The state’s administrative authority has to be subservient to government development functionality, says economist and banker Dr Haseeb A Drabu.
In J&K there is a normal tendency to look at the economy from a very restrictive perspective of government. As such, economic policy becomes a very simple-minded policy matter.
In my five years as Economic Advisor to the Government of J&K, the real policy decisions or choices we faced were how much more to get from the Union government and how. It was a single-point agenda.
Rarely were there substantive questions of any long-term macroeconomic policy formulation for economic development, fiscal strategy or expenditure planning. This was even though the state budget was completely recast and attempts to formulate and design policy made. Yet, in the end, it boiled down to one simple variable, what is the total level of assistance that we can manage from the central government to cover the fiscal gap? The fact is that almost 90 per cent of the total resources are in some form or the other coming from the central government.
Be that as it may, this level of dependence, in no way reflects the reality of Kashmir’s economy. What it does tell us is that the government is in a state of poor fiscal health. It doesn’t mean that the economy is not doing too well. It also tells that we have made no effort to integrate the economy with the government.
Many analysts and observers do tend to draw inferences about the viability of the J&K economy or the state from this simple-minded indicator of the dependence on the central government for grants and devolution. But the fact of the matter is that that is not the relevant criterion. There are two or three components of this. A large part of the assistance that comes from the Centre is Constitutionally determined and a smaller part is ad hoc assistance that many other states get too. When you get to the totality of it, it is not as if the J&K government cannot survive without it. Yes, at the moment it can’t, but with fiscal policy planning and economic policy that integrates the economy with the government, it can not only reduce the dependence but move towards fiscal autonomy. So in some ways we tend to subsume the economy of J&K within the government, which should not be done.
More importantly, when we look at the changes required in the economy, these are always seen in a restricted sense of what to do with the government. We need to take a more classical view. Towards that end, I think we need three things to address the economic issues in J&K and create a self-sustaining vibrant economy. The first one is a new model of governance. The second one is a comprehensive institutional restructuring, and third is economic reconstruction.
To start with, the J&K state must take the lead in designing a governance model in which the administrative authority of the state is made subservient to the development functionality of the government. I think this is critical.
This can be done only one way, i.e by moving away from the current bureaucrat-centric model of governance to a legislator-oriented model of governance. This in no way is unique to J&K as it can be applied anywhere but the requirements for us in J&K range from representative character to larger political issues. So I think this is a fairly critical change, It is a very restrictive kind of thing, but the issue is that we must move away from the current bureaucrat-centric model of governance.
One specific thing in J&K that heightens the tension is that by and large, the bureaucracy doesn’t have a holistic stake in the system. This compounds the entire issue in a slightly different manner than it does elsewhere.
There is no denying the fact that we are, including all state economies in India, over-administered. Even today after the whole process of economic liberalisation, subnational economies or state economies can never drive the economic change in India now. It has a far too centralised system.
Economic reforms have eroded the revenue-raising powers of the state from the top and the 73rd and 74th amendments, which instituted Panchayati Raj as a Constitutional layer have been snapping at the heels of powers of the state government. So in some ways, the entire layer of state government has become redundant in policy formulation. In other words, they cannot drive economic change. This is more stark in the case of J&K for a variety of reasons. It is in this context that one is talking of change in the governance model.
If one were to make a broad distinction between “pure administration” and “developmental administration”, it can be safely said that the functionaries at the state level belong to the former and those at the district level belong to the latter. Ironically, the senior most and the most experienced administrators are placed in the former and the less experienced juniors are placed in the latter level. The file has got precedence over the field.
Given that this is how we have organized our governance system, it is not surprising that there is a lot of file work and no fieldwork.
Even with the best of individuals, ideas and intentions, the ideal situation in this organizational form of governance will be that we will improve the departmental efficiency without enhancing delivery on the ground.
These observations in conjunction with the earlier observation on institutional networks seem to suggest that we need to empower the district-level administration. There is nothing new or novel about this conclusion. Indeed, it has been the basis of the decentralization. The key lies in not only empowering the development administration but also making it less bureaucrat-driven, and more legislative-oriented. This will bring about unprecedented accountability.
The proposed system is based on the premise of “functional responsibility” and “administrative responsibility”. Starting from the top, we should have cabinet ministers in charge of departments, as they are now. The next layers, i.e., of the Ministers of State, should be ministers of state with functional responsibility of districts or defined geographical areas not of departments. It is a very small reorganization but will have a huge impact on the delivery of development.
Realistically speaking, in the present set-up and situation, the MOS is nothing more than an unnecessary layer in our system. Having worked in government, I can assure you that this level can be safely dispensed with. So there will be no loss, indeed, if anything, there will be efficiency gains.
So how will the system work? The state cabinet remains as it is. Instead of having Ministers of State of various departments, working under the Cabinet Minister of that department, it is proposed to have a Minister of State of districts. For example, we will have a Minister of State for Bandipora. Ideally, the MOS of a particular district will be chosen from among the ruling coalitions MLAs of that area.
The MOS will virtually be the Chief Executive of the district and all the district administration, which as we said above is the development administration, will functionally report to him, even as they may administratively report to their departmental heads and through them to the cabinet minister. Also, the MOS reports to all the cabinet ministers in respect of departmental matters.
The sarpanchs of his area will be his de facto assembly. He will run the district budget, ensure spending of the allocations across sectors within his district and execute all programs devised by the Centre and the state government.
As far as the state government is concerned, he is accountable for the development of his districts, it successes and failures. It will be his terminal responsibility.
The major implications of this simple change will be that the governance system of the state will be legislative-driven governance and not bureaucratic-led governance. This amounts to the sayings that it will be a people-led governance model rather than a babu-led one. All these are the elected representatives of the people in general and of that area in particular.
