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Governance and Inclusive Development in India


Naresh Chandra Saxena

Table of Contents
1 Scope of the monograph ................................................................................................... 3

2 Brief history of economic policies in India ..................................................................... 5


2.1 Improvement in social indicators ................................................................................ 7
2.2 Rights based development ........................................................................................... 9

3 Challenges........................................................................................................................ 11
3.1 Hunger ....................................................................................................................... 12
3.2 Education .................................................................................................................. 14
3.3 Health ........................................................................................................................ 14
3.4 Inequality................................................................................................................... 15
3.5 Job creation & employment ...................................................................................... 16
3.6 Social Exclusion ........................................................................................................ 20
3.7 Corruption ................................................................................................................. 21

4 Political issues in initiating governance reforms ......................................................... 25


4.1 Are politicians alone to be blamed? .......................................................................... 26
4.2 Who should initiate reforms? .................................................................................... 27
4.3 Long-term changes in Centre-State fiscal relations.................................................. 30
4.4 Problems with centralisation .................................................................................... 32
4.5 Changes introduced in the 2015–2016 budget .......................................................... 33

5 Reforms needed at the Central level ............................................................................. 35


5.1 Sustaining growth through improving ease of doing business ............................. 36
5.2 Archaic laws and procedures .................................................................................... 37
5.2.1 Examine land laws ................................................................................................. 39
5.3 Low tax base impinges on social spending ............................................................... 40
5.4 Equity issues in Federal Transfers ............................................................................ 42
5.5 Design flaw in key flagship programmes .................................................................. 44
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6 Governance Issues .......................................................................................................... 49


6.1 Monitor Absenteeism ................................................................................................. 49
6.1.1 Should panchayats control absenteeism? .............................................................. 51
6.2 Improve M&E systems .............................................................................................. 53
6.2.1 Shift focus from input controls to monitoring of outcomes .................................. 54
6.3 Check inflated and incredible reporting ................................................................... 55
6.4 Accountability............................................................................................................ 57
6.5 Incentives for better service delivery ........................................................................ 59
6.6 Capacity building and training ................................................................................. 60
6.7 Improve Budgetary Procedures ................................................................................ 62
6.8 Gender issues ............................................................................................................ 67
6.9 Service Delivery Acts ................................................................................................ 68
6.9.1 Citizen’s Charter .................................................................................................... 69
6.10 Towards responsive and citizen-friendly administration .......................................... 72
6.11 Inadequate number of government staff .................................................................... 73
6.12 Personnel issues ........................................................................................................ 76
6.13 Lateral recruitment and entry ................................................................................... 82
6.14 Reducing Corruption ................................................................................................. 83
6.14.1 Suggested Reforms ............................................................................................ 84

7 Decentralisation and strengthening peoples’ institutions ........................................... 92

8 Summing up .................................................................................................................... 96

9 References...................................................................................................................... 102
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1 Scope of the monograph1


India - the world's largest democracy - with an electorate of over 700 million is
ethnically a diverse country. In addition to 28 million Christians and 21 million
Sikhs it has the third largest Muslim population (180 million) of the World after
Indonesia and Pakistan. There is greater diversity on language; as many as 122
languages are spoken in the country, each by more than half a million people.
India is also afflicted by unequal social structure due to the caste system, but
equality and affirmative action is guaranteed by the Indian Constitution.
Out of the 70 years since India's Independence, India has been ruled by
the Congress party for 54 of those years. However, Congress lost very badly in
the May 2014 elections, and for the first time since 1989 a single party (BJP,
considered to be a Hindu right-wing) has been able to secure an overall majority
in the Lok Sabha (lower house of Parliament), ending the 25-year long era of
coalitions. The Congress was booted out of power because people were fed-up
with a weak non-communicative Prime Minister, policy paralysis, and intense
stink of corruption scandals. People voted for Mr Modi because of his image as a
strong man and as an achiever built around his orchestrated performance in
Gujarat State as Chief Minister for three terms from 2002 to 2014.
Despite impressive economic growth in the last three decades India has not been
able to achieve many Millennium Development Goals set by United Nations,
particularly in hunger, health, nutrition, gender, and sanitation. India’s social
indicators are today worse than countries poorer than India such as Bangladesh
and Vietnam. Besides, growth has not helped the most marginalized groups, such
as tribals and women. Divergence between growth and development witnessed in
India clearly explodes the trickle-down theory that rapid growth by itself would
take care of the underprivileged.
Inclusive development on the other hand must aim at economic growth with
elimination of poverty, improvement in social indicators, and reduction in
inequality as equally important goals, while ensuring at the same time that there
is no damage to environment. However, translating these macro-policies into
action would need good governance and accountable administration, without
which even the best policies and laws remain on paper only, or result in leakages.
Unfortunately governance in India at the state and district levels is quite weak,
manifesting itself in poor service delivery, uncaring administration, corruption,

1
This monograph draws heavily from the author’s previous writings on the subject.
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and uncoordinated and wasteful public expenditure. These are the key factors
impinging on development and social indicators that need to be reckoned with.
On the other hand, returns from improving effectiveness of the government are
immense. An efficient public service is necessary (though not sufficient) for
benefits to reach the socially and economically weaker sections of the society
who have fewer alternatives to services provided by government.
This monograph analyses the present Indian situation and suggests policy
changes in all cross-cutting systemic issues, such as the role of politicians, size
and nature of Indian bureaucracy, accountability, efficacy of centrally sponsored
schemes, M&E of programmes, e-governance, civil service reforms, and
promoting peoples’ participation.
The monograph is organized as follows. The next chapter traces the history of
India’s economic development, gives decade-wise growth rates, and its impact
on social indicators, where the improvement has been modest, quite in contrast to
the GDP’s fantastic growth. This divergence has been captured in chapter 3 for
key social sectors, such as hunger, education, health, inequality, employment,
social exclusion, and corruption. The next three chapters deal with various aspects
of governance, political issues in chapter 4, reforms needed at the government of
India level in chapter 5, and at the states’ level in chapter 6. Bureaucratic initiative
has to be supplemented with promotion of peoples’ participation, which has been
dealt with in chapter 7, followed by the last chapter that summarises some of the
basic recommendations made in the monograph.
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2 Brief history of economic policies in India


The economic development strategy of independent India was founded on a
Soviet-style centralised planning system with preparing the five-year plans as
India’s core methodology. During the Second Five-Year Plan (1956-1961), a
heavy industry priority plan was adopted in which the key industries such as
heavy and chemical industries were entrusted to public sector units. Also, by this
Resolution, licensing systems were introduced to regulate private sector
companies. A mixed economy system, under which the share of public sector was
predominant, was formulated. The strategy was characterized by an inward
orientation through import substitution.
The Prime Minister Indira Gandhi propagated the slogan of "Garibi Hatao”
(eradicate poverty) in 1969 to obtain the support of the poor and left-wing
political parties. As a measure, 14 major commercial banks were nationalized.
However, beginning in the mid-1960s, the Indian economy began to suffer a long
period of stagnation, and it was said that the economy could not exceed a growth
rate higher than 3.5 percent per annum. This was called the barrier of the "Hindu
growth rate". The main reason for this long-term stagnation was macro-economic
management under India’s closed economy, due to which the American units
such as IBM and the Coca-Cola left India. Japanese investors also almost pulled
their interests from India, and what Professor Bhagwati called "a rentier society"
was embedded in India’s political system.
The only plus point of the decade of seventies was the success of green revolution
strategy which helped India attain food self-sufficiency by 1977. Otherwise, by
the late 1970s it was becoming obvious even to the ruling party politicians that
Indian economic and trade policies were not achieving their objectives. Soon after
returning as Prime Minister for the second time in 1980, Indira Gandhi asked the
IMF to assist India in overcoming its Balance of Payment crisis, and she
subsequently managed to obtain the huge sum of 5 billion SDRs. She was also
able to promote a certain degree of deregulation. Taking a chance, Suzuki Motor
Company of Japan entered the Indian market, forming a joint venture company
with Maruti. Maruti became a symbol of the New India, although the economic
liberalization of India was still in a nascent period. In 1984, her son Rajiv Gandhi
as Prime Minister further promoted deregulation and opening up of the economy.
He believed that modernizing the electronics industry was the key to the
development of society and as such, launched a modernization programme for
goods like consumer electronics and software. This, and the success of green
revolution in the paddy growing regions (which are the poorest and heavily
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populated areas of India) resulted in acceleration in GDP growth in the eighties


to 5.6 percent per annum (Figure 1), at the same time making a positive impact
on unemployment and poverty reduction.
In 1991, India was hit by a very serious political and economic crisis. The gross
fiscal deficit worsened from 6.2 per cent of GDP in 1980-81 to 8.3 percent in
1990-91. Foreign exchange reserves decreased to a level sufficient for only two
weeks of imports and India faced a debt crisis. Dr. Manmohan Singh as Finance
Minister launched a bold economic liberalization programme that depended on
financial assistance from the IMF and World Bank. Guided by these institution’s
structural adjustment programmes, India’s New Economic Policy consisted of
stabilization with deregulation, liberalization, privatization, and globalization,
following the neo-classical development economics (or Washington Consensus)
belief that the market works well, even in developing countries. Dr. Manmohan
Singh managed extremely well the first phase of the structural adjustment
programme called stabilization aimed at the control of inflation by cutting
budgetary deficits, controlling the money supply, and devaluing the rupee.
Because of India’s splendid success in stabilization management, India got a high
reputation from the international society. GDP growth recovered quickly and
strongly, averaging nearly 7% over 1992-97, the highest ever enjoyed by India in
a five-year period. Forex reserves went up from $ 1 billion to over $ 20 billion by
early 1995. So, if necessity is the mother of invention, then external crisis was the
mother of reforms!
The new government since 2014 under Mr Modi has continued the policy of
liberalization with a strong push for growth. The main achievements of the
present government are Cleanliness Drive, 120 million new bank accounts for the
poor, allowing private companies to mine coal commercially and increase in
foreign direct investment limits in key sectors, easing of restrictions in
environment laws, and demonetization to check black money. Government has
promoted ‘cooperative federalism’ by increasing states’ share in central taxes
from 32% to 42%, thus giving a lot of flexibility to the states to plan development
programmes. Inflation is down, and investment sentiment is upbeat. The age-old
Planning Commission which used to control plan finances has been replaced by
a think tank called, National Institution for Transforming India (NITI) Aayog2.

2
Hindi word meaning Commission
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Thanks to liberalisation India’s record of economic growth has been quite


impressive since 1992, and GDP has grown at an average rate of 7.1% per annum
in the last 24 years, as shown in Table 1.
Table 1: India’s Annual Growth Rate
Year GDP Per capita
GDP
1951-79 3.6 1.3
1980-91 5.6 3.5
1992-17 7.1 5.4

Figure 1: GDP Growth Rate over the past 25 years


12.0

10.0

8.0

6.0

4.0

2.0

0.0
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16

2.1 Improvement in social indicators


High growth combined with a fall in rate of growth of population and
improvement in tax-GDP ratio helped India not only to reduce poverty from 60
per cent in 1971 to 22 per cent in 2011-12, but enabled the central government to
start many social sector programmes in education, health, and livelihood
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improvement. Investment in these sectors3 that had remained starved of funds in


the first forty years helped India in more than doubling the female literacy rates
from 30 per cent in 1971 to 65 per cent in 2011, whereas longevity improved from
45 to 64 years during the same period. Infant mortality rate, though still quite high
at 37 per 1000 births in 2015, is declining now by more than two percentage
points a year as against only one percentage point during 1991 - 2001.
India has made significant progress in reducing extreme poverty in the past
decade. The poverty rate declined from 45.3 percent in 1994 to 21.9 percent in
2012. Consumption growth of the bottom 40 percent of the population has risen,
but lags behind growth of average consumption. Although poverty has declined
everywhere, it is increasingly concentrated in the poorer states—also the most
populous—which have lagged in both growth and responsiveness of poverty to
growth. Increasing inter-state disparities have led to migration from the poorer to
richer states, which often leads to social tensions, as seen in Mumbai.
Over the last two decades, role of the state in the provision of public services has
witnessed a significant expansion. Now state intervention is no longer limited to
technocratic tasks like building physical infrastructure4. One illustration of this is
the increase in financial resources allocated for social services as a percentage of
total development expenditure. This increased from 12.7% in 2000-01 to 19.4%
in 2012-13 (RBI 2014). However, these subjects such as elementary education
and health are staff-centric, and require for success a well-functioning
bureaucracy that runs on professional lines.
The argument that the Indian state has become indifferent to the poor after
liberalization appears weak in the face of vast increases in central sector
allocations by the Government of India in the last decade through several flagship
programmes in the social sector, as shown below.
Table 2: Central Plan Outlay in billion₹ (US$1 = approx. 67 rupees)
1999–00 2016–17
Rural Development 85.52 877.00
Elementary Education 28.52 400.00
Health and Family Welfare 41.82 313.00

3
Though still inadequate and much below the International norm, see section 5.3
4
Education Reforms, Bureaucracy and the Puzzles of Implementation: A case study from Bihar,
Yamini Aiyar, Ambrish Dongre, Vincy Davis, International Growth Centre, 2015
9

Women and Child Development 12.50 173.00


Water and Sanitation 13.10 140.00
Total of these sectors 181.46 1903.00
Source: Various Budget documents of GOI
Thus, the central allocation for subjects assigned to the States has gone up by
more than 10 times, though the price index5increased only by 2.5 times during
the period 1999–2000 to 2016–17. Apart from signifying a radical change in the
centre-State fiscal relations (discussed in section 4.3) the increased interest of the
centre in social subjects which are constitutionally in the States’ domain has
presented a unique opportunity to accelerate social development and to cover the
gap in future between the desired SDGs and their present levels.

2.2 Rights based development6


The decade of the 2000s saw the enactment of prominent laws related to civil,
political, economic and social rights in India. The enactment of each of these
legislations was driven by social movements that emerged in the Indian context,
and in one way or another made a case for the extension and expansion of
Constitutional Rights in India. A ‘Right to Information Act’ aimed at creating
transparency in governance was passed by the Indian Parliament in 2005. Two
legislations expanding social democratic rights, and creating rights to social
protection included the following - the National Rural Employment Guarantee
Act (NREGA), which was passed in 20057, followed by a Right to Education Act
(RTE) for children in the six to fourteen age group in 20098. A right to land titles
in forest areas was created under a ‘Forest Rights Act’ in 2006 9. An initiative
towards social security of unorganised sector workers was taken under the
Unorganised Workers Social Security Act, 2008.10 A ‘National Food Security Act
was passed in 2013, the provisions of which are to be implemented in rural and
urban areas. A ‘Rights of Persons with Disabilities Act’ has been passed in

5
Wholesale price index (1993–94=100) rose from 158 in 1999–2000 to 370 in 2016-17
6
Development and Welfare Policy in South Asia, Gabriele Koehler & Deepta Chopra
7
This was renamed the Mahatma Gandhi National Rural Employment Guarantee Act in 2009. The
statute will be referred to as the NREGA in this monograph.
8
The full title of the legislation is ‘The Right of Children to Free and Compulsory Education Act,
2009.
9
The full title of this legislation is The Scheduled Tribes and Other Traditional Forest Dwellers
(Recognition of Forest Rights) Act, 2006.
10
However, the UWSSA did not create a new ‘right’, comparable to, say, the ‘right to work’ created
under the NREGA.
10

December 2016. However, passing such laws is not enough as people don't have
the time or resources to knock on the doors of overcrowded courts manned by
overburdened judges.
In addition to providing public goods such as clean potable water, universal
Public Health, Basic education, and Disaster relief, inclusive development also
mandates state’s active involvement in protecting the poor through improving
their skills, running safety-net programmes, providing pensions and social
insurance, and enhancing their quality of life through access to basic services,
such as housing and cheap food. Lastly, as countries get more globalized
governments face increasingly complex and cross-cutting issues, such as
economic volatility, climate change and migration.
Increased urbanization and literacy are leading to demands for improved service
delivery from a middle class in India that by some estimates is now approaching
200 million11. Wide use of the internet has made citizens more aware and
impatient and that puts public servants under greater public scrutiny.
Increasingly, the role of the state in public service provision is being defined in
terms of rights, entitlements and outcomes.
Against this backdrop, public service delivery has acquired new dimensions
as governments need to respond not only to changes in the global
environment but also to the demands of an active citizenry. Formulating
integrated policies and their effective implementation would require an
adaptable and efficient bureaucracy that can anticipate emerging challenges
and ensure that potential strategies are informed by better understanding of
future contexts. It must also learn to empower people and work with them, as
traditional vertical accountability systems can act as a major impediment to
working across boundaries.

11
Civil Service Reform in India: Perspectives from the World Bank's Work in Three States Robert P
Beschel Jr. World Bank
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3 Challenges
Despite large gains on the poverty front, India continues to lag behind world—
and in some instances regional—averages on human development outcomes.
India ranks 130 out of 187 on the United Nations’ 2015 Human Development
Index (HDI). India’s child malnutrition rates are the highest in South Asia: 38.7
percent of children (under five) in 2013-14 were stunted. India accounts for 59
percent of the 1.1 billion people globally who practice open defecation. 12 India
still accounts for one-third (nearly 300 million people) of the globe’s illiterate
people.
India’s principal social indicators have only now reached the levels that China
achieved quite early in its take-off phase. Thus, India’s literacy rate in 2015 (75
per cent) remains short of China’s 78 per cent in 1991; similarly, life expectancy
in India is now 68 years, and yet to reach China’s 70 years achieved in 1991.
India’s investment rate as a share of GDP, at about 32 per cent, is significantly
lower than the 40-plus per cent that China has enjoyed for well over a decade.
Decline in poverty too has been much faster in China than India (Figure 2).

Figure 2: % living below $1.25 a day

90
80
70
60
50 China
40 India

30
20
10
0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2010

12
World Bank, Performance and Learning Review of the Country Partnership Strategy for India,
September 2, 2015, 99283-IN
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Not only India has been left far behind China in improving development indicators, its record
even when compared with neighbours has not been satisfactory, as shown in Table 3.

Table 3: India and other developing countries on MDGs


India Bangla Myan Viet Bhuta
desh mar nam n
Infant Mortality Rate 1990 81 103 78 39 93
2015 37 30 40 17 27
Stunted children under 5 39 36 35 19 34
Immunized against measles 74 96 84 96 95
Rural population with adequate
45 85 81 79 75
sanitation
Attendance ratio of girls to boys in
83 116 94 93 107
secondary school (net) (%)
(UNICEF 2016)
We discuss below India’s status on some of the key social indicators.

3.1 Hunger
Although the number of people below poverty line has slowly declined from 45
to 22 percent during 1993-2012 (or about one percentage point per annum), not a
single state has succeeded in reducing the incidence of underweight children by
half since 1990. India is home to one-quarter of the world’s undernourished
population and nearly half of the world’s underweight children, in addition to
nearly one-third of the world’s food-insecure people.
India’s age old habit of defecating in the open—which distinguishes it from many
other developing countries—makes matters worse. The proportion of Indians
who do this has fallen from 55% a decade ago to 45%, but that is more than
enough to help spread diseases, worms and other parasites that make it more
difficult to absorb nutrients even when food is abundant. Poor public hygiene may
account for much of India’s failure to make faster improvements in nutrition.
Cereal intake of the bottom 20 percent in rural India was in 2011-12 only 10 kg
per month as against 12 kg for the top decile of the rural population, though the
poor need more cereals as they do harder manual work and their access to more
expensive fruits, vegetables, poultry, and milk is limited. From their meagre
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resources the poor are forced to spend more on health, children’s education,
transport and fuel than before. Food is still needed, but is not demanded from the
market for lack of resources. In the process they get under-nourished. Endemic
hunger continues to afflict a large proportion of Indian population. Extreme
distress and rising capital intensity in agriculture is leading hundreds of farmers
to commit suicide, a phenomenon that was unheard of even in the periods of
serious drought in the early 1970s.
There are also issues at the macro-level. According to the central government’s
Economic Survey 2015-16, foodgrain production in India has gone down from
208 kg per annum per capita in 1996-97 to 206 kg in 2014-15. Despite reduction
in per capita production, India almost doubled its stocks in government godowns
in the period 1992-2014, and in addition has been exporting on an average 7
million tonnes of cereals per annum, causing availability to decline from 510 gm
per day per capita in 1991 to 439 gm in 2012. This has adversely affected the
open market price, as also the cereal intake of the bottom 30 percent, and has
increased hunger in India. The policy regarding export of cereals should be re-
visited. If basmati rice is to be exported, equal amount of ordinary rice must be
imported. It is highly unethical to export foodgrains when India’s own people are
suffering from starvation.
The International Food Policy Research Institute shows India suffering from
alarming hunger, ranked 80 out of the 104 developing countries studied, much
below Vietnam and Nepal, countries poorer than India, as shown in Table 4
(IFPRI 2015).
Table 4: Country Global Hunger Index Scores by rank
Rank Country 1990 1995 2000 2005 2015
21 China 25.1 23.2 15.9 13.2 8.6
37 Thailand 28.4 22.3 17.6 13.6 11.9
49 Vietnam 44.6 38.8 30.3 24.6 14.7
58 Nepal 44.5 40.3 36.9 31.6 22.2
69 Sri Lanka 31.3 29.7 27.0 25.9 25.5
73 Bangladesh 52.2 50.3 38.5 31.0 27.3
80 India 48.1 42.3 38.2 38.5 29.0
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3.2 Education
Thanks to massive investment by central government, the number of teachers,
classrooms and toilets has greatly improved in India. Access has been
universalized with more than 98% of habitations having access to a primary
school and nearly 90% with access to an upper primary school. Pupil-teacher
ratios have improved significantly. Against a norm of one teacher for 30 pupils,
the average for all states has improved from 31 in 2010-11 to 24 in 2014-15
(Report of the 22nd Joint Review Mission of Sarva Shiksha Abhiyan, GOI 2016).
However, there is no corresponding improvement in the quality of learning, a task
for which teachers and their supervisors need to be held accountable. According
to the 71st NSSO Round about 16% children in the age group 6-14 still remain
out of school and fail to complete primary education. According to the UN
Human Development Report 2016 there has been considerable slowdown in the
progress on ‘expected years of schooling’ in India, as it has grown only from 4.4
years in 2000 to 5.4 years in 2014 as against a goal of 11.7 years. High proportions
of children are not completing primary schooling, and drop out because the
quality of education imparted in government schools is poor and deteriorating
(ASER 2016). Percentage of children in Std V in government schools who can
read sentences in the local language has declined from 24.7% to a mere 14.9%
between 2007-14. Giving up of examinations at the elementary level has diluted
attention to improving learning outcomes.

