Transparency and Accountability in the Context of the new Fiscal Regime

There were great expectations from the 14^th Finance Commission to transform the fiscal ecology of the country given that a new government had been elected and it was talking of transforming governance under the slogan of “minimum government maximum governance” and strengthening transparency and accountability. Further the implementation of the 14^th FC coincides with the 2015-16 budget which is the first full budget of the new regime in power at the Centre. The Finance Minister in his budget speech said that this budget will make India fly, with acceleration of economic growth to 7.4% the fastest in the World, and set in process an unprecedented transformation of India’s economic and social development.

The big news emanating from the 14^th FC is the 10 percent point increase from 32% to 42% share of states in the divisible pool of taxes. There is euphoria all around that states will get a much larger share from the tax kitty. What does this really mean? Yes the states are getting a much larger share of taxes as unconditional transfers, to be precise 31.25% more as a share compared to the 13^th FC period, which means that they have more funds to plan their development strategies autonomous of the Centre, meaning delinked from Centre’s planned programs and schemes. So the positive aspect is that the fiscal space of the states to do their own thing has expanded substantially.

But has the total fiscal envelope of the states really expanded as much? The answer is no. While the proportion of unconditional transfers have increased substantially the total transfers have not increased as much – just about 2 or 3 percent points. The “magic” that has happened is that with the “shut-down” of the Planning Commission a large part of the funds that the Centre transferred through various plan schemes have now been assigned directly to the states. Thus we see that there is a huge jump of 37% from the previous year in tax transfer (unconditional revenues) to states in 2015-16 budget in accordance with the 14^th FC mandate but on the other hand for grants and loans from Centre to states we see a huge decline of 19% for the same period, mostly in the financing related to Central Assistance for State plans. In 2014-15 the total transfer of resources from the Centre to states was 51% and this has increased to 53% in 2015-16, a gain of mere 2 percent in the overall fiscal envelope which amounts to just 0.58% of GDP. Infact the 2014-15 budget had already begun that process of shifting many of the plan schemes into the state pool. In contrast the fiscal space of the Centre has shrunk consequently and this would impact budgets of a number of its line departments, especially social sector and anti-poverty programs. The big challenge emerging from this is would the states use their larger fiscal space to fill the gap that would be created with compression in the allocations of Centre’s line departments?

So given this reality the euphoria is unwarranted. The states have serious thinking and strategizing to do if they have to take advantage of this new opportunity and trajectory. At one level they have a larger fiscal space but at another level their challenge is to use this additional fiscal space effectively to fill the gaps and deficits in development and service delivery in their states. Thus defining appropriate priorities as per the needs and demands of their citizens becomes critical to achieving their development goals. This also opens up the space for civil society groups to engage with the states in determining these priorities.

At the level of the Centre their fiscal space may appear to be reduced but with the Planning Commission fading out they have simply slashed a whole lot of plan schemes which the Centre used to give as grants to the states from its own resources as assistance for state plans. But as mentioned above the loss in the Centre’s total fiscal envelope is only 0.58% of GDP but against this small deficit the burden on the states in terms of responsibility to continue and strengthen various ongoing programs that the Centre has now seconded to the states is perhaps much larger.

Further the 14^th FC has also done away with sector specific grants that earlier FCs had included arguing that such priorities are best decided by the states and often such specific grants were an imposition from above and many states did not like it. Hence this became the logic for raising the unconditional ratio from the divisible tax pool so that states had a greater autonomy or freedom to plan as per its own needs and priorities. The 14^th FC in the light of this recommendation has suggested a new institutional mechanism through which the Centre can engage with states in a transparent manner to facilitate additional resource transfers from the Centre’s fiscal envelope now that the Planning Commission has ceased to exist.

The 14^th FC has also continued with making provisions for local governments, both panchayat and municipal bodies. It is at this local level where transparency and accountability is the weakest and hence the grant has been bifurcated into two parts, one as their dedicated share for basic services (90% for panchayats and 80% for municipalities) and the other part (10 and 20 percent respectively) based on performance wherein two critical transparency indicators have been indicated – timely publication of accounts and publishing service delivery benchmarks and also efforts at raising their own revenues (see box below). Further the state is being held to account to disburse grants to the local bodies within 15 days of receiving the grant from the Centre and the latter has also been mandated to release the grant in 2 instalments, one in June and the other in October.

