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Past Issue • Oct-Dec 2015

Minimum Government, Maximum Governance: From Rhetoric to Reality

Minimum Government, Maximum Governance: From Rhetoric to Reality

Good governance for the 21st century is about narrowing the distance between the governor and the governed and the gap between promise and delivery. The author suggests that to take governance to the doorsteps of the poorest-of-the-poor in the remotest areas, focus should be on simplification of procedures and reduction of the levels of decision-making in the Government by leveraging technology.

The idea of minimum government, maximum governance implies that smaller bureaucracy with more skilled people will be more effi cient at delivering “public” services than a larger one. As such, the goal is worth pursuing. This article will address what appears to be critical baskets of reform that are essential for minimum government, maximum governance initiative to have a real impact. The traditional notion of the State (and thereby the government) was of a “Leviathan” that demanded obedience and to which the subjects voluntarily gave up their individual sovereignty to an extent for the greater public good.  This political structure came about because as Thomas Hobbes articulated, the original state of nature was brutish. The economic argument about the existence of state (government) on the other hand, is to mitigate and smooth over the various market failures that arise in the context of voluntary transactions among willing buyers and sellers. These market failures include public goods, adverse selection, moral hazard, race to the bottom, etc. that distort incentives in the market process. Finally, the progressive view of the State (government) that adds to the minimalist view articulated by conventional economics; stands on the premise that markets are not always the best intermediaries for allocating resources in as much as they favour the strong in preference to the weak. As such, letting markets allocate resources may perpetuate social inequities. The progressive school of thought thus advocates a much larger role for the government; one that positively discriminates in favour of minorities by inter alia, participating in the market processes or regulating them.

The Constitution of India adopted a welfare state model of governance that is aligned to the thinking espoused by the progressive school. As such, historically, government has played a very active role in allocating (and producing) resources in India. Underpinned with the right incentives, the welfare state yields results. However, in the absence of right incentives, the welfare state model has only brought about a very large government in its wake; and much inefficiency. India’s ranking in the World Bank Doing Business numbers captures the story; it takes 13 procedures and 30 days for starting a business in India and it takes 1420 days and 40 percent of the claim in costs to enforce contracts. There are 64 ministries and 52 ministers in the union government and an alphabet soup of regulators regulate sectors ranging from readymade food to financial services, each guarding its “regulatory turf.” Unsurprisingly, India ranks a lowly 142nd on the Doing Business rankings for 2015. In this background, the “minimum government, maximum governance” initiative flagged off by the current dispensation is significant.

Principally, the initiative involves two issues; the “quantity” of the government and the “quality” of governance. The first basket comprising reforms aimed at “Minimum Government” should be aimed at reducing the number of ministries. For example, at present, the ministries of roads and transport, aviation and shipping are distinct ministries. Instead, an overarching ministry of transport may oversee policymaking in an integrated manner. Likewise, there is a Ministry of Tribal Affairs different and distinct from the Ministry of Social Justice & Empowerment.

India’s ranking in the World Bank Doing Business numbers captures the story; it takes 13 procedures and 30 days for starting a business in India and it takes 1420 days and 40 percent of the claim in costs to enforce contracts. There are 64 ministries and 52 ministers in the union government and an alphabet soup of regulators regulate sectors ranging from readymade food to financial services, each guarding its “regulatory turf.” Unsurprisingly, India ranks a lowly 142 on the Doing Business rankings for 2015.

The basket of reforms aimed at “Minimum Government” ought to also include reforms aimed at outsourcing the production and supply of government services to the private sector. At present, the government appears to be doing a lot of activities that could be benefi cially performed by the private sector; the management of government buildings for instance, managed by the Central Public Works Department (CPWD), could be outsourced. As its manual notes, CPWD has started the process of outsourcing in select areas and the results are encouraging.1 (Of course, these measures are only illustrative and salient, and not exhaustive). Public sector units appear to be easy low hanging fruits in this regard. Arguably, the government has a rationale in owning equity in these enterprises. But it does not necessarily follow that the control of these enterprises should also rest with the government. Such has been the case though; the outsourcing of control to the private sector could particularly help the public sector banks say for instance; the P J Nayak Committee established by the RBI had recommended the formation of a Bank Bureau Board for management of public sector banks (staffed entirely from the private sector). The recent “Indradhanush” initiative by the Finance Ministry is a first step towards that autonomy. The distribution franchisee model espoused by the Electricity Act, 2003 is another (institutionalised) example of such beneficial outsourcing.

