Well-known economist Mukul Asher specialises in public sector economics and social security issues in Asia. He has been a consultant to the World Bank, International Monetary Fund, World Health Organization, Asian Development Bank, Organization for Economic Cooperation and Development, and other institutions. He has interacted with policymakers as a resource person in several Asian countries such as India, Indonesia, Vietnam, People’s Republic of China, and Sri Lanka. He teaches applied public sector economics and economic reasoning for public policy as a Professorial Fellow at the Lee Kuan Yew School of Public Policy in Singapore.
Asher was in Bangalore last week for lectures to course participants of the B.PAC Civic Leadership Incubator Program (B.CLIP) that is being conducted by the Bangalore Political Action Committee (BPAC) with Takshashila Institution as the knowledge partner. Here he speaks to Subir Ghosh about Bangalore, BBMP, governance and policymaking.
Q: It's agreed that Bangalore is in a mess. The most difficult thing to get out of a mess is to find a starting point. What can be a starting point for Bangalore?
A: Out mindset is still that we are largely a rural country. But India is rapidly urbanising. By 2040, the majority of the population will be urban. Yet, we have not given enough focus either on a policy level or in terms of governance structures or resource raising to urban issues. We find that Bangalore is not so unique in the Indian context. It is also not so unique in terms of middle income countries. For example, a city like Jakarta has many similar types of issues. It is not just one thing or one factor or initiative that will bring about a change. There should be a much higher priority for urban issues. And the urban management and urban accountability/transparency need to be aligned. We still have state governments who appoint municipal commissioners. Mayors have very little power. So, the time has come to rethink as to how we create an urban governance structure where there is a sense of responsibility, accountability and transparency. Multiplicity of agencies, the split relationships between states and urban bodies on one hand, and states and the union government on the other, are all leading to fragmentation of responsibility and the way resources are allocated. We now need a more integrated and newer ways of addressing urban problems. This is going to take time, but the debate has to begin. In the meantime, for municipal corporations like the BBBMP here as well as in other cities, there is a need to make them a lot more professional and provide them with the backup support that they need in terms of technologies, financial and budgeting system, so that we can begin to get better urban outcomes.
Q: So what is it that needs to be done at the central level whereby all devolution of powers are in place?
A: Some devolutions of powers and responsibilities are in place. But the urban governments are much largely dependent on states, and states in turn are dependent on the centre for fiscal resources. Their own source of revenue is fairly low. The 13th finance commission that recommended that a part of the GST (goods and services tax) revenue should be allocated directly to urban bodies who should get greater responsibility with greater accountability, rather than than state governments playing the kind of role that they are with municipal resources.
Q: Therefore, does part of the solution lie in urban bodies generating their own revenues, so as to be financially independent in some sense?
A: No. Not in the sense that they can generate all of the revenue that they need in terms of expenditure. But the sources of revenue that they have should have greater assurances of continuity. For instance, we know that under the finance commission, the union government taxes are to be distributed in some proportion to the states. Now, if we do that in terms of the GST, what they will have is constitutionally assured sources of revenue. But these have to be done along with governance and policy reforms. We have not changed the way we govern urban areas. For instance, the state governments say that we will keep on deputing people at the urban level (like commissioners). The way urbanisation is progressing, the way problems are becoming more complex, that kind of a system is dysfunctional and we now need a more direct electoral type system with a mayor or someone else being elected by the city and being responsible and answerable. Only then we will get some competition among cities to improve their governance, and that will have a positive effect. Right now, the state governments have been very reluctant in devolving the genuine responsibilities and powers to urban bodies. We find that in the states' plans, urban local bodies do not get the sufficient weight in terms of expenditure and infrastructure planning. At the same time, there are gross differences between the amounts that are allocated by the union government among various cities. Delhi, for instance, has a disproportionate share of allocations. The opportunity cost has been that some of the other cities like Mumbai and Bangalore have perhaps not received the kind of due attention they deserved. Obviously the local bodies cannot generate all their revenue. But it is in everybody's interest (that of the central, state and local governments) that our major cities and also other tiered cities have amenities, infrastructure and capabilities so as to be competitive in today's global economy. We can't continue with an infrastructure that is out of sync with the requirements for India to compete globally, to grow at 7-8 per cent. And that is because we haven't put in enough investments and enough competencies in our cities.
