The race is between China and India and the whole world is watching. Well, at least the Western world is definitely watching. The frequency at which articles on India’s progress or lack thereof are published in the western press is a sure indicator of this. Whatever the perspective, every one seems to be lamenting on how shoddy infrastructure is going to hold back India compared to China. The concern is definitely not misplaced. Up until a decade ago, India did not have a single expressway. Power failures have always been ubiquitous and rampant corruption only makes maters worse. There is no ‘public education’ system as such and wherever there are any signs of it’s existence, it is plagued by scarce resources and teacher absenteeism. So what do Indian people think of this overall state of affairs? There is indeed a tendency to make do. After all life goes on even if you did not have electricity the whole day yesterday. And I believe this is what the politicians count on- that people will either say OK and move on or they will find private solutions to government failures.
People will invest in generators and battery operated fail safe systems to address power failures. They will work hard to put their children through private schools or pay extra for private tutoring. They will dig their own bore wells and make their own access roads so that they are not stranded without water or a dirt road that proves to be a nightmare to navigate during monsoons. All across India, there are emerging scores of new housing complexes with complete amenities of their own so that at least a part of people’s lives is shielded from rampant government failures.
Such gated communities are not only preferred by common people but also by corporates. Take the example of Dhirubhai Ambani Technology Park. It is a complete functioning economy of its own. Pothole free roads, 24 hour electricity and telecommunications, and a clean environment to work. The moment you enter the facility you are transported to a different world! These gated communities remind me of John Galt’s hideout from the Atlas Shrugged! Even though we know much more about the intricacies and nuances of political and social systems than Ayn Rand, there seem to be too many such John Galt getaways that people prefer to flee to.
There is a lot of unhappiness about the state of governance and that might be one of the reasons that we have fractured government at all levels. Parties which either boast of dynastic heritage or of parochial and communal politics are finding increasingly difficult to win a majority to form government by themselves. They have to negotiate their way with smaller parties and independent candidates in exchange for promises to help them do good on their election promises. However, at times such coalition politics takes it own toll when getting one’s act together to push through important reforms becomes impossible. Hence, the political solution to government failure actually looks like a stalemate.
How does this bode for India’s future? Unfortunately, not so well! Having people invest their hard earned money in providing and purchasing goods for which there is a clear rationale for public provision is totally inefficient. This money could have been used for productive and efficient investments instead. So even if individually people seem to be better off, emergence of private solutions for government failures does not reflect well on long run growth of India. Efficient production and provision of public goods is not sufficient for economic growth but is definitely a necessary condition. People still have to work hard to improve their standards but then they are at least not held back because of lack of electricity, roads and good education!
Economics for India 