Why Modi Should Shake Up His Sarkars

The BJP is now in power in 14 States. To meet expectations of visible change it needs to ramp up the velocity of reforms in the States for real momentum.

BloombergQuintOpinion

Shankkar Aiyar @ShankkarAiyar

March 11, 2017, 9:35 pm

The laws of physics state that mass into velocity delivers momentum. This is true for politics too.

On March 11, the day poll results poured in, the Modi Government completed 1020 days in office. The adoption of the logic from bottom of the pyramid economics onto a political model has yielded rich dividends. The BJP is now in power — on its own and with allies — in 14 states which account for over 60 percent of the population and over 70 percent of the geographical area.

The Logjam Is Not In Delhi

The vote symbolises validation of mass subscription to aspirational programmes. It also represents expectation — for velocity in the pace of change. The pace of change is daunted by deep structural flaws in the architecture of governance. Contrary to popular notions, the logjam is not in Delhi. The cure for causal factors of most issues — from human development indicators to investment and job creation — is located in the states. This demands rebooting of the structure of governance.

The fact that the BJP is now in power in half of India’s states affords a perfect segue. Bear in mind that the flip side of being in power means the metrics of incumbency kick in. Serendipitously for the BJP there is time yet, a window of opportunity — of 18 to 20 months, before the electoral slog overs — to accelerate the pace of change. And this calls for Narendra Modi to shake up his Sarkars.

The imperative for the shake-up stems from the upside — the potential for transformation — and from the downside, the embedded risks. Such is the slack and sloth in the system that frequently the process is converted into an end in itself.

To get a perspective take a look at the major flagship programmes unveiled by the Modi Government.

  • Make in India which needs Ease of Doing Business
  • Swacch Bharat
  • Smart Cities
  • Digital India
  • Skill India
  • Gram Jyoti Yojana
  • Pradhan Mantri Krishi Sinchayee Yojana
  • National Rurban Mission
  • Namami Gange
  • Adarsh Gram Yojana
  • Ujjwala Yojana
  • UDAY
  • AMRUT

Barring the Jan Dhan Yojana and its siblings for financial inclusion, most programmes unveiled by the Modi Government are located at the inter-section of centre-state equations. Change is stalled by a bipolar disorder — the overlap of authority and decoupling of accountability between the Centre and the states.

NT Rama Rao used to describe the Centre as a conceptual myth as every square mile of India is ruled by the States.

Typically policy is laid down by the Centre and the states have had little or no say in design. The Centre can do little about implementation which is vested with the states. This chaotic arrangement has been sustained for decades despite recommendations by multiple committees and commissions — from the First Administrative Reforms Commission in the 1960s to the Sarkaria Commission to the Second Administrative Reforms Commission that submitted 17 reports during the UPA.

To appreciate this tangle, look at one of the ambitious ideas — that is, 100 Smart Cities. Over 30 percent of India is already urban — some have postulated that it could be as high as 50 percent. It is well acknowledged that urbanisation is a force multiplier for growth and employment. It is also true that India’s urban landscape is dystopian to say the least. Ergo, the idea of 100 Smart Cities is, well, a smart initiative.

The Idea Of Representative Autonomy

The question that begs to be asked is what can the Centre do beyond evangelism? Yes, it can propose and promote competition between states. Yes, the Centre can facilitate the sister city tie-ups with international cities. The next steps are all with the states. How is that panning out?

Leave the “smart” tag alone for a moment. Examine the big issues with cities — water, sewage and waste management. Almost every city in India faces a water crisis — citizens have privatised solutions by paying up for bottled water and to the tanker mafia. Barely a third of the sewage generated in India is treated. India generates over 1.5 lakh tonnes of solid waste every day — 80 percent of which finds its way to overflowing landfills where it is burnt.

These are big tag billion rupee issues. And elected local bodies lack not just funds but functional powers — elected members of Mumbai’s Brihanmumbai Municipal Corporation (BMC) cannot alter/veto provisions of its budget — and functionaries to implement plans.

As the late Vilasrao Deshmukh once said memorably, what the Centre does to states, the states do to local bodies.

The 2011 Census observed the rise in the number of Census Towns — agglomerations that are neither town nor villages. In May 2016 the Union Urban Development Ministry asked states to convert 3,784 Census Towns into urban local bodies. The missive is now trapped in a bureaucratic exercise of “punctuation”.

Consider the Swacch Bharat Abhiyan — which is in a sense the conjoined twin of the Smart Cities programme. The headline story is about open defecation but the idea behind the initiative is to clean up India — which would mean reforms for sanitation, water supply, sewage treatment, garbage disposal et al.

