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Feb 22, 2012 at 11:35am IST

Extract: 'Emerging India' by Bimal Jalan

Bimal Jalan is one of India's well-known economists. He was Governor of the Reserve Bank of India from 1997 to 2003. He has held several top positions in the ministries of finance and industry and in the Planning Commission. He was also Chairman of the Economic Advisory Council to the Prime Minister and represented India on the boards of the IMF and the World Bank. His book 'Emerging India' was recently published by Penguin India.

Here's an extract from the book:

Chapter 3

Extract: 'Emerging India' by Bimal Jalan

Bimal Jalan as Governor of the Reserve Bank of India from 1997 to 2003.

By any criterion, the administrative system is now largely non-functional and unresponsive to the economic and social priorities of the country. The size of the government machinery has increased phenomenally, the number of ministries and departments has multiplied, and more and more programmes to provide relief and services to the poor have been launched. However, as is well recognised, because of administrative apathy, neglect, corruption and diversion of resources, the overall results in terms of benefits to the people have been far below expectations. Last year, in October, we were fortunate in hearing former Chief Justice Venkatachaliah on this subject, who had also chaired the high level Commission on the working of our Constitution in 2002. The Commission, as you may recall, had some highly critical observations on the state of governance, and characterised the situation as "a fundamental breach of constitutional faith on the part of governments"

All this is well known. So, there is not much to say about the state of governance per se. What I believe is more interesting is for us to examine why this great country of ours, with multiple freedoms and fundamental rights for all its citizens, has come to this pass.

As we all know, there are two pillars in our governing structure- bureaucracy and politics. Every citizen comes in contact with bureaucracy only (except at the election time). Thereafter, ordinary citizens are on their own and if they have to go to any office for simplest of tasks, it becomes a highly frustrating experience. Naturally, for average citizens, it is quite logical and reasonable to blame the bureaucracy, particularly, government offices with which they come into contact from time to time to conduct the ordinary business of their life.

The civil service is, of course, insulated and constitutionally protected and can do what it wishes to do without any sense of responsibility or accountability. There is merit in blaming the bureaucracy for all our problems. But, I also believe that there is a much deeper problem that we face and to which we seldom give much attention. This is the role of politics in bringing us to the point where nothing really works and no one is really accountable including the people that you and I elect to serve us.

The basic issue that I want to talk about is what, if anything, we, as citizens, can do to improve a system which does not work for us, but which we ourselves have set up.

In this connection, a vital point to remember is that the reason for the ossification of the governance system is really "systemic", and not episodic. Frequently, the non-functionality and corruption in the system capture media headlines with stories about illicit, anti-social and non-constitutional behaviour of individuals in high offices. However, there is a tendency to accept such behaviour as "given" and an unfortunate part of a democratic, political and administrative set-up in India.

Let me mention some of the systemic political problems which have accumulated over the years and which have led to ossification of the administration in India.

First and foremost, over time, there has been a proliferation of ministries and agencies which are involved in the decision-making processes in the government at different levels-horizontally and vertically. This proliferation has been necessary to accommodate larger and larger number of ministers and ministers of states. In some states, we have 60 or 70 ministries and the same is true of the Centre. And each separate ministry has several over-lapping Departments with no clear line of authority. Thus, for example, Ministry of Human Resource Development (HRD) at the centre (which was earlier called the Ministry of Education), which is very much in news these days, consists of four separate Departments i.e. the Department of Education, the Department of Culture, the Department of Women and Child Development and the Department of Youth Affairs and Sports.

This is not all. Each of these Departments, in turn, has several sub-departments or divisions. The Department of Education has separate units concerned with primary education, secondary education, technical education, teachers' education, higher education, book promotion and copyright, planning, languages and Sanskrit, district education and international relations among others. Further, these departments have several commissions and subsidiary organization under them reporting to different divisions and authorities with cross- cutting functions. While there is multiplicity of specialized departments, divisions, and organization, none of them has adequate authority to take any decision concerning even the most non-controversial items.

