Good governance is at the core of improving economic growth in a country, as it provides a mechanism for linking inclusion, decision making, accountability, and responsibility. Thus, it enables equitable growth for all. Empirical evidence shows that there is an inalienable link between growth and governance. Good governance can spur the process of economic growth and lead to gains that are tangible, equitable, and inclusive. The concept of good governance emerged at the end of the 1980s, first at the World Bank, and then was further established by international development aid agencies and organisations such as UNDP and OECD. According to the World Bank (1994), good governance entails sound public sector management (efficiency, effectiveness, and economy); accountability, exchange, and free flow of information (transparency); and a legal framework for development (justice, respect for human rights, and liberties). UNDP in adding to this concept states nine major characteristics of good governance: Participation, Rule of law, Transparency, Responsiveness, Consensus orientation, Equity, Effectiveness and Efficiency, Accountability, and Strategic Vision.
According to the United Nations Economic and Social Council for Asia and the Pacific, the concept of ‘governance’ is not new. Simply put ‘governance’ means: the process of decision-making and the process by which decisions are implemented (or not implemented). Good Governance in this context means transparent, accountable, participatory decision making and implementing processes. Good governance also drives sustainable and quality reforms in a country that creates pathways for growth and prosperity.
Growth with Governance in India– The Evolution in Phases
In India, growth has almost followed an open process, with a designated authority. Soon after independence, India launched its First Five Year Plan in 1951, under socialist influence. The process began with setting up the Planning Commission in March 1950 in pursuance of promoting a rapid rise in the standard of living through efficient utilisation of resources, increasing production, and offering opportunities to all for employment in the service of the community.
Broadly speaking, the phases in Growth and Governance in post-independence in India can categorised as the following phases:
Rebuilding Phase (1951-1980s)
During the first phase of ‘Post-colonial rebuilding’, growth was given more importance than governance. The aim during this phase was to bring about reforms in the agriculture and industrial sector that would create more job opportunities and accelerate the economic growth of the nation. Each five-year plan during the phase concentrated on promotion of high growth rate, encouragement through subsidies of agriculture, and industry. Such a focus on economy with minimal attention to governance gave rise to inequality, corruption, and concentration of power in the hands of few. It was during this phase that in 1955 that the government decided to develop the oil and gas resources in various parts of the country as a part of public sector development. This was also the phase when the government decided to push growth with governance by focussing on setting up of the public sector undertakings in the country, an initial phase that has continued to lead the growth until now with focus on welfare and equity.
Structural Re-adjustment Phase (1990s to early 21st Century)
The second phase was marked by both political and economic re-structuring. While on one hand India moved from single party rule to coalition government, on the other the economy also under fiscal and economic reforms such as liberalisation. During this phase, policies and reforms aimed at rectifying the worsening balance of payment, debt burden, budgetary deficit, and inflation. The phase also witnessed increasing demands from the citizens for economic and governance reforms that would improve the quality of life and make government more accountable and transparent. In view of these rising demands and challenges, the concept of E-Governance was introduced in the 1990s to improve delivery of government services to citizens and businesses with the vision to “make all government services accessible to the common man in his locality, through common service delivery outlets and ensure efficiency, transparency and reliability of such services at affordable costs to realise the basic needs of the common man”.
The Good Governance Phase (The present phase)
The third phase is characterised, by a major shift in the manner in which growth and governance are being linked. Recently India’s political leadership, policy makers, and business leaders are motivated by a strong desire to make the country an economic super power in the twenty-first century. The high rate of economic growth, coupled with increasing foreign exchange reserves and rising SENSEX figures has led to growing confidence. The world is also looking at India with respect and considers it as having an ideal economic growth model, as India aims to have a high growth rate as well as a focus on equity. Although high growth and equality are not always mutually exclusive; the conflict arises when scarce resources are diverted to meet the demands of the growing middle class or businesses by ignoring the needs of the poor. Many of the initiatives launched over the years for achieving the objective of rapid growth coupled with poverty alleviation and inclusiveness have failed to achieve their goals because of lack of ownership, ineffective governance, and insufficient accountability at various levels. The imperatives of being a democratic country, however, are now forcing Indian political leadership to focus on good governance and take a deeper look into the causes of poverty, inequality, and suffering of the common man. In doing so, major shifts are occurring in the collective value system of India, where the focus is slowing shifting from just economic growth to growth led by good governance.
Growth vis-à-vis Governance debate
Development plans in India during this phase have also marked a major shift from on entirely economic approach to an approach characterised by its emphasis of social equity and inclusive growth. According to the plans, the capacity of institutions needs to be built to ensure poverty reduction; promotion of group equality and regional balance; reduction of inequality; and the empowerment of people. Sustainability includes ensuring environmental sustainability; the development of human capital through improved health, education, skill development, nutrition, information technology, etc. and development of institutional capabilities, infrastructure like power telecommunication, roads, transport etc. Within this background, both growth and governance are being looked at as processes that facilitate one another. On one hand good governance practices and mechanisms are seen as value additions to the democratic traditions of India, which provide better services and opportunities for development. On the other hand growth increases confidence in the government among citizens, who are then encouraged to support policies and reforms for larger good. The Indian government in its recent statements has acknowledged this fundamental link and stated that ‘the Indian economy has the capacity to grow at 8-9 per cent and good governance would make economic expansion ‘more exuberant’.
Role of Businesses in Driving Growth with Governance
Global and local evidence suggests that there is a definitive role for businesses to contribute more to the growth and wellbeing of societies with good governance and the prospect of combining the pursuit of profits, environment protection, and safeguarding the community. The Indian experience also shows that businesses supported by proactive local laws and universal principles have succeeded in not only enhancing shareholder value, but also supporting stakeholders with numerous approaches including its focus on good governance, sustainable development, community service, and social responsibility. Current laws on environment, social responsibility, and good corporate governance only strengthen Indian businesses’ march towards more sustainable growth, both for itself and also for the environment and society. This is a move that is re-writing the growing influence of Indian companies and also how they can contribute more to national economic growth by renewing the focus on infrastructure building and generating jobs.
Can Growth and Governance co-exist? A More Universal Approach
It is now widely accepted that good governance is highly relevant and a priority in India’s post-2015 development agenda as well. Effective governance institutions and systems that promote and facilitate good service delivery, inclusive growth, and accountability of public officials are assuming greater significance. Today, as we sit here deliberating the theme of Growth with Governance, the United Nations is busy giving final shape to the 2017 Sustainable Development Goals that will be launched in September. These goals will empower governments, businesses, and civil society organisations to work together for the public good, creating the twin agenda of growth and good governance in a more universal way.