governance, political economy, institutional development and economic regulation

Archive for the ‘Democracy’ Category

The price of democracy

beggar

Prof. Ashutosh Varshney of Brown University calls India an improbable democracy — poor, impossibly heterogeneous and multicultural, and ironically, only its colonial heritage keeps it going. So has our hubris cost us plenty?

Why we are not China

Forget comparing ourselves with China today. Are we at least on the same path? No, we are not. Assume a lag of a decade between China’s 1979 takeoff — Deng Xiaoping’s reforms — and India post-liberalisation in 1991. Second, assume that GDP growth is a decent proxy for national effort. Judging by the results, we have tried only one-third as hard as China to grow three decades into the reform process. Have we been tied down, like Gulliver, by democracy’s Lilliputian ropes?

Money or efficiency make the world go around

There are only two ways of increasing growth. Increase investment or increase the efficiency with which capital is used. The latter is tough but critical. Efficiency and stability invite foreign capital in, build supply chains and boost “federated” exports — many economies get a say and a share in the final product. Making the world your shareholder makes politicians more responsible — barring outliers like US President Donald Trump — and who knows, his unorthodoxy might well work for the United States.

Wasting scarce capital

Amravati

India is hugely capital starved. Sadly, it has not done well either in using capital efficiently. And it is not just the public sector alone which is wasteful. A generalised trend of wastefulness springs from poor monitoring systems available to the government, shareholders and citizens, none of which can easily check the data by triangulating information sources.

Over-designed public projects

Bengaluru airport has had charging points in its parking lot since 2008 for electric cars, which will not use them till 2030 – if then. You pay for casually over designed projects. The building of Amravati, the new capital of Andhra Pradesh, represents all that is wrong with our democracy with politicians free riding on tax payers.

Frank admissions of failure are as important as bragging about success

Finance secretary Hasmukh Adhia has admitted that the GST network has failed to provide end-to-end digitisation. We knew this. But speaking honestly and responsibly endeared him to the public. Unfortunately, no one is to be held accountable for this glitch.

Adhia

Cheap finance induces waste

Wasteful use of capital is hardwired into a system which prices capital cheaply. Most business folk will moan about the high cost of funds in India. But the fortunes, domestic and overseas troves of real estate barons and industrial tycoons were built on negative interest rates, with inflation boosting prices but diluting the real interest cost of a bank loan to zero over a 10-year period.

Four matras for democratic success 

Can we take remedial measures? The times are tough. But bad times never last. More important, are we primed to take advantage of the next uptick cycle in world economic growth? Possibly not. Here is a four-point mantra for getting there.

Efficient public services

online

First, the new national government, later this year or in early 2019, must tackle the long-ignored task of public sector reform. It is shocking that economic duality has widened since 1947. The average citizen and business is streets ahead of the government in the effective use of 21st century technology to make employees accountable. Can you imagine how the government would change if the bottom five per cent of employees were sacked every year for poor performance or if the courts disposed of cases quickly? Just focusing on achieving these two and keeping everything else on hold could retrieve democracy in India.

Make data accessible on citizen aspirations & preferences, government performance and business governance 

Second, know your citizens. Make all residents and citizens identifiable, traceable and accessible. Aadhaar is the answer. Make registration for Aadhaar painless and self-declaratory — the ability to cancel out duplicates is supposed to be built into the system — enhance its accuracy in identification; mask the private information better and multiply improved digital recognition equipment. Populate data for citizenship, electoral rights and public benefits, using Aadhaar as the base platform. Transfer all public benefits through bank accounts. Roster all government officials, below 40 years of age, irrespective of grade or cadre, to serve as field-level facilitators wherever they are posted, with specific mentoring targets, to help citizens access their benefits.

The BJP and some regional parties (Trinamul Congress, AIADMK, the Left parties) who have a cadre are ramping up to do this. Down this route lies the threat of democratic abdication. A citizen must be served by the government of the day, not tied to the apron strings of a particular party for accessing benefits.

Link official accountability with efficiency in use of capital 

Third, change public incentives and processes. Switch from lazy budgeting of inputs to specific outputs, achievable over two years and outcomes over five years. Form teams of specifically identified officials to programmes and projects; ensure that there are no transfers and the team remains intact for the next five to 10 years. This will ensure more responsible budgeting; development of job commitment and expertise and improve outcomes. China does not shuffle its officials about needlessly. They stay tied to specific tasks for long periods — many forever. We encourage our officials to forum-shop from one cushy position to another.

Stop fiddling with markets

markets

Fourth, walk the talk. Withdraw the government from being a market participant and it will work better. Markets are like forests. Naturalists like Pradeep Krishen say it is enough to fence barren land off from predators like goats to allow a forest to regenerate. Going with the grain of nature doubles results. Anything else is wasteful and inefficient.

Stop fiddling with markets and they will find their level. Focus on diluting, not alleviating, the pain of those who lose out from markets. Just that can consume all of the government. Do not dilute the bite of markets if you aim for efficiency. Equity initiatives must be front-loaded to enhance competitiveness, not installed at the end of pipe to shackle markets. Caste-based reservations for education, jobs or benefits are an end-of-the-pipe option. They gel perfectly with our real strategy of steady but inefficient, slow growth.

Democracy is not the reason for our woes. It is what we do with it that’s troubling. Democracy implies at least a 50 per cent chance of not getting re-elected. The great Mughals would not have approved of the risk profile. Neither, it seems, do our rulers today.

Adapted from the author’s opinion piece in The Asian Age, July 9, 2018 http://www.asianage.com/opinion/columnists/090718/price-of-democracy-a-4-point-growth-mantra.html

Who rules Delhi?

Delhi throne

Khichdi – Risotto if you prefer the Italian version – is a traditional palliative for Delhi belly. But Delhi’s khichdi style political governance systems are guaranteed to give anybody the runs. So bad is the mess that it is difficult to find out who rules Delhi. The Delhi Government, a contender, appealed against orders of the Union Government to clarify its constitutional mandate.

Supreme Court clarifies the law

The Supreme Court, in its July 4, five judge bench, judgement, patiently re-explained the law, without venturing to drill down to the crux of the dispute between the Aam Admi Party (AAP) government and the BJP ruled Union government – who controls the public servants in the government of Delhi? The dispute closely resembles a Saas -Bahu quarrel – principally, who gets to jangle the house keys and run the house.

Judicial decisions unlikely to resolve political power stand-off

The AAP came to power by promising to the good but poor, people of Delhi, to set right the tyrannical, corrupt Delhi bureaucrats and other elites. The AAP found, to its dismay, that they had less real powers than the Municipal Commissioner of Mumbai. Being a glorified Municipal Commissioner was of no use in leveraging the AAP onto the national level and that too within months of coming to power. AAP chose the path of open, tactically public confrontation with the Union government in a David versus Goliath stand-off.

