The rising India narrative is today under serious threat, said Sanjaya Baru, media advisor to former Prime Minister Manmohan Singh while delivering the 14th M L Ramakrishna Rao Memorial Lecture in Hyderabad.
The rising India narrative was based on three sets of numbers - in the first 30 years after Independence, the Indian economy grew at 3.5 per cent followed by 30 years at 5.5-6 per cent. In the first decade of this century it grew at over 8 per cent. With these the world believed India was catching up with China and was the next miracle in creation.
However, over the last few years there is reason to believe that "this narrative is under serious threat." He said, it is a no brainer on how important rule of law, predictability and consistency were for business and industry.
"The moment, India loses that foundational principle, investments will fly out. We are not paying enough attention to Indian investment and talent flying out. More Indians are studying abroad today spending $6 billion every year in tuition fees. It is extremely important for India to realise that it has to be seen as a democracy in which rule of law is adhered to, that governance is fair and not arbitrary, that people have rights and not just responsibilities," he said.
While government and judiciary are seeking ways to dispose off cases through technology and other innovative methodologies, enough attention is not being paid both to the physical and intellectual capacity of judiciary at lower levels. One consequence has been the rise of arbitration as an option. This is welcome, but most parties still prefer to go abroad for arbitration underscores the lack of confidence in the capability of arriving at informed settlements."
There has been much debate in India over the past couple of years on the economic slowdown. The most important is the decline in the rate of investment. The ratio of gross investment (gross capital formation) to national income grew from somewhere in the early 20s to over 35 per cent during the growth years of 2003 to 2012. Since then, this has is less than 30 per cent in the last eight years.
The decline in the rate of investment and the consequent decline in growth rates have had several consequences." One important factor in this, he feels, has been the impact of legal process and the verdicts of Indian judiciary. "Consider the 2G and coal block allocation cases. I have in mind the infamous retrospective taxation decision taken in Budget of 2012 by the then finance minister Pranab Mukerjee. The government's decision to impose a tax on Vodafone was challenged in the court and the verdict went against the government but then the Manmohan Singh government amended the act to make the court's verdict infructuous.
However, Baru, reminded that courts are not the biggest impediment to the ease of business. The executive at the centre and states have contributed more to the problems of the economy. He pointed to developments in Andhra Pradesh which have increased the political risk of investing in India. The abrogation of contracts raises questions about the rule of law and its long term consequences on investments and development process.