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2014's challenge: we need big ideas to defeat bad ideas

Despite all the back-patting we do to ourselves as the world’s largest democracy, the larger reality is that India is less governable that what we would like it to be. We can offer the usual excuses – that slow decision-making is the price we pay for democracy, that managing diversity is tougher than managing a country that is culturally homogeneous - and there would be some truth to that. But even after making allowances for democracy, demography and diversity, the fact is we simply blunder along and take the path of least resistance. In fact, it is simply too easy to take the easy, populist decisions that can be paid for by somebody else, or some time in the future.

Thus we are unable to implement a goods and services tax (GST) even though it is manifestly a good thing for the economy; we are unable to legislate a direct taxes code; we are unable to come to a sensible decision on energy pricing – the single biggest cause of our current fiscal overstretch – and we are unable to even offer a national uniform policy for foreign investors (witness the veto given to all states on FDI in retail). We now even have foreign policy being decided by states – Mamata Banerjee can block any deal with Bangladesh, and J Jayalalithaa can stymie better relations with Sri Lanka.

Bad ideas are never in short supply or lacking in widespread support.

A case in point is Arvind Kejriwal’s free water scheme and sharp cuts in power tariffs. No party opposes this. If anything, the others are saying this is not good enough. Another case in point is the UPA government’s desperate efforts to win re-election by offering even greater food subsidies and artificially pushing up the prices of land under the guise of offering fair prices to landowners. No party has opposed this, for they see opportunities for more corruption. We can lump the various state-level freebies – laptops in Uttar Pradesh, TV sets in Tamil Nadu, et al – too in this same category. No one says no to freebies.

When the beneficiaries of a political bribe are voters who can be clearly defined and counted, and the losers are unidentifiable taxpayers or even the whole of society (as when such profligacy results in widespread inflation), there is no way to check bad ideas.

And once a bad idea gets onto the statute book, it stays there forever. Or even gets expanded. A small food subsidy will become generalised. A sop intended for the poor will be cascaded upwards to the rich.

Arvind Kejriwal and Narendra Modi. Agencies.

Arvind Kejriwal and Narendra Modi. Agencies.

Here are a few more examples of well-intentioned ideas that turned bad. Their origins can be traced to the framing of the constitution itself.

Example 1: Reservations for SC/STs have now been extended to OBCs. More and more people now want to join the underprivileged for the privilege of reservations. Mayawati wants to now extend the idea to reservations even in promotions.

Example 2: India is supposed to be a “Union of States”. In other words, it is the states which are the defining reality of the Indian Union, while the Centre is an administrative necessity. But the powers of centre and states have been skewed so much in favour of the centre that we have created one more reason for centre and states to neutralise each other in the power game. If the centre wants to do a good thing – like, say, bringing in GST, or allow FDI in multi-brand retail - the states will block it; if the states want to do what they want to in their own territories (set up new projects, bring in investors, enact anti-terror laws), the centre will block them through environmental laws or by simply sitting on laws passed by states.

Example 3: The freezing of Lok Sabha seats for various states even though current population levels dictate a change. The original idea behind freezing seats for states was to ensure that states which brought down their population did not suffer a loss of political clout. Thus it was decided that no matter how many people Tamil Nadu has, it will get 39 Lok Sabha seats, Kerala 20 and Uttar Pradesh 80. However, the negative side of this law is that states such as UP, Bihar and Madhya Pradesh get a lower representation than they should based on their population totals, while the southern states get more.

The average MP in Uttar Pradesh represents a population of 2.5 million; the average Kerala MP represents only 1.66 million. The lone MP in Lakshwadeep represents just 64,429 people. The right way to protect the political clouts of states that bring down their populations faster than the laggards is to devolve more power power. So what UP MPs do in parliament should not matter to Kerala or Lakshadweep, even if there are more UP members in parliament. Right now UP’s power is being curbed by artificially restricting its MP count.

Is there a way forward where states and centre, and various political parties, use their clout not to neutralise one another, but to allow each one of them to take their own decisions in the interests of their own people?

This writer believes that democracy can work optimally in India only if the current centre-state division of powers is altered radically in favour of states. Currently, political power is in the states, but economic power is with the centre; while responsibility for social uplift rests with the states, the resources for the same lie with the centre.

Here are three things that all parties should agree to for the simple reason that it will bring down unnecessary tensions between centre and states, and between state-level political parties and national ones.

First, there is need for a radical overhaul of Central, State and Concurrent Lists of the Constitution. There are 97 areas where only the centre can legislate, 66 where only states can legislate, and  47 where both centre and states can legislate – with the centre having the edge where state and central laws clash.

There is absolutely no reason for having a concurrent list. It should be abolished, and most of its powers transferred to states.  For example, if agriculture is a state subject, there is no reason why the centre should set minimum support prices or decide on the price at which land can be bought or sold.

If education and health are state responsibilities, the only job the centre should strive to do is standardisation of curricula, validation of state degrees across state borders, etc.

In short, the overlap between central and state powers should be completely ended.

Second, we need to mandate a new system of resource sharing between centre and states, and further between states and their municipalities, zilla parishads and village panchayats. There is no reason why both state and centre should not levy their own separate income taxes (but collected jointly), just as centre and states levy their own value-added taxes and share the resultant GST in some formula. What we need is a way to unify state and central taxes into one mechanism for ensuring ease of collection and avoiding disputes.

There is also no reason why cities should not get their direct share of property taxes from stamp duties, etc. There is no reason why municipal wards cannot collect their own street, garbage or other super local taxes. We need a new compact to ensure fair resource sharing between state and centre and local bodies where there is only one common tax; we also need to enable each administrative entity to levy its own exclusive tax in some areas.

Currently, ideological and other differences between parties in a coalition can lead to policy paralysis since parties are fighting their state battles at the centre, and cities are fighting their local battles at the level of state capital. Rural MLAs and ministers sit in state capitals trying to extort money from rich cities, while rich city ministers decide how to deny farmers their dues. With a proper division of economic power and resources, West Bengal can run a welfarist government even while Gujarat runs a more pro-market one. And Mumbai can run a strong public transport system even if Delhi is more friendly to private transport.

Third, a rejigging of the political system would also be ideal. A few ideas: fixed dates for holding central and state elections so that we are not permanently in election mode all through the five years of a parliamentary term; a shift to a presidential form of government to bring greater coherence to governance issues; a replacement of the first-past-the-post electoral system with either proportional representation or a French kind of two-stage presidential election where the losers are eliminated in stage one and the ultimate winner gets at least half the vote. Right now winners can win with just 30 percent of the people behind them (as in UP, Bihar, etc). Surely, there is nothing democratic about that?

If 2014 is to become a watershed year for Indian democracy we have to learn to deal with big ideas for a change. Tinkering at the edges will not be good enough any more.

Devolving more power to states will also make them more business-friendly and less populist. They will now have to rely on their own resources to offer freebies, and not depend on central munificence. Once power is devolved, states have less reason to be irresponsible.

Narendra Modi's big idea is governance. He is unlikely to achieve it in big measure without constitutional changes. Arvind Kejriwal's big idea is devolution of power to mohallas, and greater democratic participation. He too cannot achieve it in the current constitutional scheme of things.

In 2014, the big idea must battle the bad idea.