To be sure, the BJP run Union government’s intention were hardly kosher either. It tried to swat the AAP at every opportunity. The previous Lieutenant Governor (LG), Najeeb Jung – appointed by the Congress, called an end to his stressed innings in December 2016.

Will the Supreme Court verdict change things? India is peculiarly American in its belief that good laws and sound judgements can set things right. There is little evidence to support this belief. Laws, which are out of sync with reality and judgements which are legally correct but practically iffy are not the stuff that good governance is made of.

Expectations build reality. Delhi is often described as “closely resembling a State government”. Delhi is as much a state government as we are a “federal” country – another slipshod simplification used for the essentially unitary form of our polity albeit with some federal characteristics.

How it all began

Delhi government is a “special” child of the Indian National Congress, which was in power in the Delhi Metropolitan Council uninterruptedly from 1972 till 1990. In 1991 the INC decided to embellish their jagir with a totem of statehood- possibly to appease citizens with a magic bullet which would solve all their problems. In 1992 the 69th Amendment to the constitution – prescribed a special status for Delhi. It became a hybrid between a Union Territory, like Puducherry and a State government, like Goa.

But no matter how many new, white Toyota Innova’s Mr Kejriwal adds to his cavalcade, he will remain a Chief Minister in name only and Delhi’s Legislative Assembly a caricature of democracy. This is not because Mr Kejriwal or the legislators are wanting on merits. But the constitutional arrangements militate against them having a free hand in providing good governance.

Kejriwal

The proximate cause of the constitutional spat is that the Union government claims the Delhi government has no independent powers of managing their employees. It must do so only with the concurrence of the Union government. Municipalities face a similar constraint versus the State governments, which sit on their heads. The Supreme Court (SC) has not dealt explicitly with this critical issue. But reading between the lines, two implicit messages emerge.

SC judgement implies Delhi Government competent to legislate and execute on Public services

First, the SC has specifically stated that all matters in the State list, other than the three exempted subjects of Public order, Police and Land are within the legislative authority and hence also the executive authority of the Delhi government. State public services are one such subject at entry 41 of Schedule 7, List II of the State List of the constitution. A plain reading of the SC order indicates that this subject is within the mandate of the Delhi government.

But Delhi does not have its own cadre of IAS officers allocated to it or Provincial Service Officers appointed by it, unlike other states. It is staffed by IAS and DANICS (Delhi, Andaman and Nicobar Islands) officers, made available to it by the Union government, which is the cadre control authority.

Union government’s view on services too expansive

It is unclear where the Union government’s powers to manage these cadres end. Allocation of specific officers to Delhi, training, promotion and disciplinary action are powers intrinsic to cadre management. But must the Union government also approve their posting to or transfer from one position to another within the Delhi government? These are routine decisions which affect individual officers but do not impinge on cadre management.

LG only an “engaged watcher” on all matters except Public order, Police and Land

Second, the SC drew a useful distinction between the right of the LG to be informed of all decisions of the Delhi government and his specific power to reserve a matter for the orders of the President. It was careful to emphasise that the latter is to be used only in exceptional cases. This indicates that the Supreme Court veers towards a rational and harmonious sharing of personnel management powers between the Union and the Delhi government.

The sprawling Delhi bureaucracy prefers the Union government as “Mai-Bap”

A May 21, 2015 notification of the Union Home Ministry espoused the view that the Delhi government has no powers with respect to management of public services on the specious grounds that it has no public services or State Public Service Commission of their own.

The Union government’s unorthodox viewpoint draws support from the all-powerful IAS/DANICS cadre which fear loss of prime status, versus the uniformed services, if they are subjected to control of the Delhi government whilst the police remain directly managed by the Union government. The Delhi High Court will now rule on this sensitive issue.

Dharna

Delhi’s bloated administrative architecture wastes public money. It creates a clash of political egos and a surfeit of elected authorities all elbowing for space in just 700 square km of urban space. Delhi should revert to the 1956 arrangements – Union Territory with an Administrator overseeing the existing four civilian municipalities. But each must be headed by a directly elected Mayor. If the experiment works, India’s metros could finally join the world in participatory local governance.

Book Review: Paying the price for aid

AID

Three themes undergird the author’s exhaustive narrative of the politics around foreign aid in India between 1950 and 1975, during the early years of the Cold War — the people who made key decisions; the domestic context and, finally, the geopolitical incentives that shaped donor responses.

The deal makers

come across as being surprisingly entrepreneurial in securing aid. Mercifully, unlike more recently, the political and bureaucratic manoeuvring was almost never for personal gain, other than managerial satisfaction at seeing pet projects fructify.

lobbied for civilian atomic power at a time when hydro and coal-based power was the norm. P C Mahalanobis, a physicist turned statistician, institutionalised centralised planning as a scientific prerequisite for development. C Subramaniam as minister for food ushered in higher agricultural productivity via the Green Revolution. Morarji Desai as finance minister and later prime minister promoted private Indian industry and trade, an outlier view, supported by G D Birla. B K Nehru — India’s economic ambassador to the US; John Mathai and later C D Deshmukh as finance minister, economist I G Patel and L K Jha as ambassador in Washington were more inclined to look to markets, international trade, the private sector and the criticality of macro-economic stability, all of which aligned more with the United States as a development model.

Jawaharlal Nehru and later Indira Gandhi as prime minister; Krishna Menon as defence minister, Sarvepalli Radhakrishnan and later D P Dhar, ambassadors to Moscow; Gulazarilal Nanda, deputy chairperson of the Planning Commission; K D Malaviya, petroleum minister; P N Haksar, principal secretary to Prime Minister Indira Gandhi and later deputy chairperson of the Planning Commission and T N Kaul as foreign secretary were the top decision makers who leant towards the Soviet Union.

The domestic context

But individuals became important only because they seized the moment in a given context. Nehru was opposed to be seen begging for aid. It did not fit with his ideology of non-alignment. But India needed lots of aid. With overt political alignment unacceptable, the second-best option for officials was to conspire and reassure donors, that India’s and their interests were aligned.

America feeds India

The establishment of the Peoples Republic of China in 1949 spurred America to save India from Communism. American aid funded technical assistance, community development, large irrigation and flood control projects like the Damodar Valley Corporation and credit lines for the import of machinery by private industries. The PL-480 programme, starting in 1960, provided desperately needed food grains against deferred payments in rupees. The accumulated amount equalled 40 per cent of the money supply by 1974. The US government generously wrote the largest cheque ever, of $2.05 billion, converting two thirds of the outstanding balance into a grant for India.

But disjointed Geopolitical compulsions act as spoilers

But the Indo-American relationship was an uneasy fit. The 1954 treaty of mutual security between the US and Pakistan was an early spoiler. India’s denial of an endorsement for US military action in Korea and later, in Vietnam, rankled. By 1969, interest in India waned, as President Nixon focused on resetting relations with China. In 1966, India accounted for one-eighth of total American aid. By 1975 it had dwindled to one-eightieth.

