Can India Grow? Yes We Can If We Improve Our State Capability. Here Are 12 Steps To Achieve It

V. Anantha Nageswaran and Gulzar Natarajan. Can India Grow? Challenges, Opportunities And The Way Forward. Carnegie Endowment For International Peace. 2016.

The state capacity

Lant Pritchett, the Kennedy School of Government economist and education researcher, famously called India a “flailing” state. The signs are everywhere, from poorly run midday meal kitchens to corrupt infrastructure contract management. The business-as-usual state is simply too enfeebled to effectively administer the public system. No amount of technological innovation or process reengineering can cover up the country’s sorely deficient state capability.

The most common causes for degeneration in state capability include politicization of bureaucratic processes, administrative indiscipline, erosion of accountability in the discharge of official responsibilities, weakened supervision and monitoring, lack of accountability, and ubiquitous corruption. Because state capability is deeply engaged in the dynamics of political and civil society, there are no easy answers to these problems.

But the broad contours of a plan can be sketched. Administrative reforms that minimize politicization, enhance professionalism, promote transparency, and improve accountability are critical to any effort in this direction. Some important contributors to state capability failings are the unhealthy practices that corrode personnel deployment and hamstring procurement by government agencies. Fixed tenures for district heads of departments and uniform and transparent, preferably online, transfer and procurement processes can be useful steps toward ameliorating these factors.

Performance management measures, while always difficult to enact in public systems, are essential to enforce accountability among officials and their departments. The government of India’s Results-Framework Document, despite its failings, is a good beginning. It needs to be continuously iterated and allowed to permeate down to district and local governments. A more sustainable strategy for achieving this objective, though one fraught with uncertainties, may be through a phased decentralization of functions, funds, and functionaries. Teachers and doctors who are not accountable to the local community cannot be expected to deliver services to any reasonable degree of satisfaction.

Technology, in the form of e-governance applications, has the potential to increase transparency and thereby accountability and also to improve the efficiency of public service delivery. Unfortunately, while there have been numerous stand-alone, individual-driven, and locally designed e-governance applications for a range of public interventions across districts, there has been little effort to refine, standardize, and scale up these applications across the state. State governments need to identify such applications across sectors, refine the workflow, and improve their technical efficiency before making them available for implementation across districts. Of more direct and immediate concern is improving the state’s capacity to monitor and supervise its functionaries and interventions. Reliable data, appropriately analyzed and rendered in a user-friendly and portable manner, can provide a powerful decision support for supervisors in this effort.

Finally, though such an assertion risks charges of political incorrectness in this age of government baiting, in light of India’s minimalist state, none of these efforts can succeed until administrative resources are strengthened by adequate provision of the required personnel, logistics, and finances, especially at the cutting edge. Inadequate personnel and litigation over promotions mean that important departments such as health or education have either no or only ad hoc leadership in several districts across the country. The absence of any form of leadership is true of many departments in a typical district and invariably leaves it directionless.

The challenge of easing decision paralysis is very complex and has no straightforward answers. Executive and legislative actions, however far-reaching, must be accompanied by greater collective appreciation of the nature of the problem and maturity in dealing with such issues.

As a first step, it would help to complete the proposed amendments to section 13(1)(d)(iii) of the Prevention of Corruption Act that is before Parliament. Since the Right to Information Act, 2005, has reached its ten-year anniversary, this may be a good time to review its implementation. In particular, a bipartisan committee could be constituted to examine the possibility of exempting communications related to deliberative processes from the law.

Another committee should examine the methods and processes used by auditors and investigative agencies in light of recent trends and lay down guidelines in this regard. Auditors should preferably confine themselves to examining whether public money has been spent in accordance with prevailing rules and whether due process has been followed in decisionmaking. They should refrain from passing judgment on the merits of departmental decisions or policies that have been arrived at through due process and approved by the competent authority. Not only do auditors not have the competence to make such judgments but they are very likely to be swayed by simplistic and first-order assessments that gloss over the deeper considerations that led to such decisions. In particular, they should exercise great caution and have in place adequate administrative controls before constructing counterfactuals and making presumptive valuations.

