A talk on Governance and its costs

1. India: A Nation in search of a State.
Mohan Guruswamy

2. The nature of the regime.
02/19/16

3. The case of the two halves of Nogales.
• An institutional divergence took place in the early days with
the implications lasting into the present day.
• One system evolved to milk the land for the colonial masters
in Europe, while the other evolved due to the colonization by
the settlers and for their benefit.
• While economic institutions are critical for determining
whether a country is poor or prosperous, it is politics and
political institutions that determine what economic
institutions a country has.
• Standing in sharp contrast to the nations dominated by
extractive political institutions are the nations based on
inclusive political and hence economic institutions.
• An institutional divergence took place in the early days with
the implications lasting into the present day.
• One system evolved to milk the land for the colonial masters
in Europe, while the other evolved due to the colonization by
the settlers and for their benefit.
• While economic institutions are critical for determining
whether a country is poor or prosperous, it is politics and
political institutions that determine what economic
institutions a country has.
• Standing in sharp contrast to the nations dominated by
extractive political institutions are the nations based on
inclusive political and hence economic institutions.
02/19/16

4. A sum of Rs.1,74,081 crore had been earmarked to
pay the central government's employees the
financial year 2014-15 - about 10.45 per cent of its
overall expenditure.
Combining pay, allowances and travel expenses for
central government and railway employees, the
State spent just under Rs.1,00,000 crore in 2011-
12,
a number that ballooned to Rs.1,13,785 crore in
2012-13 and Rs.1,24,646 crore in 2013-14.
A sum of Rs.1,74,081 crore had been earmarked to
pay the central government's employees the
financial year 2014-15 - about 10.45 per cent of its
overall expenditure.
Combining pay, allowances and travel expenses for
central government and railway employees, the
State spent just under Rs.1,00,000 crore in 2011-
12,
a number that ballooned to Rs.1,13,785 crore in
2012-13 and Rs.1,24,646 crore in 2013-14.
Cost of Government - trends.
02/19/16

5. Cost of Government.
02/19/16

6. 02/19/16

7. Central Govt. salaries % GDP
02/19/16

8. Higher salaries. But better Governance?
02/19/16

9. Insufficient Governance.
02/19/16

10. Number of people in the Service of the Nation!
02/19/16

11. The estimated wage bill of
government at all tiers is around
Rs.12.00 lakh crores
or
about 7.5% of the estimated
2015-16 GDP of Rs.160.00 lakh
crores.
The estimated wage bill of
government at all tiers is around
Rs.12.00 lakh crores
or
about 7.5% of the estimated
2015-16 GDP of Rs.160.00 lakh
crores.
02/19/16

12. Why more Government gives us little
Governance?
• We have 185 lakh public servants at the three
tiers of government.
• Only one out of six is with the local government
institutions.
• Which simply means we have six persons telling
us to do this or do that, for every one supposedly
serving us?
• Who are these people answerable to?
02/19/16

13. India has 1,622.8 government servants for every 100,000
residents. In stark contrast, the U.S. has 7,681.
The Central government, with 3.1 million employees, thus
has 257 serving every 100,000 population, against the U.S.
federal government's 840.
This figure dips further if the 1,394,418 people working for
the Railways, accounting for 44.81 per cent of the entire
Central government workforce, are removed. Information
technology and communications services account for
another 7.25 per cent of the Central government's staff.
Then, there are only about 125 central employees serving
every 100,000 people.
India has 1,622.8 government servants for every 100,000
residents. In stark contrast, the U.S. has 7,681.
The Central government, with 3.1 million employees, thus
has 257 serving every 100,000 population, against the U.S.
federal government's 840.
This figure dips further if the 1,394,418 people working for
the Railways, accounting for 44.81 per cent of the entire
Central government workforce, are removed. Information
technology and communications services account for
another 7.25 per cent of the Central government's staff.
Then, there are only about 125 central employees serving
every 100,000 people.
Do we have too much Government?
02/19/16

14. Who gets more Government and
possibly less Governance too?
02/19/16

15. For the most part, India's relatively backward
States have low numbers of public servants. This
means staff members are not available for the
provision of education, health and social services
needed to address the worst kinds of poverty.
Bihar has just 457.60 per 100,000, Madhya
Pradesh 826.47, Uttar Pradesh has 801.67, Orissa
1,191.97 and Chhattisgarh 1,174.62. This is not to
suggest there is a causal link between poverty and
low levels of public servants: Gujarat has just
826.47 per 100,000 and Punjab 1,263.34.
For the most part, India's relatively backward
States have low numbers of public servants. This
means staff members are not available for the
provision of education, health and social services
needed to address the worst kinds of poverty.
Bihar has just 457.60 per 100,000, Madhya
Pradesh 826.47, Uttar Pradesh has 801.67, Orissa
1,191.97 and Chhattisgarh 1,174.62. This is not to
suggest there is a causal link between poverty and
low levels of public servants: Gujarat has just
826.47 per 100,000 and Punjab 1,263.34.
Who gets less Government and less
Governance?
02/19/16

16. Centralization in India: Administrative Expenditure
Central
Govt.
State
Govt.
Local
Govt. Central Govt. share
in Total
Administrative
Expenditure
(%)(in Rs. Crores)
1960 365 525 141 35.00
1965 990 881 339 44.80
1970 1514 1540 630 41.10
1975 3072 2935 993 43.89
1980 4589 6029 1702 37.25
1985 11112 13075 3047 40.80
1990 22815 28653 6410 39.42
1995 44850 55746 12746 39.57
2000 99965 120190 27250 40.4102/19/16