Soviet Union industrializes India hoping to strengthen Indian Socialism

Soviet aid comprised projects to build industrial capacity. This fitted Indian objectives of backward area development via the creation of model public sector factories in the “core” areas according to the 1956 Industrial Policy. By the 1970s, Indian industry had caught up, whilst the Soviet Union had fallen behind in technology and run out of revolutionary fervour. Meanwhile, enhanced multilateral, soft credit from the World Bank under Robert McNamara introduced new options to source industrial equipment commercially and competitively.

The West – aligned with fPakistan, wary of China and needing its buying power –  fails to provide arms to India 

The United Kingdom, the ex-colonial power, was best placed to meet India’s defence needs. But it was unwilling to supply arms against rupee payments. Military aid from the US for India was a non-starter, given that Pakistan was a close ally. The 1965 Indo-Pakistan war did not help. In 1971 the US-China détente prompted Henry Kissinger, secretary of state, to convey that America would not come to India’s assistance, against a Chinese attack, in response to India’s military action in Bangladesh. In comparison, the Soviets were generous – supplying military assets more modern that those supplied to China; readily accepting technology transfer and payment in Indian rupees. Consequently, the Indo-Soviet defence partnership has endured.

An informative, closely referenced read for diligent students of South Asian political economy, the author posits that India paid a price for foreign aid, which subverted indigenous institutions of collective decision-making, like the Planning Commission and the Cabinet. This assessment seems overblown. Institutions evolve and adapt. Their efficiency must be measured from real outcomes, not the stated objectives or the rigidity of the institutional framework.

The race towards assured mutual destruction in South Asia was fueled by competitive arms aid but civilian aid strengthened India

However, unregulated military aid has sparked off an arms race and contributes massively to the regional welfare loss from insecurity and high defence spend. But just as surely, civilian aid cushioned the negative impact of natural and economic shocks, boosted infrastructure and enhanced human development — all of which helped preserve the integrity of India’s nascent democracy. Individual, institutional or national egos were bruised in the process. In hindsight, that is a small price to pay, for what is today a sustainable and increasingly equitable, growing economy.

Adapted from the authors book review in Business Standard, May 23, 2018 http://www.business-standard.com/article/beyond-business/paying-the-price-for-foreign-aid-118052200013_1.html

Resurrecting ghosts is bad politics

AMU

One wonders whether Muhammad Ali Jinnah would have been disappointed or elated at a band of misguided, ultra-right Hindus, objecting to his portrait hanging in the students’ union office of the Aligarh Muslim University. Disappointment, at becoming a hate object, would fit well. the elegant, urbane man with a taste for fine suits, that Jinnah once was. Elation would align with the politician, who fueled the creation of Pakistan and who could now turn around and say – see, I told you so.

Zero-sum world view, led to partition

After all, it is a belief in the irreconcilable co-existence of Hindus and Muslims in one country, which led to the creation of Pakistan. The breaking away of Bangladesh from Pakistan, should have put an end to the unfortunate idea that only an Islamic state can assure a secure future for Muslims. Wars between Pakistan and India have deepened the distrust of the larger “Hindu” nation across the border. To be fair, we in India, have also not done a good job of forging a national identity, so compelling, that other social allegiances – religion and caste, fade in comparison.

It is true that professional, social relationships and regional affiliations – culture, language and food – often paper over the underlying segmentation of caste and religion. But seven decades of hotly contested electoral democracy has fed on and deepened the fissures, rather than cemented the gaps. In India we tend to avoid head-on collisions, preferring to skirt around intractable problems and hope that time will solve them.

Our history bears this out. Consider that a deeply traditional society was assumed to have magically evolved, on the eve of Independence, into a rational, scientific and liberal society, resonating with the personal beliefs of a microscopic, western educated elite, which was dominant in the transition from colony to independence.

If Jinnah’s vision, etched out in the constitutional assembly of Pakistan in 1947, of a Pakistan, which would not make a distinction between citizens on religion, sounds hollow, so too does our avowed adherence to secularism – the constitutional roots of which remain shallow.

India bends to avoid breaking

India is a “soft” state. The rule of law is not absolute. It has a time dimension. It is considered administratively wise to allow it to be bent, in the expectation that, with time and changed circumstance, the weight of institutional rigidity would bring it back to its rightful place. Inevitably, such flexibility in the application of the rule of law allows free play to mala-fide interests and dilutes the credibility of State actions.

Democracy can deepen divides

Democracy has unexpectedly, sharpened religious polarization. The good news is that it has also deepened caste polarization. Baba Saheb Ambedkar’s pessimism about Dalits getting justice via democratic institutions, without suitable tweaks and safeguards for positive discrimination, resonate much deeper today, than they did in the rosy-tinted period post-Independence.

Dalit empowerment has created a conundrum for traditional Hindu society. It upends the gentlemanly agreement between Dalit and upper caste political elites, to co-exist without upending the basic power structures which bind down the ordinary Dalit. For example, grooms must not ride a horse to their wedding in emulation of a custom, which was the traditional prerogative of prosperous upper caste people or display and fire into the air in celebration, at Dalit weddings.

Everyone is relatively better off

Admittedly these are mere, distant pinpricks when viewed from above. The helicopter view of Indian society remains positive and progressive. Urbanization evens the score for Dalits. The enormous expansion of the service sector has created jobs which are skill based, caste-neutral and anonymous. Similarly, exports offer opportunities for good jobs in handicrafts, textiles, leather, metalwork, carpentry – areas where Dalit and Muslim communities dominate.

Communalism, casteism and low development feed off each other

Luckily for us, much of the religious and caste angst is in the backward areas of the north and central India, where human development indicators are low and per capita incomes are below the median level. In 2007-08 India’s median Human Development Index (HDI) was 0.47. The states of Bihar, Jharkhand, Orissa, Chhattisgarh, Madhya Pradesh and Uttar Pradesh, comprising 41 percent of the total population, were well below the median.

Curiously, Pakistan in 2010, with an HDI of 0.53 was worse off that the border Indian state of Punjab at 0.61 (2008) but better than Rajasthan at 0.43 (2008). Bangladesh, in 2010, with an HDI of 0.55 was better than the Indian state on their border – West Bengal at 0.49 (2008). Cross territory comparisons are notoriously misleading. But it is startling than even several decades after political separation, the cross-border differences in South Asia are less stark than those within the country. India has made significant strides in improving human development outcomes since 2008 and achieved an HDI of 0.62 in 2015 with focused attention on backward regions. The Modi governments program of targeting around 15 percent of the total number of 640 districts for accelerated support, will further even out the spatial distribution of development and income.

In 2014 the Modi government came to power on the back of an impressive record of achievement at the state level in BJP rules states. A host of development initiatives have been unleashed, which seek to sustain macroeconomic stability, raise incomes, roll out infrastructure and reverse the ravages of environmentally unsustainable development. There are more successes than misses. This is solid ground on which to go to the people in the general elections of 2019.  It is unwise to fall into the temptation of maximizing political gains by departing from the narrative of achievement.

