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The Experience of Gujarat in India

Have Economic Reforms Trumped Democratic Decentralisation?

Can economic reforms and democratic devolution go together? Can the prevailing political-economy ensure a balance between the two forms of decentralisation? The paper attempts to examine these questions with reference to Gujarat in western India. Based on a critical analysis of the interrelationship between the nature of devolution and economic reforms, it is argued that the latter seems to have triumphed over democratic decentralisation. A minimum guaranteed devolution to local governments in the constitution is suggested as a safeguard against the vicissitudes of state-level politics. 

Since the early 1990s, India has embarked on constitutionally mandated reforms to institutionalise democratic structures of local governance. The 73rd and 74th constitutional amendments impelled central and state governments to create a third tier of government comprising panchayats and municipalities endowing them with relevant powers. Many hailed it as a profound stride towards realising the Gandhian dream of gram swaraj. After more than two decades of devolution, there is considerable agreement now that the project of democratic decentralisation may not have gone the distance in accomplishing the visualised goals (GoI 2013). 
 
A major discontent is about the failure of local bodies to emerge as empowered institutions of self-government to pursue grassroots planning and development as envisioned under Article 243G. More so despite all the states having complied with the obligatory provisions like conducting regular elections for local governments and providing reservations to disadvantaged sections. Reluctance on the part of state governments to devolve much-needed powers is seen as a major hurdle towards empowering the local governments. Given their clear onus, why are the states unwilling to devolve powers to local governments? Assessments in this regard highlight a lack of political will within the ruling elite at the subnational level as a prominent cause hindering the devolution (IRMA 2008; Singh 2007). There have been instances of state governments even reversing some of the proactive steps taken towards decentralisation. It is an irony that the states at large which demand greater devolution from the centre remain apathetic when it comes to substate-level devolution. 
 
Any attempt to answer the above impasse can afford to ignore the influence of the larger political economy that has unfolded since the 1990s in the wake of the ominous economic reforms adopted with the attendant processes of liberalisation, privatisation, and globalisation (LPG). There are compelling conceptual and policy driven reasons to explore the linkages between economic reforms and democratic devolution. Embarked almost simultaneously, both the strategies of decentralisation have recorded chequered progress. The ruling elite, both at the centre and state governments, notwithstanding political affiliations, have wholeheartedly supported economic reforms as a means to reverse the tenets of the dirigisme so as to integrate the economy with the global capitalist system. The votaries of reforms have found strong grounds to argue that the reforms were a necessity owing to the prevailing macro­economic crisis and that they enabled the economy to overcome the crisis while achieving unprecedented rates of growth (Bhagwati and Panagariya 2013; Ahluwalia 2013). On the contrary, many have contested that reforms imposed from outside have not only failed to address the basic challenges of poverty and inequality, but have emerged paradoxically as a threat to democracy including for local governance decentralisation (Choudhary 2007; EPW 2018). 
 
The paper is an attempt to examine specifically whether the goals of democratic decentralisation have been hampered by economic reforms and if so, in what ways. The analysis has been attempted with reference to Gujarat in western India depicting a stark contradiction between the outcomes of economic reforms and democratic decentralisation. Gujarat is hailed apparently as a state having its own unique “model of development” accomplished through vigorous economic reforms (Hirway 2014). As regards democratic decentralisation although Gujarat had made some remarkable progress before 1993, it is currently seen as a laggard having failed to devolve powers to local governments to the expected level (Alok 2014). 
 
Divergent Paradigms
 
It is well-documented that decentralisation emerged as a common political and economic strategy of governance reforms for reversing the downside of centralisation across regimes (Manor 1999). However, the overall process of what drives decentralisation is seen as complex even though decisions are largely political in nature. Two issues relevant to the success of decentralisation are the motives it involves and the existence of pre-conditions. Both genuine and partisan motives have been identified as driving decentralisation (Manor 1999). Genuine motives could include goals like deepening democracy and enlarging citizens’ opportunities for participation. In the latter case, it may become a mere substitute for centralisation preempting any local dissensions. In the Indian case, though the stated reason for democratic decentralisation was enabling the local bodies to emerge as responsive institutions, certain partisan motives were also attributed as the then ruling party with its strength eroded was trying to consolidate its base. 
 
