Governance crisis

Reforms have slowed down because Parliament and the Central government have failed to come to terms with the growing power of States.

When the going gets tough, the dollars get going. That is why the rupee has shed some 16 per cent against the Greenback in less than four months. And because those pulling out dollars to meet liquidity contingencies arising from Eurozone worries and uncertainties in the US – the FIIs – are the biggest investors in the Indian market, it has led to a decline in the Sensex as well. But these arguments ignore the fact that Indian stocks have been among the worst performers (the Sensex has gone down by 23 per cent so far in 2011) and the rupee has fallen more than any other currency in Asia (or even emerging markets, barring a South Africa or Turkey). So, why are foreigners running so hard from India, despite it being the world's second fastest-growing major economy? The usual glib answers relate to slowing of reforms and lack of firm governance.

But symptoms are often mistaken for causes. It is also important to distinguish between first and second order symptoms so that the former don't get mistaken for causes. Specifically, the absence of reforms is said to be deterring investments. But does that make it a genuine underlying cause or simply a larger symptom? What is it that is slowing down reforms, when all political parties are seemingly convinced of their necessity? That they disagree on the details is a quibble. The real answer may lie somewhere else – in the inability to come to terms with a new political reality provided for in the Constitution, but which has manifested itself only in the last 15 years. That reality is the emergence of the Indian federation as a fact of everyday life and the simultaneous failure of Parliament and the Government at the Centre to recognise it while legislating and governing. Instead, they have tended to carry on as before when a single party commanded a majority in Parliament and ruled at the Centre.

The truth today is that the States have become more autonomous and assertive, while being increasingly ruled by so-called regional parties. Their representatives in Parliament see no reason to cooperate with the Central government unless they see a clear benefit or, at the very least, there is no loss to them. If to this is added the need of the principal opposition, BJP, to oppose for the sake of opposing and not allowing Parliament to function – though at the State-level the shoe is on the other foot, with the Congress doing the same – it can be seen why an advanced degree of political immaturity is slowing down reforms. Only a change in the mindset of the political parties will improve matters. But this could take time as it requires a clear message from the electorate that it is fed up with their antics and opportunism. That it has already happened in some States is a happy augury.
source : Hindu Editorial