3.3 Health
Why does India continue to have poor health indicators? There are several
reasons. Rural health care in most states is marked by unfilled staff vacancies,
absenteeism of doctors/health providers, low levels of skills, shortage of
medicines, poor management, inadequate supervision/ monitoring, and callous
attitudes. There are neither rewards for service providers nor punishments for
defaulters.
In India, IMR was estimated at 80 per 1,000 live births in 1990. It reached 37 by
2015, against the MDG target of 27 infant deaths per 1000 live births. Similarly
Under-5 Mortality Rate has declined from 125 in 1990 to 47 in 2015 but missed
the MDG target of 42. As regards Maternal Mortality Ratio India reached the
level of 140 maternal deaths by 2015, but could not achieve the target of 109 per
1,00,000 live births However, with the sharp decline in the recent years, the gap
between the achievement and the target is narrow.
15

The Rapid Survey on Children (RSOC), 2013 carried out by UNICEF and
Government of India, shows that, India is lagging in the task of achieving
universal coverage of one year old children immunised against measles. The
RSOC estimates the proportion of one year old children immunised against
measles at 81% in 2013. Although, there is substantial improvement in the
coverage which was 42% in 1992-93, yet at this rate of improvement, India is
likely to achieve about 89% coverage by 2015 and thus India is likely to fall short
of universal coverage by about 11 percentage points.

3.4 Inequality
Had development during 1991-2015 been inclusive, the poor and disadvantaged
would have gained equally if not more from economic growth, and inequality,
both regional and between social groups, would have declined. Unfortunately
government data show just the reverse trend.
High growth in consumption expenditure has not been shared equally among all
sections of the society and has been accompanied by increasing inequality. Figure
below gives the Gini coefficients of monthly per capita expenditure (MPCE) in
rural and urban areas.
Figure 3: Gini Coefficients of monthly per capita expenditure (MPCE)
0.45

0.4

0.35
rural
0.3 urban

0.25

0.2
1977-78 1983 1987-88 1993-94 1999-00 2004-05 2011-12

As is clear from the chart above, upto 1999-00 rural inequality has been showing
a declining trend, but urban inequality remained almost stable. However in the
last decade both have increased. Urban Gini rose from 0.35 in 1999-00 to 0.40 in
16

2011-12, whereas rural gini increased sharply from 0.26 to 0.31. Compared to the
same Gini ratio of 0.34, for both rural and urban areas in 1977-78, the gap
between them rose to as high as 0.09 points in 2011-12. Due to rising inequality,
the share of poorest quintile in national consumption in India declined from 9.1
per cent in 1993-94 to 8.5 per cent in 2009-10. Table 5 confirms the above finding
as the monthly per capita consumption of the top 30% has been rising faster than
that of the bottom 30% for both rural and urban groups except for the rural group
during 1983-97, which resulted in the decline in gini coefficient for rural
population during that period.
Table 5: Annual Growth Rates of Monthly Per Capita Consumption
Period Bottom 30% Middle 40% Top 30% All classes
Rural
1983–97 1.22 0.93 0.96 0.99
1993–2010 1.32 1.32 1.92 1.62
Urban
1983–97 1.36 1.41 2.00 1.73
1993–2010 1.71 2.25 3.32 2.77

A quarter of Indians still do not have access to electricity and almost a third of
the urban population live in slums. 65% of the population does not have access
to improved sanitation and access remains unevenly distributed. This is also the
case for clean drinking water13.

3.5 Job creation & employment


Jobs are key to achieving the twin goals of poverty reduction and shared
prosperity. Job creation, which has remained relatively flat over a long period,
will continue to be a tremendous development challenge as India grapples with
how best to provide opportunities to its burgeoning young workforce. However,
India is not doing well on this front. According to the Labour Bureau, which has
been surveying eight sectors of industry since 2009 (textiles/apparel, leather,
metals, automobiles, gems and jewellery, transport, information
technology/business process outsourcing and handloom/powerloom), the number
of jobs created by these industries is declining: From 640,000 in 2009 to 135,000

13
https://www.weforum.org/agenda/2015/11/19-charts-that-explain-indias-economic-challenge/
17

in 2015 (and only 77,000 during 2016), as against 421,000 in 2014 and 490,000
in 201314.
Every month, a million Indians become age-eligible to join the workforce, but the
growth in jobs has not kept pace with the rising number of aspirants. As per the
result of surveys on employment and unemployment conducted by Labour
Bureau, Ministry of Labour and Employment, the estimated unemployment rate
for youth aged 18-29 years on usual status basis in the country during 2012-13,
2013-14 and 2015-16 was 11%, 9.4% and 10.2% respectively15. Unemployment
is highest among those with more education – going up to as high as 25 per cent
for the graduates, and as high as 60% for engineers.
Even these figures may not truly reflect the extent of lack of jobs in India. The
traditional explanation for low reported unemployment is that the official data
fails to capture the extent of underemployment in the economy, as the poor cannot
afford to remain unemployed. They will then starve and die, and therefore keep
themselves occupied with low-return activities, or are employed only for a few
months in a year, and such people are not characterised as unemployed. The state-
wise figures confirm this; as unemployment is higher in richer states such as
Kerala, and lower in poorer states such as Madhya Pradesh. Positive correlation
between poverty and unemployment that is characteristic of developed countries
does not exist in India.
The other explanation is that women voluntarily withdraw from the labour force
when their husbands’ incomes rise, and therefore are no longer looking for work.
Even young men are forced to join post-graduation or enrol for PhD, because
suitable jobs are not on the horizon, and are not shown as unemployed. WPR
(work participation rate) for rural females has been consistently going down since
1983, and has remained as low as 16% for urban females, as shown below (based
on various NSSO reports).

Figure 4: % of 15-59 age women in work force

14
http://www.moneycontrol.com/news/business/job-growth-falls-to-7-year-low2015-labour-
survey_6279861.html
15
Rajya sabha unstarred question no-729 answered on-08.02.2017 at
http://164.100.47.5/qsearch/QResult.aspx
18

Regardless of the opportunities in MGNREGA, women’s exclusion from rural


labour markets remains a potential concern. Rural women used to transplant and
harvest paddy, which is now being done by machines, throwing millions of
women out of work. Despite women’s vital contribution to agriculture, they lack
control and ownership over productive assets (land, livestock, fisheries,
technologies, credit, finance, markets etc.), face biases due to socio-cultural
practices, and experience gender differentials in agricultural wages.
The decline in the number of female workers is a matter of concern as it increases
their dependency on men and thus strengthens patriarchal norms.
Almost half of India’s workers continue to be self- employed, mostly in
agriculture and artisan based activities, whereas another one-third are casual
workers, leaving only about 21 percent with regular or contractual jobs in the
organised sector that consists of government employment, all public sector
enterprises, and other larger enterprises/establishments, i.e. those employing
more than 20 workers, or 10 or more workers in manufacturing using power. Even
in the organised sector, almost two-third consists of informal employment
without any protection of job security or social security. These are contract
employees hired by contractors. A four-fold classification of the workforce is thus
possible, with workers in both the organised and unorganised sectors being either
formally or informally employed. The number of these workers is shown in Table
6.
Table 6: Relationship between Sector and Type of Employment, 2011-12
19

Total Employment (million)


Informal Formal Total
Unorganised Sector 370.8 (99.5) 1.9 (0.5) 372.7 (100.0)
Organised Sector 68.1 (67.0) 33.5 (33.0) 101.6 (100.0)
Total 438.9 (90.6) 35.4 (9.4) 478.3 (100.0)

Thus approximately 91% of the total workforce is engaged in activities ranging


from farming, small factories (SMEs) to pushcart vendors and agricultural labour,
and only 9% of the workers enjoy some degree of social protection. This share
has unfortunately not improved over the years.
Despite the much touted population dividend (which increases the number of
youth who could contribute to productive employment16) and massive investment
in rural employment programmes the total number of persons in the work force
has stagnated, as it was 470.1 million in 2004-05 and only 478.3 million people
in 2011-12. The number of actual workers during these seven years when the
Indian economy was growing rapidly increased just by eight million whereas
during this period the number of persons in the age group 15-59 increased by
about 60 million.
While the share of the young in the working-age population has indeed been
rising, the share of the young who are actually in the workforce has been declining
as a consequence of the declining labour force participation rate. Hence, the
dependency ratio has been rising instead of falling. Alas, there will be no
demographic dividend unless the government can change the scenario.
Rural wages at current prices have seen an average annual growth of a mere 2.9
per cent in 2014-15, which is much below the rise in consumer prices. This needs
to be compared with such wages rising by 15-20% per annum during 2007-12.
Three factors seem responsible for the trend of decline in wage growth: falling
agricultural production and moderate increase in support prices of crops,
recession in real estate business leading to a slump in construction activities, and
a drop in employment guarantee expenditure due to reduced fund allocation (after
adjusting for inflation) for NREGA from 2014-15 onwards. The central
government has also directed states not to grant bonuses on procurement of wheat
16
The proportion of Youth (age 15 to 29 years) in the total population increased from 22% in 1961 to
27.5% in 2011.
20

and paddy as it distorts market prices and adds to inflation. From October 2015
onwards, rice will not be purchased from millers at the support price, and these
changes in policies may further dampen both agricultural production and rural
wages.
Labour market inequalities are large, and disparities and inequalities have
generally increased. The most striking is the disparity between the regular/casual
and organized/ unorganized sector workers: the average daily earnings of a casual
worker stood at ₹138 in rural areas and ₹173 in urban areas in 2011-12, and that
of a regular worker at ₹298 in rural areas and ₹445 in urban areas, while that of a
central public sector enterprise employee was ₹2,005 per day. And, of course, the
public sector employee has many other benefits as well as a secure job. Thus, a
rural casual worker earned less than 7 per cent of the salary of a public-sector
regular employee.

3.6 Social Exclusion


Another major weakness in the economy is that the growth is not sufficiently
inclusive for many groups, especially Scheduled Castes (SCs), Scheduled Tribes
(STs), urban poor, migrants, single women (widowed, divorced, or just
abandoned) and minorities. Their economic deprivation derives from lack of
productive assets like land and water, and access to credit. These chronically poor
tend to remain in poverty for much of their lives, passing on the tragic legacy of
deprivation and exclusion to their children. The brutal expulsion of those who
most need it, from support and succour, from care and rights –– often by their
own families (as in the case of women), by local communities, but most
importantly by the State –– is one of the most profound public crimes of our time.
It is important, therefore, to identify those classes, social categories and local
communities, who are destitute and socially expelled.
It is generally believed that ‘programmes for the poor (or socially excluded) are
poor programmes’, describing how it is the powerlessness of those experiencing
social exclusion that results in the low quality of poverty targeted schemes.
Excluded groups are disadvantaged in many ways. They are victims of prejudice,
are ignored, and are often treated as less than human beings by the village elite
and government officials. They live in remote hamlets and are thus
geographically separated from the centres of delivery. Their hamlets are scattered
so that the cost of contacting them is higher. Finally, it is their extreme poverty
that prevents them from taking advantage of government schemes, whether it is
free schooling (children are withdrawn because their labour is needed at home or
for work), or immunization (they migrate along with their parents and, therefore,
21

not present in the village when the health worker visits). The crux of such a
hopeless situation for them lies in their inability to access and retain their rightful
entitlements to public goods and services due to institutionalized structures and
processes of exploitation.
There are also serious problems in identification of the poor. For instance, despite
three surveys (1992, 1997 and 2002) the errors of exclusion and inclusion in the
list of the poor remained above acceptable limits. Errors of exclusion are those
that misclassify the poor in the non-poor category, while errors of inclusion
include the non-poor in the poor category. According to the XI Plan (volume 2,
chapter 4), there are huge exclusion and inclusion errors in identifying the poor.
More than half of the poor in 2004-05 either had no card or were given APL cards,
and were thus excluded from the BPL benefits. These must be presumably the
most poor tribal groups, women headed households, and people living in remote
hamlets where administration does not reach. Thus the people most deserving of
government help are deprived of such assistance. On the other hand, almost 60%
of the BPL (below the poverty line) cards had been given to households belonging
to the non-poor category.
Government conducted a massive Socio-Economic Caste Census in 2013 to
prepare a village-wise list of the deprived. The primary purpose of conducting
village-wise census of poor households by contacting each household was to
identify the deprived households that could be assisted under various government
programmes. Such a survey is necessary if there are programmes and benefits
exclusively targeted to the poor. However some studies show that even this
survey suffers from misclassification, and a large number of poor seem to have
been left out (Saxena, 2015).
In summary social exclusion frequently reflects the powerlessness of the most
vulnerable and is a direct function of their weak political bargaining power as a
collective entity in a democracy. Our inability to include them in State
programmes in the last sixty years is a severe indictment of public policy and its
implementation.

3.7 Corruption
India’s failure to take appropriate structural, pre-emptive, corrective, and punitive
action against corruption has led to a situation where it is ranked a lowly 87 on
the International Transparency Index. It should come as no surprise that the most
corrupt institutions are seen to be political parties, legislators, the police, public
officials, and businessmen. All of them score poorly. More worrying is that even
22

the media and the judiciary, which are generally said to be institutions that can
act as watchdogs over others, have been adjudged just as corruption-ridden; and
NGOs are roughly as corrupt as the judiciary.
A growing belief that is widely shared among the political and bureaucratic elite
in government is that the state is an arena where public office is to be used for
private ends. The political system in many states is accountable not to the people
but to those who are behind the individual MLAs; they are often contractors, the
mafia, corrupt bureaucrats, and manipulators who have made money through the
political system, and are therefore, interested in the continuation of chaos and the
patronage-based administration.
The state resources are the most valued prize for both politicians and their
constituencies, which results in a client-patron relationship between the holders
of state power and those seeking favours. High unaccounted for election costs
and the need to accumulate illegitimate funds, have further accentuated these
tendencies, and the bureaucracy has become a tool to transfer resources from
people to politicians. It is no surprise that a state Minister has openly asked his
staff to ‘steal a little, but dont rob the people’.
Patronage is controlled by individuals, not established institutions that are bound
to follow set procedures. Where power is highly personalised and weakly
institutionalised, the decision-making process is replaced by arbitrary and behind-
the-scene transactions. In such an environment, the exercise of power for clients
demands fudging rules, dependence upon corrupt civil servants, plundering the
public treasury, and decay in governance. When the fence starts eating the field,
there is little chance of development reaching the poor. Due to an enormous
increase in political corruption, the leader of the civil society movement against
corruption Anna Hazare received some years back the reverence normally
reserved for holy men, for demanding action against senior politicians who have
indulged in alleged corrupt activities. The country cannot realise its true potential
unless it increases the risks of indulging in corrupt activities, by making its legal
regime more effective. It is as much about widening the net as about increasing
the conviction rate for corruption.
It must be admitted that even in our colonial past, honesty at lower levels was as
rare as it is now. The British appeared to believe that as long as the man at the top
was honest, corruption at lower levels would not really do much damage and
would remain confined within manageable limits. As corruption today is
increasing even in the higher echelons of bureaucracy, the fear in the minds of
lower level officials against making money has disappeared. Corruption at all
23

levels has become a ‘low risk, high reward’ activity. People in the past looked
upon functionaries at lower levels as an organised band of exploiters. In the not
so recent past, senior Class I officers were not considered a part of this mafia.
Rather they were looked upon by the people as saviours from the tyranny of
lower-level functionaries, and were never considered corrupt. Of late, the
distinction seems to have got blurred in public perception, if not totally
eliminated. Corruption at the top has emboldened lower-level officials who now
openly exploit the masses with impunity.
According to a survey of 12 Asian economies done by the Hong Kong-based
Political and Economic Risk Consultancy in 2011, India’s “suffocating
bureaucracy” was ranked the least efficient, and working with the country’s civil
servants was described as a “slow and painful” process. “They are a power centre
in their own right at both the national and state levels, and are extremely resistant
to reform that affects them or the way they go about their duties,” the report said.
A survey done in 2016 on corruption by the same agency described India as the
most corrupt of 12 global economies, as shown in Figure 1. As per the report,
there has been a deterioration in perception scores on corruption over the past 12
months because the new government which took charge in 2014 has not been as
successful in fighting corruption as people had hoped. Even though the economy
has picked up considerable momentum, graft remains a hot button, and the
Vyapam scandal (relating to recruitment in Madhya Pradesh, which is ruled by
BJP) has ‘hit especially close to home for many Indians on just how systemic the
problem of graft really is at virtually all levels. It is seen as being routine. This is
perhaps why India has the worst score of any country covered by our survey this
year, down two places from last year’.
Figure 5: Perceptions of Corruption in Asia, the US and Australia17

17
Grades are scaled from zero to 10, with zero being the best grade possible and 10 the worst. The
question asked was: “How do you grade the problem of corruption in the country in which you are
working?” http://www.asiarisk.com/subscribe/exsum1.pdf
24

To sum up, India, despite good achievement on the growth front, faces significant
challenges because its social indicators continue to lag. Mere increase in the
social sector expenditure would not be enough, unless it is linked with outcomes
directed to the socially excluded groups, and effectively monitored.
In the ultimate analysis, the constraints to human development are rooted in
inappropriate government structure, badly designed programmes, lack of
appropriate monitoring and evaluation, and poor governance. Action is needed
on all these fronts. However, the above described policy reforms would require
strong political support, as discussed in the next section.
25

4 Political issues in initiating governance reforms


A paper brought out by the Department of Administrative Reforms (GOI) for a
conference on the occasion of Civil Services Day 2009 observed:
For a variety of reasons, elections as an instrument for external
accountability have some well-known weaknesses. In India, these
weaknesses are exacerbated by the particular nature of the evolution of
Indian democracy. Politics in India is marked by a conception of
competition where to hold the state accountable is to gain access to its
power and the goods it provides. Clientelism and patronage are rife and
voters are mobilized more on the politics of caste, regional or religious
identity than on the politics of accountability and initiatives that bring long
term benefits to the public as a whole. Consequently, the state and its
apparatus, including the bureaucracy are treated not so much as a means of
generating public goods but as a means of generating benefits for the
particular group that controls the state (GOI 2009).
Although holding the state to account for results through informed debates in the
assemblies should be the main task of the State legislative assemblies, in practice
they rarely meet.18 Today, many legislative assemblies meet only for 20 to 30
days in a year. The Haryana Legislative Assembly, for example, held only ten
sessions from 2009 till March 2014, meeting for a total of 54 days – an average
of 11 days per year19. The assemblies for Uttar Pradesh (UP), Gujarat, Punjab and
Uttarakhand sat for an average of 22, 31, 19, and 19 days respectively each year.
In the twelfth Gujarat Assembly (2007–2012), over 90 per cent of all bills were
passed on the same day that they were introduced. In the Budget Session of 2011,
31 bills were passed of which 21 were introduced and passed within three sitting
days. In 2012, the West Bengal Legislative Assembly passed a total of 39 bills,
including appropriation bills. Most bills were passed on the same day they were
introduced in the Assembly. In 2011, a total of 23 bills were passed. On average,
five members participated in the discussions on each bill. Judging from the
manner state assemblies function, one could conclude that India is not at all a
‘deliberative democracy’. In practice legislatures only rubber-stamp executive
decisions.
Most legislators at the state level are not interested in their legislative
responsibilities, but rather seek a share in the executive. Many use their back-
18
http://adrindia.org/sites/default/files/Odisha%20Performance%20Report%20of%20MLAs%20and%
20Assembly.pdf
19
http://www.prsindia.org/theprsblog/?p=3257
26

door access to influence decisions relating to contracts and licenses, as well as


transfers and posting of officials., and such backseat driving affords legislators
informal control over the bureaucracy, but in a way that promotes irresponsible
decision-making and encourages corruption. The constitutional separation
between the executive and the legislature has disappeared in India. This has
resulted in erosion of internal discipline among civil servants.
In comparison, the Lok Sabha (lower house of Parliament) functions much more
professionally and its deliberations add value to legislation. Not only does it sit
for far more days20 than state assemblies, but the committee system in Parliament
has earned a great deal of respect from scholars for its detailed examination of
bills and for often suggesting radical and pro-people changes. For instance,
amendments to the Right to Information Bill, suggested by the legislative
committee and accepted by government in 2005, made the resulting Act more
effective in securing transparency and accountability from the executive.

4.1 Are politicians alone to be blamed?


To be charitable to the modern brand of politicians, it must be admitted that –
except for high integrity, neutrality towards party politics, and provision of
minimal administrative services in times of emergency– the civil service even in
the past had little to be commended for. Efficiency in the civil services was
always very narrowly defined. It meant contempt for politics and rigid adherence
to rules; ‘public satisfaction’ was an insignificant part of the job evaluation. In
such an environment, it is unfair to expect that the political processes would be
totally free from populism or sectarianism. Because of the inability of the system
to deliver, politicians do not perceive good governance as feasible or even
important for getting votes.21 Only a rare would-be chief minister seems to be
saying to his would-be voters: ‘within three months of my election ,all irrigation
canals will run on time, you’ll get 16 hours of electricity, rations will be available
for the poor, a license will reach your doors one month after your application,
your grievances will be promptly attended to’, etc. One reason he does not say
such things is that he would not be believed: voters have no faith in promises of
time-bound delivery through the administrative apparatus. Politics is after all the
‘art of the possible’, and, if the civil service is no longer able to ensure delivery

20
The 15th Lok Sabha (2009–2014) sat for an average of 69 days each year from 2009 to
2014. However there were too many adjournments and disturbances in the House, vastly reducing the
number of hours spent on meaningful discussions. The 16thLok Sabha that started functioning from
July 2014 has also seen many disruptions, though lately it has been more constructive.
21
The political perception of governance has been changing quickly in India after 2004, as discussed
in the next section.
27

of services, politicians are forced find other ways to keep alive the faith of the
voter in the political system. Populism serves this purpose.
India’s own Second Administrative Reforms Commission (2008) is no less
scathing in its criticism:
The state apparatus is generally perceived to be largely inefficient with
most functionaries serving no useful purpose. The bureaucracy is generally
seen to be tardy, inefficient and unresponsive. Corruption is all-pervasive,
eating into the vitals of our system, undermining economic growth,
distorting competition and disproportionately hurting the poor and
marginalized citizens. Criminalization of politics continues unchecked,
with money and muscle power playing a large role in elections. In general
there is a high degree of volatility in society on account of unfulfilled
expectations and poor delivery. Abuse of authority at all levels in all organs
of state has become the bane of our democracy.’
Although many civil servants hold the view that it is the political culture that
largely determines the nature of the civil service and the ends to which it would
be put, and therefore that civil service reforms cannot succeed in isolation,
causation is also in the other direction. Non-performing administration leaves
little choice to the politicians but to resort to populist rhetoric and sectarian
strategies.