“We are of the opinion that proper accounts are the starting point for financial accountability. Non-maintenance or delayed compilation of annual accounts means compromised accountability. It also implies that reliable financial data for determining the need for resources for local bodies is not available. We observe that it has been more than twenty years that municipalities and panchayats were sought to be empowered, through a Constitutional amendment, to act as institutions of local self-governance and also to provide certain basic services to citizens. It is inconceivable, and certainly not desirable, that local bodies seek an ever increasing share of public moneys and yet continue to keep themselves beyond the ambit of accountability and responsibility for the public money placed with them.” – 14^th Finance Commission

The above again is a great opportunity for civil society groups, who work mostly at the local level to use this FC recommendation to strengthen access to budget information at the local level as well as use this information to make service delivery accountable to citizens.

Finally the 14^th FC has also recognised that a substantial increase is needed in the tax:gdp ratio but it has been able to project an increase of only about 2% additional (0.67 at the Centre level) by the end of the 14^th FC period. This would continue to remain a major constraint for increasing the share of social sectors in the budget and hence would require concerted efforts by civil society groups to engage the Finance Ministry on taxation and tax expenditure issues wherein with elimination of upto two-thirds of tax expenditures and stronger tax compliance nearly 5% of the GDP can be reined in taking the tax:gdp ratio at the national level to 21% from the present 17%. However the 2015-16 budget has taken a regressive step on taxes  by reducing corporate tax rates from the present 30% to 25%, a decline of nearly 17%. This along with the 2% increase in service tax rates and removal of the wealth tax has pushed back the little progressive growth we had seen in taxation policy in the last few years. And ironically the budget estimates for tax revenues of the Centre in absolute numbers show a decline of Rs. 57000 crores from the previous year or 0.4% of GDP. This is some kind of history that this years budget has achieved. 

2014 Election Results - A Quick Analysis

The verdict is out. The BJP led by Modi has got a comfortable majority on its own and with its alliance partners almost a two-thirds majority, the latter being critical because they can make fundamental constitutional amendments with that kind of numbers. 

What are the implications of such a victory? 

Before I get into that a brief on the character/background of the BJP. BJP is the political front of the Rashtriya Swayamsewak Sangh (RSS) which is a Hindu Nationalist organization very similar to the SS of the Nazis. The RSS has grassroots cadre which protects the Hindu cultural and social traditions, and through this cadre they propagate hate for other communities, especially Muslim and Christian. Other communities like Sikhs, Buddhists and Jains are not seen by them as communities having a separate identity but as sects of Hinduism. It is a highly conservative organization with a command structure like the army and was founded by Keshav Hegdewar a medical doctor who was inspired by Adolf Hitler. It started as a Hindu social organization to protect Hinduism from the Islamic and Christian influences but soon became a kind of paramilitary organization developing disciplined Hindu cadres using military training learning from the Nazis. Hindu supremeism (and at that point upper caste) became its core value. During British colonial rule their target was the British government and British culture but post Independence given the dominance of the Congress party which was promoting a secular India and not supporting the concept of Hindu nationhood they floated the Jana Sangh party to contest elections against the Congress. 

The Congress leadership viewed the RSS as an extremist organization and banned it a number of times and thus prevented the Jana Sangh from flowering. Post 1977 after the Indira Gandhi imposed National Emergency (2 years when all fundamental rights were suspended) the Jana Sangh merged into the Janata Party alliance of all anti-Congress parties, including the left. But that alliance did not last very long and splits happened leading to the emergence of the BJP. It was only in the late eighties that the RSS became aggressive in pushing the BJP to take a strong Hindu nationalist stance what we call Hindutva in India and this led to the demolition of the Babri Mosque in Ayodhya, Uttar Pradesh wherin BJP leaders backed by cadres of the RSS and its violent outfits like the Bajrang Dal and Vishwa Hindu Parishad. That was the turning point in BJPs growth trajectory. It had captured the larger Hindu mindset and thenceforth Hindutva became its core value in its politics. Such a political ideology has grown from strength to strength and the current election results demonstrate this very well - the Hindu vote, especially upper and middle caste, has consolidated itself behind BJP.

The RSS has played a key role to make this happen in these elections first by seconding all its cadre to BJP but more importantly in the Nazi style promoted an individual through selling the Modi brand as though Modi was fighting a Presidential election. And this clicked with the masses because the incumbent PM was projected as a weakling controlled by remote control by the Congress party President, and hence it created a desire amongst masses for a strong leader to stall the policy paralysis and push "development and growth" (synonymous with the so called Gujarat model of Modi) hard. The results also show that the BJP has broken the caste based regional parties in north and central India by creating a schism between the Congress and the regional parties thus splitting the lower caste and dalit votes that gave a strategic advantage to the BJP and this explains the huge number of seats the BJP won in Uttar Pradesh and Bihar where all the caste based regional parties (Samajwadi Party, Bahujan Samaj Party, Janata Dal United etc.) have been decimated. And the Congress has been virtually decimated from across the country reduced to less than 50 seats in contrast to the more than 200 they had in the last Lok Sabha (see the link below, a map which reveals the wide reach of saffron, the colour associated with the BJP).