Also available at the TOI Blogs May 9, 2018   https://blogs.timesofindia.indiatimes.com/opinion-india/resurrecting-ghosts-is-bad-politics/

Lives dedicated to change India

RTI story

This is not a glib account of mobilising the rural poor, penned by a peripatetic babu or a drive-in-fly-out development expert. It is, refreshingly, a record of activists, who elected to spend the better part of their working lives making a difference, bottom upwards, and three decades later remain rooted in their karmbhumi — village Devdungri, Rajasthan.

school for democracy

Some came from well-off urban backgrounds and yet stuck it out in the harsh and relentless realities of the rural poor. This testifies to their commitment. But even to attribute high moral incentives to them, betrays the tinted glasses of this urbanised reviewer. The authors do not vent their frustration, voice their regrets or betray even a whiff of resentment against an uncaring world. What shines through instead, is their quiet joy and fulfillment, at doing something useful.

Aruna Roy, for all her careful attempts to disperse the credit, is the central figure. Born into a family of lawyers, she drifted into the elite Indian Administrative Service in 1968 but resigned in 1975 to work with the Social Work and Research Center (SWRC) in Ajmer. Clearly, goaded by the need to be more immediately and directly involved with real people in rural India, she left SWRC in 1983. Nikhil Dey — recently returned after college in the United States, seeking something beyond a comfortable life, became a friend; Shanker Singh, a local village official’s gifted son, adroit puppeteer and communicator extraordinaire, completed the group which bonded and decided to check out the rural empowerment landscape in Jhabhua, Madhya Pradesh. That seed did not flower. But bonds between the three deepened.

They resolved, in 1987, to put down roots in village Devdungri, which today is part of district Rajsamand in the Mewar region of Rajasthan. This was close enough to Shanker’s village, Lotiyana, to give the group an entry into rural life through his local bonds of kinship. Here, in a mud hut, rented from his cousin, the small group lived like the villagers around them and awaited a gradual immersion into the rhythm of village life and hopefully, local social acceptance — their doors and hearts open. Trust and credibility is central to an activist’s effectiveness.

MKSS

Meanwhile, the group refined the credo of their concerns. These coalesced around the need to enable the rural poor and marginalised, to look beyond their sordid reality of traditional social and cultural constraints, to understand and avail of, the constitutional rights available to them, within India’s democratic and institutional architecture. The disastrous drought, blighting the region, presented an opportunity. The standard mechanism for drought relief was to initiate civil
works.

By 1983 the Supreme Court had directed that public works must comply with payment of minimum wages. But this was rarely done. The group resolved that getting workers minimum wages would be their central concern. A related opportunity arose due to the tyrannical ways of a local sarpanch who misappropriated village development schemes for personal benefits and whose benami holdings encroached on village land.

In both cases, empowering the poor meant getting access to the government records of money allocated by the government for different schemes; the amounts spent, on what and when. At that time ordinary citizens could not access these records as a right. Often mistakenly, even a list of Below Poverty Line cardholders was conveniently construed to be secret. Consequently, in any dispute with government entities — around wages or non-inclusion for welfare schemes “the villagers were always the liars”. They had no way to prove their case because the truth was hidden inside the official records, to which only the government had access.

Getting the dispossessed to appreciate that access to information and knowledge is vital, was the easiest part. The awareness that local government intermediaries were swindling them kindled anger, and sometimes outrage among villagers. While the immediate oppressor is visible and becomes vulnerable, the veiled support of those higher up in the hierarchy, maintains the status quo. Getting villagers their rights, means changing the status quo from the top.

The political vehicle used by Aruna and her activist colleagues to generate awareness; the desire for change and an ecosystem for long-term support to deliver rights to the rural poor was the Mazdoor Kisan Shakti Sangathan (MKSS). The artful, determined and collaborative way in which it was constituted, and the strategic depth of its functioning is a delight to read. The ideological roots of the MKSS lie in the life and thoughts of Gandhi ji (non-violent protests against government apathy), Babasaheb Ambedkar (equity and dignity for all) and J.P. Narayan (social and political revolution within constitutional constraints).

The movement for access to political and social rights, formally started in 1987, expanded organically over time from the village level to the state level by the mid-1990s and finally to the national level by 2005, when the Right to Information Act was passed by Parliament. Parivartan, the Delhi-based NGO, headed at the time by Arvind Kejriwal, evolved its strategy of “direct democracy” from the MKSS methodology — a mix of rootedness in organising the poor from within; high moral, ethical and personal values; imaginative use of local folklore and theatre like the Ghotala Rath to lampoon corrupt politicians; careful research to unearth government information to pinpoint negligence, fraud or corruption using the vehicle of Jan Sunwais (public hearings).

Less successfully the MKSS also branched into directly managing kirana (provisions) stores in villages as a competitive force to make local traders less rapacious and reduce their profit margins. While useful as a temporary local intervention to break a trader cartel in a small village market, this model proved difficult to scale up. The MKSS also dabbled in village-level elections to get some of its well-intentioned members, elected and collaborate with like-minded parties. But it is far from transmuting into a political party.

Aruna and the team

Aruna, 41 years of age in 1987, is 72 today, Shanker is 64 and “young” Nikhil is 55. During the last three decades of their struggle, the Right to Information has been embedded into the accountability structure of the State, bringing the much-needed transparency. But making the State accountable to the people, in real time, is a broader unfinished task — top-down accountability and bottom-up participation, both need deepening. The good news is that the indefatigable trio is upbeat about conquering this frontier too.

This book is a must read for cynics, who want their optimism restored; those eager to share the pain and the joy of activism; organisational behavior “experts” and budding activists looking for pathways to India’s development.

Adapted from the author’s book review in The Asian Age, April 22, 2019 http://www.asianage.com/books/220418/read-it-to-know-the-pain-and-joy-of-activism.html

What the cash crunch foretells

Parliament's winter session

Conspiracy theorists are hard at work to identify the drivers behind the ongoing cash crunch, that has left the automated teller machines (ATMs) in cities and towns across large parts of the country dry. There is much finger pointing between the Reserve Bank of India and the commercial banks, both private and public sector, each accusing the other of being responsible for inefficient operations. It is unusual to see this level of discord, bordering on acrimony, between a regulator and the regulated entities.

Commercial banks bear the brunt of fuzzy policy objectives

The banks allege that the supply of high-value notes has dried up. The Bank Employees Union alleges that a shortage of imported printing ink at the currency press in Nashik could be one reason. Alternatively, this could be a covert attempt by the government to correct a problem dating back to the November 2016 demonetisation — the incomprehensible introduction of a Rs 2,000 note to replace the Rs 1,000 note as a measure to reduce black money. Phasing out the offensive new high-denomination note and stepping up the printing of new Rs 500 and Rs 200 notes instead is a more obvious and welcome blow against black money. The Ministry of Finance says Rs 70,000 crores worth of such “Hi-Value” notes can be printed in just one month. The value of such notes in circulation on March 31, 2017 (the last public data available) was Rs 7.5 Lakh Crore or ten times the value of such notes printable in just one month. So why a shortge ?