4.2 Who should initiate reforms?


Will this deterioration in governance continue forever, or are there signs of
change? My reading of the situation is that the rise of the middle classes, along
with a free press, judicial activism, and civil society action, has emerged as a big
corrective factor on the arbitrary use of executive power. With the liberalisation
that followed dismantling of the licence-permit Raj, a significant and politically
independent group of professionals, journalists, and academicians has emerged.
These people have every incentive to take government to task for its failure to
perform. Their bread and butter is not dependent upon the bureaucrat's smile and
they are likely to be in the forefront of campaigns against bureaucratic and
political indifference and poor performance. It is a healthy trend that the
monopolies of capital, power, and authority – all of which governments enjoyed
in the past – have broken down today. These new pressures seem to be more
effective, however, at the central level, and not so strong in the States, where they
are needed more because, as discussed above, State legislatures also fail to fulfil
their role as government overseer. It is significant that rights-based development,
28

even when not requiring huge funds, did not originate from the States. It was
largely initiated by the Centre, and the central government continues to be more
responsive to public opinion, as witnessed in GOI’s initiatives during 2004–2014
on various rights-based legislation, such as the Right to Information, Right to
Employment, Forest Rights, and, lately, Food Security.
The poor governance resulting from the vicious cycle of political distortions and
bureaucratic apathy, can be set right, though it will require a large number of
measures. A discussion on political and electoral reforms, 22 though absolutely
vital, is outside the scope of this monograph. Many malfunctioning States in India
have, however, lost the dynamism and capacity to undertake reforms on their own
without any external pressure. These states are ruled by people who understand
power, patronage, transfers, money, coercion and crime. The language of
professionalism, goal orientation, transparency, building up of institutions, and
peoples’ empowerment is totally alien to them.
Even when some chief ministers such as Chandrababu Naidu and Digvijay Singh
tried to improve governance in the 1990s to early 2000s, they eventually lost
elections, giving an impression to other politicians that good governance is not
compatible with political survival. Happily, there is a perceptible change in the
electoral behaviour of the Indian masses in the last ten years which gives hope
that improving programme delivery may overcome anti-incumbency and lead to
electoral victories, as has happened in Gujarat, Bihar, Chhattisgarh, Odisha,
Madhya Pradesh (MP), and recently in UP. That governance was an important
political issue in the 2014 national elections is certainly a very healthy sign.
There has been a growing realisation among some chief ministers of the need to
improve governance, but unfortunately only a few have been able to translate this
into concrete action. This would necessarily involve keeping the MLAs and
ministers under check, which is difficult when the state is under a coalition
regime, or the ruling party is constrained by a thin margin in the Assembly, or is
divided into factions. The reformist chief minister is often at odds with his own
party officials who hate getting side-lined in the process of establishing rule-
based policy procedures. In many other states, even chief ministers seem to be
averse to professionalizing administration. They think that benefits from such
policies are delayed whereas costs are immediate. As the general expectation of
a government lasting a full term of five years is low, politicians try to maximise

22
For instance, compulsory public declaration of assets by the candidates has increased the
perception among voters about the extent and intensity of corruption in India’s politics.
29

their gains from office and minimize their accountability for performance (Sud
2010).
When neither politics nor administration has the capacity for self-correction, only
external pressure can coerce states to improve governance and delivery to the
poor. In the Indian situation (where foreign donors provide very little aid to the
States as compared with what is provided by the Centre), this can come only from
the Centre, backed by strong civil society and judicial action.
Conditions under which the civil servants operate in the social sector ministries
in the GOI are somewhat different from the work environment prevailing in the
States. First, the central government joint secretary does not control field staff
and is, therefore, free from the pressures of transfers and postings, which occupies
much of a State secretary’s day. Second, his/her tenure in the GOI is for five
years, which facilitates development of professionalism. In the States, where
officers expect that they will be transferred within six months, they have hardly
any incentive to perform or acquire domain knowledge. Third, central
government officials are more in touch with experts, donors, and specialists, and
therefore are under peer group pressure to learn their subject and be able to
converse with professional experts on equal terms. In some cases, where the
GOI’s ministries (such as in education and health) have started behaving like
donors and monitor outcomes intensively, results in the field are more satisfactory
than in the ministries, such as Tribal Affairs, Food and Public Distribution, and
Women and Child Development, which are content simply to release funds or
foodgrains with little knowledge or interest of how these resources are utilised.
And lastly, whereas the economic ministries in the GOI used to be mired with
rumours of grand corruption during 2009-14, the social sector ministries, such as
Rural Development, Elementary Education, etc.,23 despite their colossal budgets,
rarely faced bribery charges as almost the entire budget is passed on to the States.
The larger role that the union ministries ought to play in improving the States’
capacity to deliver has been facilitated by change in Centre-State fiscal relations,
giving greater clout to the GOI’s ministries over the States, as discussed in the
next section.

23
The list of ‘clean’ ministries also includes the Planning Commission, which used to handle a
budget of more than Rs 1,500 billion (roughly 24 billion US $) a year. However, the Modi
government in January 2015 replaced the Commission with a think tank called NITI Aayog (meaning
Policy Commission), which is a purely advisory body with no executive functions.
30

4.3 Long-term changes in Centre-State fiscal relations


Although implementation of social sector programmes is under the domain of the
state governments, according to the constitutional arrangement, these are
increasingly being funded by the central government, as already shown in Table
1. Due to fiscal constraints faced by the poorer states, Centrally Sponsored
Schemes (CSSs) are often the only schemes at the field level in the social sector
that are under operation, as these States spend most of their own resources and
shares of central revenues for meeting essential non-plan expenditure (interest on
loans, salaries, pensions, and subsidies). This has given rise to an impression
among the common masses that ‘development’ is the responsibility of the Centre,
a view that is not supported by the Constitution.
In addition to statutory transfers through the Finance Commission, States used
to receive plan funds from the GOI through two routes, from the Planning
Commission as untied support to states’ plans (called Normal Central
Assistance), and via the Centrally Sponsored Schemes of the GOI’s ministries,
which are tied to a specific scheme. The proportion of tied funds in total plan
transfers to the States has increased steadily over the last three decades, leading
to criticism that the Centre had enlarged its turf at the cost of the States.
One of the reasons for this increase is rooted in the changes that have taken place
in the nature of the central ministries’ plan schemes that are funded by the budget
over the last thirty years, shown in Table 7.
Table 7: Percentage Distribution of Central Plan Outlay Supported by the
Budget through the GOI’s Ministries by Heads of Development*
Head of Development VI Plan VII VIII IX Plan X Plan
1980–85 Plan Plan 1997–02 2002–07
Industry and Minerals, Energy, and 51 44 25 17 16
Communications
Agriculture, Irrigation, RD & Social 33 41 63 61 64
Sector
Source: compiled by the author on the basis of Plan and Budget documents
*
The total of these columns is not 100, as there are many schemes – such as in
forestry, home, etc. – where clear division of the budgeted amount between
Central and State subjects is not possible.
The Centre spends more money on State subjects than on the central subjects,
perhaps as a consequence of liberalization as well as growth in profits of central
31

parastatals (such as the National Thermal Power Corporation, and state-owned


oil companies), because of which the Centre’s budgetary involvement in the
industry and energy sectors has been greatly reduced, permitting the Centre to
allocate more on subjects traditionally under the purview of the States.
Centrally Sponsored Schemes were originally to be formulated only where an
important national objective such as poverty alleviation was to be addressed, or
the programme had a regional or interstate character or was in the nature of pace
setter, or for the purpose of survey or research. However, CSSs have proliferated
enormously, and in the terminal year of the Eleventh Plan (2007–12) there were
approximately 175 CSSs. Many CSSs have been in operation for more than ten
years, and some even for 30. This period has seen several political parties in
power at the Centre and the States. The result is that the party in power has no
sense of ownership of the existing schemes, although it also does not wind them
up, either because of bureaucratic resistance or sheer lethargy. Greater political
advantage is seen in announcing new schemes on the Independence Day or when
the budget is introduced. Often the old schemes are refurbished under a new name
with some cosmetic changes to derive political mileage from the fanfare over the
launch of a new scheme, yet the general result is that the number of schemes
keeps on increasing.
These trends should also be seen considering the changing political economy of
Centre-State relations in India. With the decline of the Congress Party, regional
parties and those built on sectional interests have gained importance. While States
have become economically dependent on the Centre, they have become
increasingly politically independent. As subjects under States’ jurisdiction are
politically more important (land, water, law and order,24 education, and health),
the Centre has often used CSS funds to enhance its political visibility at the
ground level.
The enhanced control by the Centre over social sector spending through CSSs
should be seen in the context of the sharp deterioration in the States’ capacities to
design and efficiently implement or evaluate programmes. There is enough
evidence to show that the state governments’ capacities to deliver have declined
over the years due to rising indiscipline and a growing belief, widely shared
among the political and bureaucratic elite, that the State is an arena where public
office is expected to be used for private ends.

24
Although police is a state subject, the GOI employs more than 750,000 policemen under various
paramilitary forces.
32

4.4 Problems with centralisation


On the other hand, too much control by the GOI dilutes the sense of ownership
of States with the schemes, while it is difficult for the GOI effectively to monitor
the progress in the 676 districts spread over 29 States and seven union territories.
Most schemes follow a blueprint and top-down approach, with little flexibility
given to field staff. Any change in the scheme requires approval from the GOI,
which is time consuming. Uniformity of schemes all over the country, from
Mizoram to Kerala, without sufficient delegation to States to change the schemes
to suit local conditions, leads to a situation where the States, even knowing that a
scheme is not meeting stated objectives, become indifferent to its
implementation. For instance the Indira Awaas Yojana, a village house-building
scheme, both demanded construction of indoor toilets and provided money for
them. In many villages, there is no arrangement for water, and, hence, these toilets
were never used. However, States had no discretion to change the project design.
Similarly, in labour scarce regions in India, notably in the north-east and north-
west, labour-generating public works schemes under NREGA (National Rural
Employment Guarantee Act) are carried out, for which labour migrates from other
regions (Records are fudged to show employment of local labour). It would be
much better if the States had discretion in deciding the mix of poverty alleviation
programmes. But GOI guidelines are rigid and afford no such flexibility to the
States.
Many States are ruled by a political party different from that at the Centre. These
governments do not put their weight behind CSSs formulated by the Union
Government as they see no political advantage in successful implementation of
such schemes. Successful schemes in the past (for example, the mid-day meal
scheme of Tamil Nadu, the Employment Guarantee Scheme in Maharashtra, the
Antyodaya grain scheme in Rajasthan, and Two Rupee Rice in Andhra Pradesh)
are characterised by a high degree of political commitment and administrative
coordination, which the GOI cannot secure for want of control over the staff. The
Planning Commission observed that implementation of State-sponsored anti-
poverty schemes in Rajasthan, Tamil Nadu, Gujarat, and Karnataka was far better
than that of centrally sponsored programmes in the same states (MTA 2001).
One reason for the relatively better performance of State sponsored programmes
is that States actively or passively undermine the CSSs. States often do not release
their portion of funds for CSSs according to mandated timetables, leading to
uncertainty about the availability of funds at the field level. States even hold up
the release of GOI funds tied to CSSs, for several reasons. First, the States have
33

to get legislative approval for the GOI schemes, which takes time. Second, States
do not attach importance to the spending on CSSs and thus are in no hurry to
sanction expenditure. And third, fiscal problems 25 at the State level force the
States to divert the GOI funds for paying salaries.

4.5 Changes introduced in the 2015–2016 budget


Sensing that too much control by the GOI dilutes the sense of ownership of States
with the schemes, in 2015 the GOI accepted the advice of the Fourteenth Finance
Commission: it increased untied statutory transfers and reduced tied discretionary
transfers via the Ministries, as shown in Table 8.
Table 8: Transfer of Funds from Centre to States (in trillion Rs)
2016- 2017-
2011– 2012– 2013– 2014– 2015– 17 18
12 13 14 15 16 (RE) (BE)
FC transfers 302 340 379 415 591 707 778
Transfers, CSS 235 237 251 260 208 219 231
Total transfers 538 577 630 675 799 926 1009
% increase
over last year 8 7.3 9.1 7.2 18.4 15.9 9
Share of FC in
56 59 60 61 74 76 77
total transfers

Thus untied statutory transfers to the States through Finance Commission


increased from ₹415 trillion in 2014-15 to ₹591 trillion in 2015-16 and tied
discretionary transfers via the Ministries were reduced from 260 to 208 trillion
₹in the same period, increasing the share of statutory transfers from 61 to 74%.
This trend has continued in the later years too. It is hoped that greater financial
devolution to the states would promote accountability and people’s participation
leading to faster improvement in India’s social indicators.
On the political front too, there is perhaps reason for a tempered optimism: the
BJP won the April–May 2014 elections on the promise of ‘minimum government
with maximum governance’. It is widely believed that the massive voter turnout
in these elections and their clear verdict in favour of a single political party, for

25
There has been improvement in the fiscal situation of the States after 2004–2005, but there are still
many States where deficits run high, such as the Punjab, Bihar, Kerala, West Bengal, Assam, and
other north-eastern states.
34

the first time since 1984, reflected people’s aspiration for better governance; the
new government now has an electoral incentive to address this issue
satisfactorily. The BJP-led government could achieve this goal by: focussing on
monitoring and assessment of outcomes, linking transfers of funds with
performance by state governments, and extending accountability outward to
society and citizens. Many of these reforms do not require financial outlays,
enhancing the prospect of their implementation.
35

5 Reforms needed at the Central level


The importance of good governance26 and having honest and competent
public sector institutions for a country’s economic and social development is
now widely accepted. Daniel Kaufmann, who worked as the World Bank’s
Director for global governance, states that countries that improve their
governance effectiveness raise their standard of living, as measured by per
capita incomes, by about three times in the long run (World Bank 2000). Poorly
functioning public sector institutions and weak governance are major
constraints to equitable development in many developing countries. In
addition, governments must work with the people to ‘build anticipative
capacity, inventive government and foster an innovative society in order to
create emergent solutions to the complex challenges’ (Bourgon 2011) that the
society may face in future. In other words, the Classical model that saw
government as primarily a provider of professional services is no longer
sufficient today. Public interest now is a collective enterprise that involves
government, citizens and civil society as value creators and co-producers of
public goods.
Governments and governance the world over are undergoing a ‘paradigm
shift’ in their traditional roles and structures of inflexible control and
procedure orientation, towards result orientation, flexibility, facilitation and a
citizen-centric approach (Karwal, 2010). Success however would, to a large
extent, depend upon a cultural change in the Civil Services. Excessive caution,
reliance on precedents and following the beaten path have to give way to
innovation and inventiveness and to trying out new methods. Merit, capability
and quality should matter more than mere seniority.
This is not a rocket science, as the experience of all developed and developing
countries as well as India shows that, in order to achieve inclusive development,
we need to aim at high growth by creating business friendly environment as well
as through improving physical infrastructure (such as power, roads and water)
and social infrastructure that includes education, health, skill building, hygiene
and sanitation. This may however leave out some disadvantaged groups, which
are not likely to benefit from market-led growth alone -- these could be migrants
to cities, tribal groups, women, Dalits, old and disabled people -- who would need
special attention. Lastly, translating these macro-policies into action would need
good governance and accountable administration, without which even the best

26
governance is generally understood in India as, “a government’s ability to make and enforce rules,
and to deliver services.” (Mundle 2016)
36

policies and laws remain on paper only, or result in leakages. This strategy is
explained in Figure 6.

Figure 6: Policy Pillars of Inclusive Growth27

We discuss below reforms that need to be initiated at the central level.

5.1 Sustaining growth through improving ease of doing business


High growth notwithstanding, many controls that were imposed during the
‘socialist’ regime still continue. The present government led by Prime Minister
Narendra Modi has made serious efforts in the last three years to do away with
archaic rules and cumbersome procedures. It has upgraded infrastructure, raised
foreign-investment limits and digitized approvals and registrations. Groundwork
has been done to implement GST (Goods and Services Tax) that will replace all
indirect taxes levied on goods and services by the Indian Central and State
governments. GST will ensure that indirect tax rates and structures are common
across the country, thereby increasing certainty and ease of doing business. All
tax payer services such as registrations, returns, payments, etc. would be available
to the taxpayers online, which would make compliance easy and transparent.
However its impact would be felt only by the end of 2017. As of now the World
Bank’s report in Oct 2016 on ‘ease of doing business’ showed India had made
little improvement in its rank, which stagnates at 130 out of 190 countries,
whereas Pakistan and Indonesia made vast improvements. India's target to break
27J. Zhuang and I. Ali. 2010. Poverty, Inequality, and Inclusive Growth in Asia. In J. Zhuang, ed.
Poverty, Inequality, and Inclusive Growth in Asia: Measurement, Policy Issues, and Country
Studies. Manila: ADB and Anthem Press
37

into the top 50 by 2018 remains distant. Though India improved on some
indicators like faster access to electricity, resolving contractual obligations or
starting a business, there were still many challenges. Registering a property,
getting credit and negotiating the maze of taxes are still a big put off for potential
and existing investors. Many of these subjects are under the control of state
governments, where progress is slow.

5.2 Archaic laws and procedures


Problematic as the business environment is, the plight of average Indian citizens
is no better. They face enormous challenges in simple matters such as an
electricity connection, a caste certificate or a driving permit. These tasks can
require repeated visits to unresponsive government offices, payment of bribes,
connections in the government to unblock obstacles or a combination of all of
these. Average Indian citizens have many avenues for recourse in theory, but they
know well the futility of trying to use them. The problems are magnified even
more for the poor and the weaker sections of the society (Sud, 2010).
The maze of laws, organizations, and practices that confront the ordinary citizen
in his or her dealings with government make it very difficult to pin responsibility
on the individual government servant or blame him when things go wrong. De-
regulation has made almost no impact at the state level. The systems of buying
and selling land, getting a ration card or your security back, and Rent Control
Acts, all need a thorough revision. Unfortunately the state-level bureaucracy has
made no effort to simplify these laws and procedures. One can set up an industry
worth billions of Rupees in India without any license today, but a farmer can
neither set up a brick kiln unit, nor a rice shelling plant, and not even cut a tree
standing on his own private field without bribing several officials. A simple
operation of converting prosopis (a shrub of high calorific value occurring
everywhere in states like Rajasthan, Gujarat and Tamil Nadu, the more you cut it
the more it grows) into charcoal, which can give employment to thousands of
people requires four different permissions! Women were prosecuted in Orissa in
1995 for keeping brooms in their homes! It is a sad commentary on our laws that
all occupations in the urban informal sector, such as hawking, small
manufacturing in residential areas are illegal and subject to the whims of law
enforcing agencies.
38

Delhi has about 0.6 million rickshaw pullers but the city government has put a
limit of 99,000 on licences to pull rickshaws28. Thus, about half a million
rickshaws operate illegally in Delhi. Ironically there is no limit to the number of
polluting motor cars, whereas the non-polluting, eco-friendly, and cost efficient
transport providing livelihood to the poor has a ridiculously low ceiling! Many
rickshaw pullers sleep at their stands and public spaces because they cannot afford
to rent a shared room even in the slums.
According to the Ministry of Housing and Urban Poverty Alleviation, there are
10 million street vendors in India, with Mumbai accounting for 250,000, Delhi
has 450,000,[7] Kolkata, more than 150,000, and Ahmedabad, 100,000. Most of
them are immigrants or laid-off workers, work for an average 10–12 hours a day,
and remain impoverished. Though the prevalent license-permit raj in Indian
bureaucracy ended for most retailing in the 1990s, it continues in this trade.
Inappropriate license ceiling in most cities, like Mumbai which has a ceiling of
14,000 licenses, means more vendors hawk their goods illegally, which also
makes them prone to the bribery and extortion culture under local police and
municipal authorities, besides harassment, heavy fines and sudden evictions. In
Kolkata, the profession was a cognisable and non-bailable offence.
GOI has formulated a National Policy on Urban Street Vendors in 2009 that
clearly recognises that street vendors form a very important segment of the
unorganised sector in the country. This was followed by a Street Vendors
(Protection of Livelihood and Regulation of Street Vending) Act, 2014 in March
2014. However in most cities the Policy or the Act is yet to be implemented.
It is a sad commentary on our laws that the informal sector which provides
maximum employment is mostly declared as illegal and subject to the whims of
law enforcing agencies. A Committee should be set up to identify specific laws
and rules which hamper entrepreneurship. A systematic review needs to be
undertaken to review the areas in which government must withdraw, albeit in a
phased manner, and departments which need to be wound up should be defined.
The non-farm sector in India has immense potential to generate new jobs with
relatively low direct investments. However its expansion depends upon a number
of factors, which are influenced by government policies – directly or indirectly.
Unfortunately, de-regulation introduced after 1991 has made not touched the rural
or the small informal sector, and has largely been confined to the modern
manufacturing sector. For instance, marketing of agricultural products is
28
http://www.hindustantimes.com/India-news/NewDelhi/Smart-cards-for-rickshaw-pullers-in-N-
Delhi/Article1-1011329.aspx
39

hampered by various regulations passed under the Essential Commodities Act


and the Mandi Acts. The controls and restrictions, imposed under these laws, are
dis-incentives to production and distribution of essential commodities. Such
controls should be re-examined so as to reduce the influence of various inspectors
and their discretionary activities.

5.2.1 Examine land laws


In almost all states except Punjab, Haryana, Assam, Andhra Pradesh (but not
Telangana) and Tamil Nadu, there are tenancy laws that do not permit land being
leased to tenants for agriculture. Maharashtra goes a step further and bans even
sale of agricultural land to a non-agriculturist. Second, in almost all states, there
are provisions that agricultural land cannot be used for industrial purposes, unless
written permission is taken from a designated authority, which is time-consuming
and encourages corruption. Often politicians and land mafia operate as
middlemen to facilitate getting the required permission from government for the
change in landuse. Both these laws need to go.
A ban on leasing was imposed after Independence in almost all states to
encourage owner-cultivation and to give security of tenure to sharecroppers and
tenants. Although such laws should continue in tribal areas where agricultural
markets are not well developed, in other states where the mode of production has
become capitalist, there is a need to liberalise and free leasing-in of land from all
government controls.
Studies show that the lease market facilitates a shift of control of land to
smallholders and tenants. Big owners are found to lease out and the resultant
distribution of operational area is less uneven than the ownership pattern. Thus,
the lease market enables the landless to gain access to land that, in turn, enhances
employment opportunities since poor farmers tend to saturate their land with
inputs of labour. In areas experiencing technological change and high growth,
marginal farmers may also gain by leasing out their area and taking up non-farm
employment while still retaining ownership and the right to resume their control
over the land after the lease period.
The second issue of freeing from all controls conversion of land-use for industrial
purposes should also be addressed. Industry serves a social purpose since
employment generation per unit of land is higher in non-agricultural uses than in
agriculture, and therefore change of landuse should be free from all hassles. For
instance, a 4000 MW thermal plant may displace about 250 households but would
create tens of thousands of new jobs by providing power to small industry, and to
40

tubewells that would increase both gross cropped area and productivity. At
present the share of urban dwellers in total population of India is 32 per cent, but
they occupy only 6 per cent of the total area of the country. Growth through
industrialization and urbanisation would not only increase labour productivity but
will reduce pressure on farm land by pulling people away from land to non-
farming occupations.
The argument that this would lead to food scarcity is bogus. During 2009-14, 60
million tonnes of food grain was rotting in government godowns or was being
eaten by rats while cattle in the US and the UK are being fed another 10 million
tonnes of our grain that is exported. So we have more than enough food, if exports
are banned and internal offtake improved, and we can afford to change the land-
use of our lands from farm to non-farm to meet the requirement of industry.
Besides, should not the farmer decide whether he should grow food or not? If he
is getting a lifelong opportunity of earning from land in some other way, why
should anyone prevent that? There is no scarcity of land in this country. What is
contentious is the issue of passing over ownership of land, and who determines
landuse.
So even though the worst of the “licence Raj” has been dismantled since the early
1990s, the “Babu Raj” at the state level remains as oppressive as ever.