http://www.ndtv.com/elections/general-election-results-2014

So what are the implications of such an election result? The much hyped Gujarat model of Modi will be at the centre of their economic policy. What this means is that private business will be promoted in a big way using state resources. Land, especially rural land, will be taken away from farmers, adivasis, dalits and urban slum settlements with minimal compensation and handed over to select industrialists at throwaway prices if not free for "development"; mining contracts will be given freely by taking away land from rural and tribal communities, and crony capitalism will get a huge  boost. Taxation, especially for business, will be liberalized, tax expenditures will be increased, social sector expenditures like health, education and especially food and employment security will be drastically reduced and private partnerships or outright pravatization will be promoted. The BJP (and especially Modi) is clearly opposed to the NREGS and food security as they feel that such "charities" are dehumanizing. So according to Modispeak people should in the true Gujarati ethos engage in dhanda or business and not be subject to humiliation of state sponsored job guarantees and food subsidies.

On the human rights and socio-cultural front new challenges would be presented. Minorities, especially Muslims and Christians, on one hand and dalits and adivasis on the other hand would face further exclusion and their human rights threatened. There would be a push for Hindu nationalism and prominence to the Hindu ethos and culture as Indian or Bhartiya and the non-Hindus would be expected to fall in line in the name of inclusion. 

Transparency and accountability that had seen major gains since the Right to Information Act was put in place is likely to see reversals if not outright dismissal. To keep the gains would require stronger civil society vigilance and activism. Budgets for the social sectors would also be threatened because of the expected leverage towards privatization. Stronger efforts by civil society would need to be made to not only protect these budgets but also to demand larger shares, especially for health, education , food security, livelihoods and pensions.

With the lotus (the BJP election symbol) fully afloat and blooming progressive civil society would need to mobilize strategically and effectively to see that the new regime does not overstep our constitutional rights and social benefits that we have a right over as tax payers and citizens. To conclude an extract from a poem Onus is On Us (anonymous):

............

They might have the seats, the two seventy two

But the country belongs to me and to you

And we are a billion people, a billion and plus

At the end of the day the onus is on us

Elections Transparency and Accountability

India has over 800 million voters. The grand election circus of the largest democracy commenced in early March and this will continue until mid-May when the results are declared on May 16^th. Transparency and accountability are at the core in the present elections. Every contesting candidate’s complete information is available online on the click of a button. This information ranges from personal profile to assets and wealth owned by the candidate and his/her immediate family members, sources of income, business interests, criminal record and past electoral history and legislative performance. For some of the well-known candidates this is even published in newspapers and is discussed on television news channels. Civil Society organizations like PRS Legislature and Association for Democratic Reforms actively analyse such information and make it available in public domain. Thanks to technology there is an overload of information. So Transparency Zindabad! (Long live transparency)

Election Process Accountability

The access to such information has led common citizens and opponent candidates to pick up sensitive information and make complaints to the Election Commission (which conducts the elections) to cancel nominations of candidates. In addition huge complaints also come to the Election Commission about violation of code of conduct and these further burdens the Election Commission to investigate, monitor, issue show cause notices and take actions. So democracy is at full play. As a citizen you can record a campaign speech of any candidate on your mobile phone and send the clip having any objectionable material like hate speech to the Election Commission for review and action. While citizens participate actively in supporting the watch dog process the actions taken are often disappointing because it usually ends with a formal apology, or at best a brief sanction against campaigning in a particular region. Some violations have been exceptional and should have resulted in cancelation of candidature but the Election Commission has failed to take stringent action. Some examples below:

·         The country’s agriculture minister Sharad Pawar in one of his campaign speeches says that citizens can actually vote twice in the election because of the election being conducted in various phases. He gave an example to workers in Mumbai saying that back in your villages election is on 17^th April so go and vote there, then come back to Mumbai and vote again (if you are registered in  Mumbai also) on 24^th April. But be sure that you wipe out the election ink mark on your finger. When questioned about his statement Pawar said that he made the statement as a joke. When questioned by the Election Commission he apologised and the matter ended

·         Top BJP (the Hindu right wing party) leaders like Amit Shah have gone on record making hate speeches against Muslims and urging Hindus to vote for the BJP so that Muslims can be taught a lesson later if the BJP comes to power. A guarded apology followed and the Election Commission could not do much further

·         Candidates in their campaigns get away making casteist statements which are violative not only of the code of conduct but also the Constitution. You apologise or say you were quoted out of context and the dust settles

·         The Samajwadi (Socialist) Party leader Mulayam Singh Yadav gets away with a statement that rapists are just misguided boys and do not deserve a harsh punishment and if they come to power they will reverse the recent changes made in the rape laws that makes the punishment for rape very severe

What we observe is that transparency is very strong in terms of access to information, active citizen engagement does happen but appropriate actions don’t follow and hence accountability fails. So in this manner the election engine of India chugs along and has presently (17^th April) crossed the half way mark.

