BackGovt wants to decentralize but not abdicate its responsibilities: Bibek Debroy
Given the somewhat uncertain external environment, it’s not going to be very easy to get GDP growth rates of 8.5% or 9%, like we got earlier, says Bibek Debroy
PremiumChairman of the PM’s Economic Advisory Council Bibek Debroy delivered the keynote address at the sixth edition of Mint Mutual Fund Conclave, held in Mumbai on 26 July.
I don’t exactly have a structured talk, so I’m going to ramble for about 20 minutes about the government and what it is trying to do.
The first point to note is that when I’m using the word ‘government’, I am talking about the Union government, which is only a small part of the jigsaw. In a country like ours, as per the constitution, there is a judiciary, a legislature—the parliament and state legislatures, and there are state governments.
Depending on the year you are talking about, 90-95% of national income originates in the states. So when we are talking about a GDP growth rate of whatever it is that we want, do remember that it is an aggregate of state level GDP growths, aggregated upwards. A lot is said about external environment today not being very kind for reasons that we all know about. There was a period of time, when India, for several years, grew at more than 9% a year continuously. That was a time when the external environment was more benign, much less malign.
Given the somewhat uncertain external environment, it’s not going to be very easy to get GDP growth rates of 8.5% or 9%, like we got earlier. But what I do want to point out to you is, there is plenty of slack within the system. The introduction said that I’m an economist. If you ask any economist, what determines output growth and national income, the economist will probably say factor inputs (land and natural resources), labour, capital and productivity. Many of these are actually state subjects. The story of the last 15-20 years has been that many of the states that we historically regarded as backward, have increasingly jacked up their growth rates on a systematic GDP growth to rates of 7.5-8%. If I look at the eastern part of India, and I only think in terms of those particular states increasing their rate of growth by primarily making labour and land markets more efficient, there is enough of a slack within the system for us to be able to gradually inch up to 8-8.5%.
One of the things that is rarely talked about in India is the lack of satisfactory land records. One of the reasons we do not have clean titles to land in some states is that the cadastral surveys are still very old. But there are also states where increasingly the revenue records are being mapped with the satellite records, and therefore, we will have an incremental progression towards situations where land titles become clean; so when I buy a plot of land, it will no longer be a registration of the sale deed, it will be a proper registration that gives a title. Don’t misunderstand; I didn’t say that it will happen uniformly throughout the country, but in some parts of India, we will soon have, what for want of a better word, we can call an Aadhaar number-like piece of identity for a piece of land or a flat.
I should also say that there are certain areas that the Union government is required to spend on. One of the things this Union government has done is to spend on various items that are regarded as public goods, in the sense that the Union government does need to spend on them. These may be things like physical infrastructure, transport, roads; alternatively, social infrastructure like education and health. In the north-eastern part of the country, you have no idea how important it has been psychologically, if not otherwise, that for the first time in so many years since independence, there is a railway line in my state, or I finally have an airport in my state. If you travel in the north east, you will realise what it has done to transport connectivity, particularly to the roads. Things like these are difficult to quantify in terms of how much the GDP growth rate will be.
There are 600,000 villages in India. Until recently, seven decades after independence, about 100,000 of those villages lacked many things that everyone in this room takes for granted, whether it is electricity, metalled roads or LPG gas.
There is another thing that I would like to flag, which very often escapes notice, which is that economists and others have argued that India as a country is excessively centralized in terms of its governance. It was centralized because of revenue and other considerations under the British, and it continued to be centralised post 1947 due to planning reasons. It is increasingly being decentralised and one of the big planning changes that is happening is institutionalised decentralisation, and by that I do not mean only fiscal devolution.
There will always be certain individuals who will require subsidies. You need to go back and read what was said in 2004 by the president in her address to the parliament. When the president makes an address to the parliament, it is more or less what the government intends to do. In the year 2004, in what was promised in the first 100 days, was a decentralised identification of the poor. It was not done. This is now extensively used by both the Union and state governments, in terms of something called the socio-economic and caste census (SECC). The SECC is a completely decentralised identification of people in accordance to various deprivation metrics. So the subsidies you will have heard of like direct benefit transfer (DBT), financial inclusion and direct transfer of funds into bank accounts are being Aadhaar seeded. So individual bank accounts are being Aadhaar seeded and matched with the SECC, and now it is being integrated with individual programmes like health insurance.