5.3 Low tax base impinges on social spending


In addition to overcoming the well-known constraints of poor governance and
weak accountability, India needs to allocate more funds for social sector by
improving its tax collection, distribute it equitably among the states, and correct
the design flaws in certain flagship programmes, such as NREGA, rural
sanitation, PDS, urban housing, and ICDS29. Out of these three broad directions
of reforms we discuss first financial allocation to social sector by the Centre and
the states and its inter-state distribution, followed by design issues. Governance
issues that are more complex and difficult to improve are addressed in Chapter 6.
The fundamental reason for low social sector expenditure in India is our
extremely low tax-GDP (gross domestic product) ratio. In India, it is around 17
per cent (out of which the States collect about one-third) now, compared to 50
per cent in Sweden, and more than 30 per cent in Russia, South Africa, and Brazil.
Poor tax revenue is the most important factor for low social sector expenditure.

29
Integrated Child Development Services, village-based programme for under 6 children, with strong
focus on fighting malnutrition.
41

Even Ghana’s tax: GDP ratio at 22 per cent is higher than India. Poor tax
collection leads to insufficient allocation for social sector programmes. The
international norm is to spend at least six per cent of GDP on education and three
per cent on public health. In India, we spend only three per cent of the GDP on
education and around 1.4 per cent on health. Former Prime Minister Manmohan
Singh had promised in 2004 that India would spend two to three per cent on
health, but in 10 years we did not see this happen. Unfortunately, neither the last
government nor the current one has been able to increase revenues to the level of
other BRICS countries, presumably because half of our economy is believed to
be black economy. On the other hand, Tax-GDP ratio of the centre has fallen in
the last eight years by about 1.5 percentage points, from 11.9% in 2007-08 to
10.5% in 2015-16. Let us hope that the new government’s priority on controlling
black income and introducing GST results in more funds in future for the social
sector.
When compared with other countries, India does not fare well in respect of social
sector expenditure, as shown for health in Figure 7 below.
Figure 7: Public Expenditure on Health as % of GDP in 2014

India
Sri Lanka
Country/Region

Nepal
Bhutan
Arab States
Mexico
Thailand
0 1 2 3 4 5 6

The total expenditure on health as a percentage of GDP is much lower than in


many other middle income and developing and the lowest among BRICS (Brazil,
Russia, India, China and South Africa) countries. Similar is the story about
education, as shown in Figure 8.
Figure 8: Expenditure on education as % of GDP
42

India
Bhutan
Mongolia
Vietnam
South Africa
Kenya
Thailand
Ghana
Denmark
0 2 4 6 8 10

Of the two principal components of social welfare policy—basic public services


and safety-net programmes—India has focused disproportionately on the latter in
the last two decades, expanding existing social protection programmes such as
PDS and creating new ones like NREGA. By contrast, the country’s basic public
services, such as primary education, public health, and water and sanitation have
languished. Whereas expenditure as ratio of GDP on safetynet programmes has
jumped four times from 0.5 to 2% of GDP, expenditure on social sector has
stagnated at around 6 to 6.5% of GDP. However, safetynet programmes are also
not doing well because senior bureaucracy has not been able to design these
programmes well, an issue that is discussed in section 5.5.

5.4 Equity issues in Federal Transfers


As already stated, Federal transfers are shared with States through two channels,
i.e. Finance Commission (FC) and various Individual Ministries for supporting
Centrally Sponsored Schemes (CSS). Since expenditure of States exceeds their
tax revenue, inter-governmental transfers make an important and significant part
of their total revenue. The poorer states’ per capita plan expenditure is much
below that of the prosperous states, as their revenue collection is insufficient, and
the devolution from the Finance Commission, based on 1971 population, is not
sufficiently equitous. For instance, the total development expenditure (both plan
and non-plan) per capita in Bihar at only ₹5180 in 2013-14 was less than half as
compared to richer states, thus perpetuating inter-state disparities.
Some large poor states, such as UP, Bihar, and Odisha have been losing their
share in central taxes between the 12, 13th and 14th FC, as shown below.
43

Table 9: Share in total devolution various FC Awards


Share in Share in 12th 13th 14th
population in poverty 2011-
2011 12
Bihar 8.3 13.3 11.0 10.9 9.7
Orissa 3.7 5.1 5.3 4.8 4.6
UP 16.6 22.2 20.7 19.7 18.0
Total (3 28.6 40.6 37.0 35.4 32.3
states)
Kerala 2.8 0.9 2.2 2.3 2.5

Thus these three states have lost almost 5 percentage points in share in taxes
between 2005 and 2015, which will adversely affect their plan size for the coming
five years. On the other hand, share of the least poor state, Kerala, has been rising
and is much above its share in poverty.
It is often argued that since the FC awards are formula based and cater to the
needs of the entire population of a state, these cannot fully compensate the lack
of state resources with the poorer states. Therefore theoretically speaking,
transfers through the Ministries through centrally sponsored schemes (CSS)
should be more progressive, as these are directly targeted to reduce poverty, and
are not bound by any rigid formula. Ironically the picture is just the reverse, and
CSS transfers help the richer states more than they help the poorer states. GOI
has admitted this in the Economic Survey 2014-15 that has contrasted equity of
CSS transfers with FC transfers in the following figure:
Figure 9: Equity in transfers through FFC30 vs CSS

30
FFC=Fourteenth Finance Commission, its recommendations will be used for transferring statutory
central share in taxes, etc to the states from 2015 to 2020
44

Comparing a poor UP with a comparatively prosperous AP in the above right


hand figure clearly shows how inequitable plan and tied transfers (CSS) are. The
latest Economic Survey released in February 2017 has also admitted that the
poorest districts with 40% of the total population receive only 28% of the total
development fund. The income gap between India’s richer states such as Tamil
Nadu and Maharashtra and its poorer states such as Bihar and Uttar Pradesh is
widening and not narrowing, as classical economic theory would postulate (Mint
22 March 2017).

5.5 Design flaw in key flagship programmes


The central argument that is being presented in this section is that when a
programme is well designed, adequately funded, and frequently evaluated it does
well even in so called backward states. On the other hand, if the design is flawed,
the programme does poorly even in better governed states. Some well-designed
programmes are PMGSY (the rural roads programme), Mid-day Meals, and
National Health Mission, whereas some social protection programmes where the
very design needs improvement are NREGA, PDS, Urban Housing, and ICDS.
The primary responsibility of initiating correction in the design of such faltering
programmes is that of the central Government.
45

NREGA- The Mahatma Gandhi National Rural Employment Guarantee Act


(NREGA) of 2005, provided a legal guarantee of 100 days of work to any rural
household that demands it. The programme is demand-driven and open to every
household, whether rich or poor. A study (Desai et al. 2015) showed that three-
fourths of NREGA participating households are not poor. Unfortunately, 70% of
the poor are not able to find work in NREGA, mostly due to poor programme
implementation and work rationing.
NREGA does not work well in many poorer states, such as Bihar, Odisha, Assam,
and UP, and hence its impact on poverty reduction is marginal. For instance, the
total expenditure on NREGA in Bihar in 2015-16 was ₹10.25 billion, in Tamil
Nadu it was more than four times at ₹46.33, billion whereas the number of rural
poor in Bihar is more than six times this number in Tamil Nadu. This leads to a
bizarre situation where in 2015-16 government spent ₹9,045 under NREGA on
each rural poor in Kerala - the least poor state in India - against a paltry ₹320 in
Bihar! GOI needs to earmark NREGA funds for states, on the basis of poverty,
just as PMGSY allocations are in proportion to state-wise shortage of rural roads.
‘Free-for-all’ approach punishes poorer states as they are not able to compete with
better governed states in attracting funds from GOI.
Moreover despite the fact that NREGA mandates that 80% of works must be
related to local water conservation and drought proofing, the sustainability and
productivity of assets created is never monitored with the result that the
programme is reduced to creating short-term unproductive employment with no
focus on asset creation or soil and water conservation. Its impact on agriculture
may even be negative, as alleged by the Ministry of Agriculture. NREGA is
characterised by irregular flow of funds and high percentage of incomplete
works. As works are left incomplete, bunds are washed away during the
monsoon, which gradually accumulates as silt in the river bed downhill, which
in turn affects the nearby check dams with negative impact on agricultural
productivity.
Most importantly, collective capability is required for management of commons
and for new structures created with NREGA funds. Unfortunately most projects
have failed to generate sustainability because of the failure of government
agencies to involve the people and build their social capital.
Rural toilets – This programme is funded from two different Ministries, that of
Water & Sanitation, and Rural Development through NREGA. There are several
design issues that need attention. First, it is almost impossible at the village level
to converge and get funds from the two schemes quickly, and this was the biggest
46

dampener for the programme in the last four years. Sanitation and NREGA
guidelines are conceptually different from each other, as sanitation guidelines
give money only as incentive, whereas NREGA gives money for construction.
Moreover toilet construction is not a labour intensive activity, as total labour cost
in toilet construction is less than 30%. Another challenge to convergence is the
huge paperwork that de-motivates the implementing stakeholders. As each toilet
is regarded as a single project under NREGA, huge paperwork was needed to
record the processes.
Second, size of the pit is not being monitored; technically there should be two
small pits of only 50 cubic feet capacity. Unfortunately, adoption of the twin pit
model is very low in rural India, and often only one pit is constructed. Moreover,
the size of pit is almost ten times the recommended size to ensure that the pit
never gets filled up for several years. The demand for very large pits and septic
tanks drives up the cost of constructing a latrine considerably. States should
monitor the size of the pit, and withdraw subsidy if it is more than 100 cuft in
size.
Public Distribution System (PDS) - With a network of more than half a million
Fair Price Shops (mostly privately owned) distributing commodities worth about
a trillion ₹annually, the PDS in India is perhaps the largest distribution network
of its type in the world. However, all is not well with the subsidised grain scheme,
which provides cereals to the poor at about 5-10% of the market cost. There are
weaknesses in the distribution system including errors in identification and
inclusion of the poor families, prevalence of ghost ration cards, delivery
mechanism leading to large scale leakages at different points along the supply
chain and diversion of subsidised grains to markets and unintended beneficiaries.
Other weaknesses in the distribution system include ration cards being mortgaged
to ration shop owners, large errors of exclusion of BPL families, prevalence of
ghost cards, with weaknesses in the delivery mechanism leading to large scale
leakages and diversion of subsidised grains to markets and unintended
beneficiaries.
These problems arise because grain is given to the shopkeeper at the subsidised
rate which leads to leakages. Government should abolish the dual pricing system
in PDS and sell stocks to the fair price shop dealer at the market price, say ₹30
per kilo for wheat. The consumer would go to him with only two rupees in cash
as before and her/his UID card to buy a kg of wheat but the rest 28 ₹would get
transferred to the shopkeeper through the card. This will vastly reduce leakages
and subsidy as well as improve the dealer’s attitude towards the buyer. As of now
47

the dealer avoids the consumer as his main interest is in selling the grain in the
open market. Once he is given grain at the market price he would be forced to
welcome the card holder and persuade her/him to come to his shop at the earliest
so that the transfer of subsidy could take place.
This would not only ensure that the right person gets their rations, but would also
free entitlement holders to buy their rations from any FPS and not be tied to a
single vendor. In other words, it would ensure ‘entitlement portability’ that will
allow PDS entitlements to be accessed anywhere in the country and greatly help
the poor migrant workers, who are unable to access their entitlements now. This
would revolutionise the PDS by providing genuine choices to entitlement holders.
It would also cut down significantly on corruption.
Urban housing - 99 per cent of the urban housing shortage is from the
economically weaker sections (EWS) and the low-income group (LIG)
households. Though there is negligible housing shortage for the HIG (high
income group) category, most new houses are meant for them, leading to a
situation that the rich own more than one house that remain unoccupied, thus
leading to wastage of a scarce resource. At today’s prices, even a modest
tenement of 300 square feet would cost close to two to three million rupees, well
beyond the reach of poor residents. These are then allocated to ineligible
households, or worse they stand vacant, and gradually fall into disuse, as
monuments of official waste, because in the classic mode of bureaucratic failures,
those for whom they are intended cannot afford them, and those who can afford
them, do not want them.
Public rental was the social solution to housing during inter-war and post-war
periods in Europe and elsewhere, and very large housing estates were built in
several countries. It is now increasingly targeted towards low-income earners and
those with social problems. India too should shift the focus to promoting rental
housing.
The focus on provision of rental/social housing stock for the urban poor and
migrant population should be a critical element in making the cities more
inclusive. It must include individual rental units, shared rental units as well as
dormitory and night shelter options. The poorest such as beggars, rag-pickers and
unskilled wage earners cannot afford even houses on a rental scheme. For them
the scheme of night shelters should be revived as a centrally sponsored scheme.
Such shelters should be built close to place of employment, as the poorest cannot
afford even travelling by public transport.
48

ICDS design needs a change - The ICDS has not yet succeeded in making a
significant dent in reducing child malnutrition, as the programme has placed
priority on food supplementation rather than on nutrition and health education
interventions, and targets children mostly after the age of three when malnutrition
has already set in. Very little of the ICDS resources, in terms of funds and staff
time, are spent on the under-three child, and this low priority must be reversed.
The focus in ICDS programme should be on components that directly address the
most important causes of under-nutrition in India, specifically improving
mothers’ feeding and caring behaviour, improving household water and
sanitation, strengthening referrals to the health system and providing
micronutrients. The basic nature of the programme should be changed from
centre-based to outreach-based, as the child under three cannot walk to the centre
and has to be reached at his/her home. Another advantage of visiting homes is
that the entire family, not just the mothers, are sensitised and counselled.
Government of India should discourage the distribution of manufactured ‘ready-
to-eat’ food, as it leads to grand corruption at the Ministerial level, but
unfortunately GOI has encouraged such tendering by laying down the minimum
nutritional norms for ‘take-home rations’ (a permissible alternative to cooked
meals for young children), including micronutrient fortification, thus providing a
dangerous foothold for food manufacturers and contractors, who are constantly
trying to invade child nutrition programmes for profit making purposes. ICDS
should learn from the success of hot freshly cooked mid-day meals programme
that runs fairly well even in states not known for efficiency, whereas the supply
of packaged food in ICDS even in efficient states is not popular with the children,
besides being irregular and discouraging local participation.
An evaluation of ICDS in UP by the National Human Rights Commission showed
that despite Supreme Court orders to provide hot cooked meals, all centres
supplied only packaged ready-to-eat food, containing only 100 calories, as
against a norm of 500 calories, and 63 per cent of food and funds were
misappropriated. The food being unpalatable, most of it ends up as cattle feed. In
addition to Ministerial level corruption, even the government appointed village
workers are deeply involved in malpractices and share 2000 rupees per centre
every month with their supervisors routinely. However, such reports, though few,
are hardly discussed in state Assemblies, as they meet now for fewer than 25 days
a year. We need a new law making it compulsory for Parliament and Assemblies
to meet for at least 150 days a year.
49

6 Governance Issues
Addressing governance issues will need a shift in the way India prioritizes for
social sector and focus on cross-cutting systemic issues like dilatory budgetary
flows, M&E of programmes, personnel and administrative reforms and
accountability. Actions are needed along several critical areas and these can be
incentivised by GOI without expecting revolutionary changes in the nature of
State level politics to emerge and precede governance reforms.

6.1 Monitor Absenteeism


A World Bank study (2012) showed that the bulk of expenditures in education
and health typically flow to the salaries of teachers and health workers, yet
rampant absenteeism and shirking by these service providers means that no
services are effectively provided in many cases. That is, governments use these
resources to provide (targetable) jobs rather than (less targetable) high quality
services. The system exists for the service providers but not for service provision.
Field investigations in rural areas of Indian states, particularly in the north, reveal
that teacher absenteeism is endemic, with almost two-thirds of the teachers
employed in the sample schools absent or not teaching at the time of the
investigators’ unannounced visits. A study quoted by Keefer and Khemani (2003)
recounts how a village school in UP can be non-functional for as long as ten years
due to teacher absenteeism and shirking, without any collective protest being
organised. Another World Bank study (2008) found that the average rate of
teacher attendance was 65% in UP but the average rate of teacher activity (i.e.,
active engagement in teaching-related activities) was only 27%. No more than a
third of the teachers were actively teaching during survey visits.
Similarly rural health care in most states is marked by absenteeism of
doctors/health providers, inadequate supervision/monitoring and callous
attitudes. A study by the Planning Commission (2009) described the physical
availability of staff at the Community Health Centres31 (CHCs) as follows:
Figure 10: % of medical staff actually present at CHCs as a ratio of
sanctioned and recruited strength

31
These operate at the sub-district or block level.
50

Andhra Pradesh

Uttar Pradesh
Paramedical+Technicians

Bihar Medical Officers +Specialists

Rajasthan

0 20 40 60 80

Thus Andhra Pradesh has the best record whereas Bihar has dismal attendance,
just 24 per cent, in respect of medical doctors at CHCs. If the Medical Officer is
not present to monitor the attendance of those operating under him/her (including
not just paramedical staff but also technicians, pharmacists and others) in Public
Health Facilities, it is more likely that they too will abscond from their duties.
Long term absenteeism is reinforced on a daily basis by the skewed incentives of
a significant disparity in remuneration between the public and private spheres.
Consequently, large numbers of medical staff ostensibly serving in the public
health system are really devoting significant tracts of their time and energy to
informally serving the private system, more or less openly, and at times even
using government facilities to see patients on a private basis and charge
accordingly. On the other hand, Tamil Nadu has an effective system to ensure
that doctors employed by the government actually serve in rural areas, which
other states may like to study and incorporate in their policy.
Doctors and nurses need to be present and effective at their jobs, and provide the
care that patients need. But they are often mired in a system where the incentives
for effective service delivery are weak, and political patronage is a way of life.
Highly trained doctors seldom wish to serve in remote rural areas. Since those
who do serve are rarely monitored, the penalties for not being at work are low.
Even when present, they treat poor people badly. The declining quality of public
health and education threatens past achievements and future prospects, and
imposes additional costs on women and children.
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As regards solutions, one idea that has been tried in rural Udaipur in Rajasthan is
using cameras with tamperproof time and date functions (Narayan and Mooij
2010). Teachers were required to take their own pictures, along with students, at
the start and close of each school day. Together with other measures (a bonus in
addition to the base salary contingent on presence, and a fine in case of absence),
the experiment led to a decline in the teacher absence rate from 44 per cent to 27
per cent in a period of 27 months. The test scores of students also improved.
All ministries/departments should collect quantitative data on absenteeism of
both service providers and service receivers (students in classrooms, or women
turning up for institutional deliveries) as it throws a great deal of light on the
quality of service. Through a carefully designed methodology backed by
technology, it is quite possible to measure the performance of all service
providing agencies, such as police stations, health and anganwadi centres (meant
for children below six), panchayats32, etc, and to what extent they are responsive,
efficient and participative.

6.1.1 Should panchayats control absenteeism?


The link between decentralisation and improved teacher performance in
government schools is problematic (Bennell 2004) in many States, as discussed
below.
Absenteeism and School Management Committees: So far the decentralized
governance model to oversee school performance, with communities having
oversight powers over schools and teachers through school committees, has not
been effective in improving accountability and helping schools deliver acceptable
learning outcomes. According to a World Bank study (2011) one of the key
reasons contributing to ineffective functioning of school-based management
committees has been lack of knowledge among communities—committee
members themselves are unaware of how committees are formed, who the
members are, and what controls they have over the school. The PROBE 2 surveys
also found that these committees had not been effective in improving the levels
of teaching activity33. Once again, unequal power relations interfered with the
presumed channels of accountability. Power in most committees rested with the
president (called sarpanch) and the secretary (generally the head-teacher), who
need to be held accountable in the first place. Teacher absenteeism and lack of
accountability has to be addressed not only by greater community involvement in

32
Elected local bodies at the village, sub-district, and district levels
33
http://www.indg.in/primary-education/primary-education/policiesandschemes/EDUCATION.pdf
52

management and ownership of schools but also through better oversight


mechanisms and measurement of achievements of each student on the basis of
which teachers’ performance should be assessed.
The Planning Commission’s evaluation (2010) of elementary education
programme had the following to say about the school committees:
Community ownership of schools which was envisaged to be the backbone
for the successful implementation of the programme at the grassroots level
has met with partial success as most village education committees took a
ringside view of school activities. While Village Education Committees
(VECs) in Assam, Bihar, Chandigarh and Rajasthan reported that they
were involved in monitoring of schools, infrastructure improvement and
improving enrolment, meetings were held on quarterly basis. In Himachal
Pradesh and Tamil Nadu meetings were not conducted on a regular basis.
None of the VECs were involved as much with appointing para teachers
(except Andhra Pradesh) as with infrastructure improvement (80%). More
than half of the VECs were concerned about funding matters. Parents’ role
as primary stakeholders has been limited as only 50% of the parents in the
rural and 45% in the urban schools were aware of the existence of PTA.
The responsibility for effective implementation rests with the school
headmasters, as community mobilization/ownership has not gained ground, and
involvement of Panchayati Raj institutions in management of schools occurs only
in a few states. Role of the School Management Committees/Parents Teacher
Associations is partial at best and there is a need for them to engage more
substantively in non-monetary school activities such as improving educational
quality, and monitoring teacher and student absenteeism. For this to happen, they
will require significant capacity-building.
In a field study (Banerjee et al., 2007) of UP, it was found that people in such
committees rarely focused on the issue of children’s learning. The most
frequently raised issue and the issue around which there was the most animated
discussion was scholarships. The second issue that attracted attention was the new
government midday meal programme. Actual learning levels attracted the least
attention, and the facilitators had a difficult time steering the conversation away
from scholarships and school meals to the broader issue of learning.
Because of several practical constraints, the task of ensuring teachers’ attendance
and quality cannot be left solely to the village level education committees. Such
committees even where they are active are involved in construction works and
physical infrastructure and leave the learning aspect to the teachers and head
53

masters. Many members from disadvantaged and vulnerable sections are often in
awe of the school authorities. Whereas contract teachers appointed by the
panchayat are more responsive to people’s needs, regular teachers do not consider
themselves as accountable to the village. Therefore, whereas all-out efforts
should be made (through untied direct grants to the school committees, organising
more effective training programmes, grading34 schools on the basis of parameters
that are amenable to change through local initiative, etc.) to improve peoples’
sense of ownership of the school, for several years to come one should not dilute
vertical accountability, to be enforced by the government system through
capturing authentic data and reviewing it with the teachers from time to time.
6.2 Improve M&E systems
At present officials at all levels spend a great deal of time in collecting and
submitting information, but these are not used for taking corrective and remedial
action or for analysis, but only for forwarding to a higher level, or for answering
Parliament/ Assembly Questions. The data collected are not normally subjected
to any regular checks. There is a failure of the ministries in verification of their
correctness and almost total absence of accountability procedures. Although
some Ministries do concurrent evaluation and engage professional organisations
in preparing impact studies, such reports are hardly read by the policy makers,
and no corrective action follows from the examination done in the reports.
Ultimately the process of hiring a professional for an impact study degenerates
into another patronage activity, where favourites are chosen, and the quality of
the report is a secondary consideration.
As the Finance Minister noted in 2005 (Budget Speech, February 29, 2005):
Robust economic growth has thrown up many new challenges, among them
the need to put in place effective monitoring, evaluation and accounting
systems… I think we do not pay enough attention to outcomes as we do to
outlays; or to physical targets as we do to financial targets; or to quality as
we do to quantity… Government …intends to strengthen evaluation…
This needs to be supplemented by independent evaluations conducted by
research institutions.
Emphasis is laid only on the initial or current expenses. After five years, little is
done or monitored. Secondly, when money has been allocated for a particular
activity in a particular area, it is assumed that the work in question has been done,

34
According to the Programme Evaluation Organisation (PEO) Study, schools are graded in Andhra
Pradesh as ‘A’ ‘B’ ‘C’ or ‘D’ based on their performance which improves teacher accountability.
54

and that it was sufficient. This ignores the fact that either of the above
assumptions could be wrong. The primary monitoring activities have to do with
fiscal accountability. While it is necessary, it should not be allowed to
overshadow the need for technical and resource monitoring and planning work
accordingly. At present, there is great pressure on the field staff as a whole to
account for funds utilized, but not in terms of longer-term results, because those
are not monitored. Thus financial planning is divorced from physical planning.
In some cases academic institutions are asked to review the schemes. Their
approach emphasizes rigour, but often its completion requires years and
policymakers lose their patience with their work. There are also reports by
professional consulting organisations, especially on centrally sponsored schemes.
However, the Ministries look upon giving of funds to consulting organisations as
a patronage activity. Little interest is taken in ensuring the quality of the report,
or in following up on their recommendations.
The physical aspect of information is normally not subjected to any regular
checks. One needs to discuss in what manner physical monitoring can be
strengthened. There is a failure of the ministries in verification of their correctness
and almost total absence of accountability procedures. Although some ministries
do concurrent evaluation and engage professional organizations in preparing
impact studies, such reports are hardly read by the policy makers, and no
corrective action follows from the examination done in the reports. Ultimately the
process of hiring a professional for impact study degenerates into another
patronage activity, where favourites are chosen, and the quality of the report is a
secondary consideration.
6.2.1 Shift focus from input controls to monitoring of outcomes
The root cause of the implementation problem is that government (both
politicians and bureaucrats) is neither adequately focused on nor accountable for
social outcomes -- the health status of the people, learning by students – and do
not hold personnel providing the service accountable either. Incentives to public
providers are not such that anyone feels responsible for better or worse outcomes.
The policy makers have insufficient means of influencing the incentives facing
service providers. This weakness of administration hurts the poor and denies them
basic services.
One way to make outcomes more of a motivating factor in service delivery is to
generate and disseminate information regarding progress in services. Parents and
patients should know what they are entitled to and have a place to lodge
complaints when they are not received. Public officials should know whether the
55

public is satisfied or not. Providers and policy makers should know (and be
constantly learning) about what works. This requires outcomes to be more
regularly measured and their determinants analyzed. One critical role of the state
government, when panchayats and departments have the primary responsibility
for the delivery of publicly-funded services, is to be an independent source for
this measurement. Initially, measurement of outcomes may just be for
information and the sake of openness. Over time, such measures could be used to
hold districts and departments accountable for improvements – perhaps to the
extent of conditioning fiscal transfers to panchayats based on progress. It is in the
experimentation that such flexibility allows that solutions to the problem of
implementation can be found. Lessons learned will help all districts and
panchayats improve their performance.