The analysis of candidate information by ADR shows that 23% candidates of the current government currently have criminal cases against them and in case of the BJP, which opinion polls indicate is the frontrunner for the new government, 34% candidates have current criminal cases registered against them. The Election Commission says that they can only disqualify candidates if they have been convicted. When political parties are confronted as to why they have put up so many candidates with criminal records they say that these are our key candidates who will help us win and if the EC has no objection then its okay. This shows the complete absence of ethics amongst political parties in selection of their candidates. The thrust of this election is that the ruling combine has been there for 10 years and it is time for Change. Is this the change voters want?

Giving Change a Chance?

In the last two years politics in India has seen huge churning. The current regime has seen its worse phase in performance with a downslide in its key flagship development programs like NRHM (health), SSA (Education), MGNREGS (employment guarantee), and food security among others due to underfunding and mismanagement. The economy’s growth is down from 9% to 5% as part of the global recession. Thanks to the CAG’s audit reports and the courts huge scams and corruption has been exposed and for the first time there have been convictions and top politicians and bureaucrats are cooling their heels in jails. So there is a general anti-incumbency mood against the present government.

Civil society organizations ran a huge anti-corruption campaign across the country demanding a strong anti-corruption law and setting up the institution of the Jan Lokpal (Peoples Ombudsman) to investigate and try cases of corruption. The campaign got politicized and in late 2013 they formed a political party and contested elections in the state of Delhi. Citizens of Delhi showed their angst against the ruling Congress party and voted them out completely. While the BJP was the largest single party they did not have the requisite numbers to form the government. So as the second largest party the anti-corruption movement now called the Aam Aadmi Party (AAP or Common Peoples Party) was invited to form the government with external support of the party they ousted. This government led by the anti-corruption crusader Arvind Kejriwal lasted for 49 days and quit as they could not get their Jan Lokpal bill passed in the state assembly. Subsequently the national elections were announced and AAP too decided to go national and is contesting over 400 seats of the 543 total.

Prior to the current elections various opinion polls have been conducted and what is apparent across the board is that people want change. Across opinion polls there is unanimity that the BJP led right wing coalition is set to cross the half way mark of 272 seats. The BJP campaign centres around its prospective Prime Ministerial candidate Narendra Modi who is a controversial figure for his support of the anti-Muslim carnage in Gujarat state of which he is the Chief Minister. Opinion polls state that there is a Modi wave across most of the country, especially in west, north and central India. Modi is viewed as a fascist with strong linkages with various right wing Hindu organizations like the Rashtriya Swayamsewak Sangh (RSS) and the Vishwa Hindu Parishad (VHP) and he idolizes Adolf Hitler. So in progressive circles as well as amongst minorities he is seen as a threat to the democratic fabric of India. So in contrast to the Modi wave that opinion polls have projected there is a silent coalition of threatened groups, especially minorities and dalits who would en masse vote against Modi. Further given that across the country regional parties have a strong presence, the likelihood of individual regional parties gaining form this duality of anti-incumbency and anti-Modi is quite high. This mathematics is something which perhaps the opinion polls may have failed to capture. So there is a high possibility that some of these regional parties would be in a strong position to call the shots post-election if there is a fractured verdict. The bottom line is that there is huge political fluidity and only May 16^th, the day of the results, will reveal the final picture. So what Change we will get for our future governance we have to wait and see. Change there will be as the voter turnout hitherto has been encouraging with over eight percentage points higher than the previous elections.

The Future of Accountability

Accountability in governance is a major concern agonizing the voter, apart from corruption. Accountability and corruption are seen as two sides of the same coin. People want improved governance. They want better social services like, health, education and welfare. They want more mileage from the taxes they have paid. They want corruption eliminated. The corporate sector too is demanding stronger governance and accountability but less government. So the mood of the electorate is clearly in favour of stronger accountability so that governance improves. This is the Change people want. Whosoever comes to power would have to deliver this or face peoples’ wrath. In the past two years people have come out on the streets against corruption and have changed the politics. If the new government fails to deliver good governance people are likely to come back on the streets. The new Government must keep this in mind and deliver good governance and be accountable to its citizens.