18 Jun 12 Social conventions, doing business and a nation's progress

Niranjan Rajadhyaksha wrote in his weekly column The Impartial Spectator describing how culture influences growth of nations, “Parking behaviour is a reflection of social norms prevalent in a country”. And social norms affect (directly and indirectly) the way we conduct our economic activities that have a bearing on the nation’s economic progress. The author cites results from research studies to demonstrate the correlation and argues that “The ability to follow rules matters across all parts of society. It is an important ingredient of national success.”

While I was wondering how driving a vehicle in India cities (especially metropolitan areas) has become increasingly uncomfortable because drivers circumvent simple rules (private vehicles are the dominant mode of transit as public transportation is inadequate), I was simultaneously thinking how such social norms are influencing the doing-business environment in the country.

There is a general tendency to violate traffic rules if it appears to be beneficial to us – primarily to save time (a few seconds) or sometimes for the sake of the pure thrill of breaking rules. Similarly, while transacting businesses, are we getting tempted to grab the temporal gains? If we use the Corruption Perception Index as an indicator, probably we are. India ranks 95th out of 183 countries as one of the more corrupt countries of the world. In fact, studies have suggested that there is a high correlation between parking behaviour and the level of corruption. Again, according to IFC’s Doing Business 2012 Index, India ranks 132nd among 183 countries for ease of doing business. It has the lowest rank among the BRIC nations and ranks particularly low for parameters such as starting a business, dealing with construction permits, enforcing contracts, and closing a business.

The previous 9 years have been good for India. The fourth largest economy (PPP basis) has been growing at an average rate of 7%+ since 2003. However, if vehicle parking behaviour and our inclination to break traffic rules are used as reflective measures of the quality of India’s economic progress, we are sure to feature in the lower quadrant. Moreover, India ranks a low 134 out of 187 countries in the Human Development Index 2011. Are we ignoring the basics – valuing life itself, in our race to get ahead?

Looking forward though, the pertinent question is can we continue to grow (with all the essential economic fundamentals in place) sans strong social ethics and norms? How far and at what rate can domestic consumption, internal savings and investments and natural endowments take us if we are not creating a righteous society? I hope India does not become “the first BRIC fallen angel” as touted.

Blaming the state machinery will not help. Each and every citizen of the country has to work towards developing a progressive acceptable social framework. The government can create the underlying infrastructure but individual citizens must preserve them. For example, building a network of effective public transport system across the country by the government is not enough. Users must abide by the rules to make it work – follow queueing rules, pay the dues to make it self sustaining, ensure right usage and cultivate a sense of belongingness with a nationalist sentiment.

Ribhu Ranjan Baruah

Ribhu was a project manager at ValueNotes, managing a team that met the research needs of a global investment management firm. He has since moved on to pursue opportunities in impact investing.

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