6.3 Check inflated and incredible reporting


Equally, state governments do not discourage reporting of inflated figures from
the districts, which again renders monitoring ineffective. As data are often not
verified or collected through independent sources, no action is taken against
officers indulging in bogus reporting. For instance, in UP the numbers of fully
immunised children that are being reported by the state government are almost
100 percent, but independent assessments put the figure of fully immunised
children in UP at less than 40 per cent. Such cases of flagrant over-reporting
should not go unpunished; otherwise honest reporting would be discouraged.
The practice is so widespread in all the States, presumably with the connivance
of senior officers, that the overall percentage of severely malnourished children,
in case of 0-3 years according to the data reaching GOI from the states is only
two per cent, as against 9.4 per cent reported by Unicef (2014) in a recent survey.
The field officials are thus able to escape from any sense of accountability for
reducing malnutrition. Figures from some states show their children to be as
healthy as in Denmark and Sweden!
Table 10: % of severely malnourished children in 2013-14 according to
State UNICEF
Government
Andhra Pradesh 0.8 4.7
Gujarat 0.8 10.1
Jharkhand 0.5 16.0
Orissa 1.4 11.0
Uttar Pradesh 0.8 12.9
56

West Bengal 0.7 8.9


India 2.1 9.4
(UNICEF 2014)

One district head, when confronted with this kind of bogus figures, told me that
reporting correct data is “a high-risk and low-reward activity”! Dr Manmohan
Singh as Prime Minister called government’s performance in combating
malnutrition a 'national shame', but he was not able to persuade the states to accept
that the problem exists! Forget about the solutions.
Similarly, there are no indicators for assessing the quality of programme
outcomes. For instance, one would like to know how many newly constructed
toilets are being used, and what impact has it has had on peoples’ health and
hygiene. According to the Sector Reforms report by UNICEF on Orissa, less than
half of those who availed subsidy for construction are actually using the toilets,
either fully or partially. The district administration is not held responsible for poor
utilisation, because information is collected on construction, but not on usage.
An assessment study was carried out by GOI (2008) of 162 village Panchayats
which received awards from President of India for reporting hundred percent use
of toilets across six states - Andhra Pradesh, Chhattisgarh, Maharashtra, Tamil
Nadu, Uttar Pradesh and West Bengal. It was found that even in these villages
only 63 percent of households had a functional toilet. Among the reasons
provided by households where toilets are not being used, poor or unfinished
installation account for 31 percent followed by lack of behaviour change (18
percent) and no superstructure (14 percent). Blockage of pan and pipes also
account for another 26 percent of the failures.
Most states have a computerised Integrated Child Development Services (ICDS)
monitoring system, but the available information is not used for taking corrective
and remedial action or for analysis. For instance, each anganwadi centre (ICDS
clinic) reports on the number of malnourished children category wise, but these
figures are neither verified independently by the States nor being used for
assessing the effectiveness of the programme.
A young Member of Parliament, Sachin Pilot, while trying to understand how
ICDS functions in the districts observed (Economic Times 11th Feb, 2008):
‘As a part of a group of MPs working on the issue of malnutrition, we visited
several states, especially remote tribal areas, to see how these centres were
being run. I was surprised to see that the anganwadi worker who manages
57

the centre with almost no help has to keep 18 registers updated! It is another
matter that sometimes the number of children at such centres is less than the
number of registers.
During another visit, we discovered that all data of children at the centre for
the past five months, weight, vaccinations, health records etc, were filled in
with pencils. On probing further, I found it was done so that in case of an
official inspection, the figures could be erased and ‘correct’ data inserted to
make the centre’s performance look good!’
The situation can easily be corrected by greater transparency of the district
records that should be put on a website, and by frequent field inspections by an
independent team of experts, nutritionists, and grassroots workers. The Ministry
of Women and Child Development at the Centre should also pull up the States
for not recognising and reporting almost 90 percent of the severely malnourished
children.
Pratham, a voluntary organisation, has evolved a simple test in education at a low
cost which judges the extent of learning in primary schools. Their findings show
that the actual learning levels of students are abysmally low. However the States
do not accept Pratham findings.
It is not enough that the central government departments and the state
governments use professional and academic organisations to undertake impact
studies from time to time. Their findings must be publicised and discussed with
key stakeholders so that improvements in design and delivery can be effected at
the earliest. Governments should also put on their websites the findings of the
impact studies, and distribute these in workshops they organise. Dissemination of
results is critical for use.

6.4 Accountability
Because of its colonial heritage, as well as of the hierarchical social system,
administrative accountability in India was always internal and upwards, and the
civil service's accountability to the public has been very limited. With
politicisation and declining discipline, even internal accountability stands
seriously eroded today, while accountability via legislative review (as State
Legislatures hardly meet) has not been sufficiently effective. But strengthening
internal administrative accountability is rarely adequate by itself, because internal
controls are often infructuous—especially when the social ethos tolerates
collusion between supervisors and subordinates.
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‘Outward accountability’, therefore, is essential for greater responsiveness to the


needs of the public and thus to improve service quality. Departments such as the
Police and Rural Development, which have more dealings with the people, should
be assessed annually by an independent team consisting of professionals such as
journalists, retired judges, academicians, activists, NGOs, and even retired
government servants. These should look at their policies and performance, and
suggest constructive steps for their improvement. At present the system of
inspections is elaborate but often precludes the possibility of a 'fresh look' as they
are entirely governmental and rigid. The system should be made more open so
that the civil service can gain from the expertise of outsiders in the mode of donor
agency evaluations of projects. It is heartening to note that GOI has already
started doing so for some of its flagship programmes, such as elementary
education and health. Petitions under the Right to Information Act (RTI) have
also empowered citizens, but its use is still dominated by civil servants on
personnel issues of appointments and promotions.
Priorities for enhancing both internal and external civil service accountability
should also include: improved information systems and accountability for inputs;
better audit; face-to-face meetings with consumers and user groups; publishing
budget summaries in a form accessible to the public; a stronger performance
evaluation system; scrutiny and active use of quarterly and annual reports; and
selective use of contractual appointments.
One way to bring in accountability is to start the system of holding public hearings
in matters pertaining to the works handled by each office. Prominent social
workers and NGOs should be associated with this exercise for more productive
results. The teams would undertake surveys of the quality of service delivery in
key areas; scrutinize policies, programmes and delivery mechanisms. Civil
servants’ views on work constraints and reporting fraud and corruption should be
elicited. The reviews conducted should also form the basis of time bound changes
and improvements which should be monitored.
Needless to say that such comprehensive reforms need for their sustenance strong
political and administrative will from the top. In their absence, reforms remain
only on paper. Accountability has to be induced; it cannot be decreed by fiat.
Accountability is a result of a complex set of incentives, transparency in processes
and decision making, and checks and balances at various levels of government.
Thus, the seniors in the government departments have to put their weight behind
new accountability systems and review them from time to time.
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Administrative reforms in many countries, notably New Zealand and Singapore,


have aimed at limiting the area of functioning of politicians and civil servants,
and construct boundaries. Whereas politicians decide social goals and outcomes,
civil servants are responsible for outputs that would lead to achieving the goals.
The civil servant enters into a performance agreement with the minister every
year, and the civil servant’s performance is based on production and delivery of
outputs as described in the performance agreement. In return, the civil servant
gets total autonomy for managing his organisation.
Is this paradigm workable in India? Administration already has a lot of power,
discretion, and hence opportunities for rent seeking, whereas the new autonomy
and flexibility will give limitless opportunities to the civil servant for corruption.
Therefore the New Zealand model is feasible in India only when parallel reforms
for transparency, accountability and reduction in corruption are carried out, which
all require strong political will. On the contrary, there is a feeling among civil
servants in some states that honesty, impartiality, and concern for public welfare
are no longer being demanded of them by the elected representatives. Due to this
perception even when the senior officer is not corrupt, he is not committed to
reducing corruption in his organisation, as he has no faith in the stability of his
tenure or in getting support from the top for anti-corruption drive. The cynical
view is that the politicians’ need for money is greater than that of civil servants,
and therefore honest administration is not in their interest and politicians have to
coerce officials for their share in the loot.
Therefore, in addition to delineating the functions of politics and administration,
it is important to reduce the powers of government, as well as reduce their
discretion and increase transparency at every level. Citizens must have an
oversight role in anti-corruption efforts. The focus of this section is on suggesting
how external pressure can be brought to bear on the system so that flouting the
rules and ignoring public welfare becomes increasingly difficult for both the
political class and bureaucracy.

6.5 Incentives for better service delivery


It is anomalous to expect improvement in delivery to be carried out by an
administrative set-up that for many years has functioned as an inert, arbitrary,
heavy-handed, corrupt and uncoordinated monolith. Service delivery is about
competition and incentives, and a governmental machinery that does not itself
allow them in its own internal organization is an unconvincing proponent or
carrier of that message. In government promotions are largely seniority-based,
not merit or performance-based. There are no well-enforced norms and rules of
60

work discipline, very few punishments for ineptitude or malfeasance, and there
are strong disincentives to take bold, risky decisions.
Howsoever we may criticize these constraints, but the hard reality is that little can
be done to change them overnight. At the same time, it is possible to create some
(perhaps symbolic to begin with) incentives for good performance within the
system. Here, the magnitude of the reward or the severity of the penalty matters
less than their certainty, swiftness and fair and uniform application. A rise in
individual accountability must be accompanied by commensurate rewards and
consequences for non-performance (on-the-job training, rather than penalties,
may be the right response). The weight of evidence from all countries shows that
the lack of credible consequences turns serious accountability reforms into
bureaucratic formality.
While performance pay schemes may or may not be appropriate, meaningful
performance incentives are a must. First and foremost, the promotion system must
reward performance and penalize (and correct) under-performance. Nothing
demoralizes good public servants and destroys performance more than
favouritism and patronage in recruitment and promotion. In addition, human
beings do not live by bread alone: non-monetary incentives can be very important,
especially among the professional ranks. These may include more challenging
tasks, influential assignments, public recognition, training opportunities and
professional rewards, among other things. In any case, informed, candid and
equitable performance assessment is the cornerstone of any incentive system.
6.6 Capacity building and training
Most training institutions are poorly funded and they lack necessary equipment,
audio-visual aids, case studies, training material, and funds for preparing new
material or for taking trainees to field visits in other states. However, confronting
only these deficiencies in physical infrastructure and software will not be enough.
One has to examine the broader issues that marginalise the impact of training, and
then evolve a strategy.
Many central departments and state governments tend to look at training as stand-
alone activities to be performed at the residential training institutions. However,
training should be seen as an integral part of personnel management, and should
be linked to recruitment, career and promotional avenues, human resource
development, and general environment of governmental functioning. Without
improvement in these related sectors, the efficacy of training would be limited.
For instance, trainees may learn new skills but the environment in which they
function allows them no time nor provides any incentive to apply those skills. At
61

present most of the time the officials are busy doing routine jobs, such looking
after senior officers or politicians, filling useless formats, attending meetings, or
seeing endless files. One needs reforms in these sectors, such as in maintenance
and movement of files, where political will is not a constraint.
Therefore, ideally speaking, one should identify a few key departments or cadres,
whose performance is to be enhanced through training courses, and link
institutional training with other aspects of personnel management. This would
mean that one will do a baseline survey on the performance of that
department/cadre and will do surveys from time to time to examine how their
performance has changed through training. The report will obviously suggest
improvements in other aspects of personnel management, such as transfer and
placement policy, promotions, accountability, transparency, etc. It should also
suggest pragmatic changes that can be brought in the functioning of these
departments through training. Training Needs Assessment should follow this
report.
Blind faith in training as an instrument of change amounts to an almost wilful
mis-recognition of the malaise afflicting government. Training alone would not
affect attitudes rooted in entrenched, often corrupt, interests (such as private
practice for doctors). Nor would it reform institutional structures that were not
accountable or transparent. Arrogance in government servants is a result of both
– untrammelled powers and ignorance. Therefore pressure needs to be mounted
in favour of more transparent and accountable structures.
Just now training aims at improving knowledge and skills of the individuals.
However, organisational performance does not depend only on individual calibre.
Individual performance itself is shaped by organisational culture. Therefore
training should be geared and directly linked to improving the effectiveness of
the organisations. This will ensure that training is seen as a high priority item by
organisations. Knowledge gained by trainees would be directly utilised by the
organisation. Several changes will be necessitated if this policy objective is to be
realised. First, training needs assessment should be more group oriented, should
involve the top management, and should pinpoint other deficiencies of the
organisation in implementation, which may relate to policy, procedure, man-
management or organisational culture. Second, the shift in objectives would
imply that all levels are trained within a given period. Third, this will lead to
preparation of a long-term training plan as a component of HRD. Fourth, training
should include on the job training, short workshops, orientation courses and visits
to places where excellent work has been done by previously trained people. Fifth,
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trainees should be a mix of civil servants, politicians, NGOs, etc. at least in some
courses so that harmonious relations develop between different groups of people
involved in development.
Staff posted at the training institutions should be not only excellent teachers but
should have done well in the field too, so that they carry credibility. This would
happen only when career as trainer is seen as bringing long term personal and
professional benefits, and when adequate incentives are given to good officers to
join the training institutions. The officers and staff posted to research and training
assignments should be given suitable honorarium and free accommodation etc. as
an incentive to attract good talent. Donors should use the trainers in developing
project proposals, or for preparing case studies, or for tracking progress.
Opportunities should be available to them for enhancing their own knowledge
and training skills. Training institutions must recruit at least a part of their staff
on contract from the open market who can bring with them new ideas and new
culture. They may also take experienced people from recognised NGOs or from
government on a fixed contract. Since these people know that they have to seek
a fresh job after a few years, they cannot afford to stagnate. However, the new
approach and policy will work only if all concerned, state government at the
highest levels give full backing. In the absence of the desire to locate the best, it
is feared that these contract jobs may be filled up with retired and useless people.
Action on some of the new ideas can begin easily. For instance, preparing case
material and documenting success stories will not only improve the training
content, but it will also create an atmosphere of optimism that something positive
is being done through administration. If this material is prepared by senior
officers, or even by professionals with full sense of ownership by officers, it will
also inculcate positive values amongst them, so necessary to fight against
cynicism that is all pervasive in government today.
Training institutions should also create short to medium term fellowships for
serving officers, who could come to such institutions for pursuing studies in their
chosen field and write a monograph.
6.7 Improve Budgetary Procedures
Despite poor allocations it is ironic that some ministries such as Health and
Family Welfare, Tribal Affairs and some States such as Bihar, Orissa and
Jharkhand are unable to spend even the meagre funds that are allotted to them.
As an example, Ministry of Tribal Affairs (MOTA) was allotted ₹32 billion in
2009-10 but could spend only ₹20 billion. Non-receipt of adequate number of
complete proposals in accordance with the scheme guidelines from the State
63

governments, non-receipt of utilization certificates and lack of physical progress


by State governments, non-filling of vacant posts, austerity measures, non-
receipts of bills from the suppliers, etc. have been cited by the ministry as the
reasons for the surrender of funds. MOTA should improve its monitoring
capabilities over timely expenditure of its budget.
To a Rajya Sabha unstarred question no 1438, answered on 24 August 2007, the
Minister for Health and Family Welfare admitted that ‘data on the extent of
utilization of funds by States reveals that of the 18 States having weak public
health indicators/weak infrastructure, identified for special attention under the
NRHM, eight States have utilized more than 50 percent of allocated funds while
others have utilized funds of a lower order.’ In FY 2008–09, Tamil Nadu and
Gujarat spent 94 and 92 percent of total health funds available (centre and State)
respectively, West Bengal and Maharashtra on the other hand, were low spenders
with expenditures of only 54 and 45 percent respectively in the same period
(Accountability Initiative 2011).
Many state governments, especially the poor ones, are neither able to draw their
entitled funds from GOI, nor are able to release these to the districts/villages in
time, with the result that GOI is often constrained to divert the unclaimed funds
to better performing states. The reason for poor performance by Bihar, Orissa,
UP, and Assam is often due to the widespread shortage of staff at all levels that
adversely affects implementation and supervision of programmes. Among the
states, the record of Bihar is atrocious in using central funds. In the Accelerated
Rural Water Supply Programme alone, it lost about ₹5.40 billion of Central
assistance during 1994-2005. Even salaries were not paid on time in Bihar in pre-
Nitish era. An evaluation of ICDS in Bihar in 2007 by Unicef showed that only
less than 10% of grassroot workers received honorarium regularly, most receive
it only twice in a year rather than monthly (UNICEF 2007). Although the overall
picture of utilization of CSS funds in Bihar has considerably improved, it is still
dismal in NREGA because of shortage of technical staff at the block and village
level.
Another study by UNICEF showed that only 18% of officials in Jharkhand
working at the grassroots level are paid their salaries in time. In FY 2014-15,
Jharkhand spent only 40 per cent of its total approved budget of NHM, down
from 61 per cent in FY 2013-14 (AI Feb 2016, Budget briefs, volume 6, Issue
5).
64

The Aide Memoire to the Twenty Second Joint Review Mission on Sarva Shiksha
Abhiyan (SSA, elementary education programme) in December, 2015 had the
following remarks on utilisation of funds.
Delays often occur in release of funds for SSA at various levels. For
example, in Arunachal Pradesh, payment of salary of teachers is made
every two or three months instead of every month. In Maharashtra,
payment for textbooks has not been made for over five months and district
offices are borrowing funds from local bodies to pay teachers’ salaries. The
delay in flow of funds is primarily due to two main causes: (a)
documentation required for releases by the GOI; and (b) ways and means
position of States. The existing manual accounting system at sub-district
level (particularly in schools) with only a cashbook, cannot provide annual
accounts in prescribed format in time. This leads to delay by the States in
submitting prescribed documents to MHRD for releases.
There is also delay in release of State share. The delay may be seen in the
perspective of thin State resources, with grants released in September being
50% of the annual grant. Some States may find it difficult to release their
share of six months in one instalment. This situation is particularly serious
for the North-East States, which receive 90% grants for SSA, as their own
budget largely depends on devolution of resources from the GOI.
Funds allocated to the departments in the State budgets are not released during
the year in an orderly manner and that far too many references have to be made
to the Finance Department (FD) for prior approval for release of funds on ways
and means considerations. The same is found to be true in respect of release of
funds to ZPs. Large funds are released at the end of the financial year resulting in
many irregularities in booking the expenditure.
It is also observed that the contractual staff in centrally sponsored schemes, such
as SSA, ICDS and NHM do not receive their emoluments regularly. For instance,
39 per cent of contract teachers received their monthly salaries with a delay of 3
months and more.
Table 11: Delay in transferring monthly salaries for contract teachers
Type Mean Salary Delay in months 2015-16
No Delay 1 2 3 4 or more
Head Master 43,034 94% 3% 2% 1% 1%
65

Regular 35,797 96% 2% 1% 0% 0%


Contract and Others 12,590 23% 13% 21% 39% 4%
Source: Accountability Initiative Fund Tracking Survey (PAISA), December
2015
Empirical studies are needed to suggest what changes are needed in financial
procedures at the state level so that utilization of funds improves, timely payments
are made to the staff, and utilization reports are sent to GOI in time without delay.
GOI’s own studies show that even electronic transfer takes months with the result
that in Mid-Day Meals programme ground staff such as cooks and helpers are not
paid for months, FCI35 withholds supply of grain, and mid-day meals are served
only for 60-70% working days in some states. Similar delays take place in supply
of text books in SSA, filling up of vacancies, especially in the remote and tribal
areas, capital works, funds for maintenance, etc. In addition, there are several
schemes implemented by the states themselves using their own funds for different
development related purposes. As evidence suggest, these schemes also face the
same challenges of poor and weak implementation due to capacity constraints
and delays in fund transfers from state to district and lower levels of
implementation.
Reasons for poor utilization of central funds by the States are many. Some of the
common ones that need action primarily at GOI level are systemic bottlenecks,
such as:
- Delay in the flow of funds (at various stages)
- Rigid conditions of Centrally Sponsored Schemes, preventing the
government staff from addressing all local needs, thus, leading to poor
expenditure
- Insufficient monitoring at the senior level of reasons for delay, resulting in
slow remedial action to cut down red tape.
- Delay in the supply of goods such as medicines, foodgrains, etc.

