Dr. Bimal Jalan - Governor, Reserve Bank of India     


India's Polity: Crisis of Governance
- The Asiatic Society, Kolkata - Indira Gandhi Memorial Lecture, November 19, 2011

This Asiatic Society Lecture, to celebrate the memory of our late Prime Minister Indira Gandhi, is a truly landmark occasion. Over the past several decades, the Society has made multifold contributions to promoting India's cultural, social, democratic and secular heritage for the benefit irrespective of religion, caste, creed and regional considerations. I feel particularly privileged to have been invited to deliver this year's lecture. After receiving the Society's gracious invitation, I also had the opportunity to go through several of the earlier lectures delivered by eminent and highly distinguished academic personalities on matters of historical and contemporary interest. I must confess that, as I speak before this learned audience, I feel deeply conscious of my own academic and professional limitations to be able to say something which would even half-way match the depth, erudition and intellectual vigour of Asiatic Society's previous lectures.

This series of lectures has been named after one of our earliest and longest serving Prime Minister Indira Gandhi. About her contribution to building our nation, I can do no better than quote Professor Hirendra Nath Mukerjee who delivered the Asiatic Society Lecture 15 years ago - in 1996. An eminent scholar and a parliamentarian, he summed up both her negative and positive contributions to our country in the following words, I quote:

"..She was in her time a controversial figure: one phase of her career that saw (1975-77) the imposition of an 'Emergency' was such that the country has come to 'look back (at it) in anger'. That lapse throws unhappily a dark shadow on her work. But history, which is no 'Hanging Judge', pronounces on a person or period on the basis of comprehensive criteria, balancing good and evil elements in between, seeking the essence of the legacy of an individual or of a movement. She may be judged sternly but not too harshly for, at bottom, there can never be a doubt about Indira's love for and pride in her country, her insistence, testified by friend and foe when she was the Prime Minister, on the dignity of our India and on an erect posture of self-respect in exacting international situations...."

The subject of my talk today, as you are aware, is "India's Polity: the Crisis of Governance". I have chosen this topic as I believe that, as we look deeper and wider in the functioning of our polity, we have to recognize that we are at cross roads. Unless we tackle some of the emerging problems, the process of national integration, which is a hallmark of India's democratic heritage, may itself be at stake. Already 170 districts in India (out of 560), according to official sources, are ungovernable. Some years ago, the Prime Minister himself referred to this as the "single biggest internal security challenge faced by our country".

On the prevailing crisis of governance, let me begin by emphasising that what makes the present situation much more alarming than during earlier decades is that it is no longer “episodic”, that is, confined to some outrageous event now and then. Over time, it has become “systemic” and spreads across practically all segments of the society, including governments at center and states, public institutions, corporate sector, sections of the media, and so on. There is widespread deterioration in administrative and public accountability, prevalence of corruption, income disparities among various sections of the people, rising power of criminals in politics, and the emergence of small parties as primary factors in determining the survival of multiple-party coalitions in power.

In this Lecture, I propose to confine myself by a few core and pragmatic issues relating to emerging crisis of governance in the administrate and political system, and also suggest some measures to improve the working of our government for the benefit of the people. Many of the recent developments in the working of the vital institutions of the state were not visualized at the time of the framing of our Constitution. Some of these have substantially reduced the responsibility and accountability of multi-party governments for what they do, or for that matter, what they do not do.

A fundamental "systemic" change, which dominates the working of India's politics today - unlike the first four decades after Independence - is the emergence of coalitions as a "regular" form of government since 1989. India has had as many as 9 governments during past 21 years - with an average life of less than 2.5 years. Of these, 3 multi-party coalitions survived their 5-year terms with occasional set backs and shifts in the composition of parties supporting them from inside or outside. Excluding these three and the present government in office, the average term of 5 governments with enormous powers to allocate resources, control public enterprises and decide inter-state allocation of investments - was less than 1year.

It does not take a political genius to recognize that if he or she is in politics and gets elected to Parliament or a State Legislature, his or her life expectancy in office is likely to be "short" and entirely dependent on the party leader - unless, of course, he or she happens to be that leader, or a direct descendent of that leader.

