The Global Competitiveness Report 2002 is out. Among its authors are Michael Porter and Jeffrey Sachs. The report card for India is quite dismal. In the Growth Competitiveness Index ranking, India is placed at No. 57 among 75 countries. In 2000, India's rank was 48. In the Current Competitiveness Index ranking, India is ranked 36, not much different from the rank of 37 obtained in 2000. This speaks volumes about the management of India's economy by the bjp-led Government in the past three years. Let us wait and see if the Government will react.

Porter, Sachs and others make an important point on competitiveness: "At low levels of development, economic growth is determined primarily by the mobilisation of primary factors of production: land, primary commodities, and unskilled labour. As economies move from low- to middle-income status, global competitiveness becomes investment-driven, as economic growth is increasingly achieved by harnessing global technologies to local production."

That's put very succinctly. Land, primary commodities, labour and capital-an economy needs to create a market for each of these growth determinants and draw from that market. If land is frozen by regressive and outdated laws (as urban land was under the Urban Land Ceiling and Regulation Act), there will be no market for urban land and virtually no resource for the growth of the urban housing sector. The consequences are very visible-sprawling slums and nearly 40 per cent of the population of every large Indian city living in jhuggis.
The rigid labour market is another example. No one will-or can-plead for a policy of hire and fire. But employers must have some freedom to hire when there is a spurt in production and lay off or retrench workers, subject to the payment of compensation, when there is a decline in production or a cyclical recession. It has been established by numerous studies that the rigidity of Indian labour laws is actually hampering growth in employment.

Take a look at the growth-determining factors once again. Is it true that if we can get our sums right on labour and capital, or on land or technology, we will be assured of sustained growth? I doubt it will be so because there are other growth-determining factors and if we get them wrong they will turn into growth-restricting factors.

I think politics is a factor that determines growth. Bad politics has ruined many countries. Fiji and Sri Lanka are examples of countries whose economies have been ravaged by internal strife. Mauritius is an example of a country where two (or at most three) political parties have, alternately, given responsible government and reaped the benefit of steady growth.

Bad politics has its origin in political parties. So long as a political party adheres to certain values and principles, its government will assure economic growth. The Congress governments, both at the Centre and in the states, during the 1950s and 1960s, ensured that the economy grew at a steady, if not spectacular, rate. The depressed rate of growth was due to certain wrong economic policies. However, the decline in the values and principles cherished by the Congress brought in its wake a decline in the political fortunes of the party (during the 1970s). It was also the cause of the economic misfortunes of that decade. The consequences of bad politics were felt more acutely in the states. Uttar Pradesh, Bihar, Orissa and Assam slipped below a notional political watermark in the 1970s and have not recovered since.

In the 1990s, we got our act together, to a great extent, on some of the economic factors that determine growth. Our greatest failure was that we did not pay attention to the state of our political parties. The Congress was in power at the Centre for 14 out of the 20 years in the 1980s and 1990s. Hence, much of the blame ought to be shouldered by the party. The bjp was the party-in-waiting during those years, and in its anxiety to win power opened its doors to all and sundry, including history sheeters and criminals. Indian politics touched its nadir in Uttar Pradesh under the sp-bsp and bjp-bsp coalition governments. The bjp has managed to remain in office in Uttar Pradesh by breaking every other political party, luring legislators with ministership (at one time, there were 100 ministers) and shamelessly flaunting criminals as political leaders.

Uttar Pradesh is not likely to recover-or rediscover itself-in this decade too. Every political party in the fray in the current elections has fielded criminals. The only qualification for a candidate seems to be caste and the only point of attraction to the voter seems to be caste. If caste and criminals are the politics-determining factors of Uttar Pradesh, one can easily imagine the economic fate of that state. My worry is, can we stem the tide in Uttar Pradesh before it reaches Delhi?

(The author is a former Indian finance minister. These are his personal views)