As regards pre-existing conditions, it is argued that effective decentralisation is a theoretical implausibility under conditions of rampant inequalities (Gurukkal 2006). Social and economic inequalities may preclude the weak from fully participating in decision-making, and the outcomes could be more acute exclusion defeating the basic purpose of decentralisation. Irrespective of preconditions, the success could also be influenced by the degree of devolution either given the ideological moorings of the ruling establishment or the incentives that may confront the governments and bureaucracy to decentralise. Generally, the devolution of adequate powers along with measures for accountability has been crucial to the success of decentralisation. While ideology may impel governments to adopt substantive or big-bang devolution, sustaining it could require suitable incentives (Ragunanadan 2012). 
 
Recent theoretical arguments on decentralisation are more about incentivising different players to respond favourably to its needs (Oommen 2005). Incentives could be both political and economic. Politically speaking, decentralisation may be used by ruling parties, especially at the state level, to consolidate their base through grassroots politics while enhancing governance credibility by improved delivery of services. Various pressures including demand for decentralisation could influence states to consider diverse options for devolution (Rao 2012).
 
Designing suitable financial incentives for governments to devolve could be another alternative. Explicit financial incentives by way of tied or untied transfers have been proposed to make lower governments respond to the needs of effective devolution (GoI 2009). Yet, the results of such incentives could vary as the outcomes may depend on the degree of incentives at stake. Incentives based largely on economic rationale could turn out to be narrow having mere instrumental consequences. State governments are more likely to attach greater importance to political and not financial incentives depending on their ideological position (Rao 2012). 
 
In terms of political influence, economic reforms could potentially turn out to be a major factor swaying the way states could perceive the benefits of decentralisation. For liberals, apparently, there is no dichotomy between democratic decentralisation and economic reforms as both can go together with their proclaimed common goals (Ragunanadan 2012). Decision-making in both cases is supposed to be more decentralised involving dispersed units having interface with market and civil society for synergetic outcomes. Even local governments could integrate economic reforms in their own domains by enabling efficient delivery of public services to become part of valuable markets. 
 
Skeptics and radicals offer counter arguments suggesting that economic reforms are bound to create hazards for local governments. Many visualise reforms and democratic decentralisation working at cross purposes as the theoretical and developmental paradigms underpinning the two are fundamentally contradictory (Jayal 2007). Democratic decentralisation, while is based on a distributive justice paradigm, economic reforms which even come as a part of the project to expand global capitalism, are based on accumulation paradigm being essentially centralising in nature (Figure 1).
 

 
The outcomes of economic reforms would be growth of monopoly and oligopolistic tendencies accentuating the concentration of resources and inequalities. Primitive accumulation, joblessness, and neglect of social sectors due to contraction of the state’s role are ways in which reforms deepen inequalities excluding the poor and weaker sections from governance and development (Patnaik 2014). 
 
The neo-liberal moorings compel reforms to rely excessively on markets and finance capital while leaning towards centralisation (Chandrasekhar and Ghosh 2009). With global finance capital assuming prominence, the economic decisions of a nation are more likely to be taken at supra-national level weakening the position of the nation-state. Full-blown reforms pit the state against the market, wherein the state’s role may be undermined severely. The state is then compelled to pander to the owners of global capital through various policy concessions to keep them invested (Patnaik 2014). A major consequence of such a development is the de-politicisation of decision-making as people are left with no major choices because of homogenised economic policies across the political spectrum. There could be a shift of class balance in society with neo- liberalism marginalising petty producers, peasants, and labourers. Though local governments and civil society may try and assert themselves (Alvares 1996), the state could suppress dissensions betraying its allegiance to the capital. 
 
Reforms also introduce new principles of governance that could compromise the autonomy of local governments. Maintenance of sound fiscal balance becomes a trait of public finance under reforms curtailing the resources of governments at various levels. The fallout of such a framework is a major expenditure compression with social sectors feeling the pinch (Gupta and Muzumdar 2018). The market-based approach of reforms usher in new mechanisms like self-help groups or user-groups based on individual rationality for management of resources and services with the potential to turn citizens into consumers. Parallel bodies favouring such principles are likely to be preferred over local governments (Reddy 2007).
 