In addition, many factors leading to delays require reforms at the level of State
governments. These are:

35
Food Corporation of India, a government parastatal that procures and distributes foodgrains
66

- States are not able to contribute counterpart funds because of fiscal


constraints
- Long process of identification of potential beneficiaries under various
schemes (e.g. beneficiaries only from poor families, or SC/ST
communities, etc.)
- Capital expenditure (such as construction of schools) requires preparation
of estimates and floating of tenders, which takes time
- Often estimates need to be sanctioned by a competent authority who is not
locally available, and files travel up and down; there is insufficient
delegation
- Poor budgetary allocation for support services, such as travel, telephones,
which render supervision ineffective
- Government machinery is used to working in a sequential order, whereas
quick completion of projects requires undertaking several activities
concurrently
- Inadequate delegation of power to District/Sub-District level government
staff with regard to spending money
- Poor coordination between the Line Departments and PRIs36
- Difficulty in decision-making in the Elected Local Bodies due to political
differences
- Lack of adequate number of staff to implement schemes
- Funds received from GOI for MDG related programmes are diverted by
the States to some other sector
Release of budget is neither certain nor timely. The budget cycle is too short for
full utilization of funds for capital works. Expenditure budget should be valid for
two to five years, so that capital expenditure can be completed without surrender
of funds. Similarly for centrally sponsored schemes, approval of the State
legislature should not be necessary every year for using central funds that are
transferred to the State consolidated fund for continuing schemes. In Singapore,
expenditure budget is valid for five years, and departments are free to exceed or
delay their annual allocation without any reference to Parliament. The need to
reform financial procedures is more urgent now because of the changes in the

36
Panchayati Raj Institutions, which are elected local bodies
67

pattern of fund flow from GOI since March 2014, as central funds are no longer
passed on to state societies and agencies as before.
In India, there is ex-ante rather than ex-post control of expenditure by line
agencies through the institution of financial advisors in each department who
report both to their own departments and to the Ministry of Finance; and the
performance budgeting system for reporting of outputs and outcomes is divorced
from financial reporting and budget preparation (World Bank 2000). Given
departmental allocations, operational efficiency and effectiveness crucially
requires accountability. This encompasses (i) fixing individual responsibility for
delivery of defined service outputs; (ii) personnel policies linked to performance,
with performance being measured by actual outputs in relation to prescribed
service delivery standards and preset targets; (iii) independent internal and
external, financial and performance auditing with mechanisms for effective
corrective or disciplinary action based on audit findings; and (iv) ‘customer’
satisfaction surveys. Transparency in financial management requires publication
of programme performance reports and feedback mechanisms to elicit client
feedback on the quality of services provided. Aside from internal and external
auditing, the institutional framework for service delivery in India meets none of
these standards, and sanctions linked to poor performance, or programme
modifications based on client feedback, are sporadic, at best.
In any case, all departments and ministries should publish in their Annual Report
action taken on CAG’s findings in the last two years. The trouble arises because
the precepts of financial discipline have not been internalized in the
administrative departments and have to be imposed externally from outside by
FD. It is high time this system is changed. The State governments should adopt,
for this purpose, the system of financial advisors obtaining in the Government of
India. Under this system, the financial advisor is responsible to the main finance
only on certain broad budgetary matters. For all other matters, he works under the
control of the administrative secretary (Saxena 2011).

6.8 Gender issues


The progress in achieving gender equality and women’s empowerment has been
unsatisfactory so far. Rural women used to transplant and harvest paddy, which
is now being done by machines, throwing millions of women out of work. Mixed
forests in central India have been replaced by plantations thus vastly reducing
gathering of Minor Forest Products that women used to do before to meet their
subsistence needs. Despite women’s vital contribution to agriculture, they lack
control and ownership over productive assets (land, livestock, fisheries,
68

technologies, credit, finance, markets etc.), face biases due to socio-cultural


practices, and experience gender differentials in agricultural wages. Ownership
of land is concentrated mostly in male hands in our patriarchal society. Not more
than 2 per cent land is exclusively in women’s names. Although Hindu
Succession Act has been amended in 2005 giving equal rights to women in
inheritance, yet none of the state governments have taken the new law seriously.
Neither the Department of Land Resources in GOI nor the Ministry of Women &
Child Development has issued a single circular asking states to implement the
law.
The result is that anti-women laws and practices merrily continue in the states.
For instance, Section 46(1) of the Rajasthan Tenancy Act places women at par
with lunatics and idiots. The Department of Land Resources in the Ministry of
Rural Development should launch a campaign to correct revenue records and
ensure that women’s land ownership rights are properly recorded by the states
with intimation to women. Monitorable targets should be set for the district
collectors to ensure timely implementation of law. It may be prudent to make
these rights inalienable and non-transferable for the first twenty years on the
pattern of pattas under the Forest Rights Act. Further, MWCD should prepare and
circulate pamphlets to Members of Parliament that enable them raising concerns
about women’s rights to land and property in Parliament.

6.9 Service Delivery Acts


Some states such as MP and Bihar have already taken a lead in assuring services
to the citizens in a timebound manner. The aim of this initiative should be to make
all government services available in each locality and to ensure efficiency,
transparency, affordability and reliability of such services. However, it should be
remembered that mere computerisation of forms and data will not be enough to
achieve the objective; it would need redesigning the government processes
keeping the citizen at the centre, providing for the enablement of citizens,
businesses, producers and consumers, and replacing the old mistrust and control
regime of the colonial past. To illustrate, an applicant for old age pension has to
apply in the prescribed form to the Block Development Officer (BDO), enclosing
an income certificate and a residence certificate, both issued by the village officer.
It does not help the applicant that both these certificates have been computerized
as the applicant still has to go to the village office to collect these before he or she
can submit the application to the BDO. There is again further verification of the
claim by the BDO office before the file is sent to the social security/welfare
department. Inspite of the application of IT, the applicant has to visit at least three
69

departments – revenue, development and social security. The process can be


simplified if one single agency in any of these departments is made responsible
for receiving and sanctioning/ rejecting the application. The agency should collect
the clearances from other departments through the IT network without the
applicant having to run around. Only such an integration of processes, focused on
the delivery of each identified service, can benefit the common people. It may be
recalled that Singapore, in order to quickly address citizens’ grievances, follows
a ‘No Wrong Door’ policy. That is, if an agency receives application on an issue
which is not under its charge, it must redirect the application to the right agency
and ensure that the latter agency responds to the applicant; and if the application
involves more than one agency, the agency receiving the application should
coordinate a single consolidated response.
6.9.1 Citizen’s Charter
All talk of improving performance is meaningless unless a bottom line of
minimum acceptable standard of performance is stipulated. This has to be at two
levels viz. organisational and individual. It is imperative that each Ministry/
Department of the central and state governments and all departments and agencies
under the district administration, have a well defined and spelt out criteria by
which performance of their functionaries can be evaluated. For example the
Railways/ Airlines promise running of trains/planes as per the announced
schedule. Non-adherence to this should entail adequate compensation for non-
delivery of promised service. This concept could also be extended to other service
sectors, such as urban bodies, Telecommunications, and Post Offices.
Citizens’ charters are one vehicle to empower the public in their dealings with
service providers. The Charter is essentially a statement on the part of government
department on the levels of services which the citizen is entitled to, and which it
is willing to guarantee to him. It is important, however, that such charters be
developed in consultation with major stakeholders and widely disseminated.
NGOs can also play a vital role in collecting raw data, transforming it into usable
information, and disseminating it to a wider audience. One model charter is that
developed by the Greater Mumbai Municipal Corporation (BMC) in June 1999,
with assistance from an NGO, Praja.
With a view to make service delivery people-oriented and client centred, sub-
national units should introduce a citizens’ charter on a pilot basis for such offices
that has a public interface, clarifying citizens’ entitlement to timely delivery of
public services. The citizens’ charter should clearly define the standard for the
services being rendered. It will also specify the remedial mechanisms available
70

to the citizen. For example, the Singapore Police Force pledged to answer
emergency calls within 10 seconds at least 90 per cent of the time, to arrive at
urgent incident sites within 15 minutes and non-urgent ones within 30 minutes at
least 85 per cent of the time, to respond to letters from the public within five
working days at least 90 per cent of the time, and to update victims of crime on
the outcome of cases within 28 days at least 90 per cent of the time.
Many countries in the world have used concepts like the citizen’s charter or
service delivery agreements to attempt a prior specification of the service to be
delivered. This ensures that the people who avail of services know what they can
expect in terms of the quality and quantity of services. Therefore each department
should select some pilot institution which would draw up citizen’s charters for
specific activities under them. This would begin with the identification and
selection of those activities, which impact the maximum number of people and
use the largest share of resources allocated to improving that activity. Gradually
the citizen’s charters would be extended to cover more and more activities under
each department or agency. Finally performance in Government can only be
enforced if non-performance invites due sanctions and penalties and good
performance comes in for recognition and reward. This calls for introduction of
some clear-cut changes in the management of the civil service in the State. The
people cannot be penalized for the inefficiency of the public service. Gradually
this will foster a more pronounced commitment to act in accordance with the
value and ethics of the civil service.
Most government offices present a shoddy, dusty and neglected look. From the
moment a citizen enters a government office, he is put off by its appearance.
Working in such environment adversely affects the efficiency, productivity and
motivation of the staff. Therefore adequate maintenance budget should be
provided, and HODs should compete with each other in proper maintenance of
the office premises.
With a view to make government functioning people-oriented and client
centred, the selected department should take the following steps:
• Introduction of a citizens’ charter for each office that has a public interface,
clarifying citizens entitlement to timely delivery of public services. The
citizens’ charter thus issued should clearly define the standard for the
services being rendered. It will also specify the remedial mechanisms
available to the citizen.
• After promulgating citizen’s civil charters the departments should ensure
that the necessary changes have also been introduced in every aspect of the
71

functioning of the department and at every level to conform to the


standards set in demand of these charters.
All employees, including the senior ones, should wear name tags while on duty
in their offices. There should be computerised attendance system to ensure that
everyone attends office on time.
There should be periodical exit polls of all government offices which have large
interface with public. Some of the questions could be:
How long did it take to have his work attended to? Did he receive courteous and
helpful treatment? Was he asked to pay any bribe? Etc.
During introduction of citizens’ charters, it should be noted that merely notifying
citizen’s charters should not be an end in itself. Each department should organise
large-scale capacity building programmes to bring in attitudinal change in their
employees. Officials should interface with public on at least one fixed day in
addition to routine interaction, so that a system is devised for ensuring a speedy
disposal of grievances at all levels of governance.
The Central Government has taken an initiative to get Citizen’s Charters framed
by various Ministries/Departments/Organizations. The Centre has framed 61 such
Charters and six states/UTs have framed about 93. Some state governments have
issued citizens charters under pressure from the donors, but without any
commitment to reforms. As the example of UP given in the box shows, such
charters and transparency GOs remain only on paper and are not taken seriously
in the absence of constant review and monitoring of such practices by the senior
departmental heads.
However, nothing much has changed since the issuing of the GO regarding the
Charters. Both the political and administrative will has been lacking. Not much
thought has been given as to what services can be guaranteed to the citizen, and
what would happen if these services are not provided. It is obvious that its
implementation demands several preconditions:
• The efficiency of the system should improve so that it is practically
possible to enforce the Charter in most cases
• The personnel concerned must have faith in the charter and work to the
best of their capacity to fulfil the assurance given by government to its
citizens
• Its working is monitored from time to time by the seniors in government
and civil society
72

• There is adequate compensation to the citizen in those exceptional cases


where the charter was breached.
In most states these conditions are not being met. Hence government should give
more attention to improving operational efficiency before declaring a charter,
otherwise it is likely to remain an exercise in tokenism.
6.10 Towards responsive and citizen-friendly administration
Over the decades, after having inherited very substantial powers from its colonial
legacy, the State apparatus has steadily amassed functions – and more powers
often in the name of the poor. The new developmental State has been bestowed a
vast number of new responsibilities and vastly extended financial powers.
Although the exercise of these powers is not untrammelled – there are a number
of checks and balances imposed by the democratic system -- the labyrinthine and
obscure processes through which decisions are taken, over-regulation in many
spheres of public life, the weakness of democratic institutions, and the sheer
monopoly which vests with the State, creates sufficient ground for arbitrary
exercise of this power. This has led to two very major problems in the governance
structures, inefficiency and corruption.
Over-regulation is both a cause and an effect of bloated public employment and
the single surest route to corruption. In the scarcity-ridden context of
development in a poor society, the executive (both political and bureaucratic)
amass large monopolistic and discretionary powers for the apportioning of
resources. This results in ‘rent seeking’ behaviour. With a view to prevent rent
seeking, more rules and regulations are prescribed, which may further result in
delays, inefficiencies and corruption. Often rules on the same subject issued at
different times contradict each other, thus facilitating subjective interpretation
(‘show me the face and I will show you the rule’). Thus a vicious circle is set up,
non-compliance of rules leads to more rules ending up in a situation where
individual politicians and bureaucrats may with the best of intention find
themselves helpless in changing the ‘system’, and ultimately finds it more
convenient to join the system rather than fight it. Consequently, regulatory
simplification and the resulting contraction of public employment, although
complex and politically difficult, could raise economic efficiency, reduce
corruption and — unlike in Africa —also produce substantial fiscal savings at the
same time.
73

6.11 Inadequate number of government staff


Perverse incentives are not the only factor undermining the effectiveness of the
bureaucracy. The total number of government staff in India is woefully
inadequate when compared to other middle income countries. Including all
categories, India has only 1.3 regular government servants per 100 of population
as against 3.3 in Vietnam and 4.5 in Sri Lanka (World Bank, undated). Shortage
of staff, especially in poorer states (see Table 13), results in weak capacity and
inadequate utilization of plan funds provided by GOI through CSS.
If one compares India with Vietnam, a country with similar per capita income and
population density, the contrast both in number of government staff and their
salaries becomes obvious. India has less than half the number when compared
with Vietnam per 100 of population but salaries are almost four times! While on
a visit to Vietnam in May 2015 I learnt that a teacher for elementary schools gets
about 100 $ per month (₹6,600 per month), whereas in India the starting salary
for a regular teacher is more than 30,000 Rs, thanks to the VII Pay Commission.
Pay increases in India are not intended to serve as a reward for increased
productivity, but are given instead to gain support from the unions and to
eliminate the threat of labour unrest. Moreover government servants manage
election booths, and no political party can afford their collective anger.
Second, the number of regular government servants has been going down over
the years, as Table 12 shows.
Table 1237: Total government employment in India ('000)
Year Central Govt State Govt Quasi Govt. Local Grand
Bodies total
Central State
2000-01 3261 7425 3291 2901 2261 19138
2011-12 2520 7184 3449 2349 2107 17609

The Planning Commission (2009) evaluated quantity and quality of service


delivery in rural public health facilities under NRHM in four States, U.P., Bihar,
Rajasthan and AP. Its finding was that the human resource gap remains the
singular most important challenge in strengthening the public health system and

37
Data in Table 12 and 14 is based on the reports of Directorate General Employment and Training,
Ministry of Labour and Employment, available at mospi.nic.in/Mospi_New/upload/SYB2015/CH-
32.../Table-32.1.XLS
74

meeting the NRHM goals. Medical professionals available in the country,


especially specialists, are not joining the public services. Some specialities, such
as anaesthesia and psychiatry, have very few professionals being produced in the
country. Nursing colleges are far short of requirements, and ANM training centres
have been non-functional for about a decade in several States, leading to non-
availability of staff nurses and ANMs for recruitment. Paramedical personnel
such as laboratory technicians are again too few, or not trained and registered as
per standards. Few of the cadres have an orientation or training in public health
planning and management.
Moreover, the skill-mix of bureaucracy is also skewed. For instance, in most
States in India, about 30 per cent of all government employees are support staff
unrelated to public service – drivers, peons and clerks. Key public services –
education, healthcare38, police and judiciary are starved of regular employees,
whereas many wings are overstaffed with Group C & D support staff that have
mostly become irrelevant in view of computerisation and changing techniques of
information management. For instance, of the total 2.5 million regular employees
under the Central government 63 per cent were holding Group ‘C’ posts and 26
per cent were in Group ‘D’ posts. About 8 per cent were holding Group ‘B’ posts
whereas employees holding Group A’ posts, who are to provide leadership, were
only about 3 per cent39. Though many group C staff such as nurses and constables
are providing meaningful service, there are still many clerks who just maintain
files (and whose exact number is not known) whose services might be done away
with. The same is true of peons, orderlies, and drivers in the Group D category.
A World Bank report (Beschel 2003) described the situation as:
A given section officer (the lowest working level officer in the
secretariat) can have from 5 to 10 assistants, consisting of upper division
clerks, lower division clerks, and peons. Many are being made
redundant through advances in information technology, yet continue to
draw their salaries. Ironically, this excessive logistical tail often exists
alongside significant shortages of staff with skills in information
technology, financial management, and policy analysis. In many states,
there is also often a dearth of staff in critical front-line positions such as

38
In the last ten years there has been a lot of expansion of contract staff in education and health, such
as para-teachers, ASHA and Anganwadi workers, because of the centrally sponsored schemes funded
by GOI. Their future continuity is however not assured. Their number is not included in Table 12, as
they are not regular government staff.
39
budget.nic.in/publications/ccge/ccge-2009.pdf
75

primary school teachers, police, and rural health workers — yet differing
cadre rules and the tradition of a ‘job for life’ can make it very difficult
to let go of staff or to transfer them from surplus areas into those where
there is more demand.
Singapore also had 67 per cent Group C&D staff in 1970 but by 2008 it was
reduced to just 20 per cent, whereas the share of Group A staff increased from
five to 52% (Saxena 2011).
Table 13: Civil Service Strength by Divisional Status 1970-2008 (as % of the
total)
Singapore
Divisio 1970 2008 India (central
n government only)
I 5.3 52.1 3
II 27.3 28.2 8
III 29.7 14.1 63
IV 37.7 5.6 26
Total 54,195 67,814 2.5 million

Efforts should therefore be made to identify surplus support staff, set up an


effective re-deployment plan and devise a liberal system for exit. There should
be incentives for clerks and class IV staff to become teachers and constables.
Lastly, it is instructive to look at inter-state availability of regular government
employees. Table 14 compares the number of state government employees
(including state PSUs and local bodies only) in Bihar with Tamil Nadu.
Table 14: Number of state government employees
Tamil
Nadu Bihar
Population 2011 (million) 72 104
Total number of state Govt. servants (000) 1041 253
No of govt servants per 1000 population 14.4 2.4
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Thus as compared to the global average of more than 30, Bihar has only 2.4
employees per thousand population. No wonder all schemes are in disarray there!
State-wise position is given below.
Poor revenues do not permit government to substantially enhance the number of
useful government staff, given their high salaries. Therefore there is no escape
from recruiting ill-paid contractual employees, leading to a bizarre situation that
a para teacher gets far less than a regular peon or driver. It also results in skewed
expenditure, for instance of the total expenditure on elementary education more
than 90% is on salaries only, whereas at least thirty percent should be on text
books, maintenance of physical infrastructure, training, transport, sports, and
school uniform. In some states, such as West Bengal, officers do not travel to the
field due to the fear that their travel claims would not be approved in time due to
budget constraints. This results in lack of supervision and coordination.
The control over social sector flagship programmes under the new Modi
Government in the coming years is likely to be transferred to the states, where
politicians would find demand from contractual employees to be regularized
difficult to resist. The extra fiscal burden due to the Seventh Pay Commission
recommendations would mean that further expansion of line staff would be halted
at the cost of satisfactory delivery of social sector programmes. Budget cuts on
non-wage component (medicines, text books, repair of buildings) have already
reduced efficiency of staff in many programmes.
To sum up, India is awfully short of government servants when compared to the
world average - it is 1.4 per cent of the population in India whereas in East Europe
it is 6 per cent, and in Asia it is 3 per cent. The skill-mix is also wrong in our
country. So, people who are needed in the line positions are missing while people
who are not needed in support positions are too many. Therefore, support
functionaries need to be reduced and line functionaries need to be increased. At
the same time tax collection needs to improve if further privatisation of essential
services (which harms the poor) is to be avoided.

