The Federal Twist

Context: State need to invent their own development models to escape the structural limitations of the polity.

Major limitations in functioning of governments in India

• Poor resource utilisation efficiency: There’s an adage that governments are the only organisations that spend a rupee to provide 50 paise of benefits.
  • This loss is attributed to corruption or malfeasance, which are inarguably endemic in many countries, including India.
• Weak accountability checks: Despite difference of opinion between parties and coalitions, relatively scant attention is paid to whether stated policy or enacted law, delivered intended outcomes/results.
• Budgetary issues:
  • No outcome-based scrutiny: As final accounts (FA) for a financial year are generally presented between 18 and 24 months after that year’s budget is approved, most often as a minor artefact along with the main attraction of the budget for upcoming year.
  • Governments in India adhere to archaic cash accounting: As opposed to accrual accounting, which is the norm for most companies and governments.
  • Scope for data forgery: Significant funds which have been presented to the legislature as spent are still held in off-balance-sheet accounts not visible to the government’s finance department.
    • Annual accounts and audit reports issued by the CAG show this possibility becomes a reality almost every single year.

Way forward: Lessons from Tamil Nadu’s reformatory policy outlook

• Visionary policy prioritisation: Focusing on Union-state fiscal relations, including GST, data-centric governance, public asset and risk management, increased accountability and productivity, and strengthening the role of legislature.
• Check on unused/blocked funds: Rs 2,000 crore of funds have been verified as “lapsed” (cannot be spent for any purpose by holding agency/entity) and are hence to be returned to the state treasury.
  • Strengthening oversight: New procedures and systems to ensure that such moving/parking of funds (especially as the year ends) cannot happen outside of the finance department’s oversight.
• Data-integrity projects: Integration and cross-referencing of data from multiple sources within state’s records. Eg. the civil registration system, the public distribution system.
  • Plugging leakages: By checking ghost pension recipients and free-rice-entitled category of ration card holders.

Conclusion: Thoughtful design of policies and schemes, and their execution, which are vital to achieving our intended goal of benefiting all citizens in a fair and inclusive manner. Tamil Nadu offers a path which can be expanded throughout the country.