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Delivering services to aam aadmi

Policy design should worry less about public versus private, and more about choice and accountability.

Written by Karthik Muralidharan |
January 7, 2014 1:34:16 pm

The most noteworthy aspect of the Aam Aadmi Party’s manifesto is the explicit focus on service delivery. This is what its government will be evaluated on, and attention has shifted from the AAP’s political success to how it will deliver on these promises. The ideas below reflect learnings from over a decade of research into public service delivery in India, and may be useful to consider as the AAP works towards translating the priorities in its manifesto into specific policies.

One, bringing fiscal transparency. The AAP has revolutionised election financing in India by its transparent approach to fundraising and election expenditure. It now has a great opportunity to do the same for public finances more broadly. It can transform the nature of policy discourse in India by creating a webpage that makes it easy for citizens to drill down into the details of the income and spending of the Delhi government by department, by constituency/ ward and by position in the income distribution (the latter will take some analysis, but is doable).

A simple tool like this can increase the transparency of government spending, improve accountability by building citizen awareness of public spending in their area, and act as an internal compass for the AAP to check whether a proposed policy is going to benefit the true aam aadmi, as opposed to more vocal (and typically better off) interest groups. Such a tool can also elevate the standards of public policy discourse by highlighting the tradeoffs involved in policymaking.

Two, rethinking prices and subsidies. The main objective of subsidies should be to help the poor. But unfortunately, most subsidies in India are highly regressive because a fixed subsidy per unit of consumption leads to a larger fiscal subsidy for those who consume more (who are the better off). If the goal is to help the aam aadmi, a better approach to utility pricing would be to subsidise consumption up to a fixed number of units (at, say, the current consumption of the 80th percentile of users) and to price units above that at market cost. Such an approach is much more pro-aam aadmi and sustainable because economic growth will reduce the subsidy burden as a fraction of revenue. In contrast, a flat subsidy would increase the subsidy bill over time, disproportionately benefit the better off and crowd out resources needed for more pro-poor investments.

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Three, enforcing service provider accountability. It is tempting to think that the main reason for poor quality public health and education is the lack of facilities and inputs, but careful empirical research over the past decade has consistently shown that the key constraint to quality is the low effort and motivation of public service providers. The AAP has correctly identified the fundamental challenge of governance as being that voters are only heard once every five years, and not in between elections. In particular, they have no voice over the conduct of the police, teachers and doctors who are meant to serve them, but are “permanent” government employees and not accountable to the communities they serve. Recent research estimates the fiscal cost of tea-cher absence in India to be Rs 9,000 crore a year. If this is not corruption, what is? So instead of building new schools and hospitals, it would be much more effective to focus on increasing both top-down administrative monitoring as well as bottom-up community monitoring of performance in existing facilities.

Research also suggests that an across the board “regularisation” of contract workers is unlikely to improve service delivery, while leaving taxpayers with an inflated wage bill. While worker rights are important, it would be good to consider approaches that balance these rights with the needs for accountability. One option may be to consider longer-term contracts (of, say, three years at a time) with pension contributions, but where hiring and renewal is decided by the community. This is consistent with the principles laid out in “Swaraj” (the AAP manifesto), but the worry is that the politically difficult “local accountability” goal will be lost, while the politically easy “regularisation” will take place first. Governments do not have a permanent job, and are accountable to voters for renewal. Why not apply the same approach to public employees and the communities that they serve?

Four, making a distinction between public goods versus public-provision of private goods. In prioritising limited financial and administrative resources, it is useful to go back to a basic but often forgotten concept of public economics — the distinction between true public goods and publicly provided private goods. Examples of the former include law and order, justice, regulation, infrastructure, public health and sewage/ sanitation. These are (a) best provided by the state for reasons of jurisdiction or natural economies of scale/ scope, and (b) benefit everyone because there are large (positive) externalities to all. The latter include areas like healthcare, education and food security, which tend to be provided by the state for access/ normative reasons, but which can, in principle, be (and in practice are) provided more effectively by the private market. So the AAP should try to focus maximum attention on the public goods that only government can provide, and be willing to experiment with models that leverage the strengths of the private sector for service delivery in other areas.

Five, enhancing choice and competition in service delivery. Research on both health and education in India has shown that the private sector delivers equal or better quality than the public sector at much lower levels of per capita spending. So, while the AAP should focus on improving public service delivery (the private sector will also have to improve in response), it will do well to listen to citizens who are voting with their feet and choosing fee-charging private options over the free public ones. Of course, in some cases, the public options are better and in others, the private ones are, but citizens can usually judge quality better than bureaucrats.

So, policy should worry less about public vs private, and more about choice and competition and empowering the aam aadmi with vouchers that allow her to take the per capita spending that the government is incurring in her name and avail the best option for her.  Such an approach will empower the aam aadmi with choices similar to those available to the better off, and encourage improvements in service delivery in both the public and private sectors.

The AAP has shown a commendable willingness to not micro-manage the way money for the poor is spent and instead provide them greater autonomy (untied funds to mohalla sabhas, for instance). The spirit of “Swaraj” should be extended to service delivery to the extent possible by ensuring genuine community control over service providers, and empowering voters to spend the public money that is being spent in their names in ways that they see fit. By being transparent about public expenditure and the trade-offs involved in policy choices; by being vigilant against policies that cater to the interests of the vocal top 20 per cent at the cost of the poor; by prioritising financial and administrative resources effectively; and by being open to using both state and market means to achieve pro-poor ends (as Yogendra Yadav recently said it was), the AAP government can transform service delivery in Delhi and beyond.

The writer teaches economics at the University of California, San Diego, US

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