Scholars differ regarding how democratic decentralisation may be sustained in the event of economic reforms turning inimical. For liberals, local governments can sustain themselves by trying to complement the reform process using their own strengths of inclusive governance. (Ragunanadan 2012). Those with radical/populist views spotting an inherent contradiction advocate an alternative approach that is countervailing (Chandrasekhar and Ghosh 2009). The need is about democratising power structures at all levels—local to global—to reverse the predatory nature of reforms. Economic democracy may need balancing based on political democracy. 
 
Brief Profile of Gujarat 
 
Before we look at the interplay of reforms and devolution, an attempt is made in this section to understand the political-economy that has emerged in the state of Gujarat. Gujarat in its present form took shape in 1960 pursuant to the linguistic reorganisation of Indian states. With nearly 43% of its population in towns and cities, Gujarat figures among the highly urbanised states of India (Table 1). The sex ratio at 919 is much lower than the all-India ratio (942) indicating an adverse gender balance. Socially, the state presents a mix of diverse groups and communities with the Hindu population accounting for 89.1% in the total (GoG 2014). The weaker sections comprising Scheduled Castes (SCs) and Scheduled Tribes (STs) formed 21.5% of the population and Other Backward Castes (OBCs) about 52%. Despite this mix, the state showcases the socio-economic domination of forward castes with widespread discrimination prevailing against the weaker sections and minorities (Shah 2014). 
 

 
Economically, Gujarat is relatively an advanced state on several fronts with a higher per capita income against the all-India level. It recorded very high growth rates, especially post-2000. While the officially recorded poverty ratio is at 23% in 2009–10, Gujarat registered a relatively high inequality level (with a gini ratio of 0.343) (Hirway 2014). While the sectoral composition of GSDP in 2009–10 clearly depicts the domination of services and industrial sectors, the employment composition presents a skewed picture with agriculture accounting for the bulk of employment (53.4%). 
 
Speaking of political profile, Gujarat portrays a major shift in recent decades. The Indian National Congress dominated the scenario from 1960 to 1995 with a few non-Congress parties assuming power briefly in between. The Bharatiya Janata Party (BJP) has come to dominate the political scene since 1995 having continuously won assembly elections aided by several factors (Shah 2014). The social bases of Congress and BJP have undergone significant changes. The Congress, despite support from diverse sections of caste and religious groups, has lost its base. The dominant caste groups, both in rural and urban areas, tilted towards the BJP, particularly in the wake of anti-reservation and communal movements spread over two decades (Yagnik 2002). To sustain itself in power, especially after 2002 communal violence, and to reciprocate the support base of industrialists, businesspersons, and middle-class, the ruling BJP hastened the reforms’ process. It has tried to create a highly liberalised and market-oriented regime for industry and business through aggressive reforms. Helped by the combination of Hindutva and neo-liberalism, the BJP has established its dominance in Gujarat since the 1990s. Such a social formation has ushered in a political economy that is inherently inimical to the deepening of democracy in the state.
 
Progress of Democratic Decentralisation 
 
Prior to the enactment of constitutional amendment acts in 1993, Gujarat was among the pioneering states which nurtured the panchayati raj institutions (PRIs) (GoG 1987). The Gujarat Panchayats Act (GPA), 1963 and the Gujarat Municipalities Act (GMA), 1963 provided the legal basis for ushering in democratic decentralisation (IRMA 2008a). The legislations had very clearly identified activities and subject matters to be transferred to the local governments. Both within and outside the provisions of the prevailing acts, the state government took proactive steps to strengthen the local governments. Holding regular elections and providing various types of institutional support to local governments were two prominent features of the period. The Gujarat Panchayat Service Selection Board, Statutory Development Funds, Social justice committees, District Planning Boards (DPB), Gujarat Municipal Finance Board (GMFB), and the State Advisory Council were certain key institutional mechanisms created to support the local governments. Thus, with its own enabling acts, Gujarat had made a fairly significant progress in creating a robust local government system prior to 1993. 
 