Take, for example, the matter of providing better sports facilities for young women in schools. A proposal to this effect would require consideration by practically all the divisions and organizations as it concerns women, sports, education, youth and perhaps welfare! After the matter has gone around the Ministry's various units (with conflicting views and objectives) over several months or years, it would need to be considered by an inter-departmental committee of the Ministry, then a number of Secretaries and finally Ministers, all of whom are likely to have the most casual acquaintance with the subject. Thereafter, of course, in case finance, law, planning, security and any other aspects are also involved, the matter would need to be referred to several other Ministries with their own multiple layers of departments and divisions.

To make matter worse, administrative staff strength is large in every department, but in view of its byzantine structure, it cannot be used productively. In Uttar Pradesh, for example, the Public Works Department has a total strength of 77,000. With fifty-one full-time workers for every 100 kilometres of road, it has one of the highest manual staffing ratios in India. Wages paid to road workers are three times as high as the market wage rate. However, because of high absenteeism, absence of work culture, lack of supervision and equipment, the conditions of roads in the state are among the worst in India.

In addition to proliferation of agencies and spread of corruption, another set of problems affecting governance in India, as compared with other mature democracies, is the enormous power available to government to regulate day-to-day economic life, in addition to long term planning. Despite liberalisation of the economy and open-ness of the economy at the macro-level, which has provided a welcome upsurge in growth rate of the economy in recent years, the power available to multiple ministries to control and allocate economic activity is truly enormous. This ranges from ability to impose price controls on specific items (say, steel or coal), to allocate land for specific purposes, such as Special Economic Zones (SEZs), to external trade and tariffs on all items. Similarly, foreign investment in individual sectors, external commercial borrowings and mergers and acquisitions (at home and abroad) require government approval beyond a certain level and in certain sectors.

Unlike other democracies, another area which confers substantial powers on governmental authorities is control over public sector enterprises. In addition to major industries, like oil and steel, public sector enterprises are dominant in the financial field (particularly banking, insurance) and transport (particularly railways, ports and airports). Award of contracts as well as operational priorities in addition to appointments, are decided by multiple government ministries.

The powers available to ministers at different levels - from centre to state to district authorities-are all pervasive and extend to even the most minor matters. Thus, to give a recent example which has become controversial in a large corruption case and which has received considerable media attention, it is hard to think of any other country where some preferred member plates for private cars are assigned the grand title of "VIP numbers", and are allotted to individuals and corporates entirely at the discretion of VIP ministers.

In theory, under Indian system of executive responsibility, there is supposed to be a clear division of roles between the permanent civil service and the political leadership. The bureaucracy is sub-ordinate to the elected politicians. The government's policy priorities and its work programme is set by politicians. However, the bureaucracy is supposed to ensure that implementation of the approved programmes is done according to the laws and procedures in force, without fear or favour, for the benefit of all the people regardless of their political affiliations.

Over the years, slowly but surely, the role of the bureaucracy has unfortunately been seriously compromised. The politicisation of the bureaucracy has gathered further momentum, as a result of governments with short tenures pursuing their private or party interests in the guise of promoting the larger public good. Any party which comes to power is inclined to appoint favoured bureaucrats in sensitive positions who in turn are expected to carry out the wishes of its party leaders, irrespective of their merits or legality. According to one study, in one year alone, in the state of Uttar Pradesh (when there was a six-monthly rotation of the government headed by leaders of two parties in coalition, BJP and BSP), there were 1,000 transfers among members of the elite Indian Administrative Service (IAS) and Indian Police Service (IPS).

The deleterious effects of frequent transfers on the morale and effectiveness of top civil servants have been substantial. Lack of motivation at the top leads to acts of passive resistance and delays by subordinates. Corruption becomes unavoidable, both to avoid transfers as well as to get remunerative postings by corrupt officials.