At an operational level, it will mean that our planning moves away from being a departmental planning exercise to an area planning effort. It will be development planning and not administrative planning.
One of the many consequences will be that the performance of the plan can be measured in concrete terms and that can form the basis of the system of rewards and penalties.
The second step is the need for massive intuitional restructuring. This is needed because we are unable today to leverage the existing institutional structure and network that has been built over the 50 to 60 structure, whether that is floriculture, sheep breeding, or pulse research etc. If you name any development activity in J&K you will have an institute for that.
The tragedy is that these institutions have been swamped by administrative concerns and have ignored the developmental aspects, so we need to re-engineer these.
The rigid administrative system, with overlapping functions among different departments, and a lack of inter-department coordination has resulted in low working efficiency, and directly hampered the creation of a service-oriented/result-oriented, responsible and responsive government. No reform can be delivered unless the existing structure is changed.
It is obvious that the system is not leveraging, or more appropriately, not able to leverage, the institutional structure and network that it has laid out over the last 50 to 60 years. The institutions of development have been swamped by administrative concerns and development aspects are neglected.
There is a need to re-engineer it and give it a developmental focus. This can be done through an institutional restructuring plan for setting up a function-based integrated administrative structure to ensure greater efficiency in governance. The idea is to form user based ministry structure.
The new structure, for instance, could be as follows
a. Ministry for Economic Development
b. Planning, Rural Development, Ministry for Human Development
c. Education, Health, et al Ministry for Infrastructural Development
d. Power, R&B, et alMinistry for Social Security
e. C& PD, Labour, Welfare, Ministry for Administrative Affairs
f. Home, Revenue et al
At another level, the government needs to corporatise the PSUs. The basic idea should be to produce not to privatize and thereby leverage government ownership. The PSUs are scattered across all ministries/departments resulting in multiple control and intervention resulting in inefficiencies. All PSUs must be brought under one ministry/department, preferably a new Ministry called the Ministry of Public Enterprises.
Gradually, it can be given a holding company structure that holds a stake in all PSUs. In this holding company, a financial investor can be inducted even as we induct strategic investors in individual PSUs. Do a complete financial reengineering of the PSUs. Convert government debt into equity; employees arrears in ESOPs and generate growth momentum.
Finally on the issue of economic reconstruction.
The need for reconstruction arises from the facts that the state has gone through twenty years of civil strife, and we have gone through 60 years of centralised planning which bears no relevance to the structure of J&K
It we have an industrial policy without having an industry. We do not have industries, we have enterprises. We have 3,75,000 enterprises that have survived civil strife for the last 20 years, are making profits, and employing 7 lac people profitably.
To create employment all that is required is to increase the scale of these 375000 household enterprises. Currently, these are father-son enterprises – involving two people -, and they can involve five people. But we won’t do that, because we don’t have a policy for enterprises, we have a policy for industries derived from the central government because there are fiscal incentives and concessions, Capital subsidy (90 % never used. We don’t qualify for norms, and our industries don’t need capital subsidy).
Instead of having an industrial policy, we could better do with a small enterprise policy, which is not looking at fiscal concessions or subsidies. We have got a very bad name over the years with subsidies.
No matter which segment we look at, we find that the structure of the economy has no relevance to the policy. Same is the true of centrally sponsored schemes.
Even though we have a very robust primary education model, which is the reason the state .., we still are looking at sarva shiksha abhiyan. Not bearing the fact that the overall poverty level is the rest of the country 26 per cent and ours is 3.25 per cent (contestable though). If this is indeed so, why do need centrally sponsored schemes by the central government on poverty alleviation? t is a complete mismatch between what the government has to offer and what the J&K economy is. Again not to confuse the economy with the J&K government.
The economy of J&K is faced with two distinct, though mutually reinforcing sets of problems.
First, the set of generic problems faced by most states and second the specific problems arising out of civil strife and militancy.
The first set of problems can be dealt with through stabilization — a package of economic reforms and the second through structural reforms — a set of reconstruction initiatives. The government finances are very weak which impairs its functioning, provision and delivery of public services.
Given this understanding, there have to be two sets of policies will be formulated: One, for government finances (fiscal policy) and another one for economic development (economic policy). In J&K there has always been an effort to merge the two but these must be independent though interlinked. Fiscal policy will not used to drive economic policy. For, the moment this is done, it results in tax concession and subsidies and the system gets trapped in a “giveaway” culture. This is neither good for the government finances nor can it help in evolving a sustainable economic structure
Finally, to ensure sustainable and structural reconstruction what is required is a:
i. Development strategy of import substitution
ii. Cross-sectoral investment policy
iii. Repositioning of the economy in line with our skills and strengths.
In addition to a massive public investment-led strategy, we need to have a development strategy for import substitution. For example, daily the valley consumes 15 lakh eggs We produce one lakh. 14 lakh are imported. Why cannot we look at this?
We consume 1500 mt of mutton and produce not even 100. We need to look inward and have a conscious policy of import substitution for the next five years. India did that in the 1950’s. That is how we are surviving the way we are surviving. We were able to liberalise in the 90s on the back of a huge diversified industrial structure, which was put in place from 1952 to 1964. That needs to be done.
That also suits the entire sub-national perspective of self-reliance. Why are we not doing that?
The second is to take a gross sectoral investment policy rather than an industrial policy. At that level, we need three things, finance, technology and marketing. If we can do that you will see a huge change in the entire set-up of J&K.
Finally, we need to reposition our economy in light of globalisation in line with our skills and strengths and not in terms of our strategies of integration or whatever.
