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Reserve Bank of India (RBI) Governor Raghuram Rajan has cautioned against the multi-layered checks in government functioning, which often act as hindrance to good governance. He suggested a midpoint, which would strengthen government’s capacity.
“We will have to strengthen government (and regulatory) capability, resisting the temptation to implant layers and layers of checks and balances even before capacity has taken root,” Rajan said in a speech titled Democracy, Inclusion, and Prosperity, delivered at the DD Kosambi Ideas Festival in Goa on Friday.
“We must choose a happy medium between giving the administration unchecked power and creating complete paralysis, recognising that our task is different from the one that confronted the West when it developed, or even the task faced by other Asian economies,” he said.
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He pointed out India’s experience was different from those of countries where strong governments emerged, only to be restrained by rule of law and democratic accountability. “In India, we have the opposite situation today, with strong institutions such as the judiciary, opposition parties, the free press, and NGOs (non-governmental organisations), whose aim is to check government excess…However, necessary government function is sometimes hard to distinguish from excess.”
“Let me emphasise we need ‘checks and balance’, but we should ensure a balance of checks. We couldn’t have escaped from the Licence Permit Raj only to end up in the Appellate Raj,” he said.
While the governor refrained from citing specific examples, his comments came against the backdrop of a slew of probes against corporate houses for alleged wrongdoings.
According to Rajan, by creating a multiple-appellate process, against government or regulatory action that is slow and undiscriminating, government excess is contained, though there is a risk of halting necessary government action.
He lauded the efforts of the state and central governments towards several initiatives such as the Delhi Metro, the reach of the public distribution system in Tamil Nadu, or the speed of the roll-out of the Pradhan Mantri Jan Dhan Yojana. Such initiatives, he said, should permeate “every tehsil in every state”.
Quoting renowned political scientist Francis Fukuyama, Rajan said the country had to go a long way to create capacity for the government and regulators such as RBI to deliver governance and public services. “In many areas of government and regulation, as the economy develops, we need more specialists, with domain knowledge and experience. For instance, well-trained economists are at a premium throughout the government, and there are far too few Indian Economic Service officers to go around.”