17. Decentralization in China till 2004
0
10
20
30
40
50
60
70
80
90
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Year
ShareofCentralGovt.expenditureintotalexpenditure(%)
Source: Chinese Statistical Yearbook 2005
02/19/16

18. Decentralization in India till 2004
0
10
20
30
40
50
60
1960-61
1962-63
1964-65
1966-67
1968-69
1970-71
1972-73
1974-751976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988-891990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
Year
ShareofCentralGovt.ExpenditureinTotalAdministrativeEpennditure(%)
Source: National Accounts Statistics, Government of India, Various Sources
02/19/16

19. Population according to standard projections 1991-2051
02/19/16

20. Budget Estimates 2015-16
02/19/16
Non-Plan expenditure is estimated at Rs.13,12,200 crore.
Plan expenditure is estimated to be Rs.4,65,277 crore.
Total Expenditure is estimated at Rs.17,77,477 crore.
.
Gross Tax receipts are estimated to be Rs.14,49,490 crore.
Devolution to the States is estimated to be Rs.5,23,958 crore.
Share of Central Government will be Rs.9,19,842 crore.
Non Tax Revenues are estimated to be Rs.2,21,733 crore.
Fiscal deficit will be 3.9% of GDP,
and Revenue Deficit will be 2.8% of GDP.
Non-Plan expenditure is estimated at Rs.13,12,200 crore.
Plan expenditure is estimated to be Rs.4,65,277 crore.
Total Expenditure is estimated at Rs.17,77,477 crore.
.
Gross Tax receipts are estimated to be Rs.14,49,490 crore.
Devolution to the States is estimated to be Rs.5,23,958 crore.
Share of Central Government will be Rs.9,19,842 crore.
Non Tax Revenues are estimated to be Rs.2,21,733 crore.
Fiscal deficit will be 3.9% of GDP,
and Revenue Deficit will be 2.8% of GDP.

21. The consequences of this.
02/19/16

22. So what do we have here?
• The STATED nation.
• The STATELESS nation.
• The GATED nation.
• The NEXT nation
02/19/16

23. “The interference of the state power in
social relations becomes superfluous in
one sphere after another, and then ceases
of itself.
The government of persons is replaced by
the administration of things and the
direction of the processes of production.
The state is not “abolished,” it withers
away.”
“The interference of the state power in
social relations becomes superfluous in
one sphere after another, and then ceases
of itself.
The government of persons is replaced by
the administration of things and the
direction of the processes of production.
The state is not “abolished,” it withers
away.”
Freidrich Engels in Part 3, Chapter 2,
of Anti-Dühring.
02/19/16

24. Now think of this:
02/19/16
• India is the third largest economy in the
world in PPP terms and it is predicted that by
2050 it will be a $30-55 trillion economy.
• This is not daydreaming. In 1990-91 when PV
Narasimha Rao initiated the first dismantling
of the centrally planned state the GDP of India
at current US$ was a little over $200 billion.
• Twenty-three years later it is ten times that.
Increasing twenty-fold in 36 years is really
not a tall order

25. The government tries to downplay the numbers by having
a somewhat self serving index (now 22%), other measures
such as the UNDP’s $1.25 a day suggest that almost 37.5%
of Indians live in dire poverty.
At $2 a day as much as 70% of India is below an
internationally determined basic standard of living index.
Others indices are just as damning. India's abysmal track
record at ensuring basic levels of nutrition is the greatest
contributor to its poverty as measured by the new
international Multi-dimensional Poverty Index (MPI).
About 645 million people or 55% of India's population is
poor as measured by this composite indicator made up of
ten markers of education, health and standard of living
achievement levels.
The government tries to downplay the numbers by having
a somewhat self serving index (now 22%), other measures
such as the UNDP’s $1.25 a day suggest that almost 37.5%
of Indians live in dire poverty.
At $2 a day as much as 70% of India is below an
internationally determined basic standard of living index.
Others indices are just as damning. India's abysmal track
record at ensuring basic levels of nutrition is the greatest
contributor to its poverty as measured by the new
international Multi-dimensional Poverty Index (MPI).
About 645 million people or 55% of India's population is
poor as measured by this composite indicator made up of
ten markers of education, health and standard of living
achievement levels.
The incidence of poverty in India.
02/19/16

26. Provisions as to the Administration and Control of
Scheduled Areas and Scheduled Tribes
• Report by the Governor to the President regarding
the administration of Scheduled Areas.
• Tribes Advisory Council. It shall be the duty of the
Tribes Advisory Council to advise on such matters
pertaining to the welfare and advancement of the Scheduled
Tribes in the State as may be referred to them by the
Governor.
• Law applicable to Scheduled Areas.— Notwithstanding
anything in this Constitution, the Governor may by public
notification direct that any particular Act of Parliament or of
the Legislature of the State shall not apply to a Scheduled
Area or shall apply to a Scheduled Area
• No regulation shall be made under this paragraph unless the
Governor making the regulation has consulted the Council.02/19/16

27. “And the Gods were greatly troubled/
in their heavenly courts and councils/
Sat no Gods of Gonds among them. /
Gods of other nations sat there/
Eighteen threshing-floors of Brahmins/
Sixteen scores of Telinganas/
But no Gods of Gonds appeared there/
From the glens of Seven Mountains/
From the twelve hills of the valleys.”
02/19/16

28. Thank you!
02/19/16