Administrative Reforms and the Budget

Title: Administrative Reforms and the budget

Byline: Amir Ullah Khan

“People often perceive the bureaucracy as an agent of exploitation rather than a provider of services.”

Atal Bihari Vajpayee, Prime Minister

India has the largest number of civil servants in the world today, 1.9 crores. Two of every three workers in the organized sector work for the government and the total salary bill of government employees—state, centre, and public sector enterprises—is over Rs 70,000 crores. This is one oft ignored issue in the budget as is the incentive aspect of government spending decisions and accounting systems. Government guarantees add to future expenditure but more importantly risky and opportunistic behaviour. Our budget accounting systems have been unchanged since 1974 and it is essential to change to project- or output-based accounts and management information systems that give clear accountability and continuous feedback for decision-making. The responsibility for initiating this change rests with the ministry of finance and the budget should address this issue.

The biggest problem developing societies face is by way of weak and inefficient administrative structures. Wide jurisdictions have ensured a great concentration of powers with officials and severely hampered private enterprise and the ability of the people to solve their own problems. In August 1997, the fifth Pay Commission agreed to hike salaries only if the government cut decision-making layers from seven to three, slashed staff by 30 percent across 10 years and abolished 3.5 lakh vacant posts. The recommendations were ignored but the babus got the biggest ever hike. In September 2001, the Expenditure Reforms Commission recommended the abolishing of vacant posts, right sizing, and introduction of technology and freezing of new recruitments. In contrast, this year, the employee strength is expected to rise.

Analysis would reveal that if the Government privatizes, and not disinvests, it could instantly bring down the number of ministries by 11. What is the point of having ministries like coal, shipping, broadcasting or civil aviation in this day and age? The best way is to demarcate public services like health, education, and infrastructure and to privatize the rest. In the Anglo-Saxon
democracies and tiger economies of East Asia, there are less than a dozen critical ministries. The Government should exit business and function as a provider of social infrastructure.

It is estimated that complete decentralization from Centre to States and from States to local bodies would cost 3 or 4% of GDP. This can be raised through better tax compliance or slashing subsidies, which account for 15% of GDP. The objective should be less government, greater autonomy and power to citizens, greater competition in the provision of goods and services and decentralization. Why is the political class so reluctant to accept this reform agenda, although reforms in governance should bring maximum payoffs? Why is civil service reform not part of the political agenda? Out of 28 million people employed in the organized sector, 20 million are employed in the government, including PSUs. 45 to 50% of these are clerks, drivers and peons. Downsizing may not be politically correct, but can these people not be re-employed? It will of course be necessary to revamp old secretariat procedures and non-responsiveness.

The broad agenda of governance may seem daunting, but it is possible to focus on a minimalist agenda – justice delivery, education health care and sanitation. India is falling far behind on the UN’s Millennium Declaration targets. Only 3.2% of GDP is spent on education, the figure for health is 0.9%.

There are instances of best practices across Indian States. Karnataka has computerized 20 million land records though the Bhoomi Initiative. This has reduced delays, harassment and bribes. There is a pilot project in Tumkur, designed to improve government accounting systems. Countervailing pressure has been exerted by citizens and some States have passed Right to Information Acts. Citizen’ Charters have also effectively been used in municipal governments.

The reforms agenda can successfully work if the basic form of the Government is changed into two simple layers: policy and execution. For example, between them, the Central and State Governments spend roughly Rs 42,000 crore annually on direct poverty alleviation. If this sum were disbursed directly among the five-crore-odd poor families in the country, they would each get Rs 8400 per annum, lifting them out of poverty. There is no justification for parallel empires governing poverty eradication both at the Centre and the States, and for the replication of apparatus in state capitals and district headquarters. The Maharashtra Government, for instance, has transferred 22 critical functions from the state capital Mumbai to the districts successfully. More could be done if panchayats are empowered, as has been tried in Madhya Pradesh.

Arguably, no system can be sustained if the execution is immune from accountability. Using a combination of modern management practices, information technology and transparency, the Government must set targets of efficiency- be it the issue of ration cards and passports or the clearances the citizen seeks. Andhra Pradesh Chief Minister N. Chandrababu Naidu holds weekly videoconferences on targets. Such management tools should be used to control the delivery systems.

The best way to do this may not be through the budget and legislation alone but by ensuring people participation. It is accepted wisdom that dissemination of information curbs corruption. Besides, transparency improves efficiency.
Empowerment through right to information is a good beginning but is not enough. The problem with the right to information strategy is that information would still need to be asked for and could yet be denied. The simple truth is that without people’s participation no system, however well designed, can deliver consistently. The budget this year can kick start the process, but did someone say that this is election year?