Crisis Faced in India, Moral or Economic

In 2014 and 2015 India was the fastest growing large economy in the world, with output rising at over seven per cent a year according to the new national accounts series. Yet the estimate of the Tendulkar Committee put the number of poor in 2011 and 2012 at about 270 million people, nearly twenty two per cent of the population. In the Corruption Perceptions Index of Transparency International for 2014, India ranked 85th of 175 countries. In December 2012 the gang rape and death of a young woman in Delhi had shocked the country into protest. A nation can hold all these facts at once, and the topic asks whether the crisis it faces is at root moral or economic.

An economic crisis is a failure of production, income or distribution. India has no shortage of such failures. Hundreds of millions are poor. Nearly half of its children are underweight or stunted by some measures. Farm incomes are low and many farmers are in debt, and the National Crime Records Bureau reported several thousand suicides among farmers each year. Employment has not kept pace with growth, and manufacturing is smaller than it should be. Infrastructure, from power to roads to sanitation, is inadequate, with about half of all households having no toilet at home according to the census of 2011.

A moral crisis is a failure of values and of conduct, a decline in honesty, responsibility and care for others. The evidence for this is also strong. The 2G spectrum allocation, the Commonwealth Games and the coal block allocations that were the subject of reports and court cases between 2010 and 2013 involved large public losses, whatever the final legal verdicts. Petty corruption touches daily life, in the bribe paid for a licence or a ration card. Violence against women, the neglect of the elderly, the discrimination of caste and religion, tax evasion and disregard for traffic rules all reflect a failure to honour obligations to others. The practice of sex selection has left India's child sex ratio at 919 girls per thousand boys in 2011.

The more illuminating approach is to see how the two kinds of crisis feed each other. Corruption is a moral failing that has economic effects. It raises the cost of doing business, diverts money from schools and hospitals, and lowers investment. Studies of rations and rural works have found that large shares of the money meant for the poor never reach them. Where the state is weak, laws are not enforced and contracts are not honoured, which deters enterprise. In the other direction, poverty and insecurity breed moral compromise, since a person with little may pay a bribe to survive or sell a vote. An economy that offers few honest ways of rising tempts people to dishonest ones.

An economy that offers few honest ways of rising tempts people to dishonest ones.

Thinkers have long linked the two. Gandhi listed seven social sins, which included wealth without work, commerce without morality, pleasure without conscience and politics without principle. He held that an economy not rooted in ethics was a form of violence. Adam Smith, often thought of as the philosopher of the market, wrote The Theory of Moral Sentiments before The Wealth of Nations, and believed that markets depend on trust and sympathy. Amartya Sen has argued that development should be judged by the freedoms people have, and that economic and ethical judgements cannot be separated. B. R. Ambedkar warned in his last speech to the Constituent Assembly that political democracy would not last unless it rested on social democracy, and that India was entering a life of contradictions, equality in politics and inequality in social and economic life.

It is helpful to separate causes by their nature. Some problems are mainly of resources and skill, such as building a power grid or increasing crop yields. These respond to investment and technology, and India's growth has helped. Others are problems of will and norms, such as the enforcement of laws, the honesty of officials and the treatment of women and minorities. These do not respond to money alone. Many Indian failures belong to the second kind. India has plenty of schemes on paper, and what fails is delivery, a matter of accountability and character. The Right to Information Act of 2005 and the movement against corruption in 2011 were attempts to build moral pressure into the system.

There are risks in giving the moral answer. It can lead to the belief that the people are to blame, which excuses poor design of institutions. Many officials act corruptly because the system offers discretion without accountability and low pay with high temptation, and not because they are uniquely wicked. The economic answer likewise can be too mechanical, assuming that growth will cure everything. Several of the richest countries have also had their scandals, and growth has not eliminated discrimination. The history of the 2008 financial crisis, caused partly by greed in rich countries, shows that moral failure is not peculiar to poor ones.

So the choice posed by the topic is a false one, though the question remains useful for deciding emphasis. India needs economic reforms that create jobs, raise farm incomes and build infrastructure. It needs institutional reforms that make the state accountable, such as police and judicial reform and transparent procurement. And it needs a civic ethic, taught in homes and schools and demonstrated by leaders, in which cheating is shameful and obligations to strangers are felt.

History offers hope as well as warning. India has changed its habits before, as when it ended the open practice of sati in the nineteenth century and the legal sanction of untouchability in 1950. Reform movements, from Raja Ram Mohan Roy to Jyotirao Phule to Gandhi, worked on conscience and law together. The economic and the moral were never far apart in their campaigns.

A crisis is a turning point, and it is one only if it is recognised as such. The numbers of poverty and corruption are published every year and then forgotten, and the anger of a few weeks in December 2012 faded. Whether a country that knows what is wrong can find the character to act on it is a question that its economists can describe but cannot answer.