Inclusive growth through inclusive governance

By Mani Shankar Aiyar

It is curious but true that although from the time of Mahatma Gandhi leading the struggle for Independence to the present day there has been extensive recognition in India of the imperative of effective Panchayat Raj1 (local self-government) for both deepening India’s democracy and making its development processes “inclusive”, that is, ensuring that the people at large, and especially the poor, are tangibly benefitted by the growth process, actual progress in securing this goal has been fitful, uncertain and not sustained.

This is partly because of insufficient conceptual clarity and conviction regarding the indispensability of Panchayat Raj, that is, inclusive governance to inclusive development; and partly because of resistance to the systemic revolution entailed in effective Panchayat Raj on the part of vested interests in the polity and the bureaucracy who stand to lose their powers of patronage and influence if there is indeed a genuine overhaul of the development process in the direction of “Power to the People” through “Maximum Democracy and Maximum Devolution”.

These were the twin slogans coined by Prime Minister Rajiv Gandhi in presenting to Parliament on 15 May 19892 his initial draft Constitutional amendment for according Constitutional sanction, sanctity and safeguards to the third tier of governance that aimed at involving people in their respective neighbourhood communities in the running of their own affairs through “institutions of local self-government” comprising their own elected representatives, responsible to their own community electorate and, therefore, likely to be more responsive than a distant bureaucracy to the felt and articulated needs and demands of their neighbourhood communities.

The Indian experience would appear to indicate that while financial resources constitute an essential component of poverty alleviation, financial resources alone without effective community participation result in outcomes not being anywhere near commensurate with outlays. Pari passu, more effective Panchayat Raj should result in outcomes being brought more in line with outlays.

India’s record on Central budgetary outlays on social sector spending (including programmes targeted at a direct assault on extreme poverty) has been most impressive, rising from about Rs. 7,500 crore in 1994-95 to over Rs. 185,000 crore provided for in fiscal 2011-12, and nearly Rs. 200,000 crore proposed for the coming financial year, an augmentation on Central Government outlays of some 25 times over the last 18 years, perhaps the highest in the world.

This is in addition to an outlay of nearly the same amount on subsidies primarily intended to cushion the poor against rising prices of food, fuel, and critical agricultural inputs. This makes India among the fastest growing spenders on programmes designed to target multi-dimensional poverty. Yet, the UN Human Development Index, first published in 1994, placed India at position 134 in the league ranking and the 2011 UN HDI places India at the same position – 134. We appear to be on a treadmill of social development, running very fast to stay at the same place!

For the World Food Programme tells us that half the world’s hungry live in India and the International Food Policy Research Institute’s most recent report classifies India’s food security index as “alarming”3.

Notwithstanding India’s extraordinarily high growth rate, India remains a low-income, food deficit country in which as much as 35% of the population consumes less than 80% of its minimum human energy requirements; where nine out of 10 pregnant women suffer from malnutrition and anaemia, and, in consequence, 47% of children under the age of 5 are moderately to severely undernourished?4 FAO tells us that in the five years leading to the turn of the century, India added more newly hungry millions than the rest of the world put together5. Action Aid has just confirmed this for more recent years.

Why is there such a mismatch between the halting, uncertain, sporadic and un-sustained amelioration in the condition of the vast majority of Indians and growth in the booming service and manufacturing sectors of the Indian economy and the income of the entrepreneurial and highly skilled classes? Why is India prospering but most Indians are not?

Why are higher outlays impacting so relatively little on all that makes life more bearable for the poor? And why is political attention to the issues of poverty so muted in comparison to the hurrahs we hear over GDP growth rates?6 For, alas, the poverty of our politics is reflected in the politics of our poverty!

In the absence of inclusive governance, the people at the grassroots, that is, the intended beneficiaries of poverty alleviation programmes, are left abjectly dependent on a bureaucratic delivery mechanism over which they have no effective control. The alternative system would be participatory development, or Panchayati Raj, where the people themselves are enabled to build their own future through elected representatives responsible to the local community and, therefore, responsive to their needs7.

Not only is responsive bureaucratic administration almost a contradiction in terms, the Indian experience of the last six decades would appear to confirm that bureaucratic delivery mechanisms absorb a disproportionately high share of the earmarked expenditure: up to 85 paise in the rupee, said Rajiv Gandhi (based on one study commissioned by the Planning Commission of one programme in Bihar state); perhaps 83 paise says Dr. Kirit Parekh, former Member of the Planning Commission, in an evaluation of one key programme, the Public Distribution System8; not quite so high, says the Prime Minister.

We can leave it to experts to argue how many angels can dance on the head of a pin; for our purposes, it is enough to note that 75%-85% of expenditure on poverty alleviation schemes is absorbed by the delivery mechanism itself. No wonder outcomes are so derisory.

Worse, precisely because over a hundred schemes are delivered to the same set of beneficiaries through mutually insulated administrative silos, set up by Central government ministries intent on jealously guarding their respective fiefdoms, convergence of schemes at the delivery point becomes virtually impossible, thus depriving beneficiaries of the multiplier effect that would operate if the beneficiaries themselves, through their locally elected leaders, were to have the authority to plan and implement the utilisation of these resources in keeping with their own respective priorities.

The challenge being to convert accelerated growth into inclusive growth, the path favoured by Government after Government in India has been to exponentially increase spending on social sector and anti-poverty programmes in the expectation that a critical mass of expenditure will somehow be reached for the money thrown at the poor to become the straw they can clutch at to rise out of their misery.

