VISION statements are the required first step. As any CEO of any firm will tell you, the employees need to know where we want to go. Do we want to serve fashion conscious customers or price conscious ones? Do we want to make steel or do we simply want to acquire iron mines and sell the ore? Do we want to hire high cost graduates or are we focused on low cost, but productive workers? People need to know the answers to such questions.

It is to the credit of our new government and its leadership that the broad contours of what we want to be and where we would like to get have been stated pretty succinctly, boldly, sensibly and with a fair amount of imagination – we want development for all.

Some of the characteristics of development have been spelled out: an India where everyone has a bank account, an India which is clean and devoid of litter and trash and where schoolgirls have access to functioning toilets are three good examples of the meaning of development in concrete terms.

The important means that we need to embrace in order to make this development journey are also getting articulated one by one:

* ‘Minimum government maximum governance’ is a very powerful statement. Given that we have had for years a government which has been running airlines, hotels, railways, coal mines and phone companies, when the said government has not been busy telling us the size of the football fields we require in our schools or how many forms in quadruplicate we need to fill, in order not to break obscure, confused and confusing laws, while the government is committed to running an increasingly chaotic, dysfunctional and non-performing police and court system, means that this vision resonates loud and clear with all of us.

* The fact that there is no conflict between being pro-business and being pro-people should be obvious. Without businesses there can be no consumption by anyone, rich or poor and of course no jobs for the jobless. And yet the previous dispensation with its shrill NAC, its shriller environment lobby, its hostile tax administration had been acting for years as if businesses were vaguely unpatriotic, except when they paid up Danegeld to the ruling powers.

* The simple statement that ‘making’ things in India is desirable is even more obvious. And yet for years on end, we as a country have been actively discouraged from starting factories, mining minerals, bending metal, extruding plastic – in short all the things that we require to do in order to make things.

* The fact that the responsibility for progress/development, whatever you may wish to call it, rests not just with the nanny state and its Gosplan commissars, but with the citizens is again a refreshing change. Families need to bring up their boys such that they do not grow up believing that raping and assaulting women is their birthright. Individuals need to start clearing up the litter that they are responsible for. And just to make this absolutely clear, the Kremlinesque Yojana Bhavan has been emptied of its omniscient elite who have successfully planned for more than six decades to leave us a poor and undeveloped country.

 

The interesting thing to note is that the new government states its vision and the means to achieve the vision in absolute terms, not relative ones. I have always respected CEOs who have stated that they want to give ‘good quality service’ to their customers. When they say that they will be the ‘best’, then the attention goes away from focusing on quality or on the customer. The attention turns to the competition. The game now becomes how to get the better of competition, rather than how to deal with customers. Despite their soft lefty credentials, it was the previous government which was hell-bent on getting India into that obsolete and pointless body – the U.N. Security Council. The present government seems clear that strutting on the foreign policy stage as a ‘leader’ of the Third World and as a member of various international commissions is of no consequence if we cannot build toilets, reduce litter, bring up our male children better, bring in more female children into the world, get all our people to have bank accounts, have more operating factories in the country and create an enabling and encouraging environment for people to start and run businesses right here, not in some more welcoming foreign neighbourhood.

 

The general approach of moving away from the ‘nanny’ state which sees its citizens as children and confines them to underdevelopment to an adult state which sees its citizens as having active agency, and which seeks to create an adult environment, where risks can be taken, progress may be conceived and simple concrete achievements can be made, is not just welcome, it is overdue and it is ‘necessary’. But statement of this general approach and piling up good intentions do not in mathematical terms, constitute the ‘sufficient’ condition. As in the world of science, the sufficient conditions make rigorous demands on us to deal with step by step details and with messy empiricism. Sixty years of foolish statism with a short, half-hearted Narasimha Rao-Vajpayee interregnum has created a situation of maximum bad government, minimal governance, hostility to economic activity and mistrust and cynicism across the country. This has happened because of crippling details and it is these paralyzing details that we need to deal with if we are to make an impact beyond the statement of good intentions.

Consider some minimal anecdotal evidence. I teach a class of sixty to seventy students every year at IIT Bombay. About twenty per cent of them do not want to take up corporate jobs. They want to become entrepreneurs. When I sit down to have coffee with them, one will talk about starting a data analytics company, one will talk about doing something in E-commerce and one will talk about putting out into the market some fancy mobile telephony application.

