Babus, don’t whisper into PM’s ears against states

Bureaucratic Overreach

Prime Minister Narendra Modi’s meetings with top bureaucrats in early April seem to have carried an element of contrapuntal music, though it should be considered neither melodic nor pleasant. The bureaucrats told him about the “unsustainable populist measures” of the state governments. The Prime Minister, on the other hand, told them not to think of themselves as secretaries of departments but to think big and think differently, apparently the way they did in tackling the Covid-19 pandemic!

Modi is all attention to what the bureaucrats are telling him about the states because he trusts them more than his own cabinet colleagues, and if he had his way, he would prefer to work with them directly rather than run a cabinet with ministers responsible to parliament. But he realises that he must bide his time and wait for the opportune moment to go into a presidential form of government.

While the PM’s exhortation to the bureaucrats is one of his oft-repeated mantras, what is surprising is what the bureaucrats told him about the profligacy of the state governments, and how it could reduce them to the state of Sri Lanka’s economy – bankruptcy. One of the pro-government private TV news channel anchors elaborated, perhaps based on inside sources, on what the bureaucrats referred to – it was to the non-BJP state governments like Tamil Nadu, West Bengal, Maharashtra, Telangana, Andhra Pradesh, Punjab and Delhi.

Modi is indeed keeping an hawk’s eye on state governments, especially those run by the opposition parties. Of course, the BJP governments, even when they indulge in populism, would have the support of his government at the Centre.

So, what is the option Modi has before him to rein in the state governments that are said to be outspending themselves? There is already in place a controlling mechanism – because the Centre controls the purse-strings. It has already been laid down that state governments that adopt reforms would get additional financing.

Though India is a federal polity, the states do not have the economic autonomy that they need to have. They have to turn to the Centre for budgetary support. Remember former West Bengal Finance Minister Asoka Mitra’s caustic observation that his Chief Minister, Jyoti Basu, had to wait on a bureaucrat in the Planning Commission to get the plan outlays of his government approved by the blinkered mandarin.

Modi was a staunch federalist when he was Chief Minister of Gujarat from 2001 to 2014. Now, he is only too eager to rule the whole of India as a unitary State – as the emperors of yore did. Of course, his supporters would say, he wants to do so only to make the country prosperous and powerful. The man knows how to hide his inordinate appetite for power wrapped in democratic rhetoric. And the fact there are so many states in the Indian Union over which he has little control is like a dagger in his side.

In principle, the devolution of taxes to the states makes them financially independent, and the same rule applies with the Goods and Service Tax (GST), which has a state GST component and a central GST component, and they have an equal share. Modi perhaps wants to device more ways than exist now to contain and constrain the elected governments of these states from spending the way they want to.

Of course, it is surprising that the secretaries in the central government, all of whom must have had stints in their respective state cadres, should be telling the PM about the free run of the state governments, instead of apprising him of the central policies and schemes and how effective or ineffective they have been. Or was it really a sly attempt by the cunning officers to tell the PM about his own welfare schemes and how they could cause trouble in the future, using the state governments as a ruse?

Modi has been less than honest on the implementation of his own advertised popular schemes like Ujwala, the granting of free cylinders to village women, the free rations to 800 crore people during the Covid-19 period in 2020 and 2021, which has been extended into 2022. The payments to the farmers, which is in the form of a cash subsidy, stands out. But there is no transparency in the government’s welfare measures. There is no independent social auditing of the programmes.

It seems most likely that the Modi mandarins will argue that everything that the central government spends is a subsidy, whether it is vaccination, or cash transfers to farmers, or free rations. And even what it offers to industry through Productivity Linked Incentives (PLI). But when the state governments offer welfare or populist measures, they will raise the fiscal alarm. And given that it is a well-known fact that Modi looks at every administrative measure through the political, and electoral, lens, he would want to restrict the financial freedoms of state governments on the pretext of fiscal prudence.

At the heart of the matter is the political question: Should the central government and its bureaucrats be telling elected state governments what is permissible and what is not when it comes to states’ welfare schemes for the people? If the states run the risk of bankruptcy, then the people will throw them out at the time of elections – as they did in Punjab recently. It is not the business of bureaucrats to whisper into the Prime Minister’s ears that the state governments are playing truant.