Towards a better India/Possible Solutions
“As long as you’re going to be thinking anyway, think big.” Donald Trump.
The logical next step from Donald Trump's statement is that as long as you're free to choose, choose only to be the world's best. Not much point for a free country, for example, to aspire only to poverty alleviation. Let us choose to become the world's richest country, ever. That should at least fix the minor incovenience of poverty.
In the previous three chapters cover we have skimmed over India’s parched landscape that is pock marked with gaping craters of corruption, almost the size of blackholes. Senior Ministers sit at the singularity of these blackholes of corruption and suck in public funds away from their intended use, generating vast deserts of poverty all around them, and in place of reliable public infrastructure, give us rotten roads and dilapidated schools. We also upturned some fungus-coated institutions to find swarms of slothful socialists and communal insects living under them.
This was a journey performed as part of our joint search for freedom and meaning. Without your participation, we could not have arrived at this point in the journey.
At the end of his journey, I propose to close this search by disclosing the whereabouts of enormous reservoirs of freedom that I see hidden in India, or at least how these reservoirs can be found. These reservoirs can then be channelled by all of us, collectively, but working individually and in our own interest, into a gushing river of wealth and innovation that will irrigate India with honesty, justice and equality of opportunity, thus dispelling all gloom and misery for ever.
* * *
But first, a detour into the ‘style’ that I will use for my exposition. I am going to think really big here. No hiding behind a bush of academic niceties. Simply a bold, clear and well-defined way to freedom.
The other day, a globally admired Indian business personality had come to Melbourne. I knew this person had expressed frustration previously with the Indian political and bureaucratic system, and had strongly expressed a desire for change. I asked this gentleman in a public forum after he had made his speech, whether he had formulated a plan for India to move ahead in the direction that he visualised. On his replying that he had thought of one, I then requested him to outline his plan briefly for the benefit of the audience. But he parried my request. I later wrote to him asking for a copy of that plan. No response. Either there was no plan or if there was one, it must have been a pretty well-guarded secret.
Why I raise this matter is because we Indians need to get out of our chronic habit of simply criticising. Will need to learn, instead, to become systematic enough to outline a real, viable method of bringing about the change that we would like to see. We need overarching, ambitious proposals with sufficient detail and understanding of the Indian context, that will stand a real chance of succeeding if implemented. Having done this thinking, we must then be willing to put out these ambitious proposals for open discussion. There is not much point at that stage in marking these plans ‘top-secret’ and locking them up in a safe.
This chapter is my blueprint. This blueprint requires seventy per cent of the reform to be led by high-quality political representatives, with the remaining thirty per cent coming from a transformed bureaucracy. Of course, nothing will happen without the people of India getting actively involved, and providing a mandate for this plan. To that extent, this is clearly a bit of wishful thinking. But it is wishful thinking of the sort that we must engage in if we are not to allow our lives to end in vain, or at the mercy of the misguided souls who call themselves our leaders.
I do not claim special wisdom (contrary to all appearances!). All I ask for is that this plan be examined with an open mind, but critically, just as I would examine similar proposals from you. While examining each other’s plans, we could apply tests such as the following:
Will the implementation of these proposals enhance the levels of freedom (and its obverse, accountability) in society?
Will these proposals help us in creating governments that are efficient and accountable?
Will these plans encourage us to take responsibility for ourselves and reduce our dependency on governments?
This chapter is structured, quite unconventionally, around a thought experiment: what would I do if I became the Prime Minister of India?
Such a thought experiment is probably familiar to all of us from our school days when we wrote short essays on such broad themes. But I don’t see too many adults rushing out to write essays using this challenging format. We are perhaps wary of being perceived as arrogant or foolish if we were to talk of our suggestions in this manner. Don Quixotes, perhaps. This hesitation to look at the big picture in a systematic manner is unfortunate, for innovative solutions can only come about by being honest and fearless.
And so, here goes!
What would I do if I became the Prime Minister of India today?
It could be argued, tongue-in-cheek, that we could improve things very significantly merely by dismantling much of what we have built in the past six decades.
But while there is some – rather crude – merit in this argument, we really should be very cautious about dismantling anything without being aware of its possible impacts on freedom. In particular, we should be loathe to jeopardise our already weak justice and police systems. Being therefore wary of diminishing any of the strengths that we have built so far, my objective here is to develop a constructive story that incrementally, but very systematically, rebuilds and then strengthens the pillars of liberty.
