This month marks the 100th year of the publication of the ‘Report on Indian constitutional reforms’, commonly known as the Montagu-Chelmsford Report (MCR). Edwin Montagu, then Secretary of State for India, had advocated for increased participation of Indians in the British Indian administration and had begun consultations nearly a year earlier. After many meetings with Indian representatives, Montagu and the then Governor-General, Lord Chelmsford, published the MCR on July 8, 1918.
The MCR stands out for proposing some of the most radical administrative changes and for giving provincial legislatures the mantle of self-governance. To this extent, the report advocated the need “to emancipate the local governments and legislatures from central control; and to advance, by successive stages, in the direction of conferring responsible government on the provinces.”
The Montagu-Chelmsford Committee visited Madras Presidency to gather the views of political leaders. T. Varadarajulu Naidu’s book, Justice Movement 1917, informs us that senior members of the Justice Party led by Sir Pitti Theagaraya met the Committee and made extensive demands, which included the “creation of municipalities and local body institutions with sufficient autonomy to handle their local issues… bereft of the intrusive control of the Government.” They further demanded that administration of the Presidency be eventually moved to the local legislature. To this end, they suggested that departments in administration be placed under the control of legislatures.
Ultimately, the MCR established the framework for devolution of powers and gave credence to the cry for self-governance. This cannot come as a surprise because the report recommended that “the Provinces are the domain in which the earlier steps towards the progressive realisation of responsible government should be taken”. Another one of the most far-reaching objectives of the report was to elucidate the principle of accountable governance by directing that the “Government of India must remain wholly responsible to Parliament.”
Thus was laid the platform for the development of a responsible government. However, in the 32nd session of the Indian National Congress, led by British theosophist Annie Besant, there was strong opposition to the Montagu declaration as something that “was unworthy of England to offer and India to accept.” However, Besant later accepted the reforms as essential for the progress of British India.
The MCR would go on to become the basis for the Government of India Act, 1935, and, ultimately, the Constitution. The key principles of responsible government, self-governance and federal structure grew out of these reforms. The MCR on Indian constitutional reforms along with the Montagu Declaration are, thus, worthy claimants of the title of the Magna Carta of modern India.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.