Indian Institutions of Governance Need to Come of Age

Context: The benefits of recent structural reforms related to land, labour and capital will flow into the economy only if the institutions of governance are improved.

Issues with institutions of governance in India:

• Presence of vested interests and rent-seeking behaviour: creating bottlenecks, build leakage channels, leading to delays and therefore erode the allocative efficiency of resources.
• Archaic Institutions: Pre-independence era institutions of governance, the judiciary and administration have not changed despite population growth, the structure of economy and aspirations of the people.
  • India’s administrative capacity, culture and coordination systems still possess colonial feature whose main aim was the maximization of revenue collection.
  • E.g. The current design of a ‘revenue district’ was made by the British government primarily to collect revenues, which is now a less pressing reason for our district administration.
  • A district magistrate continues to be a “huzoor”, a salutation historically used for those in high authority.
• Compromised delivery mechanism:
  • As per a World Bank report of 2018, India ranked 164th in the enforcement of contracts.
  • It takes 1,445 days for a company to resolve a commercial dispute through the first-instance court, and costs 30% of the value of the contract.
• Inadequacy of reforms:
  • In Tax administration: confidence and trust of taxpayers remain elusive.
  • In judiciary: the creation of separate commercial courts and tribunals couldn’t reduce the unendurable pain of people.
  • In legislation: like Insolvency and Bankruptcy Code, has not helped very much.

Way forward:

• Reorient the organizational design of institutions: and realign it with the defined purpose and expected outcomes.
  • Having a focus to deliver a host of civic and welfare services and support economic development.
  • The capability of an institution is determined by - the arrangement of information, incentives, penalties and authority woven into frames of responsibility.

Conclusion: “The time to fix the roof is when the sun is shining,” said John F. Kennedy, former US president. The time for Indian Parliament to approve of epochal changes and for society to concur has arrived.