Foregrounding Financial Accountability in Governance

This chapter argues that the 21st Century is witnessing a culture of accountability in-the-making. The mores of parliamentary supremacy are giving way to assertions of popular sovereignty. The Comptroller and Auditor General of India (CAG) is therefore peering out of the blinds of a restricted system of parliamentary financial control to re-design public sector audit as a service meant directly for citizens at large, not only for governments and parliaments. CAG's organisation can demonstrate its relevance to citizens by developing the capacities to communicate with citizens through the media, support social audit mechanisms, conduct electronic financial audits, and inform the public discourse by means of research-oriented participatory performance audits. Wide public discussion to re-envision the institution and forge a new mandate for CAG is essential. Three recent United Nations General Assembly (UNGA) Resolutions to strengthen Supreme Audit Institutions for meeting the Sustainable Development Goals (SDGs) should be pursued vigorously.

New Regulatory Institutions in Infrastructure

This chapter examines the rise, design, and functioning of new infrastructure regulatory institutions in India, with particular attention to the process through which regulators are embedded in a local context. Regulatory performance is often benchmarked against an effort to insulate decision making from undue political influence by delegating powers to technocratic agencies. By this benchmark, regulators have been relatively unsuccessful. But conceptualising the regulatory process as one to be re-made around technical rules is too simple; the Indian context requires regulators to constructively engage with negotiations that occur over regulatory decisions. For this reason, rather than atomistic agencies, “regulatory space” is a more appropriate construct through which to examine the regulatory process, with the judiciary and civil society as particularly important actors. From this broader perspective, regulatory outcomes are more diverse, particularly in their ability to create new spaces for creatively engaging politics.

Re-energizing Democratic Decentralization in India

This chapter describes the current status of democratic decentralisation to local governments (LGs) in India. The political support for decentralisation has been fitful and typically driven by a few champions. The transition to a system of LGs as autonomous spheres of government has been caught in limbo because administrative and fiscal arrangements have not kept pace with well-intentioned legal provisions. This has resulted in LGs that are burdened with a wide array of devolved functions on paper, but with little fiscal space and low administrative capability to execute these effectively. The earlier paradigm of top-down devolution should be supplanted by a demand-driven approach that incentivises elected representatives from LGs to build a body of effective practice from below. Several interesting experiments in building collaborative knowledge networks and awarding local initiative might trigger the transformation that has eluded efforts made so far.

The Civil Service

This chapter provides a comprehensive overview of the institution of the civil service, covering its initial design as conceived by the makers of the Indian Constitution and changes in that design. It makes an assessment of the effectiveness of the civil service as an institution against four criteria: preserving the constitutional democratic order, impartial implementation of the “rule of law” vis-à-vis citizens, faithfully translating the will of elected governments into policies while effectively implementing those policies, and promoting development (including efficient and effective public services). It explores the causes of the various shortcomings identified in the performance of the civil service and compares the Indian civil service with other countries on several parameters. It concludes with a detailed discussion of policy ideas on reform, drawing on Indian and international experience.

Institutions of Internal Accountability

This chapter looks at reasons why the three major accountability institutions—the Comptroller and Auditor General (CAG), Central Vigilance Commission (CVI), and Central Bureau of Investigation (CBI)—have not effectively delivered on their mandate. The reasons lie as much in the overall institutional framework in which they have to operate as in their own internal structures, their history, and their legacy of past performance. The chapter recommends that the CAG would do well to position itself as a vital component of the mechanism to enforce the accountability of the executive to the legislature, and also submit itself to monitoring and accountability. The chapter sees merit in the recommendation of the Parliamentary Standing Committee to integrate all anti-corruption mechanisms under the Lokpal.

Reforming India’s Institutions of Public Expenditure Governance

Given the poor quality and effectiveness of much government expenditure in India, this chapter analyses ways of improving effectiveness through institutional reform. Improvements in outcomes include better targeting of redistributive measures and more efficient spending on productive projects. Four potential areas of institutional reform are: (1) improved functioning of individual ministries and departments, at the central and state levels; (2) better coordination across individual ministries and between the centre and states; (3) reassignment of expenditure responsibilities across levels of government (centre to state and/or state to local); and (4) reassignment of tax authorities to provide improved incentives for expenditure governance through electoral accountability. The chapter discusses each of these four areas, recent and potential future institutional reforms, and possibilities for implementing change.

Election Commission of India

This chapter examines the evolution of one of the world’s most powerful elections bodies, the Election Commission of India (ECI). Blessed with a legal status as a permanent, independent body under the Constitution, the ECI has used its broad mandate to develop wide-ranging powers to regulate the conduct and management of elections. A series of skilled leaders have further pushed the agency to undertake consistent organizational and technological innovation. In spite of this progress, the agency has struggled mightily to curb the twin influences of money and “muscle” (serious criminality) in electoral politics. Unless the ECI is given more substantial legal authorities to address these challenges, the credibility of the electoral process will likely suffer. Legal ambiguity also makes the body vulnerable to political interference, although the multi-polar distribution of political power—coupled with widespread popular support and a sympathetic judiciary—mitigate this risk.

Introduction

This chapter outlines the analytical framework for the larger volume, situating the book’s inquiry of India’s institutional foundations in the larger context of the multiple transformations the country has experienced since 1947. In so doing, it explicitly seeks to build on a 2005 volume by Kapur and Mehta on India’s public sector performance. The chapter then explicates the central themes that characterize the eleven institutions, or institutional clusters, examined in the book. In the penultimate section, it discusses five central elements of the Indian state’s struggle to transition from “old order” to “new order” institutions. It concludes by arguing that serious institutional reform is vital if the country is to build and sustain an Indian state for the twenty-first century.

Reserve Bank of India

The RBI was set up to conduct monetary policy, manage public debt and foreign exchange reserves, act as the government’s banker, and support the development of markets and financial institutions. This chapter reviews how the institution has fared on these various dimensions. It begins by examining the appointment process for the Governor and the monetary policy committee. Next, it assesses the importance of an independent debt management agency and consistency between debt management and monetary policy. The connection between monetary policy and macroprudential policy is discussed next. Large foreign exchange reserves may be viewed by government at some time as a source for a national investment fund. This requires the RBI to engage with government and to define the objective of reserves management. The RBI’s actions to improve the resilience of financial markets and its involvement with social and distributional goals of directing credit towards priority activities are also evaluated.

The Presidency

This chapter assesses the role of Indian presidents—heads of state in this parliamentary system. At most times, they are legally required to comply with the formal “advice” of ministers. But in certain circumstance—for example, in deciding which party leader should be invited to form a government after an election or the fall of a government—they must act independently. This chapter discusses the varied approaches—assertive or restrained—of different presidents. It also analyses the remarkably broad freedom that presidents often enjoy from historical precedents. The chapter concludes with a detailed analysis of the devices which presidents may employ to maximize their room for manoeuvre, including one which has never been used (and has scarcely been recognized) but which could trigger a constitutional crisis.