, Malaysia, Indonesia, Singapore, Taiwan, Mexico, Brazil, Argentina and even Sri Lanka -- moved over to the path of free market economy through libera lisation. This led to substantial direct foreign investments, flow of foreign capital and technology into these ``new economies'' as a result of which most of them received a new impetus for growth and revival.

China, in particular, achieved amazing all-round growth with foreign investments surging ahead from a meagre level of below $0.5 billion in the 1970s to nearly $50 billion towards the end of the 1990s. The GDP and per capita income of most of these natio ns increased significantly and with that, the quality and standard life of large sections of the people too improved considerably. In this period of time, there were certain notable failures too, caused largely by the mismanagement of economic factors in the process of transition, leading to disintegration of the Socialist Bloc of nations -- particularly the USSR and East Germany.

India's realisation

By then, India too realised that it will have no existence or hope for survival in a world of growing market economy, forced with the situation of excessive foreign debt, dangerous fall in foreign exchange reserves, deepening erosion in exchange value of rupee and total decline in international credibility.

Over four decades of India's experiment of socialistic economic pattern did not lead to prosperity. Instead, India was pushed to the bottom. Here was one of the largest nations in the world, next only to China, groping in the dark, with nearly 50 per cen t of its population illiterate, 40 per cent living below the poverty line and close to 30 per cent people devoid of basic needs of life. Almost all segments of economy were struggling with antiquated systems, technology and equipments, low level of capit al investments, unproductive or idle labour wasting their precious time and energy. The nation soon became one big dump of scrap, filth and garbage replete with unhealthy standards of sanity, hygiene and health. India was a classic example of self-denial and self-depredation. We then eventually made the historic decision to go for economic reforms through liberalisation and globalisation. That was March 1991. It was 'now or never' for India, with no easy way through.

(Edited excerpts of the D. Rangaswamy Memorial Endowment Lecture, organised by The Society of Auditors, Chennai.)