RBI waffles with poor communication

The Reserve Bank, unconvincingly, denies that there is any cash crunch and alleges the inefficiency of banks in properly allocating the available cash. Could this be a surgical strike by the banks and ATM service providers who have got unsettled by the criminal investigations into fraud or are upset with the March 2018 decision of the RBI to end the incentives for installing cash recyclers and ATMs for low-value notes? Was it their intention to embarrass the government by engineering a cash crunch to coincide with Prime Minister Narendra Modi’s visits to Sweden and the UK for the Commonwealth Summit? Possible, but far-fetched.

Cash remains king

cash is king

The most plausible reason is that the economy is reverting to its pre-demonetisation levels of cash held by the public of around 12 percent of GDP versus the hugely constrained post-demonetisation level of 9 percent of GDP in end of March 2017. Expectations were exaggerated on two counts. First, that the black economy would permanently be reduced. Second that digital and banked transactions could become uepreferred options. The second has indeed proved true. The use of cash by those who declare their incomes to tax, or even those below the tax levels, has reduced significantly.

But the big stick and carrots embedded in the Goods and Services Tax to incentivise the switch to banked transactions are not widely experienced yet. Systems and reporting compliance are clunky and curiously disadvantage the small, honest entrepreneur. Other small businesses may be unviable with a tax load.

RBI – bitten by the bug to ration currency, & create the “statistical” basis for “digital victory” 

Anecdotal evidence of how cash transactions are done show that post demonetisation, Rs 2000 has replaced the earlier Rs 1000 note as the preferred stock of currency held by high value entities and individuals. Unfortunately, RBI has squeezed the printing of this note. Prior to demonetisation, for every Rs 1000 note available, there were three Rs 500 and three Rs 100 notes. Post demonetisation, for every Rs 2000 note available, there are eight Rs 100 notes but just two Rs 500 notes available. RBI has curiously enlarged the relative supply of the highest value note (which is used mostly for individual stock of currency)  at the expense of having more transaction related currency in Rs 500 notes- possibly hoping that transactions would move to digital rather than remain in cash post demonetisation.

More importantly, not only has the overall quantum of currency, relative to GDP decreased, but even the share of Rs 500 and Rs 2000 notes, by value, in the total stock of currency has decreased, from 86 percent pre-domentisation to 73 percent in end March 2017 – possibly in expectation of individuals banking surplus stocks of money.

The ground reality is that the cash-based supply chain of goods and services is a subset of the demand for cash contributions, related to electoral politics. Highly contested elections are scheduled for mid-May in Karnataka and later this year in several other states. Cash resources will be needed to buy SUVs, print advertisements and motivate the lethargic population to vote.

Election Commission hesitates to adopt T.N. Seshan’s (ex-Chief Election Commissioner 1990-1996) muscular credo on mandate

ECI

Oddly, there is not a peep out of the Election Commission of India (ECI), which is charged with the responsibility of ensuring that election spending remains within the implausibly tight limit of Rs 20 to Rs 28 lakhs per candidate for Assembly elections. The EC has adopted an “end of the pipe” strategy. The intention is to catch the crooks once they show their hands via excess expenditure. A more proactive EC could have recognised the red flags of unusually high cash withdrawals unearthed by the media. It could have directed the Karnataka government to report on the ensuing potential for subversion of the code of conduct and the measures being taken to heighten border vigilance, to clamp down on cross-border transfers of cash. One can imagine former chief election commissioner T.N. Seshan diving through this open door for enhancing the regulatory ambit of the ECI. But today’s election commissioners appear to be content, at least overtly, with a narrower definition of their mandate, strictly as per the law.

RBI – a regulator at odds with its “caged parrot” status 

To speak the truth, the glory days of Indian regulatory institutions are over. Even the RBI, the first to be legislated into existence in 1934, is going through strained times. Demonetisation had spread the apprehension that the RBI was led by the nose from North Block in New Delhi. The extent of wilful defaults in the bad loans of public sector banks, often the consequence of ever-greening of impaired assets and plain fraud, also points a finger at the RBI for exercising inadequate oversight.

RBI governor Urjit Patel had appealed to the government through a public address on March 16 to bring public sector banks into a uniform regulatory arrangement as applicable to private banks. Domestic and international professionals support the broad thrust of a uniform regulatory arrangement for all banks. But the subsequent expose of the yawning deviations in ICICI Bank and Axis Bank from gold-standard board governance have cut the ground from under the governor’s feet.

Public credibility of commercial banks at its nadir

Mutual funds are upbeat about the prospects for equity investment in private banks. But the average person is inclined to quietly diversify away from private banks to the safe haven of public sector banks. Private insurance and healthcare are similarly perceived as being exploitative of the average consumer. It does not help that the Financial Resolution and Deposit Insurance Bill 2017 was worded so ambivalently that it fanned a deep seeded fear of savings deposits being sequestered as equity for resolving bankruptcy. Finance minister Arun Jaitley has been at pains to assure people that deposits up to Rs 1 lakh per account will remain guaranteed. But ministerial assurances provide very little comfort when elections are around the corner.

A common thread across this turbulence is uneven support from the government for beleaguered institutions and the absence of informed participation, quite unlike in the GST Council. RBI governor Patel bravely sat out the storm around the hasty implementation of the questionable policy option of demonetisation. But the Pandora’s box of crony capitalism has taken its toll. These are challenging times. Deeper bench strength, within the government, of trusted fiscal and financial expertise would help.

Adapted from the authors opinion piece in The Asian Age, April 21, 2018 http://www.asianage.com/opinion/columnists/210418/what-the-cash-crunch-foretells.html

Getting nationalism right

nationalism

If the term nationalism and the sight of the national flag generates a warm, comforting feeling in your heart, your government is doing a great job. If, however, this term and the flag, leaves you cold, clammy and resentful, there is something the government is not doing right.

Nationalism – an abstract construct – acquires a real dimension on rare occasions, like when you need visas to travel; or if you lose your passport whilst abroad; deciding whom to root for in international cricket; when a hate crime is reported against an Indian citizen; when P.V. Sindhu shines in badminton; when a stranger turns to you for help with her mobile, assuming all Indians are techies or when a cortege trundles, past draped with the national flag.

In comparison, ethnic, religious, professional, social or economic ties are more immediate and experienced daily. Should it be otherwise?

Nationalism versus globalization

Till recently, nationalism was a waning concept, marginalized by the increasingly interconnectedness of the world. The two decades post 1990, saw the world became unipolar; international trade boomed; the threat of wars receded – except in a few fragile regions. Poets dreamed, and the world seemed united, in solving the collective action problem of global warming.

