Why India Can't Catch Up With the West

India's legions of petty bureaucrats are killing the country's economy.

London—A deep gloom has settled in here: Europe's glory days, it's feared, are over. Private bank excesses and public-sector legacy costs are poised to drag the continent—and America—down for generations. Only India and China are seen as the rising stars in the global firmament. Their young economies have stalled this year. But they are expected to recover, learn from the West's mistakes and become economic powerhouses, displacing the West's global hegemony.

Setting China and its opaque autocracy aside, India, I am quite confident, ain't going to perch its tricolored flag atop the globe anytime soon. Not until it does something about its soul-sapping bureaucracy. The world's largest democracy doesn't have rule of law—it has the rule of babus, the local term for petty bureaucrats. And so long as they keep challenging India's entrepreneurs, there isn't much chance that India will challenge the West.

For all their problems and flaws, Western powers—America, Canada, England, Germany, and others—have functional institutions such as well-defined property rights, effective courts that enforce contracts and state-of-the-art infrastructure that enhance the productivity of their citizens. By contrast, India's horrendous bureaucracy systematically thwarts its citizens, killing productivity, often for no apparent reason but to exercise its powers over them. 

Consider my recent encounter with it: My husband, son and I were in New Delhi and wanted to make a short trip to Malaysia with our cousins. Thanks to a law passed after the 2008 Mumbai attacks, noncitizens (as we are) who wish to leave and re-enter the country within 90 days have to get special permission.

Hence, at 8 a.m. one day, armed with our Malaysia tickets, hotel bookings and other documents listed on the government website, we drove to the Foreigners Registration Regional Office. After waiting in line for one of the five mustachioed babus, we were informed that we were at the wrong office. First, the Home Ministry must grant permission. Then their office would enter it in our passports.

We sped across town to the ministry where, after some frisking and interrogating, we were directed into a room where 100 other supplicants like us were crammed. This 15-by-30-foot space reeked of urine from the ramshackle lavatory walled off in one corner. At one end sat a secretary. At the other, the babus. We needed the secretary's green light to see the babus, and to see her, we took a number: 85. She was then processing No. 12. After two hours, she got to us. "Incomplete paperwork," she sneered. "Get photocopies of your visas, passports and return flights to the U.S. before the babu calls you or else you'll have to come back another day."

We ran around frantically to get everything ready, which we managed to do just before we were summoned. Alas, there was another problem: Malaysia is not contiguous with India and therefore not among the countries from which re-entry is allowed. We'd have to cancel our trip, the babu said, unless we persuaded his superior—call him Mr. Singh—to give us special permission.

We anxiously headed for Mr. Singh's office, intercepting him, luckily, just before he went home for lunch with his waiting wife. He hurriedly penned us a note granting permission. Overjoyed, we returned to our babu, who seemed satisfied. He kept all our documents and told us to head back to the original registration office before 4 p.m.

Giddy with relief, we drove back, expecting smooth sailing. Wrong again. We needed to resubmit all the documents that the ministry babu had taken from us to the registration office or it wouldn't stamp the passport. Once again, we scurried. We returned 15 minutes before closing at 6 p.m. with everything—only to be told that they had forgotten to tell us that we also needed the electricity bill of our permanent address in New Delhi.

I snapped. But I retained enough presence of mind to play my final card: I threatened to report them to Mr. Singh, who—I pretended—was a family friend. That worked. And, after some face-saving kvetching, they grudgingly stamped our passports.

In other words, a routine matter that shouldn't have taken more than 10 minutes swallowed 30 hours of our lives. Yet, by Indian standards, ours was a happy ending. Episodes even more Kafka-esque than ours are replayed daily across the country. We had time, resources and the savvy to devote to a matter that, ultimately, didn't have existential stakes for us. But what about, say, a poor rickshaw driver who needs a license to earn his meager income? Or a farmer who needs the title to his land (something that can take 240 to 400 days in some parts of the country)?

Western bureaucracies are inefficient, but get things done. Indian bureaucracy is orders of magnitude worse and gets nothing done—unless you count harassing people—which is why it is ranked the worst in Asia. And literally every world survey rates India among the very bottom in ease of doing business. The World Bank puts India virtually last among 183 countries in enforcement of contracts.

This is all thanks to the immense discretionary powers that India's irrational rules hand to bureaucrats. Until that changes, fears that the sun is setting on the West are premature, to say the least.

Reason Foundation Senior Analyst Shikha Dalmia, a native of India, is a columnist at The Daily, where this column originally appeared.