Performance and policy audits should be part of ex post facto evaluations of decisions and should be done by independent and professionally competent third-party agencies, not by auditors. The findings of such assessments should subject individuals to disciplinary proceedings only if there is prima facie evidence of mala fide in arriving at the original decision.

Such ex post facto audits should be complemented by ex ante and concurrent financial and process audits. Any new program or policy initiative should be audited and certified before its implementation. Similarly, without adding another layer of bureaucracy, random audits should be conducted during the course of implementation to detect lapses in real time and help make appropriate corrections. Much the same should apply to the activities of vigilance officials.

Such an approach would be similar in spirit to the advance tax rulings that multinational corporations and large taxpayers seek from taxation authorities. This written interpretation of tax laws, applicable to a particular client, binds the tax authorities to their ruling and clears up taxation-related uncertainties. Such concurrent audit mechanisms would integrate audits and vigilance into the decisionmaking process, obviating comprehensive post facto assessments. While it would undoubtedly improve the legality of decisionmaking, the trade-off would be a slower pace.

Any reform of the investigative process has to start with measures to equip investigators with professional expertise in scrutinizing financial and contracting cases. Investigators should be drawn from a broader pool and should include officials with professional expertise in these areas and lateral entrants. It is also essential that officials at both central and state government levels, especially those involved in high-stakes policymaking, be offered adequate legal protection against frivolous investigations and prosecutions. The former demands adherence to a set of permission protocols before the investigative processes can kick in.

Most important, once it is established that the decision has been made by a competent authority following due process, investigations should cease. Finally, both investigators and auditors would do well to bear in mind the fundamental principle that their findings should clearly distinguish between genuine errors and mala fide actions and be able to establish the latter.

At a time when decision paralysis has taken firm hold, it is critical to ensure that officials have certain safeguards against frivolous and malicious complaints and investigations. While section 19 of the Prevention of Corruption Act of 1988 is a safeguard against prosecution, it may be necessary to restore similar protections against flippant investigations, especially for officials involved in high-level policymaking. An official vulnerable to being investigated for any complaint is certain to postpone or escalate upward decisionmaking.

The most difficult challenge will be to initiate reforms to restrain judicial overreach and snowballing litigation. One intervention could be to gradually phase out tribunals and replace them with sectoral benches in the higher courts. The issue of judicial activism may be best addressed if it is examined by a committee of the country’s most credible judges and jurists, preferably appointed by the Supreme Court. The committee should, in consultation with all stakeholders, lay down certain principles and rules that limit the range of a judge’s individual discretion and draw the line between judicial activism and judicial excess, especially on the issue of entertaining public interest litigation. The Supreme Court should then require that all courts across the country follow those guidelines. A similar process could be followed and guidelines issued on the exercise of appellate authority.

Regarding the Finance Ministry’s veto, it is imperative that certain guidelines that govern the exercise of jurisdiction by the Finance Ministry be formulated and strictly implemented. The guidelines should confine the ministry’s jurisdiction to decisions on overall budget allocations, conformity with general costing and other financial principles, and egregious deficiencies. The ministry should strictly refrain from investigating issues such as project structuring or costing formulas that have been decided by competent authorities within the administrative department. At best, the Finance Ministry should be allowed only to make suggestions, which the administrative department should then be free to disregard, for compelling reasons, recorded appropriately.

All these changes will have to overcome strongly held conventional wisdom and political correctness. They will need to be undertaken with great care and tact so that the delicate institutional balance that is critical to India’s vibrant democracy is not upset. There are no quick-fix solutions. No extent of lateral entry is going to resolve this. Not even a change of government and a strong commitment to good governance can easily correct the incentive distortions created by these trends. It requires foresight and leadership of an exceptional nature from all institutional stakeholders. Acknowledging that the problem exists is therefore an essential first step to address this deep-rooted institutional incentives problem.