At this point, it is also natural to raise the question: what about the enormous liberalisation that has taken place in our country in the last two decades, which has been universally applauded? Economy has been decontrolled, and India is now the toast of the world as one of the two fastest growing countries in the world (in addition to China). The point about a "Rising India" in an environment of liberal and open economy is certainly valid, but it does not negate the role of politics in determining the shape of governance in India. The answer to the puzzle-about higher growth combined with deterioration in governance-is to be found in the growing "public - private" dichotomy in our country.

It is a striking fact of our present situation that economic renewal and positive growth impulses are now occurring largely outside the public sector-at the level of private corporations (for example, software companies), autonomous institutions (e.g. IIMs or IITs), or individuals at the top of their professions in India and abroad. In the governmental or public sector, on the other hand, we see a marked deterioration at all levels-not only in terms of productivity and fiscal disempowerment but also in the provision of vital public services in the fields of education, health, water and transport.

This dichotomy is visibly illustrated everyday in the front pages of white and pink newspapers that we read. Just open a white paper, it is likely to be full of violence, corruption, break-down of law and order and so on. Pink papers, on the other hand, are full of corporates showing extraordinary growth, record breaking profits, buying companies abroad and paying huge tax-free dividends to themselves!

Looking at the evolution of our politics in recent years, it is also my view that the "public- private" dichotomy in our economic life is likely to increase further, unless some action to reform the working of our politics within the framework of a parliamentary form of government is undertaken over the next few years. In view of the coalition of special economic interests (in addition to narrow political interests of small regional and casteist parties), political reforms may be considered unlikely, but in my view they are unavoidable if we have to cope with rising lawlessness, rising disparities in incomes, and poor health and illiteracy among the vast majority of our people.

In my view, there have been some fundamental changes in the working of India's parliamentary democracy, particularly since 1989, the full significance of which is not yet widely appreciated. First is the emergence of coalitions as a "regular" form of government, leading to what may be best described as, short life expectancy of governments at birth. Some governments may last their full term, as was the case with the previous government. However, the crucial point is that at the time of their formation or birth, the general expectation is that they will not survive for long. Short life expectancy has important behavioral implication for ministers who take office, as well as members of the Lok Sabha. If ministers expect to be in office only for a short period, the tendency to maximize gains of office and minimize accountability for performance become paramount. Almost anything goes, including switching sides, in the event of loss of majority by a particular coalition of parties.

I should emphasise that there is nothing wrong with coalitions per se. In fact, it may be argued that coalitions are generally more representative of different ideological interests, that they are less dominated by single individual or a coterie, and that there are other in-built systems of checks and balances. There is considerable validity in this view. There are also some countries in Latin America as well as Europe, where multi-party coalitions have provided governments with a reliable majority, effective governance and political stability. At the same time, it is also true that there are many countries where coalitions have failed to provide any stable or workable framework of policies. Such unstable coalitions have also been dominated by corruption and misgovernance.

An important reason for this state of affairs is the importance of small parties in coalition governments and parliament. I should emphasise that this phenomenon, i.e. the emergence of small parties as the driving force of coalitions in India, is not specific to a particular government which happens to be in power at any point of time. There is also a high probability that this will be the case in future coalitions also. The present coalition, for example, includes a large number of parties, each of which has a relatively small number of members in Parliament - varying between 5 to 25 members in the Lok Sabha which has a total membership of 543. The combined strength of all the coalition partners is, however, not sufficient for the government to command a majority in the House. The survival of the government thus depends on the outside support by another coalition of Left parties, which have a combined strength of about sixty members. Any party or a combination of parties with, say 5 or 10 percent of membership in the House, can stall even a unanimous Cabinet decision without any prior notice.