Post 1993, Gujarat came up with confirmatory acts for rural and urban local governments. The GPA 1993, GMA 1993, and the Gujarat Provincial Municipal Corporation Act, 1949 were passed as per the new provisions of Part IX and IXA of the Constitution. The state has met all the mandatory requirements of the Constitution albeit in a staggered way. These include the constitution of the State Election Commission, reservation of seats for SC/ST and women, formation of state finance commission (SFC), creation of District Planning Committees (DPCs), and compliance with the Panchayats Extension to Scheduled Areas (PESA) Act. Gujarat also adopted or retained certain unique features besides the mandatory provisions. These include the Samaras Village Scheme, district planning boards (DPBs), equalisation funds, and the GMFB. While under the Samaras Village Scheme, panchayats get monetary incentives if they hold unanimous elections, the GMFB helps channelise grants to municipalities. 
 
As regards Articles 243G and 243H of the Constitution requiring the state government to devolve adequate powers to local bodies to emerge as institutions of self-government, there has been at best mixed progress. According to the GPA 1993, the state government can transfer to district panchayats any powers, functions, funds, and functionaries of the state government. The district panchayats can also transfer to the taluka and village panchayats powers/functions it is delegated by the state government. Under the GPA 1993, 10 departments have been identified for transfers to panchayats. Of the 29 subject matters listed in the XI Schedule of the Constitution, the panchayat department claims 14 subject matters to have been fully transferred to the panchayats based on activity mapping carried out by the department. While five subject matters have been partially transferred, 10 are waiting in line (IRMA 2008a).The panchayats at various levels are expected to prepare plans and forward them for progressive consolidation at the state level. However, in the absence of functional DPCs, there is no clarity on how such planning is being implemented. Regarding the transfer of functionaries, while all panchayats have basic functionaries assigned by the state government, the transfer of functionaries of 10 departments identified under the GPA 1993, there are no clear provisions in place yet. As regards finances of panchayats, though taxes, fee, and grants are the basic sources of revenue the grants received both from the central and state governments form a major source—about 70% of revenue for panchayats (GoG 2013).
 
About the urban local bodies (ULBs), as with panchayats, the GMA 1993 identified 10 departments for transfer to municipalities. Higher-level officials like municipal commissioners are appointed by the state government while for other officers the state government has created common cadres although their salaries are paid by ULBs. The ULBs have three sources of finance: sharable tax, own tax and fee, and grants. While municipal corporations can borrow, the municipalities have no such powers. The grants include those provided both by the central and state governments. The state governments have to constitute state finance commissions (SFCs) periodically to determine the basis for distribution of finance between the state government and local bodies. Gujarat has constituted three SFCs so far, apparently with much reluctance. 
 
How Deep Is Decentralisation? 
 
As described earlier, Gujarat did make some commendable progress in its devolution efforts prior to 1993. However, post 1993, the achievements of Gujarat under the new constitutional framework leave a lot to be desired. Except for complying with the mandatory provisions Gujarat has not made the expected efforts enabling emergence of local bodies as institutions of self-government as confirmed by available studies (IRMA 2008a; Bandi 2013). The unsatisfactory performance of Gujarat is corroborated by the multi-dimensional panchayat devolution index (PDI) as measured periodically by independent agencies for the Ministry of Panchayati Raj of Government of India. The inter-state comparative results of the composite PDI are presented in Table 2 (p 47). The PDI is measured along six dimensions of devolution, namely framework, functions, finances, functionaries, capacity building, and accountability. 
 

 
While the PDI goes with several limitations (Oommen 2009), it may serve as an indicative proxy of the underlying depth of the devolution. Gujarat, with a composite score of 40.75 and 42.61 in 2012–13 and 2013–14 respectively, is categorised as a low performing state (Alok 2014). Of 25 states Gujarat was ranked 10th in 2012–13 and 12th in 2013–14 for achievements in devolution. Gujarat’s PDI score is very close to the national-level average for both years. Reasons for the low score may be partly discerned from its performance in various sub-indices of PDI depicted in Table 3. Except for the transfer of functionaries, Gujarat scores fairly low on all the sub-indices. Under the sub-index on finance Gujarat scores only 28.43 and is ranked very low among the states (Appendix Table A1, p 52) 
 

 
The PDI has been estimated since 2006. For some initial PDI assessments, Gujarat was absent from the list of states having failed to meet eligibility parameters specified under the sub-index of framework like the constitution of DPCs and SFC (NCAER 2009). Undoubtedly, Gujarat has treated institutions like DPCs and SFC with utter disdain. Only after considerable persuasion from the central government did Gujarat pass an act for DPCs in 2008. This happened mainly because of a compulsion regarding seeking conditional funds under a central government scheme called the Backward Region Grant Fund under which DPCs were to be constituted in the districts falling under the scheme. But even with the DPC Act in place the DPCs have not been actually constituted. Gujarat continues to work with a parallel system of DPBs with an elaborate structure dominated by the state government’s bureaucrats and representatives (GoG 2018). As a result, the decentralised planning process as visualised under the constitution has not evolved in Gujarat. 
 