6.12 Personnel issues


Appointments and transfers are two well-known areas where the evolution of firm
criteria can easily be circumvented in the name of administrative efficacy. Even
if the fiscal climate does not allow fresh recruitment on a large scale, a game of
musical chairs through transfers can always bring in huge rentals to corrupt
officials and politicians. As tenures shorten both efficiency and accountability
suffer. In UP the average tenure of an IAS officer in the last five years is said to
77

be as low as six months. In the IPS it is even lower, leading to a wisecrack that 'if
we are posted for weeks all we can do is to collect our weekly bribes’.
According to a report published in the Times of India dated 1st January 201440,
some of the frequently transferred officers include 1982 batch Himachal Pradesh
cadre officer Vineet Chaudhary (transferred 52 times in 31 years), Assam-
Meghalaya cadre officer Winston Mark Simon Pariat (50 times in 36 years),
Kusumjit Sidhu of the Punjab cadre (46 transfers), and Haryana cadre officer
Keshni Anand Arora (45 transfers), in addition to the much talked about Ashok
Khemka of Haryana cadre (45 transfers in 23 years). Khemka became very well
-known publicly as a result of his exposure of corruption in departments in which
he was posted (Vaishnav and Khosla 2016).
We quote below from a study41 on the IAS:
Whenever a new government is elected, the first thing it does is to transfer
the IAS and IPS officers. For example, the BJP-BSP coalition government
headed by Mayawati in Uttar Pradesh in 1995 transferred 600 officers in
her 135-day tenure. Taking cognizance of this shocking state of affairs, the
High Court of Uttar Pradesh noted that “all governments in the last decade
had been responsible for making transfers and postings a lucrative industry
and that government servant were being treated like shuttle-cocks to be
banged and battered around frequently on political, caste, monetary and
other extraneous considerations”. The Court suggested setting up of a high-
level committee to oversee transfers and postings. The state government
promptly went in appeal and got a stay from a division bench of the Court.
It is abundantly clear that there is no political will to make any change in
the present system.
During the ICS days, an officer had a fixed posting of three years as district
collector/deputy commissioner and it is said that the commissioner was never
transferred without expressing his desire to do so.
Transfers have been used as instruments of reward and punishment, there is no
transparency, and in the public mind transfer after a short stay is categorised as a
stigma. Officers who are victimised are not in a position to defend themselves.
Internally the system does not call for any reaction to explain a one’s conduct,

40
http://timesofindia.indiatimes.com/india/68-of-IAS-officers-have-average-tenures-of-18-months-or-
less/articleshow/28203370.cms
41
Vishal Gupta: Indian Administrative Service (IAS) and Crony Capitalism: A Review Paper W.P.
No. 2015-03-07 March 2015 IIMA
78

while externally public servants are debarred from going public to defend
themselves.
In many state governments, secretariat departments (at the behest of their
Ministers) have assumed powers, which were earlier delegated to heads of
departments, to transfer personnel within the district. This is contrary to the role
that government should play. Government should deal with transfers of only
heads of departments (HODs) and Addl HODs, or at the most of Class I officers.
After all government’s role is policy making and objective impact assessment,
and to ensure that the transfer policy as laid down is being followed by senior
people in the field. If government itself violates norms for fair play, what moral
right will it have to enforce discipline in its workforce?
Frequent transfers and limited tenures are playing havoc with public
organisations. With every quick change in the head of the office, a funereal air is
noticeable and down the line the respect for authority is whittled away. Rapid
changes erode the mandate of the Department or Organisation. There are two
other consequences. The incumbent himself is not sure of how long he will stay.
This affects his attention to detail, capacity to master the situation and begin
thinking, even incrementally, about how to change things and improve them.
Since he is not too sure of what has to be done, the preference is to opt for
whatever was tried out in the past and seemed to have sufficed. In the process,
changes which may have been initiated by a predecessor are either disregarded or
thought of as being disruptionist. Most public organisations do not possess the
'memory' which will absorb change and continue it even under adverse
circumstances. Second, there are even more deleterious consequences down the
line. Other staff in the organisation do not extend the commitment so necessary
for change to be institutionalised. Their assessment is that everything new is only
temporary, and that it is different from the ordinary way of doing things represents
the foibles, or the prejudices (at worst) of the incumbent, to be forgotten
immediately on the departure of the officer concerned. An attenuated hierarchy,
which distorts intent and initiative, further impels the status quo.
The topic of reducing political interference is a sensitive one, for the right to
transfer government servants is clearly vested within the political leadership
under Article 310 of the Indian Constitution, which maintains that civil servants
serve at the "pleasure" of the ruling authorities. Yet few would disagree that this
power is often abused by both government servants and politicians - the former
in seeking prime postings, and the latter for a variety of legitimate and illegitimate
reasons. The prime concern of the political executive now is not to make policies
79

but to manipulate jobs and favourable postings for their constituents. Managing
service providers is the prime concern of politicians rather than improving service
provision. This means a high degree of centralisation at the level of the State
government and little accountability.
The Second Administrative Reforms Commission of 2008 recommended 42 that
all senior posts both in central and State governments should have a specified
tenure. The task of fixing tenures for various posts should be assigned to an
independent Civil Services Authority. This is already being done in GOI for
Secretaries in the Ministries of Home, Defence, and Finance, as well as for
Cabinet Secretary. However, none of the State Governments have made the
tenure of higher ranks of the civil services (e.g. Chief Secretary and Director
General of Police) stable, say for a fixed period of at least two years. This is
despite the Supreme Court’s specific direction43 of ensuring stable tenure for
senior positions in police and civil administration.
In January 2014 GOI amended the Indian Administrative Service (Cadre) Rules
1954, mandating that an officer in a cadre post would hold the office for a
minimum specified period and can be transferred before this only on the
recommendation of a Civil Services Board comprising the Chief Secretary as its
chairman, and other senior officers of equivalent rank as its members. Many State
governments44 have notified new Rules45 in tune with the GOI law, prescribing
the minimum tenure as two years for senior IAS officers, but cleverly keeping the
Chief Secretary outside the purview of these Rules. Thus the Chief Secretary will
continue to be at the mercy of the political bosses. This has made the GOI Rule
for steady tenure ineffective even for other State officials, as the practice in the
States is that after the chief minister decides on transfers (which may be before
the expiry of two years of tenure and purely based on political or monetary
considerations), the Chief Secretary and other members of the Civil Service
Board are made to sign their approval with a back date. GOI must insist that the

42
http://darpg.gov.in/darpgwebsite_cms/Document/file/Decision10.pdf, and
http://darpg.gov.in/darpgwebsite_cms/Document/file/decision15.pdf
43
In 2013, the Supreme Court of India directed both the central and the state governments to establish
civil service boards to manage the tenure, transfer, and posting of all officers in the All India Services.
Unfortunately, the order has been widely perceived as toothless, because very few states have heeded
the call to fix a minimum tenure of two years for civil servants (Vaishnav and Khosla 2016).
44
Andhra Pradesh, Chhattisgarh, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand,
Karnataka, and Uttarakhand
45
persmin.gov.in/DOPT/Acts_Rules/AIS_Rules/Revised_AIS_Rules_Vol_II_Updated_Upto_31Oct20
11/Revised_AIS_Rule_Vol_II_IAS_Rule_02.pdf
80

Chief Secretary and the DG (Police) have a stable tenure, so that they can then
act independently and objectively decide on the tenure of others through the
statutory Civil Services Boards.
It may also be mentioned here that many transfers are initiated at the request of
the officer her/himself, and this tendency will also get curbed with effective
implementation of new laws. The hankering after posts is linked quite often to
the 'trappings' of the post – free vehicles, house etc. It is clear that to a large extent
these are dictated by the nature of jobs and should also constitute an element in
determining how to categorize posts. One should follow the example of
Singapore where the salary package for government servants includes cash in
place of perks. No one is entitled there to subsidised housing or government
vehicle, and this increases transparency and accountability. One could begin this
practice in the Government of India with the retired government officers who are
re-employed in various sinecure jobs. They should just get salary but no staff cars
and State-subsidised bungalows in Lutyen's Delhi.
Rationalise transfers and postings - A good transfer policy should have several
objectives, such as;
• the need to curb the overall incidence of transfers
• eliminate ‘transfer industry’ and politicized transfers
• the policy should be seen as fair, objective, and leading to career
development
Several suggestions can be considered to reduce the menace of the ‘transfer
industry’.
• To begin with, DOPT should calculate the average tenure of important
officers every year in each State, and publicise this fact by putting it on the
website, so that political consensus is built up on the need for longer
tenures. There should be adequate publicity about who can transfer
officials at various levels in government. This will ensure that Ministers do
not meddle with the transfers of low level officials, such as class II officers.
• Powers of transfers of all class II officers should be with the HOD, and not
government. This will however not eliminate the menace of oral or
unsigned orders from Ministers to the HODs, but might reduce secretariat’s
interference in transfers.
• The maximum period of three years prescribed in government circulars
should be changed to five years for at least all such higher positions where
81

leadership qualities are important.


• For each cadre post, officer of the higher rank could also be posted. In other
words promotion should not always result in a transfer.
• Tamil Nadu has an effective system to ensure that doctors employed by the
government actually serve in rural areas, which other states may like to
study and incorporate in their policy.
At the same time it must be recognized that some posts would have more
attraction for the employees than others. These may be due to better location
where good schools or cheap government housing is available, more challenges,
the pull of private practice for doctors, or simply more opportunities to make
money. Except for the Indian Foreign Service, no other service categorises posts
according to its demand so as to ensure that everyone gets a fair chance to serve
on both important and difficult (such as in remote and tribal areas) assignments.
One should categorise posts in each department according to the nature of duties
and geographical location into A, B and C posts, and chart out the kind of mix
that should dictate the average officer’s span of career. In other words, if a doctor
has been in a grade C post for more than three years, he should be given the first
choice to move to grade A post. At least for Group A officers, one should be able
to know through websites that total transparency is being observed and whether
some ‘well connected’ officials have not been able to get 'plum' postings and
avoid difficult areas.
It is not correct to assume that there would be political resistance to the idea of
stability of tenure. Many Chief Ministers would welcome this proposal, as they
are often pressurised by their MLAs to resort to frequent transfers, and with a
change in procedure which is laid down by GOI, they would be able to resist the
pressure in a better manner. It may also be mentioned here that many transfers
are initiated at the request of the officer himself, and this tendency will also get
curbed with new Rules.
One progressive element introduced by some states relates to the computerised
counseling system based on transparent consultation with departments, with
decisions on transfer being related to incentives and objective criteria. Based on
the recognition that staff transfers in the past have been too frequent, and not
sufficiently based on merit criteria, it is important that transparent policies are
adopted, which increase employees’ morale and faith in professionalism.
It may be mentioned here that countries like Japan and Singapore do not pursue
the practice of annual transfers. If an employee is corrupt or inefficient, the traits
82

would get displayed wherever the employee is posted. What we require is


effective supervision and the prompt commencement of disciplinary action
against such employees instead of shifting them to another place.
One of the first steps in the reform of the bureaucracy by the government should
be an end to job extensions to civilian bureaucrats. This is an incentive to make
them malleable to the pressures of the party in power. It also enables dithering in
decision-making so that errors of commission are eliminated. This system of
rewards in the form of governorships, staff cars and State-subsidised bungalows
in Lutyen's Delhi must end46.
6.13 Lateral recruitment and entry
Civil servants should be exposed to professionals and experts on a continuous
basis. A civil servant in the states hardly meets people outside politicians, hapless
public, or his own peer group. None of them pose a challenge to his ignorance or
smugness. One of the ways to do it would be to earmark many posts in the
government to permit lateral entry of people from NGO/ professional institutions
at various levels to bring in a fresh outlook.
The Karnataka ARC, the Fifth Pay Commission and a number of expert
committees at the state level have recommended lateral entry into middle and
senior levels of senior civil service as a way of bringing in individuals with
specialized knowledge and experience from universities, research institutes, the
private sector and voluntary agencies. Issues of lateral recruitment are complex
and need to be examined in different contexts within the civil service. As a
general rule, scientific ministries such as Space or Atomic Energy are less
hierarchically organized and have resorted to lateral entry more liberally. The
central government, and the states to a lesser extent, follow the practice of
appointing reputed academics and experts in a particular field as members of the
Planning Commission or as secretaries of technical ministries. The recruitment
rules in central government permit lateral recruitment to technical positions of
advisers in the grade of Directors to Additional Secretaries in the Planning
Commission47 and in ministries like Railways, Telecommunications, Industry
and Petroleum. However, such recruitment accounts for small numbers and is not

46
Hindustan Times (New Delhi, India), April 19, 2016

47
In the last five years very few people of calibre have joined the Planning commission through this
route. Mostly retired civil servants have been appointed as consultants, and their contribution has been
marginal.
83

seen by the bureaucracy as a structural change in the hierarchy of functional and


generalist services. Selection to these isolated posts is typically done by
departmental committees with or without the involvement of Union Public
Service Commission. Some of these advisers may later be inducted into regular
panels of joint or additional secretaries. AP, Maharashtra, Karnataka and other
states provide for lateral entry of experts as advisers by contract appointment.
There are differing opinions regarding the extent to which the civil service will
benefit from the entry of outsiders. On the positive side, many maintain that
lateral recruitment practices will help to bring fresh ideas and skills into
government, and that it will also provide incentives for current civil servants to
perform better or risk being passed over for the prime postings. Yet a number of
factors have to be balanced against these advantages.
In December 2015, Minister of State for Personnel, Public Grievances, and
Pensions Jitendra Singh clarified that the present government has no plans to
pursue lateral entry into the IAS. If the past is any guide, future governments will
also move incrementally, if at all, on lateral entry given stiff resistance from
incumbent IAS officers.
The fear expressed by many is that it will increase patronage based appointments,
and people who would promote sectarian and personal interests of the Ministers
are likely to be appointed. If the quality of NGOs funded by the Ministry of Tribal
Affairs, or the Ministry of Social Justice and Empowerment is any indication,
such fears cannot be dismissed easily. Therefore the sequencing of reforms is
important.

6.14 Reducing Corruption


India’s failure to take appropriate structural, pre-emptive, corrective and punitive
action against corruption has led to a situation that India was ranked in 2015 at a
lowly 76th rank in the Corruption Perception Index out of the 168 countries
surveyed by Transparency International. As regards the institutions that are seen
as the most corrupt, it should come as no surprise that political parties, legislators,
the police, public officials and businessmen all scored poorly. High and
unaccounted election costs, and the need to accumulate illegitimate funds, have
further accentuated these tendencies, and bureaucracy has become a tool to
transfer resources from people to politicians. It is no surprise that a UP Minister
openly asked his staff to ‘steal a little, but don’t rob the people’.
What needs to be done?
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Reducing corruption is not easy, particularly once it becomes “part of the


system”. A multi-pronged approach encompasses most of the recommended
policies:
• Reducing opportunities for corruption by deregulation and privatization.
• Placing greater reliance on competition to ensure low prices and good
quality.
• Improving incentives for good performance and disincentives for corrupt
practices in government.
• Improving administrative procedures to reduce the opportunity for
corruption by increasing accountability, transparency and the role of
citizen’s voice.
• Strong punitive action against the corrupt, including immediate
compulsory retirement of officials whose record and reputation is tainted,
and prosecution against those whom there is evidence of corruption.
• Establishing Lokpal and strengthening of powers of the state Vigilance
Departments, Lok Ayukta and the Anti-Corruption branch of the state
police enabling them to effectively initiate and pursue investigations
independently of government direction.
• Guaranteed protection of civil servants who expose corrupt practices.
Governments should in each department institute annual awards for
recognition of the contribution made by such persons in exposing wrong-
doings in the government.
• Fast tracking of criminal cases against corrupt politicians and public
servants with confiscation of their properties and ill-gained wealth.
• People with criminal background should not be allowed to fight elections.
• Publishing paid news should be an electoral offence, and punishment must
be severe.
We suggest below a possible sequence of policy reforms that GOI could initiate
to curb corruption. Even for reforms that come later in the sequence, one would
have to initiate action in year one itself, but as it may involve persuading states,
it is likely that results would come later.

6.14.1 Suggested Reforms


Change Rules of Business to encourage Transparency -In the present system
it is difficult to fix responsibility for decisions, or for not taking decisions. The
85

term public interest is most abused today, as it is used to cover hidden and
malafide motives knowing fully well that the public is not in a position to
challenge the bonafides of decision-makers. It is here that a fundamental change
is required in the Rules of Business. It should be mentioned in each government
order the level at which decision has been taken. This is particularly important in
areas like procurement, licensing, contracting, allocation of land and natural
resources, where there is need for total transparency and open competition at all
stages.
Simplify laws and procedures – Many examples of archaic laws and rules that
need to be done away with were discussed in section 5.2. Simple and hassle free
procedures will not only promote economic activity but also reduce corruption
that has today become part of te system as ‘speed’ money. Therefore, in addition
to delineating the functions of politics and administration, it is important to do
away with unnecessary controls, reduce the powers of government, as well as
reduce their discretion and increase transparency at every level. A Committee
should be set up to identify specific laws and rules which hamper
entrepreneurship. A systematic review needs to be undertaken to review the areas
in which government must withdraw, albeit in a phased manner, and departments
which need to be wound up should be defined. On the whole, one should aim at
reducing face-to-face citizens’ contact with government, and rely more on
internet-based services.
Establish Lok Ayukt and Lokpal - Lokpal at GOI level should concentrate on
grand corruption and not be asked to look at petty corruption otherwise it will
lose focus, with a vicious bite at political corruption, the kind that was unearthed
in India during 2012-14 - the 2G scam, commonwealth games, etc.. It needs a
lean machinery so as to concentrate on grand corruption in federal government,
rather than petty corruption, which should be the headache of state-level
institutions, such as Lok Ayukta and Vigilance Departments. At the same time
the main investigative agencies – CBI, ED, State Vigilance – should all be freed
from direct government control.
More performance audits by CAG and Audit to enforce accountability -
Independent audits by the CAG are a major institutional mechanism to ensure
accountability of the executive. Yet, this admirable institution too has been unable
to curb mismanagement of expenditure. The CAG audit focuses mainly on
financial irregularities and while systems or performance appraisals are carried
out, these fall short of management audits and do not indicate how management
can be strengthened. Also, physical inspection is rarely undertaken. CAG should
86

involve social scientists and professional experts in auditing schemes and


programmes by physical verification of the stated works.
Andhra Pradesh went much further. It set up the Society for Social Audit,
Accountability and Transparency, an autonomous body insulated from
government interference. Over the years, contractors and middle men have been
eliminated. The Andhra Pradesh model is undoubtedly a success, with more than
3,200 social audits and more than 38,000 disciplinary cases brought against
officials involved with the jobs scheme. Hundreds have been suspended or
punished. Between 2010 and 2013, the team has been able to recover almost a
quarter of the $24m of irregularities detected48.
Make Civil Service e-governance friendly - ‘E-Government’ is the use of
Information and Communication Technologies (ICT) to transform government
by making it more accessible, effective and accountable. E-Government
includes: providing greater access to information in government; promoting
participation in government by enabling members of the public to interact with
government officials; making government more accountable by making its
operations more transparent and thus reducing opportunities for corruption; and
providing development opportunities, especially benefiting rural and traditionally
under-served communities. E-Governance is a wider term encompassing
continuous involvement of the citizen in the governance of the country through
an electronic interface. This implies participation of the citizen not only in policy-
making but also providing feedback on the impact of the policies through means
which are now made available by information technology. E-Government or the
accessibility of the information available with the government to the common
man as well as interacting with the government to obtain convenient services
electronically is often and usually a precursor of the more evolved stage of e-
governance.
E-Governance utilizes technology to accomplish reform by fostering
transparency, eliminating distance and other divides, and empowering people to
participate in the political processes that affect their lives. While e-Governance
has great potential to bring benefits to all citizens, knowledge about e-Governance
is mostly restricted to educated and professional groups. Most citizens are still
unaware of the potential benefits. Research on e-Seva in Andhra Pradesh
illustrates potential positive impacts. In case of e- Seva (earlier known as the
TWINS project) after the successful implementation of the pilot, private sector

48
ECD Working Paper Series ● No. 28 The Government Monitoring and Evaluation System in India:
A Work in Progress Santosh Mehrotra www.worldbank.org/ieg/ecd
87

partners were involved to give citizen-centric services. The government


supported the system with physical infrastructure and acted as the regulator. This
project has won the confidence of citizens and has made government more
creditable, responsive, efficient and transparent.
Bhoomi is a Government to Citizen project on land records implemented by
Karnataka. Studies show that 78 percent of users found the system easy to use;
66 percent could use kiosks without help. Seventy-nine percent of the people did
not have to meet any officials for their work except the kiosk operator in
comparison to the manual system, where 19 percent had to meet at least one
official and 61 percent had to meet 2 to 4 officials. Errors in documents were
reduced substantially from 64 percent to 8 percent. Cost of service to the farmers
came down considerably as 84 percent of the users had to make only one visit to
get service and there was an 85 percent improvement in the implementation of
mutation requests. The most important benefit was reduced levels of corruption
which came down from 66 percent to less than 3 percent. Overall the project
saved farmers ₹806 millions in bribes.
Recruit for a post and not for cadre - States have recruited a large number of
teachers, AWWs, ANMs, and other medical staff in the recent years. Procedure
for doing so varies from state to state, and some states are able to complete
recruitment with minimum corruption or complaints or litigation, because they
follow a fair and transparent procedure. If appointment is for a particular post
(and not to the cadre), postings to remote and difficult places does not pose a
problem. The centralized process of recruitment affects backward areas
adversely, as teachers selected through this process would resist appointments to
schools in remote areas. Therefore one should recruit staff for a particular post,
and make it non-transferable for at least five years.
Change the law relating to employment in NREGA - The stated objective of
the ambitious NREGA (Mahatma Gandhi National Rural Employment Guarantee
Scheme) is to do drought proofing and increase agricultural production on
marginal holdings, especially in semi-arid regions and uplands, but the
sustainability and productivity of assets created is never monitored with the result
that the programme is reduced to creating short term unproductive employment
with no focus on asset creation or soil and water conservation. Its impact on
agriculture may even be negative, as alleged by the Ministry of Agriculture. In
any case it makes no sense to run the programme in labour scarce districts of
Kerala, Punjab, Haryana, Himachal Pradesh, and the north-east. Therefore do not
provide funds for those districts where the average wage for unskilled workers is
88

25% more than the national minimum wage. On the other hand, the upper limit
of work guarantee of 100 days should be enhanced to 150 days per household in
the poorest 200 districts, with assets such as ponds, bunds, check dams, and
planted saplings being monitored at least for five years. Funds should be allocated
to the states on the basis of the number of rural poor in that state.
Link PDS with UID - The unique identity (UID) programme will certainly help
in eliminating duplicate and fake beneficiaries from the PDS rolls as no resident
can have a duplicate number since it is linked to their individual biometrics. The
Wadhwa Committee appointed by the Supreme Court in 2010-11 corroborated
the problem of duplicate cards, noting that the practice of “multiple ration cards
issued under a single name” is widespread nationally. In Delhi alone, RTI
petitions uncovered 901 ration cards issued in the name of one woman. Even in
Tamil Nadu, the problem of ghost ration cards exists which enables shopkeepers
to make illegal gains. High numbers of fake cards compel governments to make
verification norms for issuing ration cards more stringent. Some state governments
ask the applicants to provide various documents, such as the electoral roll number, a
copy of the electricity bill, and house rent bill to receive a ration card. This tends to
penalize poor and homeless families, and cuts off large numbers of BPL families who
lack necessary documents from accessing rations. As UID has been extended almost
to the entire population, it should be easier to monitor full coverage of cards to
each individual in a situation of universal coverage through PDS. Another
advantage with the UID is making PDS entitlements portable, as beneficiaries
would be able to withdraw their entitlements from any ration shop in the state, in
case their UID card allows them to do so. This would however require linking of
future FPS allocations to the shopkeeper to authenticated offtake by beneficiaries,
thus discouraging open market leakages by the shopkeeper and ensuring that only
genuine offtake by consumers is permitted. However, in most states (Tamil Nadu
is an exception) PDS is not universal but is targeted to the BPL households. Their
identification has to be done by administration, based on certain criteria, and the
UID would be of little help in such an exercise. Thus the problem of errors of
exclusion and inclusion would still remain, though no individual, however rich
and powerful he may be, would be able to obtain more than one card. On paper
the rich are to be excluded from the list of eligibility for PDS, but in practice the
technique of UID would not be able to prevent them from getting benefits of
schemes meant for the poor.
Reduce corruption in ICDS by doing away centralised procurement - The
basic nature of the programme should be changed from centre based to outreach
based, as the child under-three cannot walk to the centre and has to be approached
89

at his/her home. Another advantage of visiting homes is that the entire family, not
just the mothers, are sensitised and counselled. Government of India should
discourage the distribution of manufactured ‘ready-to-eat’ food, as it leads to
grand corruption at the Ministerial level, but unfortunately GOI has encouraged
such tendering by laying down the minimum nutritional norms for ‘take-home
rations’ (a permissible alternative to cooked meals for young children), including
micronutrient fortification, thus providing a dangerous foothold for food
manufacturers and contractors, who are constantly trying to invade child nutrition
programmes for profit making purposes.
ICDS should learn from the success of hot freshly cooked mid-day meals
programme that runs fairly well even in states not known for efficiency, whereas
the supply of packaged food in ICDS even in efficient states is not popular with
the children, besides being irregular and discouraging local participation. For
children below the age of three years, nutritious and carefully designed locally
prepared take-home rations based on locally procured food should be the
recommended option, but there could be centre specific variations. If fortified
milk powder is to be provided, it must be manufactured by a well known
manufacturer. Before inviting financial bids, states must invite technical bids in
a transparent manner so that unscrupulous contractors who get into the racket of
supplying packaged food through bribes are eliminated. Children can eat only
small quantities of food and therefore need fat rich food to obtain necessary
calories. In the absence of oil supplies, there is almost no fat content in the food
being given whereas for children below three, almost 40 per cent of their calorie
requirement should come from fats. This aspect gets totally unfulfilled in the
current SNP.
Increase the number of judges - Today, corruption is a low risk and high reward
activity. Our judicial system is slow, and very few are caught and punished in a
way that has a deterrent effect on others. We need to increase the number of
judges so that swift judgements can be pronounced in all cases of corruption.
Promote Generic Medicines - It is a known fact that most government doctors
are in league with the drug companies and prescribe expensive medicines with a
view to earn commissions. With the objective of curbing such practices and
improving access to affordable and quality generic medicines, the Government of
India proposed to open 3000 Jan Aushadhi (Peoples medicines) generic drug
outlets across the country in the 12th five year plan. However out of 164 Jan
Aushadhi Stores opened so far, 87 are presently functional
(http://janaushadhi.gov.in/faq.html). There is a need to provide affordable and
90

quality generic medicines to the people of the country especially to the weaker
section of the society, as it is critical to the provision of equitable, affordable and
quality healthcare. Irrational and overuse of medicines and insufficient research
and development also affects the access of medicine in the country.
Abolish private practice - Private practice among government doctors has been
a very old practice, continuing perhaps since the colonial days. In the past this
extra income was not shared with the seniors, and therefore the time allocated to
private practice was controlled as there was a fear that seniors would take the
doctor to task if it was discovered that government work was suffering. In the
1960’s and 1970’s some state governments tried to ban private practice but such
a ban was not effective and hence was lifted. It is likely that some state
government may still have an order banning private practice. It would be useful
to gather this information.
Market for posts in the medical profession exists for several reasons. First, the
potential for private practice varies from post to post, and district to district. It is
very high in districts having hospitals, private clinics and specialists, as it is in
these districts that a doctor, in addition to private practice, earns commissions for
referring cases to specialists and hospitals. He also earns commissions from the
Pharma companies on the medicines that he prescribes. Second, in this era of
rising corruption the power holders (this would include office assistant to
technical administrator to the IAS Secretary, MLAs and Minister) who can
influence in deciding postings would not let the doctor keep all the profits of his
practice to himself, and therefore force him to share this income with them. It is
therefore not in their interest to have a transparent and fair policy on postings.
Third, politicians in many states are all the time looking for opportunities which
increase their patronage, and therefore are very happy to find the existence of
differential in attractiveness of various posts within the cadre, as this leads doctors
to come to the politician and seek favours. Fourth, many doctors have opened
their private clinics in big cities, and therefore spend much of their outside their
place of posting. However, such absenteeism is ignored by the system when those
who matter (district head, MLA, Minister, etc.) are kept in good humour through
periodical (often monthly) payments. In places like Patna and Lucknow a large
number of such clinics are being run by government doctors who are supposedly
‘serving’ in rural districts. Such doctors do not even mind suspensions, because
they keep on getting two-thirds of their salary during the period of suspension,
and can concentrate on their ‘business’ while government takes its own time in
drawing the charge sheet etc. As procedures are dilatory, often the suspended
doctors are reinstated after a few years with no major punishment.
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Therefore make private practice by doctors a criminal offence.