Unfortunately, under the present Constitutional provisions, as a consequence of amendments carried out in 1985 and again in 2003 to prevent defections, there is now a built-in incentive for fragmentation of political parties at the time of election. This is because smaller a party, the greater the power of an individual legislator to defect to another party in search of political power. Thus, for example, a member elected from a large national party has very little discretion to defect without the support of a substantial number of other members, who also wish to defect. However, if the same person is a member of a small party of 5 or 10 members, a consensus to defect among all of them or only 3 or 4 of them, and switch from one coalition to another, is easier to achieve. The same is true of so-called "independent" members. In a situation where multi-party coalitions are the norm, all regional or caste leaders naturally have a much greater incentive to form their own separate parties.

In addition to fragmentation of parties and short life expectancy of coalition government at birth, in recent years, there has also been a subtle change in the role of Parliament, and the accountability of executive to Parliament. Parliament now has multiple centres of power (in addition to the party leading the government, and the party leading the opposition). An important consequence of the emergence of multiple centres of power is that what the Parliament does or does not do depends on 'behind the scene' agreements among different sets of party leaders within and outside government. As long as the government has the backing of sufficient number of leaders, it is supreme and it can get Parliament to do what it wishes. As Eric Hobsbawn, the noted historian and political analyst, has pointed out in another context, when important national decisions are taken among small groups of people in private in a democracy (as was the case, for example, in respect of U.S. decision to invade Iraq), the position is not very different from the way they would have been taken in non-democratic countries.

To cut a long story short about the process of decline in the role of Parliament, let me simply draw your attention to the happenings in Parliament during 5 days of March 18 to 22 in 2006. It should be mentioned that what occurred during those days had also happened in earlier years-but not in combination and in a hurry over such a short period. The decisions taken by the government during 18 March and 22 March, and approved by Parliament, included a drastic revision in the business of the two Houses, the passage of the budget and the Finance Bill by 'voice votes' without discussion, suspension of the procedure for consideration of the budget by Standing Committees, followed by sudden adjournment of Parliament sine die. What was equally surprising was that, after its adjournment, it was decided to reconvene the Parliament again after a few days, more or less as per the earlier schedule. The Standing Committees were also asked to consider the Budget after the Parliament had already approved it!

During those five days, the Parliament also approved the controversial 'Office of Profit' Bill, which was later returned by the President to Parliament for reconsideration. It will be recalled that the Parliament did reconsider this Bill in its next Session, but it was pleased to approve it in its original form and send it back to the President for his assent.

The main casualty of these political developments, taken together, has been the lack of accountability of ministers for performance either individually or collectively as members of the cabinet. Bureaucracy and civil service, although permanent, is insecure because of fear of frequent transfers and interventions by ministers in day-to-day administration. These developments, combined with proliferation of ministries and agencies, have ensured that effective governance at the ground level, again with few honourable exceptions, has virtually disappeared.

All of us, including civic organisations, may be concerned about multiple problems, delays and corruption facing the citizen who has to deal with an agency or ministry of the government, but there is not much-even at the highest level of government-that can be done about it unless some political reforms are undertaken. Frequent questions are asked in Parliament, special mentions are made, bills and resolutions are passed, and assurances are given by concerned ministers, but action to improve delivery of services, or improve law and order is largely absent. The centre, which is very active in announcing grand policies for the benefit of the people and the country as a whole, generally blames the states for tardy implementation. States, in turn, blame the centre for lack of adequate budget allocations and policy deficiencies.

Where do we go from here? I could go on, but let me now briefly turn to some areas where political reforms are urgently required in order to improve governance.

First and foremost, the administrative role of governments, which assume office from time to time, needs to be redefined and prioritised. Even after 60 years of independence, the imperial hangover and the legacy of colonial rule continue to prevail-with visible symbols, such as, Presidential carriages led by a regiment of guards on horses, ministerial convoys with red lights and VIP/VVIP entrances in public places. Many of our political masters and civil servants under them, still harbour the same imperial arrogance towards the people and continue to enjoy huge powers bestowed on them during the colonial era. In order to reduce such arrogance, as well as corruption, government's direct role in the economic area and public sector commercial enterprises needs to be substantially reduced. This does not mean privatization, or even public-private partnership, in ownership or allocation of public resources. What is required is the creation of an effective and transparent administrative mechanism which is at an arms' length from government. This can be done, for example, by creation of institutions similar to the UPSC, the Election Commission and regulatory bodies, which enjoy sufficient powers with accountability.