The approach towards SFC, a crucial constitutional mechanism for devolution of funds, has been even cavalier. Both with regard to the periodic constitution of the SFCs and in the follow-up of their recommendations, Gujarat has been highly lackadaisical to say the least. Although SFCs are to be appointed once in every five years, only three SFCs have been constituted so far with huge gaps between them. The follow-up effort is even more miserable. While for the first SFC the action taken report (ATR) was placed in the legislature soon after its submission, for the second SFC the government took nearly five years to place its ATR. For the third SFC report there is no clear information available in the public domain about the ATR. Overall, the state government has mostly failed to act on the acceptance and implementation of SFC recommendations with only about 40% of the recommendations of the first two SFCs having been accepted (GoG 2013). 
 
For effective devolution, states have been advised to carry out activity mapping (AM) and accordingly transfer functions and functionaries to local bodies. Yet there are many gaps even in this domain (IRMA 2008a). GPA 1993 identifies certain departments and functions that may be transferred to the local bodies, but Gujarat has not acted on it logically. The panchayat department’s claim that 14 of the 29 matters of the XI Schedule have been fully transferred is pretentious given the absence of any clear resolution or rule. Expectedly, Gujarat scores low under the sub-index of transfer of functions under PDI. However, among the six sub-indices (Table 3), Gujarat has done apparently well in devolving the functionaries. This is somewhat contradictory. The absence of AM does not clarify how functionaries have been transferred to the local bodies. In practice, the state government employees assigned to local bodies are treated as local bodies’ functionaries. Because of the lack of recruitment the panchayats have limited own regular functionaries at their command. 
 
Transfer of finance is an area where Gujarat figures worst on the PDI score. As indicated in the context of SFCs, Gujarat has failed to create a framework to implement financial decentralisation. Hence, local bodies remain at the mercy of the state government for resources. The state government has not come up with any objective criteria for allocation of sharable funds with panchayats and municipalities. The allocation remains ad hoc and discretionary. There are year-to-year fluctuations without reliable fund transfers (Table 4). No inter-se criteria exist for divisions within different tiers of local governments. The normative basis advocated for transfer of funds for equalisation of services is ignored. Only in the case of funds allotted by the central government, that state government follows the inter-se criteria suggested by central finance commissions. 
 

 
While local bodies can have their own taxes and fees, certain factors have caused owned funds to constitute only a small proportion of total revenues. For village panchayats and municipalities, owned revenues accounted for about 30% and 31%, respectively, of total revenues in 2010–11. Only for the Municipal Corporations owned funds contributed a relatively higher share (44%) of revenue. All local bodies mainly depend upon grants for augmenting resources. 
 
The absence of accepted objective devolution formulae is a major handicap for local governments. There are, consequently, wide fluctuations in the flow of funds to local bodies from the state government. The Thirteenth Finance Commission based on its own analysis argued that there has even been a negative transfer of funds to local bodies in Gujarat after adjusting for the central transfers (GoI 2009).
 
Several other distortions have also been discerned in the working of local bodies. Gram sabhas, the key space for ensuring participation do not work effectively in Gujarat (IRMA 2008). In 2009, the state government made efforts to activate gram sabhas by passing new rules. While the state government has apparently complied with the PESA Act 1996, the real spirit of PESA has not been observed. Autonomy of the gram sabha has generally been compromised, particularly in the wake of large scale land acquisition and mineral allocation for industrial development (Hirway 2014). The state government, after considerable delay, framed the rules for PESA areas in 2017 with the intention of activating gram sabhas in tribal areas. 
 
Gujarat continues administering the Samras village scheme despite objections from civil society which considers it as anti-democratic allowing for manipulation of elections by the elite (Bandi 2013). Like elsewhere, several parallel agencies are allowed to co-exist undermining the local bodies (Shylendra and Rajput 2010).
 