With some trepidation I raise the question of why no one is considering starting a factory. They don’t bother to laugh. They just smile, thinking and, for that matter, knowing that this is a ‘trick question’. If you wish to start a factory in Maharashtra, whose leaders have told us all along that it is an industry-friendly state, the first step is to apply to MIDC (Maharashtra Industrial Development Corporation), which may in the distant past have actually wanted to ‘develop’ industries, but which today would be a source of comic relief, if the situation were not so dire, so dismal and tragic. Getting an approval means little by itself. You need some fifty more approvals, virtually all of which are sequential as nothing happens in parallel. Department D will not look at your application unless departments A, B and C have approved it or at a minimum given it an ‘NOC’ (the expression ‘No Objection Certificate’ exists only in India).

 

I have done business in a dozen other countries and not come across this expression in any of them. The system is telling you that dozens of departments and agencies have the right to ‘object’ to your fairly innocuous, and probably economically and socially gainful proposal of starting a factory. Incidentally, there is absolutely no point in not going through the MIDC. If you attempt to do so, a dozen additional approvals/NOCs are required. Some two years after you first submit the MIDC application, you may turn up at a ramshackle, rundown, decrepit industrial shed some twenty miles outside Nasik or Sholapur or Aurangabad. There will be no water connection and the local electrical sub-station has long ago cut off supplies to your building.

As you stand there, thinking of the next steps, even before you have had time to let things sink in, you will have visits from the inspectors of sales tax, VAT, service tax, pollution control board, labour welfare board – all creations of the independent secular socialist republic of India; you will also have visits from either functionaries or middlemen representing the citizen-friendly offices of the tehsildar, the sub-registrar, the registrar (one wonders what exactly gets ‘registered’ by the great sub-registrar and the greater registrar), the deputy collector and the collector – all creations of the late unlamented British Raj, which we have retained, nurtured, expanded and glorified.

 

The ‘maximum state’ has so intimidated you that you want to give up. But, being young, energetic, enthusiastic and idealistic, you try to make a go of it. For the next six months you have to desperately keep telling the electricity board, the MIDC layout authorities and various others that you are not responsible for the fact that the previous lessee of the ramshackle shed did not pay his or her dues. Nobody believes you. Everybody assumes that you are some crook who has somehow wangled a shed, either through bribery or through undue influence or both. No one cares whether you get the factory started or not. The fact that if the factory gets operational, government revenues would go up (the great sales, VAT and service taxes) is a matter of supreme indifference to the functionaries of the state. They have no interest in getting potential new taxpayers on board. They are incentivized to harass existing taxpayers and squeeze the maximum revenue out of them.

It is at this stage that you decide to listen to the advice given to you by a classmate. Just take the soft copies of your product design documents, get on a plane and get to China. There, willing and able engineers who have running factories, and who can start new ones in a week’s time, can look at your product, make a prototype and go into scale production in a month’s time. Among other things, who wants to waste the rest of his or her life in dusty, dirty, remote, depressing MIDC sheds? Let’s get a move on!

 

Consider the other option. If you want to start a data analytics firm, all you need is to rent a room and some furniture and have half a dozen computers. You require virtually no approvals. And the financials are interesting: you may not become a corporate giant; but you will probably be cash flow positive in six months. Is it any wonder that we have become an economy of services, rather than of manufacturing?

There is nothing wrong with the service economy. In this case, jobs have been provided to half a dozen middle class graduates who are good at English and are computer savvy. They are part of the growing middle class and providing them interesting and fulfilling jobs is by no means a trivial matter. However, the only job for people with lesser qualifications, is a part-time one for a cleaning lady and perhaps a messenger who doubles up as a security guard. The large numbers of Indian youth, who cannot get into analyzing big data right away, stand excluded. They would benefit from factory jobs that our government departments are hell-bent on not allowing to be created.

There is another risk we run: we are not an advanced country. If we make a conscious choice (and our government departments and agencies seem to have made it), not to bend metal, extrude plastic or solder widgets, and are determined to have only elitist mobile applications as our principal economic activity, we run immense risks of becoming lopsided as a country. After all, Guatemalans were and are reasonably productive; the reliance on a single fruit, the banana, for their entire economic well-being made them and makes them vulnerable. Is this the way we want to go?

It is not just setting up a factory that is difficult. To build an apartment block with twenty flats takes three years of multiple approvals and NOCs. Ironically, the rich have it easy. Building a farmhouse requires no approvals and is encouraged and for all practical purposes, subsidized. In Rajasthan, which is supposed to be a tourism friendly state, one requires more than fifty separate approvals to start a hotel. And once you have started it, the denizens of the vulture state are in and out every day, collecting their rents and persecuting you.

 

The traditional Indian answer has not been to undertake the hard work to eliminate, simplify or make parallel the fifty approvals or to dispense with the perverse NOCs. Instead, we have come up with a smart semantic trick. We will offer a ‘single window clearance’. This becomes a joke, simply because behind the so-called single window, the myriad permissions still exist. That is why despite having an MIDC, whose ostensible reason to exist is to ‘develop’ industries, we are never able to exit the Alice in Wonderland world of India’s laws, rules, regulations, inspections, approvals, conditional approvals, NOCs and conditional NOCs. I am reminded of the time when the wool with which my mother knitted would get entangled. There was no way to unknot and disentangle the stuff. This is the entangled big government problem we face.