Second, there is an urgent need to simplify administrative procedures, eliminate discretion in the decision-making process and drastically reduce the number of ministries and agencies. At present, as I mentioned, 10 to 12 ministries are involved in policy-making in different areas. Similarly, 30 to 40 different clearances may be required for, say, setting up even a modest-sized industrial factory. The problem, of course, is that if procedures are simplified, then hundreds of ministerial departments and their subsidiary agencies at the centre and states may not have much to do. There is no simple answer to this problem since pursuit of ministerial offices is the driving force of time-consuming and costly electoral politics in India.

One possible solution is to continue with the number of ministries and agencies that are already in place, but re-set their direct roles. They can be made responsible for ensuring availability of public goods (such as, roads and water), essential services (such as, health and education), and poverty alleviation schemes (such as, employment guarantee). There are more than a hundred such schemes in high priority areas of public interest. These could provide substantial scope for improved monitoring and implementation of programmes on the ground. In addition, of course, there is need for an expanded role of government in respect of internal security, law and order, management of urban and rural infrastructure and so on. There is no scarcity of work to improve governance and delivery of services, provided the orientation of government activity can be shifted from "ruling" the people from top to serving them at the bottom of the pyramid.

Third, the old and cherished doctrine of concurrent and collective responsibility of the cabinet, which is now largely observed in its breach, must be formally replaced by the notion of individual responsibility of ministers for implementation of programmes of public interest announced by the government. Once an annual target in any priority area, say power or literacy, is set by a ministry, that ministry should have full authority to implement it, and the head of that ministry should be individually accountable for actual performance. The doctrine of collective responsibility can continue to prevail for all other political purposes, including the continuation of government in office.

Fourth, whether we like it or not, as citizens, we need an efficient civil service, not only to maintain law and order but also to provide essential public services to enable citizens to carry on with the ordinary business of life. In order to improve the morale and performance of civil services, it is essential to provide for "separation of powers" between ministers and civil servants in so far as postings, transfers, promotions and other similar administrative matters are concerned. We should revert to a rule-based system of administration, which circumscribes the powers of politicians and allows civil service to regulate itself. The greater empowerment of civil service should go hand in hand with greater accountability of civil servants for their performance and ethical conduct. While granting greater authority to the civil service on administrative matters, two statutory provisions in particular, namely Article 311 of the Constitution, which provides comprehensive constitutional protection to civil servants, and the Official Secrets Act of 1923 deserve to be withdrawn.

Finally, in view of the high cost of periodic elections, governance can not be improved without reducing the compulsion of political parties to raise funds through illicit means. This is one of the primary causes of political corruption, and state funding of elections is essential to help those - however few they may be - who wish to remain in politics without having to indulge in corrupt practices. Contrary to popular impression, the budgetary cost of funding elections by the state are unlikely to exceed 0.3 to 0.4 per cent of the total expenditure of Rs.600,000 crore or more in the current fiscal year. Part of such expenditure could also be covered, if necessary, by diverting funds being allocated to MPs and MLAs for financing projects in their constituencies (the so-called MP/MLA Local Area Development funds), which suffer from several deficiencies. For equitable distribution of budget funds among large and small political parties, as elaborated elsewhere, a simple formula can be put in place without much problem.

The 5-point agenda that I have briefly mentioned is by no means exhaustive. There is much more to be done in order to improve governance, for instance, some political reforms are also necessary to make coalitions stable, to redefine the role of small parties in a government and restructure the distribution of powers between centre and states for policy making and implementation of programmes. However, I believe that even a relatively modest 5-point agenda of administrative reforms would give us a good start in the long journey that lies ahead to improve governance.

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