Thus, in multiple ways, the local governments in Gujarat have been constricted to emerge as empowered institutions of self-government.
 
Explaining the Decentralisation Deficit 
 
What explains the reversal of fortunes of local bodies in Gujarat under two diverse regimes pre and post 1993? Institutionalising local governments is a complex and slow process with diverse factors impinging on their working. In our case study, we have tried to look at the enmeshing of political and economic factors as they have unfolded over the last quarter century in Gujarat. Politically, the rise of BJP as a dominant ruling force with communal undertones and leanings towards business and industrial class emerges as a strong factor having a bearing on the working of decentralisation in Gujarat. On the economic front, the whole hog roll out of economic reforms under the dictates of finance capital has unleashed forces inimical to the cause of local governments. Both the dimensions are explained below in terms of how they have worked. 
 
Political predilections: The BJP’s unassailable political dominance in Gujarat has largely coincided with the unfolding of democratic decentralisation and economic reforms. Alienation of dominant groups like Patidars and their tilt towards non-Congress parties, restive industrial and business classes seeking more patronages, and growing communal polarisation have compositely influenced the changing fortunes of the BJP (Yagnik 2002).The BJP has managed to sustain itself politically using rabid communal politics and hyper economic reforms as key strategies. The Congress, which introduced reforms at the national level in 1991, had no option but to offer its unqualified support allowing Gujarat to achieve a weird political unanimity for reforms. 
 
Such a scenario has created many incompatibilities for democratic decentralisation. The majoritarian orientation of BJP privileges homogenisation over diversities that go with decentralisation. Although the national unit proclaimed support for democratic decentralisation in its manifesto of 2004, BJP’s local unit remains silent over its approach to devolution. For example, the 2012 manifesto of BJP goes overboard in its commitment to reforms but says nothing about advancing the panchayati raj system (BJP 2012). The single party dominance has thus given continued leeway to the state leadership to ignore crucial issues like democratic decentralisation. 
 
Incidentally, the Congress which lost power at the state level had dominated the grassroots politics well beyond 1995. To curtail the grassroots influence of Congress, BJP has resorted to suppressing local bodies to establish its sway over them. The strategy was to disempower local bodies to discourage the rival party from leveraging for any political gains (Joshi 2009). This is typical of Indian state-level politics that was played out in Gujarat too. By the time BJP managed to establish its dominance over the local bodies, compulsions of economic reforms had taken over the state policies denting the prospects of local bodies further. 
 
Hyper reforms: Initiated at the national level, the reforms percolated to the states, down to the local governments. Being industrially advanced Gujarat more than willingly latched on to reforms and structural adjustment. The reforms in Gujarat were driven by external agencies like the Asian Development Bank that provided assistance with many conditionalities (Choudhary 2007). A major strategy for industrialisation involved attracting local and global investments. Since the beginning of reforms, Gujarat announced at least five major industrial policies, the 2015 policy being the latest. These policies specified various incentives that the state offered to the prospective industrialists besides attempting to create an environment conducive for investment in industries and businesses. The policies, projecting Gujarat as the ultimate destination for global investment, tried opening up diverse areas including agribusiness, health, education, and urban development. Additionally, industries were assured of availability of land, power, and water on highly onvenient and concessional terms. (Hirway et al 2014). In order to set up the infrastructure for a more focussed investment, new forms of industrial estates like industrial parks, special economic zones, and special investment regions were propagated backed by liberal rules and legislations. 
 
The state government embraced several measures to improve public sector management and service delivery while complementing the larger reforms. Two significant measures include the enactment of the Gujarat Fiscal Responsibility Act (GFRA) in 2005 aimed at curtailing the fiscal deficit and the public sector unit (PSU) reforms by way of disinvestment and restructuring (Choudhary 2007). The agriculture sector too has been brought under the purview of reforms in fairly significant ways. The tenancy ban though remains for the land market yet reformations in the tenancy act progressively relaxed the sale of agricultural land to non-local and non-farm entities since 1995. In 2005, a government resolution enabled industrialists and big farmers to acquire up to 2000 acres of common land on lease for 20 years to set up corporate farming. The state enacted its own land acquisition act relaxing many provisions of the Central Government Act of 2013 on land acquisition to ease land acquisition for industrial needs (GoG 2016). The step compromised the active role of panchayats, gram sabhas, and municipalities as specified in the 2013 Act. Allowing private players to buy produce of farmers and creation of water users’ associations are other initiatives in the agriculture sector. 
 