When someone finally gets to become Prime Minister, it is time for action, for results. No more sleepless nights thinking, planning and hoping. Years of hard work are a pre-requisite for delivering a truly Free India. Therefore, at least ninety per cent of the thinking would have to be done well before someone became Prime Minister.
Finding the right people
One of the greatest challenges facing a potential Prime Minister would be of finding the right people to form the freedom-devoted team that will contest elections. Today, it is almost impossible (as discussed in chapter 5) to find competent and motivated people to contest elections. Of the millions of good people who surely exist in India, it is an astonishingly hard job to find even ten of them willing to contest elections in the current Indian dispensation of corruption and thuggery. Indeed, many of you who reading this would potentially make very good candidates; however, I suspect that you are not enthused by the thought of participating in the political process due to the bad image that politics has in India. So who will bell the cat?
But over and beyond this obvious problem, that will face me as potential Prime Minister, I have made things really hard for myself due to the stringent criteria that potential candidates will need to fulfil in order to represent the ‘political party’ that I would belong to. These criteria are:
The bare minimum requirement would be that their ethics must be impeccable and unquestionable.
These candidates would have to be, in addition, wholly committed to the advancement of freedom in India, and fully understand the philosophy and logic of freedom.
They would also have to be very competent, and able to formulate complex policy that is consistent with the logic of freedom.
Then, they must be capable of dealing with very complex and challenging problems as future Cabinet ministers without panicking and running for shortcuts or politically expedient solutions.
Next, they would need to be at least Level 4, if not Level 5, leaders: people who are very superior and therefore humble enough to listen to others and assimilate the feedback they receive in a positive spirit.
On top of all this, they would have to be great team players, willing to work in any capacity that the party asks them to work in. Groups or teams comprising of expert individuals are generally wiser than isolated geniuses no matter how brilliant, and the party to which I would belong would have to follow the highest standards of internal democratic decision-making.
Finally, these candidates would have to agree to wide public consultation on policy issues, and very high levels of transparency about themselves, at a level they may not have experienced before. Citizens will need to be able to see virtually inside their minds and know what they think on key policy issues.
I admit that I do not know yet how to motivate such good people to participate in elections. Good intentions are not enough when one’s family is potentially threatened by armed gangsters at the time of elections. Therefore, perhaps over and above the other qualities, candidates who are willing to contest on my party’s ticket will need to have lion hearts and an unwavering determination to overcome the greatest adversity in order to achieve their goal. Hopefully, among a billion people, at least 1500 people of this calibre will be found, particularly after they read this book!
Agreeing to a blueprint
Presuming that I am fortunate enough to attract these 1500 outstanding leaders to contest elections under my party’s banner, the second major challenge before me would be to get these candidates to agree to a high level policy platform supported by a detailed blueprint for action, well in advance of elections. To ensure that the party has a detailed blueprint, a well-balanced Shadow Cabinet comprising candidates who are particularly competent in certain specialisations would be assembled – up to three layers ‘deep’, to provide for drop-outs at election time, and for some candidates inevitably losing elections.
In any event, it will be crucial that all policy decisions and high-level strategies be agreed upon within the party at least three years before participating in elections. Such clarity of thought would prevent mayhem from breaking out (with ad hoc decision making) when the Ministry finally assembles. The blueprint would also help people understand what the party stands for. I imagine that it would run into a few hundred pages. This document, to be made available in full on a public website, will then inform a much shorter and crisper election manifesto.
This policy platform and blueprint feed into a major public education program to run for three years prior to elections. We would need to go out to the people and explain what is wrong today, why it is so, what can be done to improve things, and how the necessary changes will be brought about, by whom, and when. Simply going into an election under the banner of freedom without sufficient awareness among the citizens of the key issues involved, will doom this effort to failure. Freedom cannot, and should never, be forced upon anyone (unlike the preferred approach of socialists and communists who believe in imposing their ideas, if necessary through the barrel of a gun).
In the hypothetical scenario being considered here, what I am proposing below is a blueprint based on my current personal views. I must point out that if I were actually to ever be the Prime Minister of India, the suggestions I am promoting below may change in many ways (though not their underlying principles) after extended discussion, debate, and democratic voting within ‘the party’.