Nationalism, it appeared, had bowed down to globalization and become just a set of civic duties and rights for citizens – a sub-set of broader rules governing the entire planet. High border walls, to keep citizen from escaping abroad or stopping those wanting to get in, became an aberration. Foreigners eager to become citizens became a metric of a country’s success and in the United States, the reason for it.

India appeared well placed to walk the talk. Our constitution is an enabler to pursue globalization. Our history places us at an advantage. We are no strangers to foreigners settling permanently in India. Foreigners ruled India for seven hundred years prior to 1947 and were assimilated into the mainstream. India did not come ready-made in 1947. It has been built, since then, using a mix of persuasion, pressure and perquisites. Parts of the North East, which had remained restive, have now joined the national mainstream, driven by the pervasive influence of Bollywood, domestic economic migration and adaptive political alignments. The valley of Kashmir however remains an outlier.

Drivers for sustained nationalism

The best glue for national integration is the perception that every citizen and every region is getting more from the nation than they are giving back. A positive balance, for every individual and every region is possible because in economics one plus one is more than two. Collective decisions create opportunities for adding net value, which do not exist if individuals were to decide separately. Managing climate change – a negative externality – and the beneficial scale effect from integrated markets – a positive externality – are both examples of the benefits from collective action.

Nations with complementarities should stick together. Sadly, they often don’t because of political noise or perceptions of inequity. Consider that our trade with South Asia is abysmally low. Imports are less than 1 percent and exports 7 percent of our total imports/exports. But India is not alone in such errant political behavior. Brexit happened because Britons felt, or were made to believe, they were giving more to the European Union than they were getting from it.

Inequity and discrimination – a leading cause for nations breaking up

bangladesh

Nations can splinter if systematic inequity persists and not enough is done to address the problem proactively. The creation of Bangladesh in 1971 is one such example. Pakistan managed its province of East Pakistan (previously part of Bengal) on an extractive basis, like the colonial masters prior to independence in 1947. It did not help that the new colonial masters were heavy handed, often brutally repressive fellow Muslims from Pakistan who ignored the deep Bengali cultural roots of the region. A perception of inequity fed on the fact of cultural differences and significant economic disparity between the two regions.

In comparison, India has been better at managing actual and perceived inequity at the regional or provincial level. Quotas for recruitment of tribes into the civil services have benefited the North East areas. Special benefits built into the scheme for devolution of central grants and share in union taxes, make additional resources available in tribal areas for infrastructure development. Caste, in Hindu majority India, is a significant driver of inequity. But quotas in government jobs and special schemes for livelihoods for the lowest and mid-level backward castes have levelled the field somewhat.

Embedding liberal, democratic principles in nationalism is tough

MK Stalin 2

Democracy breeds contestation. Tamil Nadu is the economic and cultural powerhouse of South India.Tamil, claims to be older than even Sanskrit,  With firebrand DMK leader, M. K. Stalin annointed to succeed strongman M. Karunanidhi; intense infighting in the ADMK after Amma and film star Rajnikanth exploring political waters, expect populism and rhetoric to prevail. A favourite ploy is to play victim and seek special status for a pan-Dravidar region, comprising the six southern states (including Puducherry). The cone of south Indian states comprises 21 percent of the population with an outsized share of 29 percent in national GDP and higher than average social indicators. Industrialized southern states benefit from access to the markets of the less industrialized northern, central and eastern India. The underdeveloped hinterland is a source for cheap, unskilled, migrant labour and a market to absorb skilled southern migrant workers.

Liberal Democracy is under stress internationally. Nationalism, conflated with authoritarian, even whimsical rule from the top, is on the ascendant. President Trump’s America First is the most distressing example, because it is a betrayal of existing international compacts. Russia, under President Putin remains whimsically self-centered. China, backed by recent economic success and the ascendancy of “Emperor” Xi, represents the most troublingly compelling, muscularly proselytizing, alternative to the liberal, democratic model of nationalism.

Partnerships, across nations, can secure the liberal, democratic order

In this dystopic, political landscape, ageing Europe and Japan emerge as beacons of liberal democracy.  Partnerships with them and select countries in Sub Saharan Africa and the Asia-Pacific can provide demographic and market dividends whilst fostering our common political and civic values, rooted in the Magna Carta.

Also available at TOI blogs March 30, 2018 https://blogs.timesofindia.indiatimes.com/opinion-india/getting-nationalism-right/

 

India’s 50-50 reforms

half reforms

Unlike politicians, who can choose their targets, business leaders have to dance to the tune of  shareholders, who buy or sell, based on the existing or the future bottom line. In politics. it is relatively easy to change the goal posts or indeed, shift the goal itself.

Changing goals

In India, the current metric for political performance, is jobs. Self -selected by the Bharatiya Janata Party, this may become a self-goal because even globally, there are few, near-term solutions.Prior to jobs, in the noughties, it was all about boosting economic growth — where again headwinds have built up. Before growth, it was about ending poverty in the 1990s. Earlier, in the late 1960s and till the mid-1970s, it was about boosting agriculture, becoming self-sufficient in food and avoiding famines. Even further back in the 1950s, heavy industrialisation and infrastructure were the mantra. Of course all these are part of development. But sequencing matters. Also, pancaking more reform targets on the existing ones, confuses even the reformers.

Partial success abounds, but excellence less visible

Seventy years on, we are only narrowly competitive in manufacturing; our infrastructure is vast but shoddy; agriculture has low productivity levels; 40 per cent of us are either poor or are vulnerable to poverty; we are still stretching for sustained real growth in high single digits; unemployment is rife and the participation rate in the workforce is a low 44 to 48 per cent, with women faring worse than men.

This is not to trash what we have achieved. But it is useful to look beyond the efforts made by the successive governments, at the outcomes and ask the question, why are the results always worse than expected?

Elusive transformative change

Tribal protest

Transformative change is disruptive. We have been slow in embedding credible instruments to mitigate the cost of disruption. This increases the risk perception of change, leading to a public push-back on reforms. Consider how poorly we acquire land in public interest. The instruments for identifying, determining and managing the acquisition are loosely supervised, at the cost of ensuing inequity and poor transparency.  Massive amounts of mineral resources continue to lie buried in tribal areas, whilst tribes prefer to eke out a subsistence level traditional life, rather than participate in the process of development. The overriding fear of every property owner, or occupier, is of being gypped in the process of acquisition, by forces beyond their control. In a democracy we cannot ignore insulating people, especially the poor, from the cost of disruption.

Public trust and credibility in short supply

Managing change successfully, requires a governance system good at modern parenting rather than a patriarchal approach to directing and controlling people and events. Our governance systems still follow the colonial legacy of collaborating with entrenched elites to get things done, somehow. Those affected at the bottom become a hindrance rather than participants. There is very limited institutional appetite or capacity to deal directly, as a change agent, with those who are most affected by change. Even when specific processes, like consultation are provided for, the approach degenerates to ticking the box, rather than using the opportunity to gather feedback on the process, test assumptions and obtain buy-in for the way forward.

