Corruption in India has now reached a point when it is not only plundering national wealth on a scale not seen before even institutions of the state have been turned into tools of plunder and national degradation. Writes Navaratna Rajaram (NS Rajaram) in his first of two parts column.

Background: beyond corruption

Most people equate corruption with the taking of bribes, especially by government servants for performing services they are paid to perform. My copy of the Webster’s Dictionary however defines corruption as “becoming evil or morally depraved.” This more accurately describes the state of politics and the government in India today. But in one regard the state of public life has gone beyond this: what was considered corrupt has now become the norm. It appears people in public life have moved beyond any sense of decency; nothing seems to shame them.

Syeda Hamid, social activist & member of Planning Commission

Another point is that in addition to gross misuse of public office for personal gain, there is severe deterioration in governance and the delivery of government services. Reasons are not hard to seek. Office holders are too busy using their office for personal gain and covering up their misdeeds to pay much attention to their sworn duties. So in this essay and the following, we shall go beyond the financial aspect of corruption and look at the moral, political and spiritual cost of corruption, particularly the collapse of governance.

Corruption leads to dysfunction

An extraordinary thing happened during the recent power blackout. India received international coverage that was many times more than the normal. The prestigious magazine Economist noted that for an aspiring economic superpower, there can be few more chastening events than electricity cuts as massive as those that struck northern and eastern India recently. An area (including the capital, Delhi), in which more than 600 million people live, faced blackouts over two days. Infrastructure, from traffic lights to trains, stopped working. Hospitals, sanitation plants and offices ground to a halt. Airports and factories had to rely on backup generators, often fuelled by truckloads of diesel.

So this was a double blow: there was no power for businesses, and offices and plants were forced to burn expensive imported diesel fuel to keep themselves going. (Those who could not afford backup generators and public services like the famed Delhi Metro had no such luck; they shut down.)

The impact of the blackout on India’s economy goes far beyond lost output. It further damaged the country’s image highlighting the rotten state of the infrastructure that is hobbling its efforts to compete with China for investment. In the face of this, the response of the leaders, Prime Minister Manmohan Singh and his boss Sonia Gandhi was extraordinary. Like the dog in the famous Sherlock Holmes story that did not bark, too did nothing. Rahul Gandhi went one better. As his wont in times of crisis, he pulled a disappearing act.

The cause of the blackouts is murky— an overloading of the national network that links together regional grids is the most likely explanation. The engineers did a heroic job of patching things up. But the power industry, which must double its output roughly every decade if India is to grow at a reasonable rate, has long been a disaster waiting to happen. Gujarat is a solitary exception and Karnataka, once the leader in power generation is trying hard to catch up. Gujarat has met its energy needs by tapping solar power and Karnataka seems to be following suit.

An analysis of the power situation shows that the government and the Planning Commission have not given it the serious thought it deserves. At one end, not enough cheap coal is being mined and gas fields are all but dysfunctional. At the other end, the national transmission grid needs upgrading. But it is a vicious circle— who will invest given the present dysfunctional state of the government? Also, much of the power is stolen or given away free. Local politicians put pressure on them to keep tariffs low, which leads to huge losses. Squeezed between a shortage of fuel and end-customers (like local distributors and electricity boards) who are nearly bankrupt, those private generating firms are now cutting back on vital long-term investment in new plants.

Partners in corruption and incompetence

It is not as if it is an insoluble problem. India may be short of fossil fuels, but is extremely rich in solar. India’s Planning Commission however has paid little or no attention to exploiting solar power. China on the other hand made a major commitment to solar and is now the world’s leading producer of commercial solar power plants. India, with its huge domestic demand should be a leader in solar energy, but is now a decade behind China, not to speak of U.S. and Germany both of which receive much less sunlight than India—less by 30 percent.

The state of the power industry causes problems for the country not just because electricity is in short supply. There is corruption and mismanagement at all levels. The distribution companies’ huge debts weigh on the banks’ balance-sheets, threatening the health of the financial sector as well. The solution is to cut graft, tackle vested interests and allow markets to work better. The coal monopoly needs to be broken up and local distribution firms privatized; these are major contributors to corruption as well as being dysfunctional.

Yet, despite the looming crisis, for a decade the government has avoided doing what is clearly necessary, just as it has failed to implement key tax reforms, cut public borrowing or decentralize activities that are best done locally. It has allowed corruption and red tape to damage other vital industries, such as telecoms. The so-called reformer Manmohan Singh has failed dismally to deliver.