The crucial point here is that at the time of formation of a multi-party coalition government, general expectation of small and regional parties is that enormous powers that their nominees, as ministers, enjoy may not last very long - or that it may change if a more powerful leader of one or two large parties in coalition so decides.

Under the present Constitutional provisions, as a consequence of amendments carried out in 1985 and again in 2003 to prevent defections, now there is also a built-in incentive for fragmentation of political parties at the time of election. This is because smaller a party, the greater the power of an individual legislator to defect to another party in search of political power without having to relinquish his or her seat in Parliament or State Assembly. On the other hand, a member elected from a large national party has very little discretion to defect without the support of a substantial number of other members, who also wish to defect. Thus, the smaller a party the easier it is for a few of its members or all of them to switch from one coalition to another, and maximize their political capital. The same is true of so-called “independent” members, who are supported by some political parties during elections. In a situation where multi-party coalitions are the norm, all regional or caste leaders naturally have a much greater incentive to form their own separate parties.

In addition to fragmentation of parties and short life expectancy of coalition government at birth, in recent years, there has also been a subtle change in the role of Parliament, and the accountability of executive to Parliament. Parliament now has multiple centers of power (in addition to the party leading the government, and the party leading the opposition). An important consequence of the emergence of multiple centers of power is that what Parliament does or does not do depends on ‘behind the scene’ agreements among different sets of party leaders within and outside government. As long as the government has the backing of sufficient number of leaders, it is supreme and it can get Parliament to do what it wishes. As Eric Hobsbawn, the noted historian and political analyst, has pointed out in another context, when important national decisions are taken among small groups of people in private in a democracy, the position is not very different from the way they would have been taken in non-democratic countries.

Unfortunately, over the past two decades in particular, politics has also become a career of choice by persons with criminal records. The investigative and prosecution machinery for suspected criminal activities is under direct control of departments of the government. There is a natural reluctance to speed up investigations and the prosecution of persons who are leaders of political parties and/or members of the cabinet. According to the statistical survey of elections to the Lok Sabha in recent elections, it has been found that nearly 20 percent of the candidates surveyed, cutting across party line (excluding independent candidates) had criminal antecedents. In the present Lok Sabha which has 543 seats in all, well over 100 members had criminal cases pending against them. No wonder that physical scuffles and assaults among some members on the floor of state assemblies, and even Parliament, is not an uncommon sight when tempers rise because of charges of corruption and wrong-doing by leaders of one political party or another.

Further, unlike other democracies, in addition to major industries like oil, gas and steel, public sector enterprises in India are dominant in the financial field (particularly banking and insurance) and transport (particularly railways, ports and airports). Award of contracts as well as operational priorities, in addition to appointments, are subject to ministerial discretion without sufficient accountability.

Recently, there has been widespread public outrage about corrupt ministers at the centre and states about scams relating to allocations of public resources, such as, land, mines and gas. Some ministers have also been sent to jail by the Supreme Court and High Courts because of involvement in bribery and other illicit practices. To see our so-called Hon'ble ministers in jail is a sad commentary about the functioning of India's democracy. But let us also ask ourselves - how is it that these Hon'ble ministers had the opportunity and such enormous discretionary powers to accept massive bribes from corrupt corporates? Who gave them this opportunity? Was it the intention of our Constitution to confer such powers on elected representatives of the people?

A fundamental principle laid down in our Constitution in Article 75(3) is that "The Council of Ministers shall be collectively responsible to the House of the People". However, recent history is full of instances where important policy decisions, leading to considerable revenue losses to the government and/or unwarranted allocation of public resources for personal gain by political leaders, were taken without individual and/or "collective responsibility". A striking example, which still dominates media headlines, is in respect of allocation of 2G Spectrum. Heads of ministries, which were involved in the process of allocation have been "passing the buck", as it were, to some other ministry or to their own civil servants on the ground that they merely concurred in the decision taken by some one else. It has also been claimed that in any case, the final decision was approved by the Cabinet. If this was indeed the case, then the question arises: what does the "collective responsibility" of the Cabinet mean?

Another development, which has gathered further momentum in recent years, is the politicization of India's bureaucracy. In theory, under Indian system of executive responsibility, there is supposed to be a clear division of roles between the permanent civil service and the political leadership. Government's policy priorities and its work program are set by politicians. However, bureaucracy is supposed to ensure that implementation of the approved program is done according to the laws and procedures in force, without fear or favor, for the benefit of all the people regardless of their political affiliations.

