India needs a “Distributed Growth Model” – Growth Alone will not suffice

“Distributed Growth model” is the need of the hour. Growth alone will not suffice.

India’s budget preparation is in the final leg and it will be unveiled soon. Last two budgets have put the focus correctly; by giving thrust to rural development, agriculture and infrastructure, but the bureaucratic red-tape has been an impediment. We have a long way to go and we need to evolve a new model – the ‘Distributed growth model’. All these decades, we have chased the ever-elusive “double digit” growth, but we are not going to achieve that with the current approach.

“Too many economists spoil the budget”. We had a world-class economist running the country for a decade, we had the best economists running the RBI and the erstwhile Planning Commission, and we still could not achieve double digit growth, and floundered. So, it’s time to have a fresh look at our economic approach. A mere change in the interest rates have not done anything, and will not. Economy is not about tax collections, interest rates or money supply alone, it is much more. ‘Text book economists’ do not understand the country’s complexities, and neither they do good to the economy, or to economics. Also, the general perception is, that only 3 % pay taxes. Yes, 3 percent may be paying direct taxes but every citizen of India pays taxes indirectly when s/he purchases a product from the market. With GST implemented, all the more! So, to use this reason of low tax payer’s base is wrongfully placed.

It is time we considered a model that leads to growth which percolates downwards and spreads wide, that what I call as, ‘Distributed Growth model”. How do we make it happen?

Let’s look at the following data;

More money in the hands of the poor : There are about 250 million households in India and of these, about 25 % are BPL. So, we need to continue and enhance their earnings with “Mission 62.5 million households”.
Agriculture : The number of cultivators and agricultural labourers added together make up around 263 million or 22% of the population (@1.2 Bn population based on 2011 census). Investment in ‘Irrigation’, in agri-allied sectors, and in setting up forward linkages with markets in towns, and for exports is the need. Special ‘Agri-infra & Irrigation mission’ project is needed to fire the most important engine of our growth – Agriculture.
MSME : As per the annual report of the MSME Ministry (2015-16), MSME sector employs about 80 million people in about 36.1 million units. Out of these, units in rural areas are 20 million and number of women enterprises are 2.6 million. MSME needs to expand more to semi-urban and rural areas and engage youth and women entrepreneurs, and also boost MSMEs expansion in food processing, agriculture based and allied segments, high-end tooling, IOT and niche manufacturing. MSME is where massive employment and income gets generated. It will not only ensure success of ‘Make in India’, but most importantly, as the MSME employees themselves are the customers of “Make in India’, it will create ‘customers’ for such products. With such customers available, ‘Make in India’ will be a grand success. MSME is the second engine of the economy that needs to be fired up
Six states (Bihar, Uttar Pradesh, Rajasthan, Madhya Pradesh, Jharkhand and Chhattisgarh) have 42 percent of population and 56 % of the total population growth. Luckily, all these are under BJP. We need to invest more in uplifting the economy of these states. Lower growth in these states can drag down the overall growth of the country.
Retailers number 13 million and we need to carefully tread FDI in online and retail segments. 100 % Investment in Retail for daily use products might be myopic, and the policy makers need to be careful if BJP wants to run this country for another 25 years! Also, we need to create innovative models to explore, to seek investments in retail and grow the standalone stores at the same time
Tourism: India has about 10 million tourist arrivals and this can become 5 times. Imagine the number of hotels & convention centres, cabs, guides etc. that will come up and the best part, without any Government investment, as the private sector will invest seeing the business potential. Government must focus on tourism as a job creator and a foreign exchange earner. India has so much to offer to global and domestic tourists! Focus on ASEAN and expand beyond .

Health & Education

Recent study had revealed that 50 million go below poverty line due to healthcare costs. Also, it is a known fact that most of the ‘educated’ are not ‘skilled enough’ to do the jobs that the country needs as its economy evolves. Hence, education and health needs investment. If the workforce is not healthy and competent, how can the economy be strong? In fact, anecdotally (since I am not an economist by training), I would take the liberty of stating that GDP growth would be equal to the GDP spends on education, and health! Our healthcare system and education system is in shambles and it needs massive investment. For achieving ‘distributed growth model’, investment in health and education are a precondition.

