Repurposing governance- trim the fat in state governments

The tragic snafu over making sufficient oxygen available to meet the spike in demand from COVID-related morbidity is a red flag for an underlying malaise—of overlapping mandates, state governments enfeebled by decades of Union government spoon feeding, and under capacitated local government.

Sadly, state governments have voluntarily accepted this hollowing out of their core functions. So dependent are they on grants and central government schemes that they are incapable of even accurately anticipating the demand for hospital supplies like Oxygen—a routine management task.

Consider also, the latest Union government missive that states should procure COVID Vaccines directly from identified manufacturers, the pool of which is expanding. The ensuing outrage is akin to the anguished cry of an infantile, middle-aged person, whose security blanket is whipped away—sadly, well past the growing-up stage.

“Nanny” Union governments have infantilized state governments

The Union government, as a behemoth, supervising midget states, is not what the constitution envisages. The Seventh Schedule List II—the State List—specifically mentions public health, hospitals and dispensaries and sanitation (entry 6), industries (entry 24) and gas and gas works (entry 25) as being directly within the mandates of the State Governments.

To be sure, successive Union governments have enhanced the ambit of their mandate—well beyond constitutional limits—not just in health but also in agriculture, education and social protection.

State government have not protested this unnecessary intrusion, possibly because the mandate creep comes with dollops of financial assistance. But it is up to the states themselves to retain their constitutional autonomy by being self-sufficient and using their ample resources well. The notion that all states are fledgling, poorly-funded entities, which need hand holding by the Union government is pure fiction.

State governments are better funded than the Union government

State governments spent 1.6X of what the Union government budgeted, after excluding committed expenditure like debt servicing or committed grants, which we define here as “allocable resources”.

In FY2020-21 (BE) states budgeted for “allocable resources” of INR 38.8 trillion (RBI State Finances). In contrast, the Union government spent (RE) just INR 24.2 trillion (Union Budget 2021-22)

But even out of this smaller pie, the Union government spent nearly one half or INR 12 trillion, on agriculture, commerce and industry, education, rural development, social protection, urban development, food subsidy and fertiliser subsidy—all areas which are within the mandate of the state governments.

This left the Union government with just INR 12.2 trillion to spend on its core mandate of defence and internal security, external affairs, external trade, ports, railways, aviation, telecom and cross border highways.

These core mandate areas of the Union government got just 19 percent of INR 63 trillion, which was the combined “allocable resource” of the Union and the states. This partly explains why infrastructure development lags.

“Big-brother” Union government a politically motivated design

Why do Union governments feel compelled to ignore their core mandates and dabble in areas which are outside their constitutional ambit? Is it just the compulsion for political one upmanship in the heat of the elections?

First, the legacy of central planning institutionalised an unwieldy “system” of extensive Union intervention in state subjects. Sadly, this patronising, “nanny” approach to governance was much more than just a bad techno-fix.

The underlying political incentive was to control state governments through discretionary capital allocations.  Recalcitrant states, like West Bengal, an Opposition-ruled state over the last four decades, is a good example of central negligence.

Formal central planning ended in 2014. But the embedded fiscal pipes left behind via the large number of central schemes, continue to be actively used towards narrow political ends via pliant, quinquennial Financial Commissions, appointed by the Union government, to recommend inter-governmental grants.

Second, the constitutional ambit of the Union government relates to high level policy formulation, standard setting, leadership in science and research, environmental and natural resource management, macroeconomic stability and fiscal management.

The immediate relevance of these highly abstract and technical subjects is not easily understood by the average Indian voter, whose meagre needs do not extend beyond bread-and-butter issues—free food, jobs, drains and roads. More recent, welcome additions to this gift-pack are toilets, drinking water, affordable houses, free gas connections, health insurance and direct benefits transfers.

During national elections, differences across parties in external, defence, science, space, industrial or tax policy or alternative visions for shared growth and reduced inequity are less material than the lists of real benefits – public and private – promised to voters, who shop for “best buys” per vote, in the quinquennial political bazar. Economic reform, for instance, is not politically saleable. It must be done by stealth, after the votes have been cast.

National agendas less high brow than constitutionally envisaged

With the virtual demise of the Left, the BJP, alone, under Prime Minister Modi, has offered, a unique, somewhat controversial, national agenda for a Hindu India. To the surprise of many, who believed that a parochial, religious agenda had no salience in “syncretic” India, this appeal to traditional identity, has worked to the political advantage of the BJP, thus far. Our first-past-the -post electoral system facilitates parties with committed, albeit less than majority support, to dominate Parliament.

India is predominantly Hindu, which is why, there is little long-term substance to Hinduism as a political glue. Using it for short-term political mobilisation, has the disadvantage that even if Hindu domination gets legislated, its subaltern identities based on caste, region and language, remain open to being poached.

There is wider empathy for the implicitly, centralised vision of India, the BJP offers. Till China falters, it presents a shining example of centralised, single party, political management. To create an Indian version of this template will require major political surgery. But there is a middle path to more effective governance.

It took a pandemic—and sadly too many lives lost—to bring home to us, that well defined inter-governmental mandates and aligned allocations of fiscal and management capacity are crucial for a complex, multi-tiered political architecture to function efficiently.

Repurposing Local Governments

Possibly, we are past the stage where sprawling state governments were symbols of identity. In any case, majority governments at the center ride roughshod over the state governments and their party rules and disadvantage state governments—ruled by other parties, rendering both types of state governments, redundant. Digital connectivity is also reducing the need for long chains of command.

One option is to strengthen local governments versus state governments by transferring existing fiscal and program implementation capacities, away from the state governments to local governments, with whom citizens have an intimate interface.

Doing so, would increase the direct accountability of government to citizens. At the cost of truncating the powers and prestige of around 4100 state level legislators, we would be empowering three million councilors of urban local bodies and members of rural Zila Parishads, Block Samitis and Gram Panchayats. This is instant democratisation at its best.

India has insufficient physical and fiscal headroom for three levels of autonomous political power. Delhi is a classic example of “too many political chefs”, with the Union government, a state government and five municipalities, all jostling for autonomy within 1500 square kilometers. We can ill afford the overburden of redundant political masters.

Extracted from the authors expert speak in May 1, 2021

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