Ten years ago, when then-prime ministerial candidate Narendra Modi promised India bullet trains, he probably did not bargain for the system’s resistance to high speed. The journey from an average speed of 60 kmph to a bullet speed of over 300 kmph would take longer than expected. It required an entirely new state-of-the-art infrastructure and a new mindset. However, that did not dissuade the pragmatic Modi as PM Modi from bringing greater speed to the railways by introducing the Vande Bharat trains that run at 120 kmph.
Parallel between trains and economy
In a way, the story of the Indian economy is similar. With a steady stream of reforms, it runs fast enough but below ‘bullet speed’. The system needs a total overhaul for the latter.
In the post-Independence years, India’s planners and policymakers understood the importance of scale but not of speed. As the grip of government and the bureaucracy on the economy tightened, speed was continuously sacrificed in a complex maze of decision-making. After 1991, the government began exiting certain domains of the economy and was substituted by the private sector, which brought an element of speed. However, the processes of government itself, many of which affected private sector performance, remained snail-paced.
To Modi’s credit, he was the first leader of a central government who understood the importance of speed within the government. Perhaps he was acutely aware of the system’s limitations. Which is why he insisted that the government had no business to be in business.
A senior official of the then-PSU Air India once told me an anecdote that summed up why GoI cannot run a competitive business. Even a relatively minor catering decision, like whether to add a sachet of ketchup to a meal, had to be put up on file and circulated not just within Air India but also to concerned officials in the civil aviation ministry. A decision that would be made in a minute in the private sector would take 2-3 weeks in the public sector. The processes of government simply don’t allow speed. Air India is in a different sky after privatisation.
While privatisation as a whole has not taken off, GoI has focused on bringing speed to government processes. Modi’s willingness to adopt technology has been transformational. The use of the JAM (Jan Dhan, Aadhaar, mobile phone) trinity, for example, has meant that benefits reach the poor faster than ever before. A focus on improving the ease of doing business has meant that many old laws and regulations have been abolished and others amended to make the environment more attractive for investment.
However, the underlying system of government decision-making and its fundamental processes are unchanged. Like in the railways, speed can only be increased up to a certain level without overhauling the entire infrastructure and mindset. The time is ripe to begin deliberating a big overhaul. Administrative, police and judicial reforms must be on the agenda if India wants to grow at a speed equivalent to a bullet train – in double digits.
Administrative reform isn’t about abolishing the IAS, just as police reform is not about abolishing the IPS, or judicial reform is about taking away the judiciary’s independence. Instead, it is about rethinking the structures in which these systems operate. They must be redesigned to align the incentives of those operating in the system with the desired objectives.
The current structures are colonial legacy. They are designed – indeed, fit – for control and to maintain the status quo. They can sustain a 6-7% growth but not accelerate to 10%. A country that aspires to break out in a world defined by rapid change needs to disrupt the status quo. Perhaps it is good that India has begun to appreciate the idea and importance of speed. We like the fact that we are the fastest-growing major economy in the world. We like faster trains. We are impressed by expressways and highways that enable inter-city journeys to be shortened by half the time taken.
Unfortunately, just as a bullet train can’t run on the infrastructure built for a regular railway, a high-speed economy cannot run on a system designed for slower speeds. Modi has the political capital, administrative experience and willingness to disrupt the status quo, which can make the next set of radical reforms possible.
This article was first published in The Economic Times as What India needs is speed on May 7, 2023.
Read more by the author: The SVB Downfall: a Macroeconomic Phenomenon