So, broadly speaking, the union government’s intention is to decentralise, devolve increasing amounts of decision-making to the level of the states, but not abdicate the responsibility.
Quite often people like silos like “is this government market friendly or against the market?" Markets happen in a certain context. What a market means here might be completely different from what a market means in a village in Jharkhand. There are places where the government cannot abdicate its responsibility; and certainly where public expenditure is concerned, the prior claim is of those 100,000 villages or those neglected regions, or those aspirational districts which have so far lacked the physical and social infrastructure.
The other part of it is backing off where the government need not be present. The doing business indicators of the World Bank are only part of the story, because the world bank surveys are limited to only two cities, Delhi and Mumbai. In other words, if I improve the business environment in these two cities, India’s rank will immediately shoot up. But it is much more than that because what the ministry of commerce and industry has done is actually have a set of ‘doing business’ parameters, which supplements what the World Bank is doing, simplifying matters for everyone else.
There was a lot of corruption associated with public procurement. I do not find it normally reported in the newspapers that there is now a portal called GeM, through which all union government procurement now takes place. There were allegations of corruption associated with interviews, particularly for group C and group D posts. Interviews for these posts for Union government have been completely abolished, including the railways.
Recently we had the budget, and a lot of commentary on it and a lot of time on TV was devoted to it. But this budget needs to be seen in the context of continuity, because it is not as if a government headed by prime minister Narendra Modi was suddenly appointed this year. This government has been in place since May 2014, and therefore, there is a continuity in policies and what the government started to do in May 2014, and this continuity will persist. After all, the budget, as per the constitution, is only an annual statement of the Union government’s receipts and expenditure. Many of the reforms will happen, and should happen outside the budget. If they are announced in the budget, everyone will write edits praising the budget, and later on those reforms will not materialise. It’s far better not to get plaudits through the budget speech, but to actually deliver those reforms outside the budget.
I used the word ‘reform’, so let me make a point about it. Whenever we use the word, we have our own definitions of it. But there is an implicit value judgment in it that reflects our priorities. But what we define as reform may not necessarily be considered reform by someone who has been deprived of physical infrastructure for years.
The last point that I want to make is about the constitution and the preamble to it. The preamble says “We the people." This means all of us as citizens. We tend to think that the government is an island and that it will suddenly become super efficient and completely de-linked from the ecosystem, But it doesn’t work like that.
The introduction said that I was a member of the first committee set up by the Narendra Modi government to look into railway reforms. To do so, I had to travel on trains, and not the Rajdhani or the Shatabdi, but ordinary trains. Once, when my wife and I were travelling on such a train through UP, the train stopped at a platform at around 2.30 am to let the Rajdhani pass.
We ascertained that the train was going to halt there for 30 minutes, so we got off and started pacing up and down the platform. The platform was deserted, and only a food stall was open. Along comes a tall and hefty guy, he buys a packet of chips, eats the chips and then tosses the packet onto the platform.
I can see my wife advancing, and can guess what’s about to happen. So I do my best to pretend that I don’t know her, but at the same time I need to follow her, so I follow 10 feet behind her. She goes up to him, taps him on the shoulder, points at the packet and says, “pick that up and put it in the garbage bin," and I think “Here we go!"
The man looked her up and down, picked up the packet and put it in the bin. We went up to the food stall owner and marveled at this, and he said “This would not have happened before the Swachh Bharat mission."
One of the reasons why I am bullish is that I detect citizens getting involved in improving governance for the first time—whether it is Swachh Bharat or giving up LPG subsidy. If you look at Swachh Bharat, the change has not been brought about by what the government has done, but by the Swachhagrahis. The word ‘governance’ is used a lot, but it doesn’t mean the government; it means ‘we the people’.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