Over the years, slowly but surely, the role of the bureaucracy has been seriously compromised. Any party which comes to power and joins a multi-party coalition, is inclined to appoint favored bureaucrats in sensitive positions who, in turn, are expected to carry out the wishes of its party leaders, irrespective of their merits or legality.

As emphasized by several former cabinet secretaries and other high level officials in their memoirs, most of the administrative powers which were earlier in the hands of the civil servants have now been taken over by political masters at the ministerial level who have no direct or indirect experience of administration. As politics has become more combative and personalized, and coalition governments have become less secure about their tenure in office, transfers of civil servants have also become very frequent. Some years ago in U.P., for example, where two parties resolved to have a 6-monthly tenure in government, there were as many as 1000 transfers within a year amongst members of the IAS and the IPS. First head of government transferred senior officers at an average rate of 7 per day. The second head of government, who took office after the expiry of 6-month period, decided to beat this record and transferred officials at the rate of 16 per day!

As a result of frequent transfers, administration has naturally become weak. What is even worse is that civil servants, instead of being independent of political leaders or parties in power, have now become sub-servient to them. Bureaucratic corruption has also become rampant, both to avoid transfers as well as to secure remunerative postings.

India perhaps also has the largest number of programs, launched by the government, to provide subsidized food, primary education, housing and improved rural infrastructure for the benefit of the poor. Yet, the absolute number of persons below the poverty line has been rising rather than declining. Assuming that as many as 200 or 250 million people are currently benefiting from the high rates of growth in manufacturing and services in the private sector, more than 800 million persons in India would still continue to be at the periphery of the circles of prosperity for quite some time. This paradox can only be explained by the poor state of governance and rising incidence of corruption in the public delivery system.

A good example of substantial diversion of subsidies and budgetary resources to unintended beneficiaries under an important poverty alleviation program is that of the Targeted Public Distribution System (TPDS). Under this program, in order to provide food security, certain quantity of food grains are provided under the public distribution system (PDS) at highly subsidized prices to households with incomes below the poverty line (BPL) families. The objectives of this program are indeed laudable and are supported by all sections across the political spectrum. However, an evaluation study covering 60 districts and 3600 households, undertaken by the Planning Commission a few years ago, found widespread diversion of grain from genuinely poor families to other households. Among its findings, the following are particularly disturbing:

  • 16 large states covered under the study were issued 14 million tonnes of food from the central pool for distribution to BPL families. Of this, less than 6 million tones (or only about 40 per cent) were delivered to the BPL families, and the rest never reached them;
  • Thus, for every kilogram of food grain delivered to the poor, Government of India had to issue 2.4 kg of subsidized grain;
  • Out of the consumer subsidy disbursed by centre to these sixteen states as much as 60% did not reach BPL households.;
  • The Government spent Rs.3.65 through budgetary food subsidies to transfer Re.1 the poor.

There could not be a more serious indictment of the governance system in India than the above findings of the Planning Commission. There are multiple reasons for failure of administration to deliver services to the poor, or for that matter, improve public infrastructure. The most important reason, in addition to some of the political factors mentioned above, for this state of affairs is the proliferation of ministries and offices of government over time. There is no item of government business for which a single ministry can be held responsible, except perhaps taxation or the budget-making. The number of ministries has shot up from 18 in 1947 to 75 or more now, and there has been a sharp increase in the number of cabinet ministers, independent ministers of state in charge of separate ministries, and large number of ministers of state who report to cabinet ministers. Many of these ministries have very little to do. All ministries also have more than one department and several sub-ordinate agencies. The rigid hierarchy in the delivery and decision making process further ensures that horizontally as well as vertically, a dozen or more offices are likely to be involved from different ministries, including Planning Commission, even when there is no policy to be decided, such as, say, provision of drinking water or electricity to rural areas.

In addition to the Center, there is similar proliferation of governmental organizations at the state and district level. It has become a routine matter for policy to be announced by the central government, but implementation to be in the hands of state government and their subsidiary organizations. Central government blames state governments, and the latter blame the central government for rigidity in the provisions of the scheme or inadequate allocation of funds. Within the central government, it is now common for one department or ministry to blame another department for any drawback in either policy formulation or policy implementation.