Strongest thing about India’s economy is ‘1.34 billion consumers’, who run the consumption story (growth engine) for the country, and we add about 18 million new consumers every year. With more opportunities for consumers from Agriculture, MSME and Tourism; and assuring them with quality health and education; we will fire the economy to grow 10 percent a year, and that too, sustainably.

I see foreign trained economist keep warning India about the Fiscal discipline. If the investments are going in areas outlined above and not in opex, we must not worry. Even if the fiscal deficit reaches 5 percent, investments in these sectors will payback, and our economy will be amongst the 3rd largest in a decade. USA is a case in point. It is too big an economy and though its fiscal arithmetic is baffling, does it worry about its ratings or deficit!!?

In oil rich Gulf countries, GDP and GDP per capita appears fantastic as statistics, but since the oil fields are in the hands of a few royal families, the wealth gets concentrated in a few hands. Recently, the annual Oxfam survey has found that the wealthiest 1 % Indians garnered 73 % of the wealth created in 2017. This is due to the ‘Concentrated Growth model’. So growth alone with not suffice , and we need ‘distributed growth’. In the “Distributed Growth” model lies the answer. India should move to this model before the gap between ‘have’s’ and ‘have nots’ increases more!

What the policy makers must aim is on enhancing the income and money in the hands of consumers by creating more avenues to work, earn and spend. This will happen if we invest in agriculture and value addition in allied agro based industries, MSME, tourism, infra, health & education.

Lastly, let us not forget, electorate will evaluate Modi government’s performance on health, education, employment, electricity and inflation. These hold the key to a massive win in 2019.

Good economics is long term politics!

Rajendra Pratap Gupta is a leading public policy expert. Views are personal

How to reform the Bureaucracy

Kill bureaucracy to convert Red tape toRed Carpet

On May 28^th, I wrote the article in the ET; ‘Bureaucrat Mukt Bharat (http://blogs.economictimes.indiatimes.com/et-commentary/steel-frame-of-bureaucracy-is-an-obstacle-to-development-its-time-to-rehaul-it/).

On Independence day, we heard the Hon’ble PM saying that his Government’s motto is to reform, perform and transform. Also, on 01st September, Carnegie Endowment for International Peace wrote, “India’s economy has grown rapidly in recent years, but the country’s bureaucratic quality is widely perceived to be either stagnant or in decline”. A former PM had once said about the Indian Civil Service (ICS) , the earlier avatar of IAS; “as neither Indian, nor civil, nor a service.”

I think it is time to re-look at overhauling the bureaucracy, if we wish to realize the vision of Modi’s idea of India

We need speed, we need efficiency and we need effectiveness in our entire chain of command. This is the pre-requisite in realizing the vision of the greatest statesman – Modi.

We have had a mixed bag of experience with the bureaucracy in implementing some of the key announcements from the Hon’ble Prime Minister, and the commitment on budget announcements and schemes. I have the following suggestions;

The reason our bureaucracy fails is because of the following;

Unlike the politician, who have to go to the electorate every five years seeking ‘votes’ as his ‘appraisal’ for the performance, bureaucrats come with a ‘seniority based promotion’ and a defined retirement age and hence, they are least bothered for their performance reviews and also that these ACRs (Annual Confidential Reports) for performance reviews can be ‘managed’.
Also, since bureaucrats make the ACRs of these bureaucrats, the norm is ‘do no harm’, and they are generally rated between 8-10 in the ACRs and the chain continues year after year, badge after badge. Actually, now there is no merit in looking at these ACRs. Even the most corrupt and inefficient officers had the best of ACRs
Most of the bureaucrats are there for ‘authority’ and ‘administration’, and not development. Their approach is to ‘control’ and ‘Govern’ and not – ‘work as a team’ for ‘development’.
Also, if one gauges the real working of majority of these bureaucrats, they don’t work for anyone, but they work for themselves, and then, there are ego’s, differences, grudges and dislikes for other bureaucrats. So there is never a ‘team approach’ in whatever they do and this drags the performance of the Government.
Bureaucrats are more ‘procedure driven’ than ‘Outcome driven’. They focus more on following procedures and not necessarily on the outcome or performance, and that is why files take months to travel from one desk to another. Famously, one of the best performing Minister, Sh. Nitin Gadkari said on 09^thMay 2016, that it took him a 9-month wait for an approval for an automated parking. This is when Sh. Nitin Gadkari ji is known for being really fast in getting things done within the bureaucracy, and hence we can imagine what other ministers must be facing!

