Anything multiplied by zero is zero indeed!

M R Venkatesh

http://www.rediff.com/money/2007/apr/11guest.htm

April 11, 2007

"Power will go to the hands of rascals, rogues and freebooters. All Indian leaders will be of low calibre and men of straw." Winston Churchill on the eve of Indian Independence.

Sometimes facts speak louder than comments. The following are some extracts from the Approach Paper to the 11^th Five-Year Plan, prepared and published by the Planning Commission last year.

Coming from the highest echelons of the government, these remain an authentic and a grim reminder of what has gone wrong since Independence. Consider these dismal facts from this document of the Planning Commission:

• Official poverty stands at 28 per cent. Significantly, one has to appreciate that the current definition of poverty is hopelessly inadequate. It is defined on the premise of whether a person can afford to consume 2,400 calories of food in rural India or 2,100 calories of food in urban India per day. Naturally, this limited definition ignores the other bare minimum necessities required for a decent living. Obviously, if one were to consider a more realistically defined poverty line, based on the basic needs for a decent living, the number of poor in India could be far more than the officially stated figure of 30 crore (300 million).
• The abhorrent practice of manual scavenging continues even today.
• Quality of education and curative health services are beyond the reach of the common man and those provided by the private sector are costly and of variable quality.
• A major institutional challenge is that even where service providers exist, the quality of delivery is poor and those responsible for delivering the services cannot be held accountable.
• In the health and education systems, there is a large number of staff vacancies that have not been filled up due to resource constraints.
• The cost of displacements of our tribal population is high and the compensation tardy and inadequate.
• Corruption is now seen to be endemic in all spheres and this problem needs to be addressed urgently.
• The legal system in India is respected for its independence and fairness but it suffers from notorious delays in dispensing justice. Delays result in denial of justice.
• Literacy rate is still below 70 per cent.
• The most difficult task is to ensure good quality of instruction and the position in this respect is disturbing. A recent study found that 38 per cent of the children who have completed four years of schooling cannot read a small paragraph with short sentences meant to be read by a student of class 2. About 55 per cent of such children cannot divide a three-digit number by a one-digit number.
• Drop out rate in primary schools for the country as a whole was at a staggering 31 per cent in 2003-04.
• While some of our institutions of higher education compare well with the best in the world, the average standard is much lower.
• India's infant mortality rates, under-five mortality rates, maternal mortality rates and immunisation rates are higher than that of Sri Lanka, China and Vietnam.
• The biggest constraint in achieving a faster growth of manufacturing is the fact that infrastructure -- roads, railways, ports, airports, communication and electricity -- is not up to the standards prevalent in our competitor countries.
• Indian roads are very accident-prone and claim a large number of lives representing an enormous human and economic loss.
• The Accelerated Power Development and Reform Programme (APDRP) initiated in 2001 was expected to bring down AT&C losses to 15 per cent by the end of the Tenth Plan. In fact, the average for all states is closer to 40 per cent.

The net result is that today India languishes at the bottom half of the global Human Development Index (HDI) wedged between underdeveloped countries like Namibia, Sao Tome and Principe, and Solomon Islands. Even countries endowed with lesser amount of natural resources and lower calibre of human capital have performed better, perhaps even miraculously. This has been largely due to effective, responsive and effective governance. India definitely deserves better.

The net fiscal impact of the above. . .

Apart from the underperformance in the social sectors, the impact of the lack of governance needs to be understood in monetary terms too. The debt of the central government stands at approximately Rs 25 lakh crore (Rs 25 trillion) as at March 31, 2007: that is, 25 followed by 12 zeroes!

What needs to be further understood is that like an individual, a government too can borrow -- provided it has corresponding assets. It may be noted that the foreign debt comprised within this overall debt is still computed at historical costs (when the exchange rate was say Rs 16 per US $), thereby suppressing the aggregate by trillions of rupees.