The proliferation of multiple government agencies involved in the decision making process, without any individual or collective responsibility, combined with complexity of administrative rules and regulations has had the inevitable result of increasing both the demand and supply of corruption in India. Thus, according to the widely quoted Transparency International's corruption index (EPI), India was ranked as having one of the highest levels of corruption in the world. India's rank was higher than non-democratic countries like China. It was also substantially higher than other East Asian countries like Japan, Malaysia and South Korea.

In addition to wide acceptance of corruption as a necessary evil, another area of grave concern is the interlocking or 'vertical integration' of corruption at various levels of the government hierarchy—elected politicians, higher bureaucracy and lower bureaucracy. Along with vertical integration, there is also horizontal spread of corruption to other public institutions, large corporates, parts of judiciary, media as well as independent professions. This has made the prevention and control of corruption even more difficult. As if all this were not enough, another unfortunate development has been the politicization of corruption. Increasingly, cases of corruption are being given a political color without any serious intent to tackle the problem. This has facilitated the entry into politics of persons with a track record of corruption. The public no longer knows whom to trust—the accuser or the accused.

Corruption is now a major hurdle in growth, development and poverty alleviation in India, as indeed in several other countries. Research has established that in the long run corruption reduces productivity, lowers investment, causes fiscal drain and has a debilitating effect on efficiency. Unfortunately, these adverse effects of corruption are not generally appreciated by India's political and legal institutions or its public.

It is abundantly clear that unless Indian authorities take some measures to improve governance and reduce the "demand and supply" of corruption in the economy, there is simply no way in which India can reduce the rising disparity (and despair) among the bulk of its people. Given the current political scenario of multiple-party coalitions with no shared agenda, dramatic reforms or "hard" measures to improve administrative efficiency may not be feasible in the near future. However, hopefully, with the emerging pressure from the Civil Society, over the next few years it should be possible to evolve a consensus on introducing a package of reforms which are relatively benign and are likely to be in the overall interest of the country as a whole.

An important priority is to redefine the primary role of government in the economy. At the macro-economic level, the political (i.e. ministerial) role of the government should be to ensure a stable and competitive environment with a strong external sector and a transparent domestic financial system. While the macro-economic priorities (for example, the so-called trade-off between growth and inflation) may be decided by the government, the instrumentalities for achieving these objectives must be left to autonomous regulatory and promotional agencies. Similarly, government's direct role in economic areas should be re-set in favor of ensuring the availability of public goods (such as roads and water) and essential services (such as health and education) to the people. In these areas, the government's role must expand substantially. At the same time, its role in managing commercial enterprises deserves to be correspondingly reduced. The latter objective should be achieved without in any way affecting the financial and other benefits of those who are presently employed.

Similarly, it is necessary to simplify administrative procedures and reduce the number of agencies, at different levels, involved in providing clearances for undertaking any activity. For example, at least thirty different clearances involving several agencies at the Center and the states, are required for setting up even a modest-sized industrial factory. Except in selected areas, it is desirable to cut through the elaborate red tape and rely primarily on 'self-certification'. The government can lay down standards and norms (for example, in respect of environmental impact or safety), and the entity concerned may be required to 'self-certify' at the highest levels of management that these have been complied with as per the notified procedures. Government agencies can make random checks and in case there are violations, appropriate penal action can be taken. Similarly, the present complexity in regulations should be reduced drastically. Such simplification has been tried out in some areas with success (for example, foreign exchange transactions).

A related area is transparency in the decision-making process within the government. A major step in this respect has been taken with the enactment of the Right to Information Act, 2005. The beneficial impact of this legislation in making the government accountable and citizen-friendly is already visible. A further step in this direction is to make it mandatory for all ministries and departments of the government to voluntarily make information on the decisions taken by them available to the public (excluding security-related subjects). It may be clarified that information should be released by the ministries themselves without the need for any member of the public to ask for it. If this is done, the free media and civil society institutions will constitute an effective instrument for enforcing accountability in the decision-making process itself.

