In any professionally-run company, the CEO is in overall charge of affairs and performance. He is responsible to the board of directors which oversees operations. There is a top management which could also be a part of the board and may go with designations such as deputy managing director and executive director. They prepare the strategy for the company.
Then there are different divisions in the company looking at various functions — they could be strategic business units or divisions with functional responsibilities. There are, accordingly, heads for each division or function that are designated as chief general managers or presidents or chiefs or simply heads.
There is a clear-cut reporting structure and the activities are streamlined. These heads can make suggestions and argue out their cases, but it is the top management which finally decides what has to be done. The functional heads execute the plan once things are decided. In short, they are the executive while the top management is the legislative organ. The other members of the departments have to carry out the work given to them. There is also the CFO, who controls the finances, which ultimately matters in a capitalist set-up. But, this function also has to be within the confines of what the top management decides.
Now if we look at the structure of the government, it is not very different. The PM is the CEO and hence in charge of whatever happens as the buck theoretically stops with him (or her). We have various ministries which cover different functions and hence the ministers, either of cabinet rank or of state, could be looked on as heads or deputies. The Finance Minister is the CFO who controls the purse and hence all allocations to ministries come from this wing. The others will bargain for higher allocations for their departments and these are finalised when the budget is drawn up.
While there is really no board of directors as such, governments are answerable to the electorate. They also have some advisory bodies like the Planning Commission, the PM’s Economic Advisory Council, the Chief Economic Advisor, and others who provide options. There is somewhere a top management, or the inner group, which may or may not have ministers directly.
The point in drawing this extended analogy is that governments work like corporates in terms of functioning and individuals may not make a difference in general when it comes to formulating overall goals. The action plan is drawn up and implemented through various ministries. While individuals in a ministry may have their own views or plans that they would like to implement, they would have to necessarily fall in line with the overall framework drawn up by the Prime Minister or the core group. The difference will be in terms of the skills that they possess to implement various programmes.
It is against this background that the recent reshuffle of ministries should be viewed. Some of the questions that may be asked are the following.
First, will the economic growth path be fostered or pushed back? The answer is probably there will be no change as the decisions are taken by the core group, which has always been the case. A mere change in the name of a minister should not matter. However we have seen that when P Chidambaram took over as FM, things did start moving. It is still not clear whether it was his presence that did it, or the change brought about subtly merely coincided with the government's decision to push forward reforms. This will not be known.
But given that we do not see some weighty names taking over critical ministries such as environment or coal or commerce, there will be a question-mark here. Except for the petroleum ministry, which is in the middle of hyperactivity as decisions here affect not just production but also pricing and hence the subsidy bill and the fiscal deficit, this may be an exception. But still pricing decisions are seldom taken in isolation.
Second, does this reflect in any way a cleansing act given the controversies around some portfolios? Again the answer is no, as some of the reshuffling involves existing ministers and, therefore, there is reason to believe that the current spate of controversies relating to impropriety is not the driving force here.
Third, will the getting in of new and young blood make a difference? The answer is again no. Most of the new inductees are not well known and may not have the knowledge to run these complex ministries. While it is true that it is the bureaucracy that runs the ministries and the overall contours are laid down by the core group, some of the inductees may not have this competence to understand and resolve complex issues. It would take time and we may not have this luxury presently.
Fourth, is this reshuffle based more on political motivations? Most definitely yes, as there is reason to believe that there has been some focus on playing the caste and religion factor in getting in new faces. Also there is some pressure being put on regaining strength in Andhra Pradesh so as to fight a former Congressman who has a large following.
Fifth, will these changes lead to better governance? The answer is probably no, because the ministers have been given too little time to actually understand and bring about change. The absence of knowledge may not be a major disadvantage given, as mentioned earlier, the executing bureaucracy is already in place. But dynamism cannot be really expected.
Last, do these name changes give us confidence that bills and reforms will be pushed through Parliament? Again this is unlikely because we now have a divided coalition running with outside support – people who may have agendas of their own. Certain sticky issues, where these parties and the opposition have to be taken along on policies like FDI, land, and fuel price decontrol, would still face the same level of opposition as before. The new ministers can’t change this reality.
On the positive side, certain ministries like external affairs, law, petroleum, HRD (can be contested), and power could see some dynamism, but overall the reshuffle was done only to give the impression that things can change. In practical terms, one cannot expect major improvements in administration.
If the changes were made keeping the 2014 general elections in mind, we will know from the final results at that time if the gambit has worked. But leaving that aside, in terms of real impact in governance and administration, this is more sound and fury than anything else.
The author is Chief Economist, CARE Ratings. These views are personal.
Updated Date: Oct 31, 2012 12:45 PM