This then is the world faced by the proverbial small and medium businessperson in this country when examined in detail. If he or she chooses not to emigrate but stay in business, there is a simple alternative. Just do not seek approvals and NOCs. Casually and with nonchalance, break the law. Let the vulture inspectors descend on you and feed them as best as you can. You can easily be in business for decades this way. You can steal electricity from the grid, release polluted substances into the field next to yours, understate your tax liability and just merrily become a productive outlaw. This is the equilibrium that we have all adjusted to. This, in short, is the minimal to non-existent governance situation that we face.

 

And our feeble attempts at solving problems with imaginative solutions have led us nowhere. Consider school toilets. The 72nd amendment of our Constitution was supposed to empower village self-government through the ancient institution of panchayats. These have become hotbeds of corruption and paralysis. We can easily build toilets for girls in schools. But the panchayat does not believe that it has an obligation to supply water to these toilets. So these dirty, stinking buildings are soon abandoned. Some contractor (perhaps the panchayat president’s brother-in-law) has made money building that toilet and has moved on.

The Commissars at Yojana Bhavan are happy. They can attend conferences in Stockholm and proudly state that India has built so many toilets for schoolgirls. On the ground, except for the fact that some contractors have become rich, nothing has changed. One notices that panchayats have quickly and ably learnt the fine art of persecution and rent collecting. They are not present when toilets get dirty. They are present as soon as a khaata/satbara/patta needs to be updated or a building plan needs to be sanctioned. They are the latest ‘collectors’ of protection money in our hapless country.

The problem is in the details. How does one implement the nice visions? How does one translate good intentions into actual productive economic activity? Only one of our leaders understood the nature and extent of the gridlock we have inflicted on ourselves. At one stroke, Narasimha Rao eliminated industrial licensing, MRTP restrictions, backward area requirements, FERA and the Controller of Capital Issues. He did not say that licensing will stay, but now you will get a single window clearance. We need a repeat of the Narasimha Rao exercise, state by state, sector by sector. In other words, my mother’s knotted wool needs to be cut; it cannot be painstakingly disentangled.

 

Consider the simple issue of zoning. Why cannot the whole country, with the exception of forest lands, be zoned for mixed use: agriculture, commercial use, residential use, office use and non-polluting industrial use? We do this illegally anyway today. Why not make it legal? The fixers and middlemen who specialize in converting ‘A’ to ‘N-A’ (agricultural land to non-agricultural land) would be out of jobs. But should that really worry us? Why cannot two states ruled by the party currently in power in Delhi just do this?

Let us see how this experiment goes. Consider sales tax, service tax, VAT and the proposed GST: why not go for complete self-certification and statistically sampled inspections, instead of having inspectors? Why cannot our Income Tax Department and our Customs and Excise Departments simply announce that they will not appeal any case that they lose at the Tribunal level? This would make us not just a business friendly but a citizen friendly country. It would eliminate thousands of litigations and thereby free up the courts to improve the elusive governance that we seek.

Why cannot it be a simple rule that no two government departments or agencies will sue each other beyond the Tribunal stage? Is the government scared that its friends in the legal fraternity will protest? Why cannot entire government departments, ministries and agencies just be done away with? Are we seriously missing the comical Planning Commission? Do we need both a TRAI and a DOT? If we are serious about our environment, why not set up a SEBI-like EPA and eliminate the Ministry of Environment and Forests? Of course, there is no point in setting up an EPA and keeping the MOEF alive. That would be like allowing both the factories inspector and the tehsildar to persecute you. And in any event, ninety per cent of EPA’s activities should be monitoring, and where needed prosecuting the violation of simple transparent guidelines. It should minimize being in the business of prior approvals.

 

Getting Joint Secretaries to come in early to work may seem like a smart idea. The smarter idea is to have fewer Joint Secretaries. In fact, one could consider a simple proposition: Compulsorily retire two-thirds of our Joint Secretaries and double the salaries of those who are left. The fisc will be better off and the citizens of this benighted country will be happier. We should also consider a radical change to the role of panchayats; we should take away their powers for granting ‘prior approval’; we should instead give them grants and impose on them obligations, e.g. supplying water to school toilets.

Government, in India, has become a controller, inspector, oppressor and persecutor of economic agents. ‘Minimum government’ is the right vision. But it has to be made to happen at a level of detail. One can only hope that in the coming months we will see this painstaking attention to mercilessly eliminating our regulatory and bureaucratic albatrosses in droves.