Comprehensive reforms have allowed Gujarat to reap considerable economic benefits. Gujarat has become one of the leading destinations of industrial investment in the country since 1991. Gujarat was ranked number one in the Ease-of-Doing-Business category by the World Bank in 2015 (GoI 2018). Between 2000 and 2017 Gujarat attracted considerable foreign direct investment (FDI) and major investment proposals resulting in creation of several mega projects and big industries across the state. The overall outcome was Gujarat’s accelerated economic growth during the reforms’ period (Table 5). 
 

 
Growth has been accompanied by considerable reduction in absolute poverty as per official estimation. Absolute poverty in Gujarat was 23% in 2009–10 as against 31.6% in 2004–05. The ‘model’ pursued by Gujarat though was hailed by some (Bhagwati and Panagariya 2013) has simultaneously come under severe scrutiny. Dubbing it a myth, critics argue that a more holistic view needs to be adopted while assessing results achieved by Gujarat (Hirway 2014, Sood 2012). Despite higher growth rates, Gujarat has failed with regard to inclusiveness, inequality, and human development. The state was ranked 18th in human development among 20 major states with an HDI score of 0.527 in 2007–08. Many in-depth analyses of Gujarat’s reform reflect contradictions afflicting the “model” having implications for development and democracy. It is in the light of these assessments that one can identify the specific fallouts for democratic decentralisation.
 
Undermining of local governments: While Gujarat has largely followed the pattern of reforms adopted at the national level, many unique features characterise its approach. Economic reforms increasingly assumed a centralised form as implement­ation progressed. Decision-making became concentrated fully with the state government and its bureaucracy in deference to the wishes of finance capital trying to invest in Gujarat. Reform measures have undermined the autonomous role visualised for the local governments and civil society. Given the circumstances unfolding during reforms, the state was neither keen nor was under any compulsion to devolve adequate powers and resources to the local bodies. This has happened despite incentives specified for devolution under central fund transfers to local governments. The above is corroborated by many evidence of the suppression of local governments in Gujarat some of which are highlighted below.
 
Since the state was keen on attracting investors through liberal incentives while being committed to sound fiscal management, local governments and social sectors had to bear the brunt of the state government’s selective profligacy. The state government, under its declared policies, has given concessions and subsidies with implications for the fiscal position. A study estimated that the state forsook around 72.76% of sales tax revenue in 1999–2007. Total subsidies including capital subsidies to industry and infrastructure accounted for `56,538 crore in 1990–2011 (Hirway et al 2014). These incentives, provided on a sustained basis, deprived the state of considerable revenues. The state, in the meantime, managed to restrict its fiscal deficit to 2.46% of GSDP in 2012–13 (GoG 2014) as against the target of 3% under GFRA. Given its fiscal compulsion the state was not at all keen to adopt an assured revenue sharing mechanism favouring the local governments. Bhatt and Shah (2000), analysing the first Gujarat State Finance Commission’s recommendations, had vehemently concluded that the Commission has tried to protect the interests of state government at the cost of panchayats. 
 
Similar tendencies were noticed in other domains of devolution. As part of industrial development, as mentioned earlier, the Gujarat government set up dedicated industrial areas which ensure easy access to land and other infrastructural facilities to industries. These areas have overriding authority over resources like land and forest superseding the local governments (Shah 2014). With land acquisition liberalised in Gujarat, studies reveal that gram sabhas and village panchayats, which need to be consulted for land acquisition, are being bypassed by industries (Joshi 2009) undermining of the legitimate role of panchayats. In many places panchayats and farmers are co-opted or coerced for land acquisition. 
 