So, the time has come when we think out of the box and overhaul this system. Else, in 2019, our biggest failure will be because of the inefficient and unaccountable bureaucracy who will fail to implement Government’s key schemes.

We need to focus on the team approach; ‘One India, One team, one Goal’, that touches and transforms life till the last man standing in the line.

Re-defining the Appraisal System: As of now, we have an appraisal system that looks at ACRs, which only counts for an individual’s performance. If the performance and payment of the bureaucrat was based besides his individual performance (50% weightage) , the performance of his department / ministry (25%weightage) and the overall performance of the Government (25% weightage) , then the bureaucrats would work as a team and give up the siloed approach . So the first change is;

Move from ACR to CPR (Comprehensive Performance Review), which includes

Individual Performance Review (IPR). Based on the yearly goals/ deliverables assigned

A) Secretary’s goal should be decided by the Minister of the department
B) Deliverables of the Joint Secretary and above decided by the Secretary of the department and the chain follows down

Department’s Performance Review (DPR). Overall departmental review be based on the goals set for the year for the department / Ministry
Government Performance Review (GPR). This is the overall performance rating of the Government based on the

a) facts / data based self assessment by the Ministry / department (10 % weightage)
b) Annual online survey taken by the citizens, for all the departments / ministries at the central level (15 % weightage)

Weightage for each level of review for the Comprehensive Performance Review (CPR) :

Individual Performance Review (IPR) should have 50 percent weightage
Department’s Performance Review (DPR) should have 25 percent weightage
Government Performance Review (GPR) should have 25 percent weightage

Increments, variable pay/ incentives and promotions of officials should be based on CPR

Implementation: Can be in a phased manner ;

Option 1: We could start the IPR (Individual Performance Review) & DPR (Department’s Performance Review) from 2017 at the Joint Secretary level, and the CPR (which includes the overall Government review) can start from 2018
Option 2: CPR (Comprehensive Performance Review) can start at the Secretary level from 2017
Move to the Joint Secretary level from 2018
From 2019, the same can applied to employees holding the post of director rank in the government – Central
Option 3: Have CPR only for Secretaries in 2017, and rest can be in a phased manner

Parameters for IPR could be picked up from what is already defined under ACR, but it must be more specific like;

For Defining / planning time bound quantifiable and measurable deliverables for the year (20 % weightage)
Completion of targets within the time frame (20 % weightage)
Completion of targets without increase in budgets (15 % weightage)
Utilization of funds (15 % weightage)
Disposal of files & Grievances (15 % weightage)
Innovations (15 % weightage)

For any of the misses, the weightage be objectively apportioned.

Department’s Performance Review (DPR)

Every department must define / plan its key yearly deliverables / priorities. This must be done by the TEAM – Minister in-charge and officers up to the rank of Joint Secretary (20 % weightage)
Completion of targets within the time frame (25 % weightage)
Completion of targets without increase in budgets (20 % weightage)
Utilization of funds (20 % weightage)
Disposal of grievances (15 % weightage)

For any of the misses, the weightage be objectively apportioned.

Government Performance Review (GPR)

A part for the GPR be based on actual data / facts, and must be done by an independent government agency (40 percent weightage) and the rest must be based on public perception (60%) ; or it can be made (50 %) of actual assessment by an independent agency and (50 %) by public voting ;

Implementation of key schemes goals Vs. achievements (10 % weightage)
Meeting the Inflation target (5 % weightage)
Fiscal deficit (5 % weightage)
GDP Growth (5 % weightage)
Utilization of funds (5 % weightage)
Disposal of grievances (10 % weightage)

The government works for the citizens, and finally it is the citizens who are the best judge of its performance. Parameters 1-6 above can be objectively judged with data / facts, and others can be subjectively judged by the citizens under Jan Bhagidhari Assessment (JBA) through online voting.

