T

he Supreme Court on Monday held that 194 coal mining areas, or

blocks, handed out by the government between 1993 and 2010,
were illegally allotted. The government has the power to allocate coal
blocks to enterprises in specific sectors such as power, and iron
and steel in particular. However, the court found that the process by which it
did so was casual and breached guidelines, and lacked transparency and,
thus, arbitrary and illegal. That the allocations were illegal does not mean that
the court has cancelled the allotment of coal blocks; that decision will be tak-
en on September 1. This verdict comes two and a half years after the Supreme
Court cancelled 2G telecom licences for similar reasons. The court subse-
quently clarified, in response to a presidential reference, that resource allo-
cation was the prerogative of the executive, and the courts would concern
themselves only with criteria of fairness and non-arbitrariness. It is these cri-
teria that the Supreme Court found to have been violated in the case of coal
allocation. Its verdict on Monday led to considerable uncertainty. Shares in
some companies that benefitted from the allocation of coal blocks fell sharply
after the courts decision. Banks, which have lent around ~7.7 lakh crore to the
coal block-dependent power and iron and steel sectors, are also worried about
a sudden and sharp deterioration in already poor asset quality.
Unlike the wholesale cancellation of 2G licences, which had thrown the
entire sector into a state of limbo for some considerable time, the Supreme
Court on this occasion has taken a more granular view, which former coal sec-
retary P C Parakh described in these pages as practical. Chief Justice R M
Lodha, in fact, said that the court might set up a panel under a retired judge
to examine individual cases. This would be a vital step forward to restoring
transparency and clarity to the coal and related sectors. It will also be neces-
sary to ensure that the ~2 lakh crore that has been invested in the sector is not
rendered valueless. Many of the blocks have already been cancelled; others are
not yet operational, due to environmental and other concerns, but the linked
investments have been made. Around 40 of them are already producing coal
between 40 million tonnes and 60 million tonnes a year, about 10 per cent
of the total production in India. It is to be hoped that the court-appointed pan-
el is able to ensure early removal of the uncertainty over investments made in
these coal blocks.
The revival of Indias economy, and of its manufacturing sector, depends
on the availability of power. There is considerable coal-fired capacity in the
power sector, but inventories of coal for these plants are never sufficiently
deep. The iron and steel sector, similarly, is basic to industrial growth. That is
why it is welcome that the court has decided to be cautious in the actions it
takes in response to the illegality it says it has found. It is to be hoped that the
panel to which the chief justice referred, and the eventual judgment, will
take into account how badly the Indian economy needs clarity and pragma-
tism in the coal sector. More than just this and related sectors, the entire
economy, and the country as a whole, need to move on from the corruption-
related paralysis and uncertainty that has marked the last few years. In this
national effort, the Supreme Court has a vital role to play.
Moving on
Final coal judgment will hopefully end uncertainty
T
he just-approved Digital India project, seeking to deliver all gov-
ernment services electronically in less than four years, has already
thrown up object lessons whose implications go far beyond the
future of the project itself. The project is vital for the future well-
being of every Indian. The information technology industry will be given a
boost, too. And it has the benefit of building on an already successful pilot proj-
ect, in Gujarat. But the challenges are daunting. In fact, one of its key goals
achieving an import-export balance in electronics seems unachievable in the
foreseeable future.
The backbone of Digital India has to be quite literally the National
Optical Fibre Network, or the NOFN, whose cables will carry digital signals
across the country. This project, started in 2011, set out to connect 250,000
gram panchayats in 27 months at a cost of ~20,000 crore. The scope has sub-
sequently been scaled down to less than half (110,000 gram panchayats), the
scheduled completion target is gone, and the project is nowhere near complete.
In a revealing article in this newspaper four months ago, Nripendra Misra a
former chairman of the Telecom Regulatory Authority of India spelt out the
numerous hurdles the project encountered and by implication, the lessons that
needed to be absorbed. The project had been approved by the Union Cabinet,
and had such high-profile names as Sam Pitroda and Nandan Nilekani on its
implementing committee but it suffered from lack of coordination. The
need for both hardware and software (local language content) had not been
thought through; the maintenance of what was done was not properly provided
for; officials, mindful of anti-corruption laws, were unwilling to approve pro-
curement tenders as cartels appeared to be at work; there was no revenue mod-
el that would be the mainstay of the project once it got going; and the coun-
try did not even have enough capacity to manufacture the ducts that would
carry the cables.
