The Indian economy is in bad shape. Gross domestic product (GDP), unemployment, savings and investment, wholesale and retail inflation, the exchange rate—all economic indicators—show signs of the malaise.
A variety of factors is blamed for the situation. A cause that is frequently overlooked, however, is the administrative deficit in the central government. There has been a collapse of both bureaucratic and ministerial decision-making and implementation in the executive branch. This problem is not new, but it has worsened under the United Progressive Alliance II (UPA-II).
The new government can address the collapse—and thereby help revive the economy—by focusing on four areas: anti-corruption laws, civil service reforms, central-state relations, and ministry reforms.
India’s anti-corruption efforts, however necessary and well-intentioned, have produced a chilling effect on public administration. Most notable is the Prevention of Corruption Act enacted in 1988. It applies to public servants and defines criminal misconduct. But some of the law’s language discourages action. For example, it defines as a criminal offence when any individual, “...while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest.” Bureaucrats, who are public servants, tend to make decisions that benefit third parties. In addition, “public interest” is a vague term. Such language is enough to make a public servant hesitant to act.
Making the situation worse is that the number of complaints received by the Central Vigilance Commission has risen significantly, tripling from 10,142 in 2008 to 37,039 in 2012. The increase reflects the pressure being exerted on corruption and has been reinforced by instances of whistle-blowing.
Ensuring the culpability of dishonest civil servants is critical, but it is equally important to protect honest ones. Challenges exist on both fronts, however. For example, Article 311 of the Indian Constitution makes it very difficult to take action against a civil servant. In addition, before a court can take cognizance of an offence under the Prevention of Corruption Act, Section 19 requires the sanction of the competent authority. Then there are delays granting sanctions, and technical problems with the process are used to argue for acquittal. Finally, trials take a long time, and conviction rates are low.
Protecting honest civil servants also has its hurdles. Some sections of the Prevention of Corruption Act shift the burden of proof to the accused, and there are several dimensions to corruption. In many cases of relatively petty corruption, the answer lies in eliminating monopoly and discretion and increasing transparency and accountability. However, discretion cannot be eliminated at the higher levels (joint secretary and above) of the central government. There is also a lack of clarity on the protection granted to retired civil servants.
The necessary reforms have been documented in more than one report by the Second Administrative Reforms Commission and should have been implemented by the executive branch. Since they were not, a writ petition was filed with the Supreme Court, which delivered a judgment on 31 October 2013. Among other things, this judgment directs the government to set up a central civil services authority, enact a Civil Services Act, and have a fixed minimum tenure. In addition, civil servants are not to act on the basis of verbal directions and instructions, are not to have any dealings with a person claiming to act on behalf of a business or an industrial house or individual unless the representative is properly accredited and approved by the department concerned, and must keep a record of all interviews granted to accredited representatives.
It is possible to complain of judicial overreach and that some of these recommendations constrain efficient decision-making. However, the Supreme Court would not have got involved had the government implemented the recommendations of the Commission.
The agenda for the new government is straightforward: set up a central civil services authority, enact a new Civil Services Act, revamp the laws on corruption, and change the Conduct Rules. The new administration should also swiftly enact the pending amendment to the Prevention of Corruption Act.
Civil service reforms
Reforms that enhance quality and productivity in the civil service are necessary to improve decision-making and implementation.
In September 2013, UPA-II announced the establishment of the Seventh Central Pay Commission to examine the compensation of central government employees. In the past, the actions of these Commissions have often led to a substantial increase in salaries. Logically, this ought to happen if there has been a commensurate increase in productivity. Arguments are sometimes advanced about low government salaries and the need to raise wages to attract and retain talent. But if one accounts for perks and allows for a job security premium, that proposition is no longer valid. Therefore, the new government’s plan for this Commission should be to reform the civil service by using performance appraisals to incentivize employees.
A failure to clarify the states’ role in policymaking has exacerbated the administrative deficit. Whether the issues involve a central counter-terrorist centre, a goods and services tax, or agreements with Bangladesh, the decisions have been held up by confusing the jurisdictions and priorities of the central and state governments.