Hopefully at the end of all this preparation, 300-350 outstanding candidates would win elections to the Parliament, and the party’s Prime Minister would systematically and effectively implement the well-panned Free India agenda, detailed below.
To ensure accountability of individual Ministers once the government is elected, each Minister would sign and publish a contract. This contract (based on the blueprint) would list the deliverables for which the Minister would be responsible during the first year; and the document updated subsequently. At the end of each year, Ministers would report publicly on achievements. If a Minister failed to deliver on significant committments, he or she would relinquish their position voluntarily – as part of the deal signed under this performance contract.
Key decisions of ‘my Cabinet’
I’m structuring into a few artificial categories for this chapter the decisions that will need to be taken to ensure a Free and prosperous India. These will be taken by the hypothetical Cabinet that I will hypothetically lead. I have neglected to mention here, in the interest of brevity, a number of issues that also need reform, and which will form part of the ‘actual’ blueprint. Further, it is worth noting that the focus here is on matters largely within the direct control of the central government; state matters are touched upon only briefly in this chapter.
1. Raising resources for public goods
Advancing freedom calls for a very strong government that supports our security and provides law and order, and social and physical infrastructure, paid for by citizens collectively. We also need our governments to be efficient, ie. to manage their resources very prudently while delivering upon agreed commitments. And finally, we need them to be effective, ie. to deliver high-quality, first-rate products that achieve the intended objectives.
A cheap government will be guaranteed to be ineffective, as quality will become its first casualty. Today India has a cheap government. Only a little over 1/6th of our GDP is spent on services provided by government. That is less than half of what many advanced free countries spend.
By spreading thinly a very small amount of money over a very large number of public servants and services, the quality of services provided by the Indian government is doomed to mediocrity, even if there were no corruption or malfeasance. But we are not talking mediocre delivery here; we are talking failure. The effectiveness of most activities is compromised so severely that the very purpose of these activities is often defeated. And, of course, since the checks on accountability are not established effectively either, the tentacles of corruption slither into every nook and crevice of the government. We need effective delivery of a few, chosen, services, not the failure of thousands of miscellaneous activities.
Let me therefore make clear at the outset that freedom will not, and can never, come cheaply. I do not propose that my government will provide the thousands of socialist services currently ‘provided’, but what it chooses to provide, will be absolutely first-rate; world-class. In particular, my government will provide the highest level of freedom (justice and law and order) practicable, and selected social and public infrastructure, at market cost.
I expect that in the first two and a half years, the expenses of the government would increase very significantly as the core functions of government are strengthened and capability building for these functions undertaken. Core activities will need to begin immediately, but tax revenue will lag, given the vast restructuring needed in the revenue system. Therefore innovative solutions, compatible with freedom, have been found to tide over the first three years. These include:
Borrowings by the government at market rates.
Sale of public sector undertakings including all government schools and universities (both discussed later).
Auctioning almost all the government-owned lands and property.
On this matter, we must remember that in a truly free country, it is people who own, individually, the country’s land, not the government – which is a mere artefact of our convenience. The government, which is a creation of the people, has no ‘natural’ right over our country’s land, despite past ‘conquests’ over our lands, as in the Mughal or British period. Only individual citizens have rights over land. The government must therefore release all lands that were appropriated by it by force and let citizens do what they do best: put it to its most productive use. Wonderful things can be done by citizens with lands lying fallow and unused with government.
Therefore, departments (including the armed forces) that own property, particularly in urban or semi-urban areas, would be required to submit a plan within six months for restructuring their property ownership. Where possible, after selling such land, consolidated, large buildings would be built in strategic locations to form the new hub of government.
If a government does need land for its genuine activities, it must generally buy or lease it from the people, just as a company or registered society has to. That will ensure that the true cost of each government service is clearly understood by government functionaries. For instance, if a Military Dairy Farm owns 1000 hectares of land but does not factor the opportunity cost of that land to society through its lease value, it will over-report its profits (or under-report its losses). Once the Army is made to lease its lands, it would think many times before putting land to such, generally unproductive, use.
Having set these things in place to ensure that sufficient revenues are available for the first three years, the public finance system will be given urgent attention.