Mr Misra is now principal secretary to the prime minister, and presum-
ably has been available to provide guidance about the cardinal need for coor-
dination to ensure any kind of progress. Under the current government, there
is every hope that coordination will be better and execution swifter. But still
is it realistic to set a timeline of under four years for a project many times the
size of the NOFN and, to begin with, five times its budget? One key issue cen-
tral to any coordinated collection and storage of digital information on citizens
privacy appears not to have been addressed. In part, the project is a col-
lection and repackaging of existing incomplete projects under a nice-sound-
ing label. It is great to launch a vital, grand project, but where is the homework?
Imagining Digital India
Flagship e-governance project needs more homework
If Zulfiqar Ali Bhuttos invocations of
Asia are taken as some kind of pan-Asian
commitment, his eat grass rhetoric
must be treated as advocating vegetari-
anism. The British diplomat, Sir Morrice
James (Lord Saint Brides), who was high
commissioner to both India and
Pakistan, called him Lucifer and a
flawed angel. Farzana Shaikh, his biog-
rapher, quotes both terms, but doesnt
admit that Bhuttos Asianism was only
an attempt to mobilise forces against the
arch-enemy he called Greater Bharat.
This is not the books only flaw.
Chinas rise hardly needs the imprimatur
of even someone as eminent as Bertrand
Russell. A century before Russells visit
to China, with which Ramachandra
Guha introduces this misleadingly titled
anthology, Napoleon famously called
China a sleeping giant who would
move the world when she awoke . A
collection of the lives of eminent Asians
would have raised no cavil, but the
attempt to suggest a supra-national
framework for 11 ultra-nationalists (10
male and a female) just doesnt work.
Despite reservations about
Ms Shaikh, this is not a comment on
the individual biographies. Potted his-
tory is always useful, and Srinath
Raghavan on Indira Gandhi is informa-
tive, incisive and a pleasure to read. His
essay could even be expanded into a
full-scale biography to correct some of
the factual errors in Katherine Franks
hugely acclaimed noveletteish gush-
ing. But Mr Raghavan wisely doesnt
present his account in terms of the
politics before economics dictum
that is advanced as the collections rai-
sondtre. In fact, Indira Gandhi used
economics to further her political aims
when initiating at Cancun, even before
the July 1982 Washington visit
Mr Raghavan mentions, what he calls
a long-overdue, if limited, rapproche-
ment in US-India relations.
As the Introduction says, Lee
Kuan Yew is the only subject still liv-
ing, albeit frail and ailing. Otherwise,
he might have objected to the heresy of
being lumped with a bunch of politics
before economics politicians. Mr Lee
made no secret of his conviction that
South Asia, especially India, lagged
Southeast and East Asia precisely
because politics enjoyed precedence
over economics. He had some harsh
things to say about P V Narasimha Rao,
whom he had previously compared to
Deng Xiaoping, for deservedly (as Mr
Lee thought) losing the 1996 election
by neglecting economics.
Mr Lee believes Manmohan Singh
wouldnt have done so if Narasimha Rao
hadnt thwarted him. But thats like the
saying that the now defunct News of the
Worldwas the only newspaper in the
world to abide by C P Scotts news is
sacred, comment is free dictum because
it carried no comment and the only news
were law court reports of sex and vio-
lence cases. Michael Barr deals percep-
tively, if a trifle unfairly, with Mr Lee. Not
everyone will agree Singapore is still ster-
ile, soulless and racist with little respect
for ordinary human values, let alone
human rights. Even if it is, that must
have something to do with the character
of the Chinese settlers who are in the
overwhelming majority. There is nothing
to suggest Goh Keng Swee, whom Mr
Barr (like some others) appears to favour
as the true author of the Singapore mira-
cle, was markedly different.
InSophie Quinn-Judge andRana
Mitter (takingtwoother contributors at
random), HoChi MinhandMaoZedong
have foundless censorious chroniclers.