Image vs reality: no reformer

All this calls for reform. It was once thought that Manmohan Singh was a reformer but his record as prime minister shows otherwise. It is now clear that Manmohan Singh was never the reformer he was made out to be: his hand was forced by the late P.V. Narasimha Rao who recognized the need for reform and went through with it. Singh’s record before he was made finance minister clearly shows him to be a statist who believed in government control. And as prime minister he reverted to his original instincts, and went along with Sonia Gandhi’s attachment to failed 1960s style European welfare state social programs like the NREGA.

Had the same money been spent on a major public works program like river linking it would have given productive employment to millions and also contributed to the national infrastructure. But in the nearly ten years that the Sonia-Manmohan government has been in power, not a single significant infrastructure program has been undertaken. Sonia Gandhi’s attachment to such European social welfare is understandable—she grew up under such a regime—but an educated man like Manmohan Singh should have done better. Further, these social spending programs are launched with the sole purpose of buying votes. This goes beyond corruption: it loses money and makes governance worse.

Rahul Gandhi, disappearing act expert

The government’s reaction to the power cuts has been depressingly in line with its more recent performance. During the blackouts it enacted a cabinet reshuffle, and the power minister was promoted to a more senior post as home minister. One hopes that the very scale of the power cuts may remind voters that bad economic policies are not just abstract notions, but hurt people’s lives by making jobs scarcer, roads more congested, and food and phones more expensive. And that in turn may remind politicians of the dangers of ignoring the economy. India’s great blackout is a consequence of rotten governance. Voters need to understand that and send the right message to their leaders.

Planning for non-performance

This writer’s discussions with the Planning Commission did not produce a favorable impression. Leaving aside the fact that centrally controlled planning has been a disaster everywhere, in India it is dominated by fantasy more than pragmatism, let alone professional competence. The present Commission is a curious mix of retired bureaucrats, economic theorists, social activists and ivory tower dreamers. They seem to think and act more like a cult group or social club than a serious policymaking body. The result is reams of paper with wish lists that allocate resources but don’t look at results; even if they do, they don’t have the qualifications needed to evaluate them. This ensures money is spent but no work gets done— again going beyond corruption. It is a black hole:  resources get sucked in but nothing comes out.

Here is a sobering fact. After sixty years of planning, the national capital Delhi regularly suffers water shortages and power shortages. And in the same sixty years the country is continually faced with the specter of floods in the east and northeast and scarcity in the west. This is entirely predictable and happens every year. More, a practical solution in the form of linking rivers has been known for years. But this government and this country club called Planning Commission continues ignore it. Members lack the confidence to leave their ivory towers and step into the real world. It should be called the Planning Club.

For India’s economic development Nehru followed the Soviet model of centralized planning under government control. According to the U.S. Ambassador John Kenneth Galbraithwho was close to Nehru, “the center of Nehru’s thinking was Laski [Harold Laski of the London School of Economics]” and “India is the country most influenced by Laski’s ideas”. It is mainly due to his influence that the LSE has a semi-mythological status in India. He was a revered figure to Indian students at the LSE. Among Laski’s Indian students was Nehru’s favorite Marxist, V.K. Krishna Menon.

Tribhuvandas Patel– the visionary ‘milkman’

India was not the only country influenced by Laski and his Marxist ideas. He attracted a large number of students from third world countries who went home to apply his ideas to their newly independent countries creating political instability and bringing economic ruin. While there is no denying Laski’s influence, Nehru’s admiration for the Soviet Union should not be underestimated. In his Soviet Union, Some Random Sketches (1926) Nehru wrote: “Russia interests us because… conditions there have not been, and are not even now, very dissimilar to conditions in India… Much depends on the prejudices and preconceived notions… [but] no one can deny the fascination of this strange Eurasian country of the hammer and the sickle, where workers and peasants sit on the thrones of the mighty and upset the best laid schemes of mice and men.”

Curiously, Nehru’s admiration extended even to the notorious Moscow prison with the beautiful name— the Lubyanka. “It can be said without a shadow of a doubt,” Nehru wrote, “that to be in a Russian prison is far more preferable than [sic] to be a worker in an Indian factory. The mere fact that there are prisons like the ones we saw is in itself something for the Soviet Government to be proud of.” For a man who could admire Soviet prisons it was not hard to admire and adopt the Soviet system of planning. (If this is not moral corruption, one would like to know what is.)