Secondly, it calls for the introduction of reforms that will induce performance-based monitoring and evaluation of bureaucracy. Designing specialised public sector performance metrics against which to measure its performance, is therefore a critical area. There is a risk here of equating minimum government with quicker decision-making and designing metrics around how fast files are cleared by the departments. A more nuanced matrix where both input variables (like speed of arriving at a decision) and output variables, are used, appears feasible (even if evaluation can be complex with this approach).

Thirdly, it necessitates introduction of reforms by way of E-governance initiatives. One fallout of the economy having the state as a major player is that the government becomes too entrenched in activities that it should NOT be involved in. Labourintensive government processes result in bloated bureaucracies. For instance, the bi-annual census of government employees reported that the ratio of gazetted to non-gazetted employees across the central government was a whopping 1:17 as of 2011. The census also found that approximately 82 percent of government employees fell in Group B and Group C; having mostly clerical profi les. E-governance can play a vital role in reducing the sovereign footprint, especially in “routine” Government-to-Citizen (G2C), Government-to-Business (G2B), and Government to Government (G2G), activities.

The fourth and final branch of the “Maximum governance” initiative should include efficient regulation. It is trite to state India is an over-regulated state. From food to financial sector, we have an alphabet soup of regulators, retaining plenary powers of lawmaking and enforcement, but having little or no oversight of electorally responsible agents. Like corporate governance for companies, maximum governance initiative should require regulators to be transparent and accountable.

Each of these reforms is discussed in greater detail below.

Segregation of Policymaking & Implementation

Integrated policy making and implementation2 in India creates conflicts of interest. The Ministry should exclusively concern itself with policy making. The departments in the Ministries should concern themselves with the implementation thereof.3 India has failed to restructure the government on the lines of the foregoing principle; and that has impacted robust policy outcomes for the Ministries concerned.As the 13th Administrative Reforms Commission Report notes, the Ministers concerned are so caught up in the day-to-day operational details that they have little time for thinking through macro policy outcomes. Moreover, if the Department will both set and implement the policy, as the Manual of Office Procedure lays down, the conflict of interest will prevent adequate supervision of implementation of the policies laid down.

Principally, governments across the spectrum have adopted an “agency model” in which the Ministry is concerned with the broad policy and agencies are structured under the Ministry’s supervision to implement the policies. Departments are hived off into agencies with specific mandates, independent operations and also independent budgets.

Public Sector Performance & Evaluation Metrics

There is an urgent need to create a culture of performance within the government. To that end, public sector performance metrics need to evolve.

There is a risk of equating minimum government with quicker decision-making and designing metrics around how fast files are cleared by the departments. A more nuanced matrix where both input variables (like speed of arriving at a decision) and output variables, are used, appears feasible (even if evaluation can be complex with this approach).

Given the unique “public goods” character of the service they perform, metrics that the corporate sector uses-share price, return on investment, etc. are not replicable in the public sector space. Nonetheless, the lack of replicability should be no excuse for not evolving these metrics. Indeed, as an extract from the BJP manifesto reveals, the government is committed to making the administration and its members accountable through a rigorous monitoring and evaluation framework.4 As discussed above, the ideal metric would be a combination of input-based variables (like speed) and output-based ones (like value-for-money).

Once the appropriate metrics are in place though, we are confronted with other issues; firstly, the need to establish a credible monitoring agency to “administer and evaluate” on the basis of identified metric. This should be a third party service provider. In this regard, the recently released, “Assessment of State Implementation of Business Reforms” by the World Bank could be a template to be followed. However, it is potentially a challenge to convince government departments and public servants that a third party service provider like the World Bank will “evaluate” their performance; this is especially so because performance-based evaluation has hitherto not been the norm. As such, the “fear of the unknown” may be at play among government departments and public departments. A related issue is linking the evaluation to a scheme of incentives, carrots and sticks, as it were.

It is easy to imagine that entrenched and partisan interests won’t make it easy to put such a scheme in place. But other than “political concerns”, there are some other issues that need to be addressed for an appropriate incentive structure to be put into place:

  1. What should be the relative share of monetary and non-monetary incentives in this scheme?
  2.  Should it be a group incentive scheme (departmental level) or an individual incentive scheme?
  3. What are the types of employees the incentive scheme should cover?5

Considerable know-how is however available on how to go about the process of monitoring and evaluation in India.6 The Results-Framework Document (RFD), policy has already operationalised this idea but unfortunately this policy has not moved as swiftly as it should have.