Q: You have repeatedly stressed on the differences between cash accounting and accrual accounting in governments, especially the intrinsic fallacy with the former. How can this argument be narrowed down to the urban level, say in Bangalore?
A: Only 20 countries have fully implemented the accrual system of accounting. Most have implemented this where it is useful e.g. railways or post & telegraphs. For instance, where a city has a water supply company, they should have accrual accounting. Take for example, the case of the BEST service of Mumbai. There is no reason why they should have cash accounting. So, for commercial-type organisations in governments of any level, there is a strong a strong case for them to go for accrual accounting. For others, Bangalore for example, if they have a good registry of what their assets are, they will be able to use them more productively. If the city understands what its assets are, what its air space rights are, what space rights it has below the ground, then they can put together revenue-generating capacities and initiatives that will help them undertake some of the infrastructural work that they need to do. You don't have to move completely to the accrual system of accounting, but at least you should have asset registry to understand what our accrued liabilities are going to be. All those sound financial management practices and budgeting practices have to be followed.
Q: This brings one back to the same thing you mentioned earlier — there are far too many commercial-type civic agencies operating within the same geographical area. What is a better way of managing these things?
A: First, all of these agencies (like BWSSB, BESCOM, etc) should have accrual accounting. They need to have financial management reforms, they need to have management information systems, and so on. The coordination problem is one that exists in every government in every country. It is not a question of whether there is full coordination or zero. But what we do know right now is that the coordination is at a minimum, and therefore we should move towards better coordination between agencies. This is where the executive leadership should help. We have to now recognise and bring it to our political agenda that managing urban localities is an important national priority. We can no longer regard ourselves being a rural or not-very-urban country. We are rapidly urbanising. Unfortunately, except for Gujarat chief minister Narendra Modi, other political parties are not talking of urban development issues to be brought to the national focus. I hope that more people will try to do so. Then, the energies will get focused and we can try to find initiatives. The key thing here is that we cannot continue as we are doing now. We need to take new initiatives. Some may succeed, some may fail, and some may have a learning curve. But we got to start now.
Q: Can these initiatives be made participatory and inclusive?
A: The words 'participatory' and 'inclusive' are very heterogeneous terms that can mean whatever someone wants them to mean. Let me put it this way — if we have a government, be it central, state or local, that is providing physical connectivity through good urban transport and roads, besides electrical connectivity, healthcare, and schools — that is the most inclusive type of government that you can have because that will empower people to make most of their capabilities and broaden economic growth. The idea is that when policies are made in the name of the poor, these are poor policies. Just using the words 'participatory' and 'inclusive' does not make them so. You have to do what is required for individuals, organisations, cities and countries to be functional in the 21st century. There is no substitute for competence and for providing these digital/physical connectivities, human resources development, etc.
Q: Narrowing down all that you have said so far to the B.CLIP programme itself, how important and beneficial do you think these are both in the short as well as long run?
A: What we find in the traditional civil service and the traditional political class is that there has been a lack of sophistication and economic literacy to be able to think through the economic consequences of policy initiatives. There has been a fear of numbers. What these kind of programmes (the B.CLIP initiative) do is by providing the exposure to these issues, the mindset gets expanded and focused in a different direction. Now one is able to ask the right questions. Public financial management is not about spending money. It is about getting the outcomes or results with the use of the least amount of economic resources valued in terms of money. If that is understood by people at the ward level, then hopefully over time that is going to make a lot of difference in the way we approach our public policies, the way our politicians behave. So, we will begin to think in a hard-headed way about what we need to do rather than fall back on an emotional set of slogans that we have adopted which have absolutely no meaning, and have become dysfunctional in the current context. Because in today's context, if a country is not economically dynamic, that country in the 21st century will find it very difficult to become a major power. We shouldn't be afraid of power.