To give shape to his plans Nehru turned to the highly regarded statistician P.C. Mahalanobis. Mahalanobis was as much an institution builder as a scientist (and self-promoter). Mahalanobis succeeded in convincing Nehru that his tour de force, a mathematical magic box that he modestly called the ‘Mahalanobis Model’ could be the answer to the economic analysis needed for the five year plans.

The Mahalanobis Model was a wonder to behold. Like the legendary Kama Dhenu of Hindu mythology, the model could grant any wish in the form of numbers: one had only state one’s wish and it spat out the desired numbers. Armed with his ‘Model’, Mahalanobis went on to become Nehru’s soothsayer and number cruncher. It attracted little foreign investment—if anything it did the opposite with several companies closing their Indian operations—but attracted droves of economists. Another legacy was a feudal system of favored ‘experts’ to advise the government like Mahalanobis, Homi Bhabha, Vikram Sarabhai (another scientist turned numerologist), and most recently Sam Pitroda and Montek Ahluwalia. The legacy is still being felt in the form of corruption and dysfunction.

Alternative: decentralized development

In refreshing contrast to this dysfunction delivered from the ‘commanding heights of the economy’ is the success achieved by two important revolutions— the Green Revolution and the White Revolution (in milk production). Their success was the result of applying scientific principles and empowerment at the local level. The history of the Green Revolution is well-known, but the contribution of the White Revolution is in some ways more remarkable and has many lessons to offer today, especially as India moves increasingly towards solar energy and renewable resources. So it is worth a look.

While Verghese Kurien is justly renowned for his contributions to India’s White Revolution, its real founder Tribhuvandas Patel is not as well known to the public. Without his vision of milk cooperatives networked into a national grid Kurien’s management skills alone would not have sufficed to make India the world leader in milk production. His achievement of creating a national grid by networking small producers distributed over a large area is worth revisiting today as the country embarks on a program of meeting its energy needs by exploiting solar power, which like milk production is spread over a large area. It is helpful to contrast this with the Planning Commission disaster.

Tribhuvandas Kishibhai Patel was born on October 22, 1903 in the village of Anand in Gujarat, a village that he was to make internationally famous by founding Anand Milk Union Limited or AMUL. Founded in 1946 as a small cooperative it has now grown into a $2.5 billion giant.  While it lists only about 750 people in its marketing division as employees, it has a pool of more than 3 million independent milk producers as members. In addition, the AMUL model has spawned many imitators in milk production and in food industry in general.

As a youth Tribhuvandas came under the influence of Mahatma Gandhi and Sardar Patel and took part in the Freedom Movement. He was imprisoned several times in 1930, 1935 and 1942. He grew particularly close to fellow Gujarati Sardar Patel who impressed him with his capacity to organize people and get them to work towards a common goal. This was the lesson he took to heart when as early as the 1940s he began working with the farmers in the Kheda District under the guidance of Sardar Patel. Soon he set up the milk cooperative union in his native village of Anand to which he was closely attached. He was the first chairman of AMUL.

As the milk cooperative began to grow, he recognized that it needed professional management skills that he did not possess. In 1950, he brought in a brilliant young manager called Verghese Kurien (born 1921) to run AMUL. The rest, as they say is history. Tribhuvandas’s contribution was recognized with the Ramon Magasasay Award in 1963. The Indian Government followed suit giving him a Padmabhushan only the following year. The award seems inadequate given the magnitude and impact of his contribution when people who have done far less like Brajesh Mishra and Amartya Sen have received higher awards. (Why do Indian Governments always wait for foreign recognition before they do?)

The White Revolution is a textbook example of the wisdom of the old saying, “Think big, but start small.” Experienced managers know that when venturing into uncharted waters it is better to start on a small scale so that the problems become easy to identify while the cost of failure is still small. A bureaucratic mindset on the other hand prefers the reverse approach of a large program with unclear goals. An example of the latter is the NREGA (National Rural Employment Guaranty Act) that has drained the national exchequer while producing no tangible results. The same money allocated to a few pilot projects in river linking would have provided a valuable learning experience that might have come in handy today. It would have given productive employment to thousands.

But today public life in India has moved far from such selfless and enterprising leaders. It is now in the hands of self-serving opportunists who are willing to sacrifice the nation’s interests for small personal gains. This is the result of corruption deep into the education and culture of the nation. This corruption led to national degradation, paving the way for present sorry, sordid state of public life.