Integrated policy making and implementation in India creates conflicts of interest. The Ministry should exclusively concern itself with policy making and the departments in the Ministries with the implementation thereof. India has failed to restructure the government on these lines which has impacted robust policy outcomes for the Ministries concerned. Ministers concerned are so caught up in the day-to-day operational details that they have little time for thinking through macro policy outcomes.

E-governance

As discussed above, the census of government employees reported that the ratio of gazetted to nongazetted employees across the central government

was a whopping 1:17 as of 2011. The census also found that approximately 82 percent of government employees had clerical profiles. In the light of these statistics, initiatives like E-governance and outsourcing of non-core activities of the government to the private sector appear to be critically important.

In this regard, Government process re-engineering (re-writing the government process codes), so that they enable E-governance is important. It is also important to ensure capacity-building at the governmental level (both in infrastructural and human capital sense) for the E-governance initiatives to succeed. For instance, “Gyandoot” (a G2C platform initiated in Madhya Pradesh to extend the benefi ts of IT to rural areas by directly linking villagers and government through information kiosks), indicated low connectivity and the lack of constant power supply could be bottlenecks. A related issue is skilling at the government end of this link. In this regard, “Bhoomi” project in Karnataka offers valuable lessons. “Bhoomi” concerned digitisation of millions of land records; in the initial stages, there was a lack of “buy-in” from the local offi cials. But, intensive statelevel workshops and training brought about a change in attitude and skilled the staff. And 20 million land records digitised.7 “Bhoomi” also provides a casestudy for change management. Fear of being replaced among the clerical staff, and vested bureaucratic interests that stand to lose with E-governance, were potential bottlenecks but intensive training removed these barriers. Ultimately, 20 million land records were digitised.8

Regulation

Finally, we come to regulation. Focus appears to be on proscription and not on regulation in the current structure, evidenced by numerous bans we have witnessed in recent times. At present, innovation is constrained to conform to regulation.9 Excessive regulatory discretion without accountability and abuse or risk-aversion have an undue impact on business climate and investor sentiment. It is imperative therefore, that statutes governing regulators require them to conduct a cost benefit analyses before a proposed regulation is enforced, and that its constituents can be held accountable in a court of law. On the other hand, regulatory and bureaucratic autonomy ought to be preserved by repealing archaic laws like the Prevention of Corruption Act that mitigate innovative decisionmaking by regulators/bureaucrats.

Good governance for the 21st century is about narrowing the distance between the governor and the governed and the gap between promise and delivery. It requires strong institutions, information, technology and talent.10 The reform measures discussed in this article cover some of these critical bases and pillars for realising the dream of “Minimum Government, Maximum Governance.” It remains to be seen if the enthusiasm witnessed during the campaign trail for the welcome initiative continues unabated at Race Course Road.

REFERENCES

  1. See CPWD Maintenance Manual 2012 available at, http://cpwd.gov.in/Publication/MaintenanceManual2012.pdf (Preface).
  2. The Manual of Offi ce Procedure defi nes the Department as being “responsible for formulation of policies of government. [a]nd also for the execution and review of those policies.”
  3. The 13th Administrative Reforms Commission Report details administrative restructuring of several states including the United Kingdom that have restructured their bureaucracies in line with this principle.
  4. See BJP Election Manifesto 2014, p. 12 (“the administration and members will be made truly accountable to their tasks through rigorous evaluation process.”).
  5. See Prajapati Trivedi, “Public Enterprises in India,” Economic & Political Weekly Vol. XXI No. 48, page M-145.
  6. See Prajapati Trivedi, “India: Performance Monitoring and Evaluation System (PMES), in Proceedings of the Global Roundtable on Government Performance Management, December 11-12, 2013 (UNDP, New Delhi).
  7. The 11th Administrative Reforms Commission Report details Bhoomi experience.
  8. The 11th Administrative Reforms Commission Report details Bhoomi experience.
  9. Uber-RBI episode in the context of Uber’s innovative use of credit card payment system to side-step cash, highlights the issue.
  10. See Vikram Mehta, Good Governance 101 available at, http:// www.brookings.in/good-governance-101/.

ABOUT THE AUTHORS

  • magand

    Mandar Kagade

    Mandar Kagade is Analyst at Bharti Institute of Public Policy at the Indian School of Business.
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