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Not in a fit state

Recent economic logjam underlines need to remake the state for the 21st century.

Written by Pratap Bhanu Mehta | Published:August 29, 2014 12:02 am
The much-awaited minimum monthly pension of Rs 1,000 by EPFO will be implemented from September 1. (File) With the possible exception of the Indian Economic Service, most of the knowledge-producing services of the state are in disarray.

India’s challenge over the next five years can be summed up somewhat melodramatically in one sentence: a medieval state is trying to run a post-modern economy. Almost every interesting story in recent days involved serious regulatory failure. These stories have belied any hope that cleaning up India’s regulatory mess is going to be easy. The right combination of technical skills, oversight mechanisms, public reason and mediation of knowledge systems is not going to be easy to institutionalise across a range of sectors.

If this diagnosis is correct, what India needs is not a new Planning Commission, not a new think tank, but a state-building commission. This is different from an administrative reforms commission, which looks at conventional issues of administration and process. A state-building commission has a different starting point. It would ask: how do we build a state fit for purpose?

Behind the recent economic logjam is not just a story of paralysis and corruption. It is also the story of a state that has not come to terms with new functions. The debilitating imbroglio over coal is not just about corruption; it also reflects an inability to understand what modern mining might look like. Disputes over electricity tariffs abound, with the recent Supreme Court stay on the compensatory tariff order for Tata-Adani being just the latest instance. Environment regulation is a general mess all around. There is no framework for thinking about the tradeoff between security and convenience even in as simple a thing as Uber. Apart from the knowledge issues, behind our inability to have a sane conversation on GM foods lies a well-founded suspicion of our regulatory capabilities. The list could go on: the police does not even have basic forensic capabilities to handle its case load; our newly commissioned warships are apparently taking to sea without submarine detection equipment. Corruption is part of the story in many of these cases. But the context in which the state operates has changed in several ways.

First, the knowledge mediation functions of the modern state are immeasurably more complex. It cannot avoid taking a call on scientific and technical knowledge, on every issue from regulating GM crops to assessing the environment, from health to the choice of energy technologies. How credible are its processes and capacities to take such calls, particularly in a context where the asymmetries in knowledge between what is produced in the state and what is produced outside it are growing immeasurably? What data does it require to have a minimum of social self-knowledge to intervene intelligently? Does it have the capacity to assess cross-cutting risks at the level of detail that matters? Our options are reduced because we do not trust the state to perform this role.

Second, while the state will continue with many traditional functions, it is now more deeply implicated in markets, civil society, professional associations and so forth. Even internally, the state is a lot more heterogeneous and differentiated: it has to have capacity for command and control, regulation, contracting and so forth. The nature of laws that have to be drafted, the kinds of contracts that have to be overseen, the kinds of entities that have to be held accountable, the principal-agent problems that need to be surmounted, the networks that need to be managed, are vastly different. There is constantly sand in the wheels because few processes are attuned to these realities: the government is losing on poor drafting, poor contracting and poor project design. Traditional bureaucracy cannot do these functions.

Third, the human resource requirements of the new state are going to be very different. But nowhere in the Indian state is there a credible human resource strategy. What kind of people will the state need? Even when the state subcontracts out, it needs capacity to understand good subcontracting. With the possible exception of the Indian Economic Service, most of the knowledge-producing services of the state are in disarray. India’s pioneering statistical service is a pale shadow of itself. How does one select them, and what will it take to get them under altered market conditions? The department of personnel and training should be doing this. But it has no credible staffing roadmap for the state. No wonder the state is often out-lawyered, out-hacked and generally outwitted.

Fourth, a modern state ostensibly needs to supplement process with performance. There has been a lot of talk of performance accountability frameworks. But most of these are window-dressing. At the moment, the state does not do even one little routine exercise that should be mandatory. Many laws or significant policies usually have a financial assessment attached. But there is no administrative assessment attached to most laws or policies. Who will carry out the required functions? How much time and manpower will it take to carry them out? Policies cannot be drafted on the assumption that state capacity exists.

Fifth, a modern state, like all states, is located in an international context. But globalisation requires the state to have a thicket of interactions across a range of domains. Sometimes your strategic advantage is simply a function of the number of lawyers you can deploy in a negotiation. Unless you want to just say no, building up arsenals of negotiation is probably half the source of your power. Our arsenals of negotiation are much weaker than they should be.

Finally, the nature of rationality embodied in the culture of the state has changed. It could never be reduced to a purely technical exercise of economic maximisation or bureaucratic domination. This rationality has to take on board the undeniable importance of democratic experimentation and justification. It cannot be a top-down rationality constantly out of touch with organic processes and a changing society. It has to have cultures of communication that can engage with those that are going to be affected by policies. To borrow Jurgen Habermas’s phrase, it will have to engage in a form of communicative rationality if it is not to be constantly subverted.

Contrary to polemical readings, the Indian state is not hopeless. The first avatar of the Planning Commission coincided with a phase of state-building that was thought appropriate for the times. For all the rot in the bureaucracy and public sector, the fact remains that during the 1950s, India built some remarkable institutions that helped nation-building and democratic mediation. Getting rid of some old laws and deregulating more areas is easy. But the risk of being stuck with an ineffective state is still real. The big challenge is: How do we build a 21st century state?

The writer is president, Centre for Policy Research, Delhi, and a contributing editor for ‘The Indian Express

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