One canimagine the Great Helmsman
chucklingover Mr Mitter saddlinghim
withultimate responsibilityfor Deng
Xiaopings revolution. It is temptingtogo
onfor the life stories are interestingand
enlighteningevenfor those whodont
agree withCarlyle that the historyof the
worldis but the biographyof great men.
But so far as the land mass from the
Mediterranean to the Pacific is con-
cerned, Gandhi, for all his monumental
stature in Indian eyes, is not especially
relevant. Singapores Straits Times news-
paper didnt even include India in Asia
until the Narasimha Rao-Manmohan
Singh reforms promised a profitable
bilateral relationship. Many Japanese,
Chinese and even Americans still incline
to a similar chopsticks definition of Asia.
Other concepts vary from Hegels lands
that had never known freedom to
Japans Greater East Asian Co-Prosperity
Sphere to Ananda Coomaraswamys uni-
ty fragmented by centuries of colonial-
ism. If the purpose were to present a
pan-Asian panorama, Kemal Ataturk,
Jose Rizal, Rabindranath Tagore, the
Japanese art historian Okakura Tenshin,
Sun Yat Sen, Mohammed Ali Jinnah, the
Meiji Emperor and his advisers, Mujibur
Rahman, perhaps even Attila the Hun,
might have been included. Some of them
were makers of Asia in a more vital sense
than politicians who served only
their country.
The old does Asia exist? question
cropped up again as late as 2012 when a
Melbourne University professor, Antonia
Finnane, responded to Michael Wesleys
keynote address at an academic confer-
ence with historically, Asia has served
as a catch-all phrase for societies that
were literate but not Christian: hence, its
application to places from Turkey in the
west to the Philippines in the east. It may
be approaching its use-by date. The
Asian values debate and the Asian
century dream (it was already old when
Jawaharlal Nehru wrote The Discoveryof
India) reflect the same controversy. A
deeper unity does lie in some of the val-
ues listed in Confuciuss analects (fluctu-
ating though their fortunes have been)
that are common to most Asian societies.
But race is probably the strongest bond.
Although its not politically correct to
mention it, the brown, yellow and off-
white nations cheered when Japan sank
the Russian fleet in 1905. Colour remains
the most visible manifestation of Asias
identity. No attempt is made here to jus-
tify the books catchy title by analysing
any of these factors or discuss how far
they apply to the subjects.
Potted histories of some eminent Asians
I
s thenewsystemof appointingsen-
ior judges through the National
Judicial Appointments Comm-
ission an improvement on the one pre-
vailing since the 1990s, under which
only judges appointed judges? The
alacrity with which the two Bills to
introduce the new system were passed
in double-quick time, and unani-
mously indicates that the political
class unitedtoget its hands onasystem
that had eluded it.
The level of integrity that the polit-
ical class, across the spectrum, has dis-
played in recent decades does not cre-
ate any hope that the new system will
be a better one. For all its faults high-
lighted by former judge Markandey
Katjuthroughwell-timedinterventions
the system that has just ended gave
the country and its people some relief
through judicial activism and forth-
right decisions when the political sys-
tem had seriously abdicated.
The fact that two out of the five
members of the commission say, the
law minister and one of the two emi-
nent persons can veto a name will
mean that all judges to be appointed
henceforth will be those in whom the
political class sees no danger for itself.
A lawyer or judge who has shown he
has a mind of his own and so cannot be
takenfor grantedwill havelittlechance
to join the bench. This will promote
mediocrity and advantage those who
have networked well among both
judges and politicians.
Take the case of Gopal Subraman-
iam, who has both considerable intel-
lectual calibre and a reputation for
integrity. By all accounts, he was per-
suaded by the chief justice of the
Supreme Court to agree to become a
judge at great personal pecuniary loss
(saying goodbye to a thriving practice)
but his name was returned as, in Mr
Subramaniams own words, his inde-
pendence as a lawyer is causing appre-
hensions that I will not toe the line of
the government. His role as amicus
curiae in the Sohrabuddin Sheikh fake
encounter case had embarrassed the
NarendraModi government of Gujarat.
