Governance lag

Raghuram Rajan, the newly-appointed chief economic adviser to the finance ministry, has said that a period of rapid economic growth in which governance capabilities did not keep pace has allowed sections of the private sector to “make a killing”.
Elaborating on this comment, he said that natural resources such as spectrum or coal, which were plentiful earlier, had become much more valuable today because of the growth not only of India but of other countries like China. Yet, the process of allocating these resources had not changed to take account of this fact.
“The private sector to some extent took advantage of this gap—some of them through means that were fair, some through means less fair—and has made a killing,” he added.
Rajan said what was urgently needed was to bring the level of governance on a par with the level of the economy, a process that “is under way”. Acknowledging that it was difficult to improve governance mechanisms in areas like coal allocation, he stressed that India would have to do it because “if we don’t then we are going to stagnate”.
Pointing out that various parts of the global economy were in the grips of a structural crisis, Rajan acknowledged that it would constrain India’s growth. Yet, it would also mean that if India’s slowdown bottoms out and growth starts rising to about 6-6.5%, “we will create a positive dynamic that will serve us very well”.