The way out is to reform the decision-making process by making it transparent and rule-based. Moreover, administrative reforms should also be introduced.
A high growth rate for the Indian economy cannot be sustained without a vibrant and growing manufacturing sector.
There is enough evidence from several research studies to show that bad governance, and in particular corruption, has been the most important factor inhibiting the growth of the manufacturing sector.
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Corruption mainly takes place where important discretionary powers are vested with the decision maker and where rules are not clear-cut and the decision making is not transparent.
The way out is to reform the decision-making process by making it transparent and rule-based and by drastically reducing the discretionary powers of officials. So far, despite brave declarations of intent, no serious attempt has been made in this direction of administrative reforms.
In addition to administrative reforms, the government should also introduce rules and laws to drastically discourage cash transactions and cash holdings.
Thus, a policy aimed at GDP growth based mainly on attracting investment in the services sector will not succeed. Moreover, a thriving manufacturing sector is vital for employment generation. Under these circumstances, reforms should be aimed at good governance, transparent and time-bound decision-making, reduction of currency transactions and holdings, and the rule of law.
The author is Member Secretary and Hon. Director, Forum for Global Knowledge Sharing, and also the Professor of Economics, Madras School of Economics.
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