“Accountable discretion” is not an oxymoron

It does not help that there is a near ubiquitous ban on the transparent use of executive discretion — prompted by misuse of the privilege in the past and a judicial preference for impossibly rigid rules, regardless of their negative impact on implementation.Consider, for example, the burgeoning non-performing loans of banks. The rule bound approach to bank lending insures the lender- manager, if sufficient security against the loan existed, on paper, when the loan is approved. The focus is on achieving secured lending targets rather than adding economic value. This makes gold plating of projects, to increase the notional value of an asset, a mutually convenient tactic between the lender and the borrower, especially at times when the real lending rate is low. Never mind that it can adversely affect the project’s viability and thereby the repayment capacity of the borrower. The public sector no longer trusts its employees. But ending supervised, executive discretion has significant efficiency costs.

Chasing impossible scale 

We succumb easily, to the insidious temptation to effect instant change at sub-continental levels, rather than build change, bottom upwards, block by block. India is heterogenous without parallel. For us, the political model should be Europe, rather than China. Multi party politics in India requires sufficient elbow room for diverse political agendas. The political architecture may prescribe the objectives and principles of public management. But being flexible in program implementation is a must.

The Constitution fixed past challenges, but under-provides for the future

Our constitution reflects the challenges faced at the time of independence rather than today’s priorities. Integration fears at the time led to a centrist constitution. This is what enabled the Union government in 1959 to dismiss the first elected E M S Namboodiripad government of Kerala. The governor of a state, appointed by the President, acting on the advice of the Union government, is another centrist feature as are the emergency powers of the Union government.

Overlapping mandates

The capacity constraints existing at independence shaped the lop-sided division of mandates between the Union and the state governments, with the former unduly burdened. The sub-state or local government came into existence only through a 1993 constitutional amendment.Delhi is a good example of poor inter-governmental allocation of mandate resulting in a governance logjam. Overlapping mandates confuse citizens. and reduce accountability. Consider that Members of Parliament get elected by getting drains made and Members of Legislative Assemblies by promising higher prices for agricultural products or by proposing a separate flag for their state — all areas outside their mandates.

Poor arrangements for resource management

The constitutional scheme for recruitment and management of the bureaucracy is unduly complex and diffuses accountability. Officials must be “owned” by the level of government they serve. Fiscal resources, at every level of the government, must be aligned with form, which should fit the functions executed at that level.

Avoid the Banyan Tree 

banyan tree

The top-down, centrist approach has the disadvantage of an overblown apex crushing the little people below. Remember, nothing grows under the Banyan tree.Change, sensitive to mitigating the costs thereof, flexible implementation of norms driven from below, with primacy for real value addition can deliver 100 per cent results in reforms.

 

Adapted from the author’s opinion piece in the Business Standard, March 27, 2018 http://www.business-standard.com/article/opinion/india-s-half-baked-reforms-why-are-the-results-always-worse-than-expected-118032601102_1.html#

Junk policy for action

parliament

Policies mean very little, unless there is a national consensus behind them, because governments change in a  Formulating a policy is a clunky, time- and effort-intensive, process. It should be attempted only if massive structural change is necessary. India has rarely been in the game of big bang reform. Our forte is incremental change. For this, key actions with outsize results are more significant than policies.

Industral licensing became ideological & lasted well past its expiry date

Also, policies can haunt a country for longer that necessary.The Industrial Policy Resolution of 1956 was one such. It was inspired by the seductive early achievements of the Soviet Union. The Bombay Plan 1944 formulated by leading industrialists, including the redoubtable JRD Tata, implicitly supported massive state intervention and regulation to protect domestic industry from foreign capital and competition. This became the trap, chaining private enterprise in regulations and excluding it from capital intensive “core” sectors.

Never mind that Jamsetji Nusserwanji Tata had invested in Asia’s largest integrated steel plant as early as 1907, helped by a buy-back arrangement from the British Indian government, which also laid a railway link to the site. It was India’s first public–private partnership (PPP).

tatasteel

It took us over eight decades, till 1992, to come around to the idea that leveraging public resources with private management and investment was cleverer than autarkic public investment. It took another 25 years for us to come to terms with foreign investment. In the meantime, India missed the bus of industrialisation and manufacturing, even as China marched ahead, from the 1980s, to become the factory of the world.The short point is that making a policy is no panacea for achieving results.

Were the existing low-level of health outcomes unachievable without a policy?

Health is a state government subject under the Constitution in India. But a National was formulated in 1983. Despite three decades of central planning since then, health outcomes vary significantly across states and aggregate achievements are unimpressive.

Gradual privatisation of SOEs is ongoing because there is no policy to stop it

Balco 2

Conversely, structural change is often implemented without articulating a policy.Consider the privatisation of state-owned enterprises. The National Democratic Alliance government under Prime Minister Atal Bihari Vajpayee found it impossible to build a consensus around privatisation. A comprehensive privatisation policy was therefore, never attempted. The Industrial Policy Resolution of July 1991 — which sought to weaken the stranglehold of the government over industry — had shrunk the industries reserved for the public sector to atomic power, defence, mineral oil, mining of coal, iron and other metals and the railways. This enabled the sale of minority shares in the other public sector undertakings (PSU). Then finance minister Yashwant Sinha used the 1999-2000 Budget to reduce the reserved sector to “strategic” PSUs in atomic energy, defence and railways only. All others could be privatised.

Gradual disinvestment has been ongoing, primarily with the intention of raising revenue. This year the government anticipates an all-time high of Rs. 1 trillion from disinvestment, being 30 per cent of non-tax receipts, other than debt.Seasoned bureaucrats will advise never write something down, unless you need to.

Electricity remains a “vexed” business despite reform legislation and policy

Merely articulating aspirational objectives in a policy will not achieve results. This has become particularly true in an uncertain world, made even more unstable by technology development. Clunky state action tends to come late and gets clogged into stranded assets.

This is the fate of our Mega Power Policy with 30 GW of power generation stranded because of low demand or disrupted fuel supply. Policies create huge inertia. Consider that as late as 2015-16 the Budget Speech sought to create 4 GW of additional power capacity, even as stranded power assets were building up.

Foreign policy is different 

ASEAN

Some policies are intended to signal political alignment and intent rather than become an entry point for concrete action. falls clearly in this genre. The “Look East” policy of the Manmohan Singh government was followed by the “Act East” policy of the present government — both signaling our interest in South East Asia. But substantively little has changed in the years since, even as China has gone, from being a dominant economic power to a power-hungry bully in the region.

Paris 2016 – the world laid to rest, climate policy & switched to voluntary actionable metrics 

India does not have a comprehensive  We tend to put development before the environment — in exactly the manner other developed countries have grown. This is pragmatic. The 2016 recognises the futility of having a single for the world. Instead, it defines a global target — reversing aggregate carbon emissions to keep global temperature rise within 1.5 degree Celsius of pre-industrial levels. Countries now evolve their own action plan, keeping in view their development needs. Collective action works better than global posturing.