At the end, it is the Government ‘for the people’, so the people must rate the Government on overall performance through public voting, after Government presents its self- appraisals on the points mentioned from 1-6 above.

The voting should be open for 30 days for the public to vote by a missed call from their registered mobile number on a toll free number; (60 % weightage should be assigned to public perception / judgment on performance) and 40 % on self appraisal / independent assessment by the Government.

Major change in bureaucracy is about making it a ‘performance based contractual service’: Also, one reaches the rank of Joint Secretary after a minimum service of 17 years. Joint Secretary is the actual ‘official’ who runs the show for the Government on a day-to-day basis, but if one sees the performance of the Joint Secretary, in a real sense, s/he does not feel accountable to anyone. The reality is, that now they are more driven by authority and administration and less by duty and development.

The biggest bane of bureaucracy is their job security and on one can demote them or remove them. When politicians have to go every five years for their performance review and renewing their term before the electorate, why should the top officials not undergo a review and renew based on their performance? Let us give them job security, but for performers. The Government is serious about a ‘Big Change’, and has to go and seek appraisal from the voters in 2019, but most of the bureaucrats are not as serious. They have been used to seeing government after government for decades. For them, this is all routine office work but for the Government, it is an implementation emergency. This is the only way to bridge the divide and bring about a cultural change for performance, accountability and rewards. Today, only the politicians are accountable but not bureaucrats! And it is time to change and fix the accountability based transparent review process / system.

All officers of the rank of Joint Secretary and above must be put on a 5-year contract, based on their performance review, with a performance based financial incentive for their outstanding work. So, the salary structure should have a fixed pay and a variable component . If they fail to live up to the performance standards (IPR) below 80 % for three years (out of five year term), they must be relieved. Let us not forget that the ‘Best are first to be hired and last to be fired’. So no worry for the best performers, rest should worry about themselves.

Even, Nirmal Kumar Mukarji, the last serving Indian Civil Service (ICS) officer in India who retired as Cabinet Secretary in 1980, as chief guest at the Indian Administrative Service’s 50th Anniversary celebrations 1997, had called for an end to the all-India tenured services.

Also, PS to the Minister is considered an important bureaucrat but he is a junior IAS. (below the rank of Joint Secretary), and hence s/he plays safe dealing with his seniors, as one day he might have to work under them, and the loser in this case always is the Minister. So, we need to consider that the PS to the Minister be a Special Secretary rank .

eOffice & eFile – Files are taking months to move from one table to another . e-Office / eFile concept must be implemented. No file should take more than three weeks and pass more than three levels. If there is a delay of more than a week, the note should be made on the file justifying the reasons for delay

Modi has the intent, the will and the vision and he is working really hard. Will his administrative system be able to catch up? There is a big difference in how the minister and the common man are handled by the bureaucrats. So the first impression here, should not be the last impression! Bureaucracy is slowly putting red tape to the red carpet !

Modi rightly said recently, “We cannot march through the twenty first century with the administrative systems of the nineteenth century”. If we see, we still have ‘Collectors’ in post British India, and this itself shows that the bureaucracy is still in 19^th Century! A senior IAS wrote to me, ‘Modi is ahead of time’ and I said ‘ Yes, Modi is definitely ahead of time but unfortunately, the bureaucracy is still in the 19^th century’. When Modi was thinking of Planning Commission, he made a profound statement, “Sometime it is better to build a new house than to repair the old one”. May be the same approach is needed for the ‘institution’ called bureaucracy. Do we repair the old house or / and build another one. The transition is critical and we have no time to lose. It needs to start soon and there should be a time bound plan to implement it

Rajendra Pratap Gupta

Kill Bureaucracy to save this country

How to reform Bureaucracy in India

Bureaucracy Mukt Bharat

Time to change ?

http://blogs.economictimes.indiatimes.com/et-commentary/steel-frame-of-bureaucracy-is-an-obstacle-to-development-its-time-to-rehaul-it/

Last year at the Economic Times Global Business Summit, finance minister Arun Jaitley had said that “the creeping acquisition of Rajya Sabha is on”. The thumping victory in Assam and an increased vote share across states show that the BJP government at the Centre is marching towards its goal. Also, the party seems closer to the goal of ‘Congress-Mukt Bharat’ after the latest assembly polls.