Case studies of international experience in the management of public services show that the objective of such programs can be achieved better, and at less cost, if a distinction is made between the ownership of these services (by the government) and the delivery of such services (by non-governmental organizations and local enterprises). In such cases, the public authorities retain the responsibility for regulating and monitoring the activities, providing subsidies where necessary, and laying down distribution guidelines. In India, two noteworthy examples of public-private collaboration in the area of public services are: the public call offices (PCOs), which revolutionalized the availability of telephone services all over the country in the 1990s, and the Sulabh Sauchalayas, which, despite some problems, are estimated to have provided sanitation facilities to ten million people at very low cost.

In addition to administrative reforms and improving the functioning of governments in power, it is also necessary to introduce some political reforms to reduce corruption, power of small parties to destabilize multi-party coalitions, and attractiveness of politics as a career for persons with criminal antecedents. I have dealt with these and other political issues which require urgent attention in some detail elsewhere (please see "India's Politics: A View from the Backbench, Penguin, 2007). Let me just mention three urgent political reforms which require to be undertaken as early as possible.

First, the anti-defection law should be made applicable to small parties and independent members who choose to join the government. In other words, those who join the government cannot defect (as has happened in several states of India in past few years) without having to seek re-election. At present, as mentioned above, there is a built-in incentive for fragmentation of political parties at the time of elections as the anti-defection law applies only to members of a particular political party irrespective of their numbers in Parliament or Legislatures. This has had the unintended consequences of providing an incentive for formation of small parties, and reducing the personal autonomy of elected legislators belonging to a large party.

Second, highest priority should be given by Courts to hearing cases of elected leaders with criminal antecedents. Their cases should be mandatorily decided within six months after their election. Such a procedure would effectively "reverse" the incentive for criminals to choose politics in order to delay investigation of their cases and possible conviction. In fact, they may choose not to contest elections so that they are in a position to delay hearings through normal legal procedures!

Finally, in view of the high cost of periodic elections, governance can not be improved without reducing the compulsion of political parties to raise funds through illicit means. This is one of the primary causes of political corruption, and state funding of elections is essential to help those - however few they may be - who wish to remain in politics without having to indulge in corrupt practices. Contrary to popular impression, the budgetary cost of funding elections by the state are unlikely to exceed 0.3 to 0.4 per cent of the total expenditure of Rs.600,000 crores or more in the current fiscal year. Part of such expenditure could also be covered, if necessary, by diverting funds being allocated to MPs and MLAs for financing projects in their constituencies (the so-called MP/MLA Local Area Development funds), which suffer from several deficiencies. For equitable distribution of budget funds among large and small political parties, as elaborated elsewhere, a simple formula can be put in place without much problem.

There is a great deal to be done in all these areas, and I could go on indefinitely. I don't propose to take much more of your time. In conclusion, let me just add that notwithstanding our past performance, I am sanguine about India's economic potential and our ability to achieve high growth with financial stability. The reason for this confidence is that, despite problems in governance, the innate ability of our people is immense and has been demonstrated beyond reasonable doubt. The open, participative and democratic system ensures that a change, where necessary can be delayed, but it cannot be avoided altogether.

Recently, for example, the power of the people to bring about positive changes in the accountability of state institutions through peaceful democratic means was abundantly made clear in the formulation of the Lokpal bill. To begin with, as all of us are aware, there was considerable resistance by government to respond to suggestions made by Anna Hazare, and the movement launched by him to improve the bill. Later, however, the government had to agree to move a new bill in Parliament which met people's aspirations. Similarly, to curb political corruption and reduce discretionary powers of ministers in the allocation of public resources, government has announced its intention to take necessary legislative and administrative action. Much more, of course, remains to be done. While there would no doubt be resistance and delays, I am sure, ultimately "people's will" shall prevail.

I am deeply grateful to the Asiatic Society for giving me this opportunity to raise some issues about the state of governance and politics after 64 years of our Independence from colonial rule. It is a matter of pride for us, as Indians, that Asiatic Society was established more than two hundred and twenty five years ago, in 1784, and is among the oldest academic institutions in the world. India is a relatively young and vibrant democracy. I am sure that, given the will, India will achieve its full potential in the years to come, and India's poverty would have become a distant memory.

Thank You.

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