ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Audcious NAC Proposal: Big Brother Watching

Big Brother Watching The National Advisory Council (NAC) has suggested to the central government that a Rs 10,000 crore fund be set up in the Planning Commission to encourage states to compete among themselves to improve delivery of social services. States that perform well, according to an index of governance, will be


Big Brother Watching

he National Advisory Council (NAC) has suggested to thecentral government that a Rs 10,000 crore fund be setup in the Planning Commission to encourage states to compete among themselves to improve delivery of social services.States that perform well, according to an index of governance,will be “rewarded” with funds from this kitty. The governanceindex, the NAC has suggested, could be based on a numberof parameters such as the infant mortality rate, extent ofimmunisation, child sex ratio, creation of job opportunities,market wages of agricultural labourers, availability of drinkingwater, percentage of girls married below 18 years and thenumber of senior officials convicted for corruption.Panchayats too will be graded on their performance; the fundsto be passed on to them and the degree of autonomy linkedto this grading.Given Delhi’s penchant for looking upon the states as adrag on the nation’s progress and the centre’s interventionas the cure for all ills of governance, such a proposal shouldcause no surprise. The plethora of centrally sponsored schemes(over 200 even now) and the detailed guidelines accompanying them bear eloquent testimony to this big brotherlyattitude. However, never before has an attempt to get thestates to perform been so audacious as the NAC proposal.It is undeniable that the quality of governance in manystates needs to be urgently improved; the choice of parameters is also unexceptionable. But who is to judge who hasperformed and how well? One would have thought that ina democracy it is the people who periodically make these

Economic and Political Weekly January 14, 2006

judgments on the governments they have elected. They alsovote with their feet: an ill governed state loses its skilled andthe talented; capital too moves out. Competition amonggovernments makes for efficiency in governance, but it is thedemocratic process that provides the corrective. Witness thechange of government in Bihar. The NAC apparently doesnot have much faith in the democratic process to secureresults and thinks nothing of the damage likely to the workingof democracy when it calls on the centre to rank statesaccording to their performance. The suggestion that therating be done by an “independent” body of experts is notgoing to carry conviction about fairness, especially whenmore than half the states are ruled, as now, by parties notbelonging to the ruling coalition at the centre. Even whenthe judgments are fair, they will be suspect if states ruled bythe opposition are downgraded. The result will not be healthycompetition, but bitter acrimony.

One also wonders how the many indicators of performancewill be combined to generate a single index. By attachingweights? Obviously there will be an enormous play of subjectivity even in deciding what weights to attach to thedifferent parameters. In several areas such as employmentgeneration, the performance of a state depends largely oncentral policies and the policies may not affect all statesequally. Can such states be judged as “poor performers” forno fault of theirs? And what about fiscal performance? A statemay wish to provide public services at a nationally desiredlevel, but finds this impossible given the obligations underthe fiscal responsibility laws, which too the states have been“incentivised” to legislate to access the benefit of debt reliefheld out by the Twelfth Finance Commission.

Finally, there is the fundamental question of what empowersthe centre to sit in judgment over the states and reward/punish them for good/bad governance. In order that thetransfer of funds from the centre to the states (necessitatedby the division of functions and financial powers) does not make the latter subservient to the former, the Constitution has very thoughtfully mandated that the task be entrustedto an independent constitutionally-created body, the FinanceCommission. All revenue transfers and grants from the centreshould therefore be routed through the Finance Commission.That unfortunately has not happened with the PlanningCommission, an extra-constitutional body, coming into thepicture. The flow of grants for state plans, bypassing theFinance Commission, is something that the states have cometo live with, although central discretion in the matter ofallocating centrally sponsored schemes has tended to foulup both equity and efficiency. Grants by way of reward forgood performance clearly militate against the constitutionalscheme of inter-governmental transfers. By no stretch of imagination can Article 282, which is usually invoked insupport of plan grants (a matter that remains controversialeven now), be used to justify such a scheme of transfers.

The NAC’s concern about governance is understandable,but that does not justify undermining the democratic process.If it could ensure dissemination of information about the achievements of the states in different fields, citizens would be better informed when they are called to the polls to passjudgment. Such information is now not available in all areas.The distribution of central funds among states and theirutilisation (or for that matter the centre’s investments incentral undertakings) in different states remains unknown.Data on the flow of private investments to different states

– the most telling indicator of investors’ judgments aboutgovernance in a state – is also not easily available. Even dataon the gross state domestic product (GSDP) on a comparablebasis is not brought out regularly, leaving it to the states toplay games with GSDP figures as well. The idea of the centrerewarding the state for good performance is wholly repugnantto a federal system or even a quasi-federal system that purportsto treat the elected governments of the constituent units with

a modicum of respect.

Economic and Political Weekly January 14, 2006

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