Imagine the impact on Google’s share value if it bound itself to follow a medium term policy

Consider that multinational companies do not formulate business policies in an autarkic manner. They define strategies which, nimbly align with global trends to  eke out the maximum value for themselves. This is a sensible approach. We should get away from announcing sector policies. Instead, we could define incremental and jointed action plans, which result in achieving national objectives.

Google folllows the money. We could follow the Directive Principles in our Constitution

happy girl

National objectives do not need to be defined afresh. A close look at Part IV of our Constitution will suffice. The Directive Principles of State Policy were formulated more than 75 years ago. Our task is to put in place the action points to achieve them, via the annual and medium-term budgets. Politicians love announcing policies and programmes because these can be narrowly targeted at specific beneficiaries for votes. This is the downside of the dharma of  We should junk sector policies as an instrument of development. Intellectuals will disagree. But pragmatism must trump ideals.

Adapted from the author’s opinion piece in Business Standard, February 26, 2018 http://www.business-standard.com/article/opinion/junk-sector-as-an-instrument-of-development-118022500673_1.html

Delhi babus – between a rock & a hard place

delhi strike

The breakdown of a working relationship between the Aam Aadmi Party (AAP) government of the National Capital Region and its officers is a seminal moment. On February 19, AAP legislators heckled, abused and allegedly assaulted Chief Secretary Anshu Prakash, the Delhi government’s topmost bureaucrat, at the residence of the Chief Minister (CM). Both CM Arvind Kejriwal and deputy chief minister Manish Sisodia were present.

The legislators allege that the chief secretary (CS) used intemperate language in the shouting match between them. Cross-first information reports have been lodged by the two rival parties with the police. Further investigations would reveal the facts.

Chief Secretary’s complaint is, primae facie, more credible

But the circumstantial evidence favours the chief secretary’s case. He was summoned to the CM’s house for discussions at around midnight. He found a group of 11 legislators and/or partymen — notably all male — assembled. He was made to sit on a sofa, sandwiched between two legislators, who subsequently assaulted him. The bone of contention, according to the CS, was that the legislators were outraged that TV advertisements on the completion of three years of the AAP government in Delhi were not approved in time. The CS avers the advertisements violate the Supreme Court guidelines for government advertisements. The AAP contends that holding up the advertisement, churlishly, is yet another instance of how the Central government uses the office of the lieutenant-governor (L-G) to shackle the state government.

The state government-level staff and officer unions have demonstrated and resorted to work-to-rule tactics against the criminal assault on a government servant while on duty — which attracts severe punishment under the Indian Penal Code. Two legislators — the alleged assailants — have been arrested. The Delhi government is in turmoil.

Partial devolution creates potential for conflict in operations 

Beyond the inter-personal behaviour issues, which may have sparked the conflict, a larger problem looms. Are institutional arrangements for governance in Delhi so fraught that they breed conflict between politicians and the hapless bureaucrats, who have to play to the tune of two masters?

Long-term observers would say that no, that is not true. After all, for over two and half decades since 1993 — when elections were first held for the Government of the National Capital Region — this is the first instance of violent conflict.

Delhi is just a “half-state government” — to twist Chetan Bhagat’s evocative phrase. The management of land, the police and the civil service remains with the Union government, represented by the L-G. If the same party is in power at the Centre and in the state government, any conflict can be resolved internally. This safety valve is taken away when different parties are in power.

In the past – guile, maturity and sagacity avoided a breakdown of governance

However, this is hardly the first time that different parties have been in power. In 1993-98 the BJP under Madan Lal Khurana ruled the state, while the Congress under Prime Minister P.V. Narasimha Rao ruled the Union government till 1996. In 1999-2004 the tables were reversed with Prime Minister Atal Behari Vajpayee of the BJP heading the National Democratic Alliance government at the Centre and chief minister Sheila Dikshit, of the Congress, at the state level. So why the open conflict this time?

One difference is, that on the previous occasions, when power was split in Delhi between two parties, both were national parties with mature leaders, well versed and socialised in working within the constitutional constraints of the separation of powers. Put simply, ever since Independence in 1947, a “Lutyens’ political set” has evolved, which often seems to have more in common with each other than their own party brethren from out of town. This is not unlike the Washington “Beltway” syndrome in the United States.

Its different now – the Lutyens consensus is shattered

Since 2014, this “Lutyens’ consensus” lies shattered. Prime Minister Narendra Modi shuns the airy, closeted politics of the Lutyens kind. He draws power directly from the masses. Arvind Kejriwal, chief minister of Delhi, is cast in a similar mould. He exults in being “common” — preferring sweaters to jackets even in Delhi’s winter, with a trademark muffler around his head to keep the wind at bay and is usually clad in sandals rather than shoes. His partymen emulate his casual dress style.

PM Modi and CM Kejriwal are zero-sum people

Mr Modi and Mr Kejriwal are both visceral men. Every election is a zero-sum game which must be won. Compromise is akin to defeat. This strategy has worked for both of them. Neither is likely to change.

Delhi has become the battleground for Goliath Modi to slug it out with David Kejriwal. When elephants fight, the bureaucratic grass is bound to get trampled. Anshu Prakash, the incumbent chief secretary, finds himself between a rock and a hard place. A mild-mannered old-school bureaucrat, he has none of the Machiavellian skills needed to become a trusted adviser, simultaneously, to two implacable political adversaries.

Poor devolution impacts all municipalities in India

Is this sorry state of governance an outlier? Unfortunately, no. Till 1993, Delhi was a Metropolitan Council working under the Union government. In the states, municipalities work under state governments. There is inevitably a potential for conflict, or at the very least neglect (as in Calcutta through the long years of communist rule in West Bengal), if different political parties are in power in the state government and the municipality. Delhi municipalities are currently ruled by the BJP. Their staff have demonstrated in favour of the Chief Secretary. They face symmetric harassment too.  Fuzzy separation of powers and functions and inadequate devolution of finance make local bodies dependent on state governments. This stops cities from becoming the fulcrum of participative democracy and keeps them from becoming vibrant growth centers.

Delhi is a tinder box for igniting urban class-conflict – restraint is advised

Delhi violence

More immediately, in Delhi, we need a truce. The AAP would relish being dismissed by the President of India on the charge of a breakdown in the constitutional machinery. Even as traditional Communist parties remain immersed in obscure, internal ideological battles, it is the AAP which has succeeded in igniting a genuine class war in Delhi, between the “haves” and the “have-nots”. Alas, there are too many of the latter. In this classic struggle, it is the establishment — the bureaucracy and the police — which bear the brunt of public frustration. A dangerous trend, which could be a tipping point, in urban governance.

Adapted from the author’s opinion piece in The Asian Age, February 24, 2018 http://www.asianage.com/opinion/columnists/240218/trouble-in-lutyens-land-babus-as-political-fodder.html

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