Arun Shouries article on IE. Must Read

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<b>How to create a lean, clean governing machine</b>
There must be a strong man at the top to steer Reforms. But he must be dealt a fair hand. Equally, for top posts, talent must be rewarded, even if this means ignoring seniority
ARUN SHOURIE

Presidential governance

The most important thing is to see the nature of our governments. We talk of ourselves as a parliamentary system, and in some senses we are — that the catchment from which a Prime Minister may choose ministers is limited to Members of Parliament, for instance, is a serious limitation. But once constituted, the government is presidential — indeed, often the elections too are presidential: often a single question dominates the people’s mind — ‘‘Who shall be PM/CM?’’

The Prime Minister is not ‘‘the first among equals’’. He is the dominant determinant. I can speak of the current case at first hand. Many of us will go on arguing what we will. At some point Atalji will say, ‘‘Theek hai,’’ and all argument is ended. The proposition to which he has just assented becomes the decision. And yet he is a more consensual, democratic Prime Minister than one can imagine. The Reforms that we associate with Dr Manmohan Singh could not have been carried through without the backing of Mr Narasimha Rao. Not one of the hosts of changes that have been put into effect in the last five years could have been carried through without the backing and guidance of Mr Vajpayee. Hence the over-riding importance of the one we choose as Prime Minister.

His team

But he must be dealt a fair hand. Even to run the ministries, to say nothing of thinking out and carrying through Reforms requires high professionalism. ‘‘Imagine what would have happened,’’ my friend Bimal Jalan said the other day, ‘‘if our external account had been managed the way X has been handled’’ — I leave the matter at ‘‘X’’ as Bimal is not one to permit me to disclose the decision he used as an example!

Nothing could be truer. Today our foreign exchange reserves are increasing by a billion dollars a month. Four years ago, a moment came when we began losing a billion dollars every few weeks. At such moments one wrong step by the RBI, one unguarded statement would have sparked a run on the Rupee, a rush of dollars out of the country. Remember that ‘‘the fundamentals’’ of the Brazilian, Argentine, Mexican, and nearer home the South East Asian economies are not what tumbled overnight — elusive perceptions did, a defiant statement here a wrong decision there, and they began losing a billion dollars a week till the economies were down on their knees.

The first difficulty is that our electorate, and much of our political class, does not attach sufficient attention to competence. But even if it did, that would not be enough. Competence, though indispensable, is not sufficient. Piloting change requires another element — one to which the electorate and the political class attach even less significance. That is, integrity. There is scarcely a change in policy that does not affect different sections, different corporate entities differentially. In the major economic ministries, everyday matters come up for decision that have implications of crores and crores. Corporate rivals are quick to circulate allegations — they are able to plant them in papers with ease. The people too are prepared to believe the worst about everyone. The person who is entrusted with devising and carrying through a Reform must, therefore, be beyond suspicion. Else, the Reform itself will be derailed by the allegations against the person.

The moral is simple: help the one in whose hands you place the country or the state — give him a clear majority so that policies are not at the mercy of fringe groups; and give him a set of persons who have the conviction, the integrity, the competence, the stamina — each a distinct attribute, each indispensable — to manage economic affairs, in particular Reforms.

In the present circumstances, asking for even this much seems a lot. But clearly, it will not be enough. One has to spend just a day in it to realise that no Prime Minister, not even a Presidential-Prime Minister can disregard the clamour in Parliament, no Prime Minister can disregard the dispositions of generality of the political class. There are thus just two options: either through the present electoral process the general level of this class is raised or some way is found to redefine the relationship of the Executive and the Legislature. UK is not the only democratic country. The USA, France, Germany are no less democratic. Yet the relationship of the two branches is very different in each instance. We should study these, and commence a national discourse on alternative arrangements. It is entirely possible to make adjustments without in any way diluting the Basic Structure of the Constitution — indeed, we could well end up strengthening it by ensuring more effective governance.

A simple change that will trigger improvement

Short of getting a better lot through elections, one proposal that Bimal Jalan has long urged will pay rich returns. Government should select twenty-odd senior positions — the head of Intelligence Agencies, Secretaries of vital ministries like Finance, External Affairs, Home etc., and openly declare that for these twenty positions, it will not go by seniority, that it will select the person best suited for the job.

But even with clear majorities and a competent set to carry through the vision of a Prime Minister or Chief Minister, execution will be a problem unless three or four additional things are done.

Educate your rulers

One, a dialogue among institutions — in particular with the judiciary. Most judges would be as innocent of the shop floor, of the rough and tumble of markets as us journalists. Yet their pronouncements have the most far-reaching effects on economic operations. Every occasion must, therefore, be seized, as many as can be contrived should be contrived to bring the realities of technological change and of the current economy to our judges. As some of them may be hesitant to directly participate in discussions and workshops on these matters, we should engage with retired judges and with lawyers: they are of the same family, and we can be confident that what they pick up at such exchanges will trickle through to their sitting brethren.

It is for the same reason that I have come to see some merit in sending legislators on trips abroad: seeing where the world is going cannot but stir some at least among them to clear the blocks that we place in each other’s path at home. If only our trade unionists could be sequestered in China for a while! Surely, even they would see that if we continue to hobble our enterprises by laws and practices as they exist today, we will kill their chances of competing with Chinese companies, and thereby render jobless the very workers whose interests these union leaders are sworn to protect.

Processes

The second head concerns what is a paralysing infirmity today — the processes of the Executive: from the items that are taken to successive levels right up to the items that require the seal of the Cabinet; to tender procedures; to the number of persons and departments that have to be consulted over a question. Reforming these, pruning them, hacking many of them away, making them transparent, will, I have little doubt, have to be one of the main points of focus of the Government after the elections. And the improvements in these processes must reach the municipal level — for unless land is made available at that level no vision statements, no bold policy pronouncements will lead to actual production, that is where the power will have to go on, the water to flow into the factory.

Rewarding performance

Third, the decades-old formulae by which the Planning and Finance Commissions allocate funds should be stood on their head. In their current form, they scarcely reward performance, Reform, improvement. Indeed, if a state is kept poor, if its finances are so mismanaged that its current account deficit remains high and intractable, it gets ‘‘rewarded’’ — the allocation to it under various heads is higher. It is only under a few programmes — the Accelerated Irrigation and Power programmes, for instance, that expeditious execution brings rewards. But the amounts set apart for these programmes are a pittance compared to overall allocations. The proportions should be reversed. And the scale multiplied.

The latter depends on the other key area of Reform: current expenditures of governments. Both to provide rewards for performance that would actually make it worth the while for states to affect improvements, and to provide funds for investment in infrastructure that would sustain industrial growth, it is current expenditure of central and state governments that has to be restructured. And that means first and foremost acting on the politically unmentionable — subsidies. This is perhaps the one area in which a breakdown alone will give the political class the reason to do what everyone knows has to be done