My last two columns have been motivated by the impending demise of the Planning Commission. I suggested that this event gives an opportunity to think beyond the narrow question of what might replace that institution, to exploring the structures and functioning of government in India. That analysis included emphasising the limitations of the ?think tank? idea, and the inappropriateness of China?s National Development and Reform Commission as a role model for what India can or should do.
Here I want to explore the feasibility of government reform. At a recent conference on the Indian economy, I remember some speakers were very pessimistic about there being the political will for achieving an improvement in government functioning. Why? Think back to the milieu that gave birth to the Planning Commission. The approach to governing India after independence was a sort of enlightened paternalism, fitting well with the country?s history of social hierarchies, limited expertise and concerns for political stability while achieving rapid economic change. Along the way, this paternalism (and sometimes maternalism) has tended to get perverted. Government decision-makers often want to keep enjoying the perks of power, which include money as well as non-monetary benefits.
Despite economic reform, and complaints about the withdrawal of the Indian state in favour of the private sector, much of the problem of Indian governance is that the state still exercises a great deal of paternalism, in the form of discretion. Discretion is appealing to those who think their expertise and judgment will lead to socially better decisions?ultimately, some discretion is necessary, for exactly this reason. But discretion also allows for decisions that favour the decision-maker rather than citizens. This emerges very clearly from the stories told by the former Comptroller and Auditor General (CAG) in his new book, Not Just an Accountant. In these cases, the discretion sought by politicians or political appointees also came with lack of transparency.
Discretion allowed politicians to make decisions that did not clearly maximise some agreed-upon social objective (for example, maximising government revenue from spectrum allocations, or maximising wireless access, or minimising costs of procuring aircraft, or choosing an aircraft purchasing policy that was optimal for the government airline, and so on). In many of these cases, auditing after the fact is a much less efficient way of operation than having better, firmer and more transparent rules up front. Ideally, the CAG?s office should have to do much less work than has been required of it.
The CAG?s office deals with fraud and waste, but there are cases where, despite the best efforts of decision-makers and implementers, the results are not what were hoped for. This should not be an issue with buying aircraft or selling spectrum, but has been a persistent problem with large-scale spending programmes. Those programmes, even if there is no fraud or waste, might just not be well-designed, or may be implemented poorly for various reasons. These problems are not within the scope of the CAG?s office, but require some kind of autonomous evaluation office to review outcomes.
Again, just as well-designed rules for procurement and allocation reduce the work of the CAG by reducing corruption and waste, good procedures for programme design reduce ineffectiveness and improve outcomes, reducing the work of an evaluation office. The Indian situation is the following: government procedures in India are well short of commonly understood best practices. In some cases, bureaucrats do not have the requisite expertise in-house, but government processes do not seek this expertise from outside as and when needed. In other cases, the bureaucrats have the expertise but are not allowed to exercise it to the fullest extent. In the second case, politicians are the obstacle. In the first case, the roadblock may be politicians, bureaucrats, or both.
In sum, those who currently exercise power and discretion may choose to protect their domains, rather than allow structural improvements in governance. This is a larger and more pervasive problem than the ineffectiveness of the Planning Commission and what kind of institution might replace it. Having a good decision-maker at the top is preferable to not having one, but it is not enough to solve India?s problems of governance. Better coordination across decision-makers, better decision-making at each level, bringing in more expertise at each such level, and better processes and rules are all needed. These are structural as well as procedural improvements, but do not necessarily require organisational leaps: much can be achieved through incremental change.
The problem is that there is a reluctance among many in government to consider such possibilities for change. In the bigger scheme of things, bureaucrats are perhaps less culpable than politicians for the impasse. They have expertise and are used to following processes, especially since sticking to rules helps to shield them from blame if things go wrong. It is the political leadership that has to believe that it can glean greater rewards from structural change throughout government than from preserving the status quo. It is not clear yet if this is the belief of the new leadership.
The author is professor of Economics, University of California, Santa Cruz