The intention is sound but commentator after commentator rues the fact that implementation has been hopeless. But, as is the wont of economists as a tribe, they point the finger of accusation at dreadfully poor implementation and then think it is someone else’s job to find the solution.9

The critical systemic fault lies in the present practice of implementation. Over a hundred social sector and poverty alleviation Centrally Sponsored Schemes (CSS)10 are implemented by separate agencies for each scheme operating through parallel bodies set up by the Central and State government bureaucracy in collaboration with civil society organisations to perform tasks that the Eleventh Schedule of the Constitution specifies might best be entrusted to the PRIs.

In consequence, the beneficiaries remain hapless recipients of Government/NGO largesse instead of actively participating in designing the schemes, adapting them to local community priorities and being effectively in charge of supervision, guidance and disciplinary action.

The implementation agencies, therefore, look over their shoulder to those who entrusted the task to them instead of towards the beneficiaries for approval or course correction. In these circumstances, it is hardly surprising that Gram Sabhas (village assemblies) are reduced to hapless spectators and rubber-stamps instead of providing “advice and consent” to the elected panchayat executive as is the democratic requirement when the executive is held responsible to the people. Thus outcomes fall woefully short of outlays, as we have seen.

Footnotes:

1 In common parlance, rural local self-government is referred to as Panchayati Raj or Governance of the Panchayats; purists insist, however, that grammatically the correct expression should be Panchayat Raj or Governance by the Panchayats. I have tried to follow the grammarians’ injunction but it is possible that I might have slipped occasionally into the more conventional usage.

2 Rajiv Gandhi, Selected Speeches and Writings 1989, Vol.V, Publications Division, p.178

3 “Food Security: India ranks lower than Rwanda, India 67th in Global Hunger Index Among 81 Countries With Worst Figures”, Times of India, 12 October 2011, p.11, “Times Nation” section. The report relates to the findings of the International Food Policy Research Institute’s Global Hunger Index, comprised of three equally weighted indicators: the proportion of the population that is undernourished; the proportion of children that is underweight; and under-five child mortality. “India has the ignominy of being among the countries with the least improvement” in the last ten years, that is, precisely the period of explosive GDP growth. However, IFPRI have moved India a notch ahead from “extremely alarming” to “alarming”.

4 World Food Programme 2008 www.wfp.org

5 Food and Agriculture Organisation www.faostat.fao.org

6 cf. N.C.B. Nath, “Political Perspectives on Chronic Poverty” in A.K. Mehta and A. Shepherd (ed), “Chronic Poverty and Development Policy in India”, op.cit., pp.248-271: “… the political class is, by and large, not equipped or willing to deal with chronic poverty problems”(p.266). See also Table 8.3 at pp. 258-259 which provides a useful compendium of “Selected Opinions” on “Poverty Reduction and Political Regimes”

7 The institutional basis for such inclusive governance has now been deeply entrenched through a series of elections to nearly 300,000 PRIs and municipal bodies, to which have been elected nearly 3.2 million representatives, including 1.2 million women, 86 000 of who hold office. See The State of The Panchayats report, 2006, op.cit. Table 1, pp.29-32, updated to 2010 in Tables 2.1 and 2.2 of V.N.Alok and P.K.Chaubey, Panchayats in India: Measuring Devolution by States, Macmillan Publishers India, 2010, p.13 and p.15.

8 Sarvekshana, Jan-March 1994, pp.1-34

9 See, for example, “The India Mosaic”, Academic Foundation, New Delhi, 2004, edited for the Rajiv Gandhi Foundation by Bibek Debroy; his own contribution to the volume, “The Idea of India and the Economic Tryst” quotes Nehru’s famous ‘Tryst with Destiny’ speech: “The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity”, and then goes on to deplore, in much the same terms used here, how distant we are from that goal. But beyond saying “The national goal cannot be accepted as a national one without a buy-in by these deprived sections” there is little by way of a roadmap as to how this might be achieved.

Similarly, the 8-point programme for dealing with chronic poverty suggested by Mehta and Shepherd, op.cit., pp. 46-48, includes a number of normative recommendations but not a word on governance issues.

Arjun Sengupta’s “Reforms, Equity and the IMF”, Har-Anand, New Delhi, 2001, makes the case at pp.255-256 that “Development, however, is not just a matter of increasing the GDP” and touches the key point that “in social sector investments, there is so much fat and wastage that a proper system of delivering public expenditure through government organisations and Panchayats might have so much impact on productivity that it may not require much increase in the quantum of investment as against a properly targeted implementation of the existing investments themselves” – but does not elaborate, rather like Pontius Pilate who “would not wait for an answer”!

William N. Bissell, whose Making India Work, Penguin, 2009, is making waves actually seeks to promote people’s participation by dismantling Panchayat Raj! (p.200)

Even the latest foray into this subject, India: Perspectives on Equitable Development, Academic Foundation, New Delhi 2009, excellent in analysing the problem falls short on the systemic solution.

10and ACA – Additional Central Assistance - allocated at its discretion by the Planning Commission

(This paper was presented at the inaugural South Asia Policy & Research Institute Summit on Delivering Inclusive and Sustainable Development held on 9 and 10 April 2012 in Delhi. Website: www.thesapri.org.)