The new government can begin rectifying the situation by focusing on fiscal transfers. Article 280 of the Constitution provides only one mechanism—the Finance Commission—for transferring tax revenue from the central government to the states. There is no provision for plan transfers that are executed by the Planning Commission according to development plans rooted in the Five-Year Plan and discretionary transfers.
Therefore, the Plan versus non-Plan distinction should be abolished, transfers through the Planning Commission drastically reduced, and non-discretionary transfers made through the Finance Commission. In addition, the new government should revise the system for discretionary transfers by the Planning Commission through Centrally Sponsored Schemes (CSSs)—schemes that are largely funded by the central government but carried out by state governments and requiring matching contributions from non-special category states.
The Planning Commission’s view on CSSs, at least in the course of the 10th Five-Year Plan, was the following: “It would be better to do…fewer things well rather than messing up with a larger number of activities…One of the ways to reduce the mismatch between the lofty intentions of the (government of India) and its poor implementation capability is by re-examining...Centrally Sponsored Schemes, and by radically limiting its number and improving its flexibility. The share of the CSSs in the Plan budget of the central ministries has now increased to 70% against 30% in the early 1980s. This massive increase has however not been matched by improved monitoring, and effective control over diversion of plan funds for salaries and other non-plan expenditure. Therefore the number needs to be curtailed drastically from more than 200 today to just about 20 to 40...”
There are other problems with CSSs as well: they encroach on states’ authority; they increase states’ financial burden; they impose conditions in areas that are the legislative domain of the states; and they transfer funds to autonomous bodies, bypassing the states.
The CSSs should be pruned, and more “untied” funds should be available to the states. Funds need not be completely untied; there can be overall guidelines and some indication of the sector for which the funds can be used. However, states need to have far greater flexibility.
It makes sense to retain only those CSSs that are in some sense demand-driven. For example: Swajaldhara (for drinking water), the Mahatma Gandhi National Rural Employment Guarantee Act, the Total Sanitation Campaign, National Horticulture Mission, National Rural Health Mission, National Urban Health Mission, Sampoorna Grameen Rozgar Yojana (for food and employment), and Integrated Child Development Services. But even in such cases, the centralized template should be tweaked and weakened, so that states have greater flexibility.
The Constitution Amendment Act of 2003 specifies that the number of ministers in the Central Council should not exceed 15% of the total number of members in the Lok Sabha. UPA-II had 51 ministries and 79 ministers—nearly the maximum allowed by law. The administrative deficit can be traced in part to the existence of so many ministries. For example, roughly counting, an average infrastructure project requires 56 authorizations and clearances from 19 ministries.
The disproportionate influence of these ministries also has had an effect. Constitutionally, issues are meant to be resolved through collective decision-making by the Cabinet. Under UPA, however—and more so under UPA-II—this system was shortcircuited by a large number of Groups of Ministers and Empowered Groups of Ministers. There are no reliable figures on how many of these groups exist. But according to journalists’ reports, 183 such groups have been set up since 2004.
Clearly, to rectify the administrative deficit as well as protect constitutional sanctity, there is a case for re-examining the number of ministries and ministers at the central level. And it is not hard to imagine fewer. If, as stated earlier, there is clarity of central and state jurisdictions, a single ministry for social sectors could suffice. And India does not require so many ministries for energy or for transport.
The administrative deficit may not be talked about as much as the fiscal deficit. But if it is not corrected, growth will not pick up. India doesn’t need new commissions or committees to determine what needs to be done. Recommendations already exist; they merely need to be implemented. Administrations often tend to focus on “policy”—but any policy is only as good as its implementation.
Bibek Debroy is a professor at the Centre for Policy Research, New Delhi.
This is adapted from a chapter in the upcoming book Getting India Back on Track edited by Bibek Debroy, Ashley J. Tellis and Reece Trevor. It will be published in June by the Carnegie Endowment for International Peace and Random House India.