However, these results need introspection from all political parties. While the results have led to comments from party veterans like Digvijaya Singh’s observation that Congress needs “a major surgery” and Satyavrat Chaturvedi’s similar prognosis involving “a cardiac surgery”, the Narendra Modi government needs to conduct an open heart surgery for a ‘Bureaucrat-Mukt Bharat’. In 2014, India had voted in Modi to spearhead radical change, end corruption, execute citizen-friendly policies and administration, provide development with jobs, and lower prices.

The prime minister started well by meeting the secretaries and not his ministers. But somehow, the bureaucracy, after a while, started ignoring the ministers, as they had direct access to the PMO. I know of a minister who lost his portfolio because the secretary of the department made repeated complaints against this honest man who took a tough stand on irregularities happening in the ministry. Finally, the bureaucrat succeeded in ousting the minister.

I had a meeting with an additional secretary in the presence of a Cabinet minister. We discussed a few programmes that could be implemented on a priority basis. The additional secretary had a problem for every solution we proposed. He provided reasons as to why a major programme could not be implemented. And when we provided a workable solution for each one of his ‘problems’, he finally agreed on a timeline — without ever delivering. During the meeting, he kept flaunting that he had just returned from a meeting at the PMO.

Dragging the Nation Down
Then there was a senior technocrat in a ministry whom I met last month. He immediately told me to send him an email and promised that he would get the job done. The email was forwarded to his junior for action only after nine days! And this, despite clear instructions from the Cabinet minister a few days before. Most bureaucrats don’t seem to be bothered with the job at hand.

When people single out politicians for corruption and non-performance, I beg to differ. The bureaucracy runs the government. If the bureaucrats did their jobs well without fear or favour, we would not have straggled so far behind China. We have been terribly let down by the bureaucracy. There are always exceptions, of course. But they are far and few between.

Bureaucracy has still not got out of the officer culture that they have been used to for about 60 years of Congress rule. The role and orientation of the civil services has to change. Bureaucrats need to give up their role of ‘administrators’ and work on becoming ‘developers’.

I keep hearing that bureaucrats are afraid of taking decisions due to the fear of being hauled up by the Comptroller and Auditor General (CAG), the Central Vigilance Commission (CVC) and the Central Bureau of Investigation. But aren’t these institutions also in the hands of their fellow officers? Why on earth are bureaucrats afraid of bureaucrats?

It is time for the officer to learn a few lessons from the armed forces. Soldiers join the army knowing well that while working for the country, they can lose their lives. The working conditions for soldiers are not as comfortable as that of bureaucrats and neither do most of their pay scales match those of bureaucrats. And, bureaucrats are also soldiers for development and they should not worry about action against if they discharge their duty impartially and without fear or favour.

If people don’t have the passion and commitment for the country, or if they join the civil services for a job that gives them only authority as an administrator — or only for a safe job with a good retirement plan — don’t join the administrative services. Modi has a grand vision and is a man of action. So, either the bureaucrats rally behind the prime minister’s vision and implement his government’s idea of India by focusing on development with passion. Or we get rid of them.

Goodbye to Bureaucrats
Union road transportation minister Nitin Gadkari has got rid of bureaucrats in his ministry in key positions while having achieved a lot in a ministry considered tough to handle. Could Gadkari’s prowess as a minister have anything to do with the fact that his private secretary and key members of staff are from outside the Indian Administrative Service (IAS)?

So, we need to get rid of the British Raj-era kind of bureaucracy and its officer culture. Otherwise, the bureaucracy will be the biggest bottleneck for implementing the vision of the Modi government with the country paying a price it cannot afford. Fortunately, the prime minister has three years left in his current tenure. So, the next goal for the government should be a ‘Bureaucrat-Mukt Bharat’.

The writer is a public policy expert

DISCLAIMER : Views expressed above are the author’s own.

Published in The Economic Times on 28th May, 2016