For streamlining, the administration the Government of Gujarat recently created the post of revenue secretary at the village level who reports to the mamlatadar, a revenue department officer at the taluka level. The revenue secretaries handle all the papers regarding land transactions. While the revenue secretary’s post was created with the apparent intention of reforming land administration, it has kept village panchayats totally away from the ambit of land transfers (IRMA 2017). It is a similar case regarding the use of own funds by panchayats: till recently, the Sarpanch and an authorised member of the panchayat were designated persons as per the provisions of GPA 1993. However, an amendment in 2017 made the panchayat secretary, a government staffer, the co-signatory along with the Sarpanch. Many village panchayats raised their voices as they felt it undermines their autonomy (Bhardwaj 2017). For downsizing the bureaucracy as part of reforms, the state government banned recruitments in many departments. This applies even to panchayats that now depend on casual workers for providing civic services. Given the inadequacy of funds, panchayats are compelled to either recruit inadequate staff or pay paltry wages affecting the quality of services (IRMA 2017). 
 
Another domain where the role of panchayats has been found to be severely constrained is with regard to the implementation of the centrally sponsored schemes (CSS). A multi-state study of the major CSSs, including in Gujarat, revealed that the panchayats have been sidelined significantly with line departments playing a major role in their implementation (Shylendra and Rajput 2010).
 
The ULBs, too, have had to face many predicaments. The ULBs have been unable to assert their power vis-à-vis the violation of regulatory norms by the industry and business given their lobbying abilities and soft approach of the state government. Shah (2014) observed that many industries in Gujarat’s industrial corridor pollute the environment through emissions and effluents. They blatantly link their effluent pipes to municipal sewages and water bodies. 
 
With urban development assuming prominence, municipal corporations (MCs) have literally come under the state government’s dominion. Municipal commissioners appointed by the state government exercise enormous clout in the planning and administration of MCs. The neglect of ward committees has led to the undermining of the roles of community and civil society in urban areas (Mahadevia 2014). The emergence of a parallel agency, namely Gujarat Urban Development Company has undermined the role of ULBs in town planning and development (GoG 2013) even as ULBs face difficulties in getting their plans approved from the urban development department. Further, the ULBs instead of pursuing their own development schemes are compelled to adopt the PPP model for slum development in the name of reforms. While slum-dwellers can ostensibly get houses free, the private developers are compensated by allocating surplus land causing considerable loss to ULBs (Mahadevia 2014). To conclude, the above evidence clearly highlights that reforms have compromised the role and autonomy of local bodies in multiple ways. 
 
Conclusions 
 
The paper tried to examine whether major contradictions have developed between economic reforms and democratic decentralisation leading to an irreconcilable hiatus between the two. The analysis focussed on the state of Gujarat, which has become a torch bearer of reforms pertinent to faster economic growth while displaying an apathetic approach to democratic decentralisation. As predicted through theoretical arguments, the paper clearly corroborates that reforms through their centralising tendency of serving the interests of global capital have seriously dented the working of democracy in general and grassroots devolution in particular. 
 
The present regime while trying to take forward both the processes has shown greater appetite towards economic reforms over democratic decentralisation. While the reforms show some significant results regarding growth, the state has suffered in broad basing development. No doubt, the reforms have largely taken an expected trajectory yet, given its own context, Gujarat presents some uniqueness. The immediate past history and political contingencies unfolding in Gujarat have given a sustained thrust to reforms aided by favourable class formation. The attendant political economy has, in turn, unleashed excessive centralising tendencies deleterious to democratic decentralisation. It may be concluded that economic reforms have triumphed over democratic decentralisation in Gujarat. 
 
Given the overarching reach of economic reforms, the analysis of Gujarat imparts insights regarding why democratic decentralisation has suffered at the national level. Even though a few states have made some headway in devolution during the reforms period, it could be possibly because of the local political compulsions playing out differently to the advantage of local governments. Unless attempts are made to reverse the situation, incongruities between reforms and devolution may widen further. Hoping for political classes in various states to empower the local governments by way of incentives can go only a certain distance. Given the enormous uncertainty involved in such a strategy and the inimical nature of political economy, the main way forward is to create necessary safeguards within the Constitution itself. The progress of decentralisation should not be left to the vicissitudes of state politics. Having created the basic constitutional framework for local governments in 1992 it is high time the second generation amendments be introduced so that minimum devolution on basic domains like functions, functionaries, and finances is guaranteed to local governments. Based on such a guaranteed devolution, local bodies can consolidate their gains and reach newer heights even to emerge as countervailing forces against the consequences of reforms. 
 
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