In recent weeks the BJP has registered impressive wins in panchayat elections in Odisha and in local bodies in Maharashtra. The victories are fuelled by high expectations. It is a moot point whether the winners can deliver in the panchayats in Odisha or the municipal corporations in Maharashtra without a cooperative and collaborative state government?

Sure. The Centre can suggest funding structures, special purpose vehicles and even enable credit from multilateral institutions — but it is up to the states. Faced with limited resources and competing compulsions states often choose to deal with the immediate and postpone the inevitable.

It is true that following the 14th Finance Commission, the Centre has allocated more funds to the states and has even allocated Rs 2,87,400 crore (for 2015 to 2020) to local bodies. Of this, Rs 2,00,000 crore will be devolved to 265,000 Panchayats and the rest to municipal bodies. Try the math to ascertain what the eventual trickle will be. Yes. States are obliged to allocate funds for urban bodies but what is the flow?

It is not just about funds. Two decades after the passage of the 73rd and 74th Amendments panchayats and municipal bodies continue to be emasculated. The idea of representative autonomy remains an idea.

Must Everyone Okay Everything?

Make in India is both an economic and a political imperative. What is the biggest grief of investors? The process takes far too long.

The reason: investors are required to clear hoops and loops at the Centre and the States. A large housing or hotel project for instance requires over 120 permissions.

Theoretically Ease of Doing Business should not be an issue. After all it is 25 years since PV Narasimha Rao dismantled licence raj. But a cosy coalition of political parties and bureaucracy has kept permission raj alive.

The simple question that the Centre needs to ask is: must everyone okay everything?
This calls for decentralisation.

Through successive amendments to the Constitution (Third, Seventh and, the 42nd) in 1954, 1956 and in 1976 the Centre encroached upon the domain of states and expanded the Concurrent List to include — issues originally in the States List — for instance land, forests, administration of justice, population control, weights and measures and even education.

Quite simply the success of the flagship programmes depends on how intelligently the government is able to unravel the tangle that is the Concurrent List to decentralise form, funds and functions to the States. The Prime Minister has frequently invoked the idea of Team India — a collaborative effort between the Centre and the States to take India forward. Invocation alone though is not enough.

Acceleration in the pace of change calls for restructuring the framework of governance — essentially restoration of subjects back to the states. Given the complexities of the exercise this is a tall order for even a government with a majority. And this will take time.

This is why it is critical to shake up the Sarkars.

The BJP along with its allies is in power in 14 states — Uttar Pradesh, Uttarakhand, Maharashtra, Andhra Pradesh, Madhya Pradesh, Rajasthan, Gujarat, Jharkhand, Assam, Chhattisgarh, Haryana, Jammu and Kashmir, Sikkim and Arunachal Pradesh. There is an opportunity to craft competing models of governance — to deliver a demonstration effect.

For instance, the campaign in Uttar Pradesh was riveting in the many metaphors deployed by the BJP on delivery of electricity to homes and for businesses. The Modi government is proud of the work done under the UDAY programme wherein the debt of the bankrupt state electricity boards (SEBs) has been transferred to the balance sheet of the states, liberating SEBs to borrow at lower costs to buy power. However power shortage and outages persist. The reason is SEBs continue to be emaciated, the cause of bankruptcy is only partially addressed.

The difference between the value of power generated and the value realised — power sold and bills collected — is between Rs 80,000 crore to around Rs 90,000 crore (Rs 900 billion) annually. This is described as transmission and distribution losses — a euphemism for political capture and theft. This can be curbed only if states show the gumption to act. The BJP President could push the states it rules to serve as an example of exemplary political courage.

There has also been much debate about the high level of tax avoidance, about why enterprises stay small, and about the existence of an unusually large unorganised sector in business and industry. The nub of the problem is essentially the plethora of archaic rules that govern employment in India.

States like Rajasthan have made an effort to reform labour laws. A team led by Bibek Debroy at the NITI Aayog is formulating a more modern model code. Adoption will be up to the states. The BJP ruled states could show the way. This will also help to lure manufacturing that is shifting from China into India.

These are but some instances of the opportunities. The BJP could propel its states to pioneer creation of contract-based farming, public private partnerships for skills training, induction of technology in agriculture, creation of a cadre for panchayats and municipal bodies.

Opportunity beckons. Will the BJP grab it?

Shankkar Aiyar is the author of Accidental India: A History of the Nation’s Passage through Crisis and Change

You can email him at shankkar.aiyar@gmail.com or follow him on Twitter. His previous columns can be found here. This column was first published here.

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