governance, political economy, institutional development and economic regulation

We subscribe to the myth of complete symmetry in governance systems across India. The British, Sardar Patel and todays “eliterati” believe this is a good thing leading to uniformity in development opportunities, thought and circumstance. The unpleasant fact is that this not a good model for a country the plurality and size of India. Unity yes but only through diversity. Till now the “diversity” permitted to us by the State has been of language, religion, culture and caste. Sardar Patel’s view of a “steel frame” and common governance systems, as a necessary skeleton for diversity is no longer critical. The Durga Shakti case is yet another illustration of the potential for conflict with overlapping functions between the center and the state. Delhi simply does too much and often it meddles in a biased manner…. turning a blind eye to the misdemenours of its own party at the state level. Delhi needs to give up power and responsibility to the state government, which must in turn devolve powers and finance to block and village panchayats. The central government must (a) devolve more finances to states for developing their own schemes and priorities (b) merge the IAS, IPS and Indian Forest Service, since they are no longer needed to “bind” the country together, with the parallel cadres in each state, We have other and better  “binders” in place. The glue for making India a “sticky” concept is the political parties; the private sector and empowered citizens. All these drivers of unity are already kicking in. Many may apprehend that the withdrawal of central remote management of the state government will mean more corruption and mismanagement in the states. This is a myth. Through all the 20 years of Lalau’s rule the “bureaucratic steel frame”  could do nothing to blunt his destructive disruption of institutions, the economy and the rule of law. The long periods of left rule in West Bengal and Kerala did not result in corruption or poor management. Better then to let the states manage their matters in their own way. Devolve all funds to them except the 40% needed for defense and diplomacy; federal security; fiscal management; financial sector regulation; network backbone development (grid connectivity; inter operability in telecom; rail track development and management; civil aviation facility regulation; interstate roads etc); space and atomic energy.  Currently the central government keeps 70% and devolves the rest to states. It is moot whether inequality across states would increase, beyond what it already is today (per capita income in Bihar is less than 25% of Maharashtra and Harayana), if this ratio is reversed.  Higher fiscal resources for state governments could lead to better cash flow for projects and higher growth and better social development, aligned to the needs of the states. More importantly, the discretion with Delhi to bend finance to politics will diminish and states will be responsible for what they decide. China devolves around 75% of its central revenue collection to states. Of course with the Party in control everywhere it does not need to play fiscal politics, in the manner that Delhi does, to remain relevant. Also China is not as plural as India. Admittedly these differences are real but more than six decades after independence the only sustainable way to hang together is to acknowledge diversity and cater to it, rather than continue with the tired template of  uniform governance systems for development.

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