How will the two eminent persons
on the commission be appointed? The
chief justice of the Supreme Court, the
prime minister and the leader of the
opposition will select them. As there is
nomentionof aveto, it is tobeassumed
that if theprimeminister andtheoppo-
sition leader join hands to bring in a
politically acceptable person, then he
gets through. An unholy alliance
between politicians of all hues cannot
be ruled out. Or else, why should elec-
toral reform, such as the inclusion of
what a party spends on the election of
a candidate into the calculation of his
election expenses, not see the light of
day? Or, why do political parties man-
agetokeepout of theambit of theRight
to Information Act?
There is also something intrinsical-
ly wrong in the chief justice being a
member of acommissionandalsoplay-
ing a role in the selection of two others
the eminent persons. One who has
come in with the chief justices support
canbeinclinedtobesupportiveof him.
IntheUnitedKingdom, fiveverysenior
judges are members of the Judicial
Appointments Commission but not
the lord chief justice, who is part of the
panel that selects the lay members of
the commission.
Thecardinal issueis, weneedjudges
with high intellectual calibre and
integrity, who together represent the
diversity of Indias polity. The earlier
system was certainly flawed; but under
it the country saw some great forth-
rightness, courage and outstanding
judgments, and decisions. Judicial
intervention has done the country
proud from forcing all public trans-
port in Delhi to go on compressed nat-
ural gas, to ending the loot of iron ore
andensuringthat itsminingisresumed
in a safe and legitimate manner. Our
senior judges arenot angels andhaveat
times fallen down but overall, they
have filled a vacuum.
In figuring out how a better system
can be devised, we can look at Britain
with its 15-member Judicial
Appointments Commission. It has six
lay members, one of whom is the chair-
person. These six and a lay justice
member are selected by a committee
comprising the chief justice, the chair-
person of the commission and a lay
member who has never been a judge,
lawyer, civil servant, member of the
commission or its staff. There are five
judicial members and one each from
among barristers, solicitors, justices of
peace and tribunal members.
Now see the commissions trans-
parent selection process based solely
on merit. Vacancies are advertised,
application forms and information
packs issued, applications received
checked against requirements men-
tioned in the information pack, and an
assessment made of good character
through financial, criminal and pro-
fessional background checks.
Applications are then shortlisted
throughonlinetests or paper sift, which
includes written evidence, self-assess-
ment andreferences. Thenthoseshort-
listed go through interview, role play
and situational questioning. Phew!
subirkroy@gmail.com
OPINION 11
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Volume XIX Number 12
MUMBAI | WEDNESDAY, 27 AUGUST 2014
The poor politicians felt left out
G
oodgovernancefallsinthemotherhoodand
apple pie category. Who could argue against
less corruption in the bureaucracy, fewer
inspections by pesky factory inspectors and an end to
the sifarish-firman raj that politicians have ruled
over? However, given the fetish for good governance
in the current political discourse, a question worth
answering is, what difference does governance make
to growth? Economists have been examining this for
decades. Most mainstreamresearchersagreethat good
governance is a necessary condition for growth. This,
byextension, means that differences ingrowthacross
countries can be explained at least partly by differ-
ences in the quality of governance.
But first things first. What exactly is this gover-
nance? Daniel Kauffman (in Growth without gover-
nance, a World Bank discussion paper from 2002)
defines ameasureof governancethat considers abas-
ket of six things: voice and accountability; political
stability and the absence of violence; government
effectiveness; regulatory quality; rule of law; and con-
trol of corruption. This has emerged as the gold stan-
dard of governance measures, and most researchers
use a variant of this. While there appears to be a con-
sensus in the mainstream, there are notable voices of
dissent on the necessity of governance for growth.
JeffreySachsandhiscollaborators(inEndingAfricas
growthtrap, aBrookingspaper from2004) arguethat
differencesingrowthacrossAfricahavenothingtodo
with governance. Instead, they can be explained by
levelsof old-fashionedaid-financedinvestments. The
least governed states have actually produced spec-
tacular growth rates.
Recent work on India throws up some interesting
results. Maitreesh Ghataks and Sanchari Roys some-
what controversial articleintheEconomicandPolitical
Weekly (Did Gujarats growth rate accelerate under
Modi? in April 2014) does not find any significant
acceleration in Gujarats growth rate (relative to the
national average; this is important) for the 2000s
decade (the Modi years) compared to the 1990s. If I
weretoassume(andI amsurethat manywouldagree)
that the regime quickly ushered in a substantially
improvedgovernancestructure, thenoneclear impli-
cation is that the growth-governance link is weak.