As the data on performance (immunization and malnutrition are good examples)
on health indicators is fudged, there is no accountability for the district health
staff towards achieving results. Data on some other indicators (IMR, MMR) is
collected once in eight years and is never used to hold individual officers
accountable for slow decline of the index. This is despite the fact that too much
of data is collected in government at all levels, but only for upward submission
and hardly for analysis or taking corrective action.
Among the many challenges facing civil service in India, corruption remains one
of the most pervasive and the least confronted. Corruption and rent-seeking
shrink the range of opportunities available to the country as investments become
less productive, the cost of capital increases, and private investment, foreign
direct investment, and foreign aid all decline. Finally, corruption imposes the
heaviest burden on those who are economically the weakest. Even more
problematic is the failure to punish or weed out corrupt or incompetent officers.
The process of sanctioning malfeasance or mal-administration is fraught with
multiple review and appeals stages, resulting in years of delay and only a minority
of cases where criminal or administrative sanctions are imposed.49 As a result, the
average Indian civil servant has little to motivate him or her to better performance
beyond their innate professional ethic, and faces only a minute risk of punishment
for unlawful or inappropriate behavior. Corruption flourishes because of two
elements in our culture of governance. The first is the lack of transparency. We
must use extensively information technology to bring in transparency. Some
success has been achieved in states like Andhra Pradesh. The second element is
delay. This delay is also partly because of the tendency of our public servants not
to take decisions. While the corrupt are prepared to take even the most brazenly
illegal decisions propelled by the viagra of the right amount of bribe, many honest
public servants contribute only delay by not taking decisions at all. After all, we
had a Prime Minister who reportedly said that not taking a decision itself was a
decision!

49
In this regard, the comparison of Uttar Pradesh (UP) with Hong Kong’s Independent Commission
Against Corruption (or ICAC, arguably the most effective anti-corruption agency in Asia) is highly
instructive. The average Hong Kong citizen is 39 times more likely to institute a complaint; the ICAC
is over 240 times more likely to investigate a case during the year in which the complaint is made; and
a Hong Kong civil servant is 24 times more likely to be charged with a crime than his or her
counterpart in UP. Furthermore, disciplinary cases in UP can wind through the courts for as long as 20
years, and a large majority ultimately end in acquittal [India: Sustaining Reform, Reducing Poverty;
World Bank Report No. 25797-IN, July 14, 2003].
.
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7 Decentralisation and strengthening peoples’ institutions


Creation of panchayats in India through a constitutional Amendment in 1993
initially raised hopes about their role in improving service delivery to the people,
as decentralisation was expected to achieve higher economic efficiency, better
accountability, larger resource mobilisation, lower cost of service provision, and
higher satisfaction of local preferences. But studies show that although some
village level panchayat leaders have done commendable work, elected local
bodies too on the whole have not benefited the people to the extent of funds
provided by government. Their record in empowering the excluded people is even
more disappointing.
Panchayats are more concerned with consolidating existing economic and social
relations rather than using the democratic process to change inequitable rural
societies. Gram panchayats function more or less as “political” bodies, that is as
organizations reflecting local power relations, and development funds are used to
consolidate that power.
The picture is worse at the block and district levels. This is despite the fact that
these two tiers have sufficient funds and staff at their command, when compared
with the village tier. The elected members of the panchayati raj institutions (PRIs)
at these levels behave more or less as contractors, with no institution of the gram
sabhas at that level to put moral pressure on them.
Involve them in social sector: Panchayats at all levels are mostly busy
implementing construction oriented schemes, which promote contractor - wage
labour relationships. These do not require participation of the poor as equals, but
on the other hand foster dependency of the poor on Sarpanch and block staff. In
such a situation panchayat activities get reduced to collusion between Sarpanch
and block engineers. Panchayats should be made more active in education, health,
self-help groups (SHGs), watershed, nutrition, pastures and forestry programmes,
which require people to come together as equals and work through consensus.
No programme that aims at generating social capital can be successful in isolation
in the long run, unless a significant number of development programmes follow
the community approach. Therefore, development programmes should aim at
both – institution building as well as economic security for the poor - and develop
multi-sectoral indicators for judging how well they have performed.
Panchayats to collect local taxes: Local bodies have not been given sufficient
powers of taxation as to raise revenue locally. In addition to receiving a share in
taxes and Central grants the panchayats should have the right to levy and collect
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more taxes, such as on land and water, on their own in order to reduce their
dependence on State and central governments. Today the PRIs hesitate to levy
and collect taxes, as they prefer the soft option of receiving grants from GOI. This
must be discouraged and the local bodies be encouraged to raise local resources
for development and then receive matching grants from the Centre/States.
Increase untied grants: States need to increase the share of fiscal transfers to PRIs
as untied grants. The formula of transfer should no doubt give weightage to
population and poverty, but also to efficiency. Through a carefully designed
methodology, it is quite possible to measure the performance of panchayats, and
to what extent they are inclusive and participative. It may be added that similar
rankings can be evolved to judge the accountability of administration, especially
to people, and districts/states should be incentivised on the basis of their rankings.
Empower Gram Sabhas: Gram Sabha meetings are regularly held only in a few
places, and in most cases, participation in the meetings is low. Often such
meetings take place only on paper. Empowering Gram Sabhas and strengthening
their control over panchayats would be a powerful weapon towards transparency,
and involvement of the poor and marginalised people. For instance, Gram Sabhas
should be the final authority to decide who the poor are, subject to a ceiling fixed
by government on objective considerations. However, most of the State Acts and
policies have not spelt out the powers of Gram Sabhas, nor have any procedures
been laid down for the functioning of these bodies.
Control over village staff: Attendance and work of important field level
functionaries whose work touches the lives of almost every person in the village,
such as Teachers, Doctors, health workers, Anganwadi Workers, Agricultural
Assistants, Veterinary Doctors and Electricity department linemen should be
monitored by Gram Sabhas and panchayats, regardless of the tier to which they
answer. The creation of local cadres through administrative and legislative
measures is essential so that Panchayats can function effectively, execute
schemes and be accountable to the people. This would also reduce staff costs.
Link devolution with performance: A "Devolution Index" may be prepared for all
States, and at least one-third allocation of centrally sponsored schemes in the
panchayat functional domain or block grant (when introduced) may be allocated
to the State Governments on the basis of this index.
Social audit and ranking of panchayats: Large expenditures are now being
incurred by PRIs. Their accounts are to be audited by Local Fund Audit, but there
are several problems. First, there are huge arrears, and in some cases accounts
have not been audited for more than ten years. Secondly, the quality of their
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reports is very poor, therefore the utility of such audits is doubtful, and the impact
they make on improving systems is at best marginal, perhaps negative. Thirdly,
there are complaints of corruption, and the general impression is that audit reports
can be bought. Lastly, elected officials are not held accountable for any lapses
noticed in their reports, only officials are, which breeds irresponsible behaviour
on the part of non-officials.
The quality of work done by panchayats should be closely monitored by a team
of journalists, civil society members, panchayat leaders from the neighbouring
districts (if they have already done excellent work), and stakeholders. Based on
these reports, panchayats should be graded, and future funds should be linked
with their grade. Strengthening financial management and audit procedures will
also strengthen accountability of the local bodies, their standing committees and
their representatives, to the people as well as to government.
Through a carefully designed methodology, it is quite possible to measure the
performance of panchayats, and to what extent they are inclusive and
participative. In UP, a study evolved some criteria for ranking twenty panchayats.
Not surprisingly, 75 percent of the studied panchayats rank in the ‘Unsatisfactory’
or ‘Very Unsatisfactory’ category. But two achieve a ‘Good’ rank while three
achieve a ‘Very Good’ rank. Notably, two of the best functioning panchayats in
the sample were headed by women Sarpanches (Srivastava, undated).
Increase the use of IT: IT as a tool can be very effectively used by PRIs in the
implementation of projects. Several transactions can be carried out using on-line
applications. This has been sufficiently demonstrated in various pilot projects
carried out across the country. For instance, land records can be put on the web,
and then disseminated through private kiosks.
Rural decentralisation and PRIs are a profound change in the Indian rural
institutional scene. They may ultimately offer a better option for rural
development and poverty alleviation. Disadvantaged jurisdictions might then be
the main winners. It is an important opportunity. However, it is a mistake to think
that PRIs will emerge as caring institutions in an environment of rent-seeking
politics and unresponsive and inefficient bureaucracy. If district level civil
servants and politicians are indifferent to public welfare, it is too much to expect
that village and block level politicians will be any different.
There are big risks in premature promotion of PRIs. Past attempts at
decentralisation failed in India, in part because of resistance of the vested interests
of the bureaucracy and State level politicians. These vested interests remain.
Steep deterioration in political morality as well as in governance has further
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distorted the scene. The effectiveness of decentralization depends on how well it


is administered, and the sequence of the measures adopted is equally important.
A very common error is to delegate authority to act without adequate standards
for guidance or adequate audit and oversight mechanisms to ensure compliance
with general policies. This would seem so elementary that it would hardly require
iteration, but the frequency of violation is too great to ignore. India should learn
from the experience of Pakistan where substitution of the district collector by an
elected non-official called Nazim totally failed (Saxena 2013). If not carefully
designed, sequenced and implemented, decentralisation can increase the fiscal
burden on the States and lead to a break-down in service delivery50, in particular
to the poor.
Thus political and civil service reforms must go hand in hand with empowerment
of panchayats. Effective panchayats would also require effective district and
block level administration. The managerial competence of each State and their
capacities to control their bureaucracies effectively, as well as panchayats with
fairness and justice, would have to be enhanced before introducing radical
reforms. Reducing funds for tied CSS and devolving more untied resources to the
States for State plans in the spirit of decentralisation will improve efficiency only
if they are accompanied with improved governance and accountability, especially
in the poorer and badly governed States.
In addition, the political will at the State level to strengthen decentralisation is
lacking since State politicians gain from centralisation of powers, and fear the
sense of loss of power and patronage that decentralisation is expected to result in.
Therefore GOI must play an important role in neutralising resistance from the
States. It should also direct its Ministries to put the sector-oriented user
committees and parallel bodies under the supervision and control of gram sabhas.

50
A cynical remark is that PRIs have only succeeded in decentralisation of corruption.
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8 Summing up
Despite good achievement on the growth front, India faces significant challenges
as its social indicators continue to lag behind. India’s tax to GDP ratio is just half
of many other BRICS countries. Besides, central allocation of funds to the states
is not equitous leading to sharpening of inter-state disparities. However, mere
increase in the social sector expenditure would not be enough, unless programmes
are well designed, and expenditure is linked with outcomes directed to the
socially excluded groups, and effectively monitored.
Some do-able reforms suggested in the monograph are summarized below.
Change land laws - In almost all states, there are provisions that agricultural land
cannot be used for industrial purposes, unless written permission is taken from a
designated authority, which is time-consuming and encourages corruption.
Therefore land laws should be changed to facilitate industrialisation in rural India.
Create decent jobs - Many skill development programs, such as Aajeevika, are
of low quality and are not leading to job creation. Their content needs to be
updated and instructors should be better trained. In addition, industry linkages
should be improved, in terms of contribution to content design, training delivery,
and final placements.
Finances – Improve tax collection and devolve it equitably amongst the states.
Improve Design of CSS – Many centrally sponsored schemes, such as NREGA,
urban housing, sanitation, and ICDS are not doing well as these have not been
designed well, and have a design flaw. Central Ministries need to take initiative
in re-structuring the scheme.
Improve skill-mix in bureaucracy - There are too many government servants in
the support positions, such as clerks, orderlies, and drivers, who are now not
needed in this era of advanced technology, and too few people in the line
positions, such as teachers, nurses, and policemen, who are meant to deliver
public services. Efforts should therefore be made to identify surplus support staff,
set up an effective re-deployment plan and devise a liberal system for exit. There
should be incentives for clerks and class IV staff to become teachers and
constables.
Focus on Accountability - As a consequence of its colonial heritage, as well as
of the hierarchical social system, administrative accountability in India has
always been internal and upwards, and the civil service’s accountability to the
people has been very limited. ‘Outward accountability’ to the public, therefore,
is essential for greater responsiveness and improved service quality. To achieve
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this, outcomes such as quality of learning in schools, actual use of toilets, and
degree of satisfaction with government services must be measured regularly.
Check inflated and incredible reporting - State governments do not discourage
reporting of inflated figures from the districts, which renders monitoring
ineffective. As data are often not verified or collected through independent
sources, no action is taken against officers indulging in bogus reporting.
The situation can easily be corrected by greater transparency of the district
records that should be put on a website, and by frequent field inspections by an
independent team of experts and grassroots workers. Their findings must be
publicised and discussed with key stakeholders so that improvements in design
and delivery can be effected at the earliest. Governments should also put on their
websites the findings of the impact studies, and distribute these in workshops they
organise. Dissemination of results is critical for use.
Control absenteeism–All ministries/departments should collect quantitative data
on absenteeism of both service providers and service receivers (students in
classrooms, or women turning up for institutional deliveries) as it throws a great
deal of light on the quality of service. Through a carefully designed methodology
backed by technology, it is quite possible to measure the performance of all
service providing agencies, such as police stations, health and anganwadi centres,
panchayats, etc, and to what extent they are responsive, efficient and
participative. Technology should be used to monitor not only attendance but
performance of field staff.
Evaluate flagship programmes more frequently - Although some Ministries
do evaluation and engage professional organizations in preparing impact studies,
such reports are hardly read by the policy makers, and no corrective action
follows from the examination done in the reports. Ultimately the process of hiring
a professional for impact study degenerates into another patronage activity, where
favourites are chosen, and the quality of the report is a secondary consideration.
It is not enough that the central government departments and the state
governments use professional and academic organisations to undertake impact
studies from time to time. Their findings must be publicised and discussed with
key stakeholders so that improvements in design and delivery can be effected at
the earliest. Governments should also put on its website findings of the impact
studies, and distribute these in the workshops it organizes. Dissemination of
results is critical for use.
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Improve flow of funds - Many state governments, especially the poor ones, are
neither able to draw their entitled funds from GOI, nor are able to release these to
the districts/villages in time, with the result that GOI is often constrained to divert
the unclaimed funds to better performing states. The reason for poor performance
by Bihar, Orissa, UP, and Assam is often due to the widespread shortage of staff
at all levels that adversely affects implementation and supervision of
programmes. Empirical studies are needed to suggest what changes are needed in
financial procedures at the state level so that utilization of funds improves, timely
payments are made to the contractual staff, and utilization reports are sent to GOI
in time without delay.
Stability of tenure - For highest ranks of the civil services in the states e.g. Chief
Secretary and Police Chief, postings may be made contractual for a fixed period
of at least two years (as is being done in GOI for Secretaries in the Ministries of
Home, Defence, and Finance). Stability index should be calculated for important
posts, such as Secretaries, Deputy Commissioners, and District Supdt of Police.
An average of at least two years for each group be fixed, so that although
government would be free to transfer an officer before two years without calling
for his explanation, the average must be maintained above two years. This would
mean that for every short tenure someone else must have a sufficiently long tenure
to maintain the average.
Lateral recruitment and entry - Civil servants should be exposed to
professionals and experts on a continuous basis. A civil servant in the states
hardly meets people outside politicians, hapless public, or his own peer group.
None of them pose a challenge to his ignorance or smugness. One of the ways to
do it would be to earmark many posts in the government to permit lateral entry
of people from NGO/ professional institutions at various levels to bring in a fresh
outlook.
Increase the number of judges - Today, corruption is a low risk and high reward
activity. Our judicial system is slow, and very few are caught and punished in a
way that has a deterrent effect on others. We need to increase the number of
judges so that swift judgements can be pronounced in all cases of corruption.
Make administration e-governance friendly - E-Governance utilizes
technology to accomplish reform by fostering transparency, eliminating distance
and other divides, and empowering people to participate in the political processes
that affect their lives. While e-Governance has great potential to bring benefits to
all citizens, knowledge about e-Governance is mostly restricted to educated and
professional groups. Most citizens are still unaware of the potential benefits.
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Continuous involvement of the citizen is needed in the governance of the country


through an electronic interface. This implies participation of the citizen not only
in policy-making but also providing feedback on the impact of the policies
through means which are now made available by information technology.
For instance, in December 2016, a very large number of common people queuing
outside banks felt that the bank employees are diverting the new currency to
money launderers through back door, while they were being denied even petty
cash. Had the Reserve Bank disclosed how much money is being sent daily to
each branch, people’s anger would have subsided. Greater transparency would
have not only checked illegal transactions but also led people to appreciate the
efforts being made by banks to meet the crisis caused by slow printing of new
currency.
Panchayats to collect local taxes: Local bodies have not been given sufficient
powers of taxation as to raise revenue locally. In addition to receiving a share in
taxes and Central grants the panchayats should have the right to levy and collect
more taxes, such as on land and water, on their own in order to reduce their
dependence on State and central governments. Today the PRIs hesitate to levy
and collect taxes, as they prefer the soft option of receiving grants from GOI. This
must be discouraged and the local bodies be encouraged to raise local resources
for development and then receive matching grants from the Centre/States.

However, the above described policy reforms would require strong political
support. In some rogue states political pressures for distribution of patronage are
so intense that there is no time or inclination for the ministers and bureaucrats to
do conceptual thinking, design good programmes, weed out those that are not
functioning well, and monitor the programmes with a view to improve the
effectiveness of delivery. One can only hope that these states would learn from
the positive example of other states where the Chief Ministers have overcome the
anti-incumbency factor by improving governance and thereby achieving
inclusive growth.
A good civil service is necessary but not sufficient for good governance; a bad
civil service is sufficient but not necessary for bad governance (Schiavo-Campo
et al. 1983). Thus, a dilapidated civil service has been a key factor in Africa’s
economic decline. Conversely, a strong civil service is one of several reasons why
in several east Asian economies, especially Japan, Singapore and South Korea,
authoritarianism has co-existed with excellent economic performance. It can be
argued that the link between authoritarianism and economic decline, so evident
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in Africa, has been inoperative in these Asian countries largely because of their
strong civil service. Greater responsiveness and openness can legitimately be
demanded of public administrations in many East Asian countries. Clearly, civil
service systems in most East Asian countries cannot be considered a problem;
they are, rather, an important part of the solution to these countries’ other
problems.
Civil service reform is an issue of critical importance and one which has engaged
the attention of the Government of India since well before independence. Since
independence, about fifty Commissions and Committees have been set up at the
level of the Union Government to study and make recommendations on what can
be broadly characterized as administrative reforms. As a result of the
deliberations and recommendations of these Commissions and Committees on
different aspects of public administration, some incremental reforms have been
effected. These include the creation of a separate Department of Administrative
Reforms in the Union and State Governments, setting up of the Indian Institute
of Public Administration, setting up of the Central Vigilance Commission,
Constitution of Lokayuktas in States, strengthening of citizens’ grievance
redressal machinery, drawing up of citizens charters, focus on training and
capacity building of civil servants, restructuring of the recruitment process, and
modifications in the performance appraisal system.
The reforms which have been put in place are essentially ‘soft’ reforms, which
have not seriously addressed the issues of lack of accountability and outcome
orientation, corruption, criminality and collusion within the Government. Many
of the recommendations involving basic changes have not been acted upon and
therefore, the framework, systems and methods of functioning of the civil
services based on the Whitehall model of the mid-nineteenth century remains
largely unchanged. Yet, all these Reports have been dealt with in a routine
manner, with cursory Action Taken Reports being prepared, filed and forgotten.
The prodigious research and intellectual efforts of these Committees, not to
mention the administrative and financial resources expended on them, have been
largely wasted. As the Second Administrative Reforms Commission noted, “the
Indian reform effort has been unfailingly conservative, with limited
impact…Civil service reform in India has neither enhanced the efficiency nor the
accountability of the Civil Service in any meaningful manner.”
Civil service reforms must be aimed at improving transparency, accountability,
honesty, efficiency and sensitivity in public administration at all levels. The
solution to the problem of corruption has to be more systemic than any other issue
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of governance. Merely shrinking the economic role of the State by resorting to


deregulation, liberalization and privatization is not necessarily the solution to
addressing the problem. All such procedures, laws and regulations that breed
corruption and come in the way of efficient delivery system will have to be
eliminated.
We must also remember that we are not talking about creating a bureaucracy on
a clean slate ab initio. We have inherited a bureaucratic system which has its own
compulsions and culture. Our challenge today is how out of this we shape a new
bureaucracy and in that sense "create" a bureaucracy that works. We are
somewhat like the managers of a fitness club knocking people into shape. We
have to be content with incremental reforms that can be sustained over a long
period.
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