Remaking India Yes, prime minister

http://www.economist.com/news/asia/21625857-more-moderniser-market-reformer-narendra-modi-relies-his-bureaucrats-yes-prime-minister 

More moderniser than market reformer, Narendra Modi relies on his bureaucrats Oct 18th 2014 

THOSE who hoped that Narendra Modi would prove a busy liberal reformer as prime minister have so far been disappointed. But that, says Gurcharan Das, a writer and former businessman who now advises the government, is to judge the man by the wrong measure. Rather than being mad about markets, he says, Mr Modi is a strong-willed moderniser, a man who thinks a capable bureaucracy can fix much of what ails India. It is the lesson of Mr Modi’s running of Gujarat, where he relied heavily on his civil service and got public-sector firms to flourish.

But the bureaucracy is very far from capable. Lant Pritchett of Harvard University has described India as a “flailing state” thanks to its rotten administration. Bureaucrats are incompetent and corrupt when they are not simply absent. India struggles to implement even well-found policy. India’s head, in Mr Pritchett’s metaphor, is not reliably connected to its limbs.

Mr Modi appears bent on changing that. In office for only five months, he spends a lot of time with civil servants, preferring to meet them instead of ministers. He and they have been looking for fixes, such as shifting the paperwork needed to open a business onto the internet, or freeing firms from petty inspections. Meetings are said to have a corporate air, with Mr Modi as chief executive. Dates for specific targets—the “deliverables” of corporate jargon—are set. Resistant bureaucrats are transferred. On October 16th Mr Modi announced a big reshuffle, with a liberal reformer from Rajasthan becoming the finance ministry’s top bureaucrat.

Mr Modi presses his civil servants to think big. In August he called for 75m more Indian households to have bank accounts by February. The scheme, called Pradhan Mantri Jan Dhan Yojana, involves state banks and could prove transformational if households get in the habit of using their accounts rather than keeping cash under the mattress. Officials say over 55m new accounts have been opened and nearly $700m deposited. The aim is to increase access to banking in a country where two-fifths of households lack it.

An obvious opportunity is for such new accounts to serve as conduits for the government to distribute welfare as cash rather than, as at present, to supply the needy with wasteful subsidies in kind. It helps that Mr Modi, though once a sceptic, is now an enthusiast for India’s most modernising effort by a mile: Aadhaar, the unique-identity scheme, in which biometric data are to be recorded to create a digital identity for every Indian. This can now be used, say, to open a bank account or get a passport. Some 690m people are enrolled in Aadhaar, the world’s biggest biometric database. The target for next year is 1 billion out of India’s 1.2 billion citizens.

The prime minister’s chief civil servant for e-government, Ram Sewak Sharma, spells out what might follow once Indians have digital identities. Last year in Jharkhand state in eastern India Mr Sharma installed a system to track the daily attendance of nearly 14,000 officials. Each day at the office they log in and out by scanning a fingerprint or iris. The data is then published live, online. Taxpayers can even see which civil servants are at work or not.

Mr Modi has pressed Mr Sharma to do the same for the central government in Delhi. This month Mr Sharma rolled out a website, attendance.gov.in, for 149 departments and 51,000 national civil servants. The effect may seem Big Brotherish, but truancy in the civil service is appalling, and such monitoring is bound to boost attendance and productivity. In time every hospital, state school, court and government office could have the tracking system.

Both Mr Sharma and his boss think technology can do a lot to lessen rampant corruption. Much of it is in programmes for subsidised food and fuel, which cost the government $41 billion a year. Digital monitoring would certainly bring efficiencies. Again in a test in Jharkhand, ration shops and individuals who get cheap wheat, rice, salt and oil are now being monitored using Aadhaar identities. For example, each time somebody picks up a 35-kilo ration of rice, they digitally scan their fingerprint and record the transaction. Better management of stock and reduced theft should lower “leakage” rates that touch 50% in places.

Measurably better performance is what excites Mr Modi. He says a more welcoming bureaucracy—even, if you can imagine it, in visa offices—will encourage investors. The prime minister wants India to be among the top 50 in the World Bank’s “ease of doing business” index. It is currently 134th. (The other obstacles, however, remain formidable and include unreformed courts and land laws.)

Next, a commission will report on restructuring the huge and lumbering Indian Railways. Another will look at how to modernise the Food Corporation, which sits on much of Indian agriculture. Reformers still call for more space for private actors, which would entail a host of structural reforms and liberalisations. But Mr Modi is more likely first to order state-run bodies to be run better. Similarly, he is reluctant to sell Air India, the national carrier, hoping to turn it around under state control.

Can the modernising Mr Modi become a more liberal economic figure, too? If the bureaucracy works better, implementing market reforms later may prove easier. Perhaps, too, the prime minister will prove to be bolder now that state elections in Maharashtra and Haryana are over, with the results due on October 19th. After long years in opposition in those states, Mr Modi’s Bharatiya Janata Party looks set to win them. It currently controls only five of 30 state governments—not enough for the ambitions of a moderniser or a reformer.