Secondly, what is indeed appalling is that the government concedes that it has a liability aggregating to Rs 12 lakh crore (Rs 12 trillion) without corresponding assets. Finally, for the balance assets, no provision is made for depreciation. Net of depreciation, this figure would be even more abysmal. All these are further manifestations of our mis-governance.

Needless to emphasise, if this is the position of the central government, one can imagine the financial position of the state governments. The interest bill coupled with the salary burden has a debilitating impact on the finances of the State. Even a 'progressive' state government like Tamil Nadu spends approximately 70 per cent -- yes, 70 per cent -- of its revenues on the salary of its employees.

If salary were to be such a high proportion of the total revenues, there is hardly any sum available for development, which in turn depends on fresh borrowings. For the benefit of a mere 2 per cent of the population, the rest are taxed and in the name of government, we continue to suffer this absurdity silently.

It would appear that the government exists not for the greater good of the greater number, but greater good of its own employees. Such a model is purely unsustainable.

While one should not and cannot have an argument against increased State intervention in such matters -- the moot point is whether the State intervention is at all effective? If that were so, everything else would be justifiable. Unfortunately it is not and that calls for a rethink on the present model.

After all, anything multiplied by zero is zero.

This is simply because we have outsourced governance -- even if it were to the brightest minds in India -- the employees of the government. The fact of the matter remains that with no direct say on the outcome, governance has become the largest stumbling block for the prosperity of our own people.

Taking governance to the people

This is simply because our governmental system, largely being of British vintage -- centralised, corroded and constrained -- is largely unsuited for this country. Surely, the humungous nature of the challenges faced by a vast country with a size of a sub-continent and a billion people makes it impossible to be governed with a centralised system -- as the British system was and the present system is -- comprising a few million at Delhi, State capitals and district headquarters, usually uninterested, virtually unaccountable and predominantly corrupt.

So what needs to be done?

In this context, one is forced to recall the Manesar Declaration, which explicitly states: "The process of development is inherently political and if it is inequitable and non-participatory, it can actually create poverty. The objective of eradicating poverty can only be achieved through struggle in which people living in poverty are empowered to take control of their own lives and resources. People living in poverty, the majority of whom are women, are best able to identify the structural obstacles that perpetuate and accentuate poverty. In consequence, they are also best placed to set the agenda, to address these obstacles and to define solutions that can eradicate poverty."

The billion-dollar question now is: how to make governance participatory?

The solution to the above lies in thinking beyond the current template. This can be done through a grand design of involving the Panchayathi Raj Institutions (PRIs) as a delivery mechanism. Unfortunately, PRIs are largely ornamental pieces of legislation in an otherwise sublime Constitution. We need to leverage these institutions and churn the system so as to make the development projects the responsibility of these local bodies and 'un-bundle' the State and central governments of the same.

Unfortunately, under the present three-tiered Constitution, responsibilities are mostly vested with the Central or the State or both, with very little functional mandate extended to the third tier, viz., the PRIs.

The spirit of Part IX of the Constitution, which deals with the PRIs, goes beyond the concept of political empowerment. It is a majestic idea towards self-governance. By design it is the State (hence eminently suited for the purpose) in all its majestic manifestation but with a vital difference -- by its very design it will be 'participatory,' especially in a country like India.

The time for unleashing the power of the idea of PRIs has come. It has to be noted such an empowerment of the PRIs must include direct fund transfer by both the State and the central governments -- of all possible developmental programmes.

Importantly, the crucial role of developmental process must be piloted by the PRIs. Naturally, it would at once trigger a movement for grassroots democracy and with it developmental economics to flourish.

Our resistance to change and vested interests that feed on the extant system mean that the PRIs are essentially non-starters even after two decades since their introduction in the statute book.

It has to be noted that the ideas as suggested above, though illustrative, could well trigger a massive movement as the programmes are meaningfully under the control of the intended beneficiaries. One sincerely believes that this is the only way out to deal with imperial demand of India's social sector. Else Winston Churchill will continue to chuckle.

The author is a Chennai-based Chartered Accountant. He can be contacted at mrv1000@rediffmail.com.