Analysisof state-level databySudiptoMundleand
his colleagues at the National Institute of Public
Finance and Policy (The quality of governance: how
have Indian states performed? in July 2012) finds a
positive but statistically weak relationship between
the quality of governance (again gauged by
Kauffman-type measures). This perhaps is a rigorous
way of stating the obvious that a whole lot of things
other thangovernancedeterminegrowth. However, it
is worth highlighting in the current political context.
Theresearchongovernanceis not just about these
somewhat sterilestatistical links. Therearemanyoth-
er insights that our policymakers who think about
governancecouldtakecuesfrom. Apaper byRafael La
Porta and three co-authors (The quality of govern-
ment, National Bureau of Economic Research, 1998)
analysestheexperienceof alargesampleof economies
over a long period and arrives at a number of power-
ful insights. Of particular interest to India is their
assertion that government intervention and efficien-
cy are not mirror images. Let me quote them: We
have consistently found that better performing gov-
ernmentsarealsolarger andcollect larger taxes. Poorly
performinggovernments, incontrast, aresmaller and
collect fewer taxes.Theauthorsarequicktopoint out
that this is not an endorsement of bigger government
of anyquality. Instead, theyassert that identifyingbig
government with bad government can be highly mis-
leading. Thismight giveusreasontorethinktheless
government, more governance mantra that is so
much in vogue these days.
The proposition that big government is not neces-
sarily a bad thing is linked to the question of what
governments should be doing in the first place.
Traditionally, the role of governments was to address
market failure through non-market institutions, and
thisdrovethegovernanceagendainbetweenthe1950s
andthe1980s. Themost extremeformof thisnon-mar-
ket intervention was central planning that relied on
mechanisms such as industrial licensing. India, like
others, botched this up completely; the result was a
combinationof severemacroeconomicproblems and
theproliferationof rent-seekingactivitiesandrampant
corruption. In short, market failure was replaced by
government failure.
Thebacklashagainst thefailureof thismodel came
from mainstream economists whose prescriptions
were administered by agencies like the International
Monetary Fund and World Bank touting a model of
market enhancing governance that would jettison
the planning approach and instead replicate the con-
ditions of an efficient market. This would be imple-
mentedthroughacombinationof things: stableprop-
ertyrights; lowtransactioncosts; andminimisingrent
seeking and corruption. An extreme but popular view
was that since government intervention breeds cor-
ruption and rent seeking, an obvious solution would
be to have a small government.
What this agenda misses is the entire business of
state capacity. Government intervention failed
because the government simply did not have the
capacity to do the things it was trying to do. Mushtaq
Khan, aneconomist at LondonsSchool of Oriental and
African Studies (in Governance, development and
economic growth since the 1960s, a working paper
from 2007) argues that while one cannot argue with
theobjectiveof creatingefficient markets, developing
countriesmight not havethecapacitytodothiseither.
Marketsindevelopingcountries, heargues, areinher-
entlyinefficient andthekindof improvement instate
capacity required is difficult to achieve.
The second proposition that Mr Khan and others
make is that recent history shows that efforts to
enhance marketshavent quite paid off (take Latin
America in the 1990s, for instance) .What appears to
have worked very well, instead, has been the kind of
governance structures growth enhancing gover-
nance he calls it that led to a boom in East Asia.
These experiments the creation of the chaebols in
South Korea using public resources; the setting up of
the town and village Enterprises in China and their
subsequent privatisation; the channelling of credit in
South Korea to priority industries all made a sub-
stantial contribution to contribution. Some of them
appear to go against the principle of the market
enhancing school since they involve state interven-
tion to correct for market failure. Be that as it may, the
bottom line is that they have worked well. India has
learnt to look East in many domains of our eco-
nomicandinternational relationsstrategy. Perhapswe
shouldlookEast whenit comes todecidingonamod-
el of governance as well.
Thewriteris withtheICRIER. Theseviews arehis own
ILLUSTRATION BY BINAY SINHA
More government,
more growth?
Abheek Barua asks: how much growth can good governance get us?
BOOK REVIEW
SUNANDA K DATTA-RAY
MAKERS OF MODERN ASIA
Edited by Ramachandra Guha
Belknap/Harvard
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