Systems to radically improve tax collection will be put in place, particularly strengthening the income tax, wealth tax, and corporate tax regimes with a view to bring the total ratio of taxes (both centre and sates) to GDP to 25%, equal to the chauth – a historical tax in India – from the current level of approximately 16%. The overall tax burden in most OECD countries is now well over 40% of GDP; over the course of time, India may need increase its tax burden to probably around one third of GDP.
At the moment, given its very poor wealth and income tax collection regime, the Indian government has largely depended on expenditure taxes such as sales taxes but also corporate tax, customs and excise duties that are paid ultimately by consumers as a tax on expenditure on products, not on their incomes.
These forms of tax hit the poorest the hardest and are regressive in their effect. For instance, the poor, who spend virtually all their earnings on consumption goods, face the full brunt of these indirect taxes, while the rich face a much lower ratio as a proportion of their income, since they save (and thus invest in assets) nearly all their income. Indeed, investments may attract tax exemptions. If the rich spend 10% of their income on buying new clothes and cars, the incidence of indirect tax on them becomes, relatively speaking, one-tenth of the incidence on a poor person who, for argument’s sake, spends his entire income on consumption goods. If we factor in the lower (marginal) perceived value of these taxes to the rich, this relative incidence on the rich becomes even smaller.
Now, eliminating poverty hinges critically on clearly identifying who are the poor and what they earn, in order that their incomes can be directly topped up by the rest of us to negative income tax. That will require income tax returns to be lodged by all Indian families, including by the poorest of the poor. But that is very hard, relative to the ease of taxing suppliers of goods at source.
While it is true that the rich will pay income taxes over and above these indirect taxes, that does not excuse this multiple tax system which is counter-intuitive.
We need to be paying the poor (eg. through a negative income tax) – and indeed do so today in some form or the other with a large number of subsidies such as the corruption-ridden public distribution system to allegedly salvage the lot of the poor. Instead, today, we tax the poor on one hand and then dole a small portion of that back to them through subsidies. There is little point in having a system of subsidies for the poor on the one hand while at the same time taxing them heavily through indirect taxes (eg. a poor person buying a cloth pays corporate tax, excise duty, sales tax, and to the extent the ingredients of the cloth are imported, customs duties).
We should make sure that the poor are never required to pay any tax whatsoever until they rise above the poverty line. That is the only sensible system compatible with freedom and equality of opportunity.
Tax reform will therefore, among other things, work towards building a simple system of taxes that focuses exclusively on taxing income and wealth in a ‘progressive’ manner, with the richer people paying a relative larger share of their incomes than the less rich. In order to do that, lodging income and wealth tax returns by every adult in India will be made compulsory within three years, irrespective of the level of the person's income. Today we only have 3 crore tax payers in India, merely double the 1.34 crore taxpayers of Australia which has a population one-fiftieth of India’s! In the same ratio, there will be 67 crore tax payers in India within three years, even if a good portion of them will get advance payments of negative income tax to help them overcome poverty.
That will be followed closely by the roll-out of a redesigned tax system with corporate, excise and sales, and a host of indirect taxes on products and transactions being eliminated. Land taxes, municipal rates, user based taxes, or compensatory taxes (eg. carbon tax, cigarette taxes) will remain, or be strengthened.
2. Building capability to govern
Most of this chapter deals with building capability to govern, which is our Achilles Heel. The primary objective of the solutions in this section is to bring in, or develop, Level 4 or 5 leaders at all levels in government, whether political or bureaucratic, and to thus increase our freedom (and accountability). In particular, our unduly powerful bureaucracy will be held very firmly to account for delivering world-class results in the model outlined here.
2.1 Enabling public servants to represent people
Some individual members of India’s civil services, particularly the honest ones, who have been learning throughout their life, are uniquely placed to bridge the divide between socialism and capitalism, and indeed to become initiators of political change if they develop leadership capability. Their detailed knowledge of existing rules of the game and our operating environment is comprehensive and can prove invaluable in designing solutions compatible with freedom. Therefore, as a first step, public servants will be permitted to resign and contest elections if they so wish, and to return back to their earlier positions within one month of the declaration of election results, if they are unsuccessful in the elections.
2.2 Appointments of Cabinet Secretary and Ministerial staff
The ball of bureaucratic accountability will be set rolling by, first of all, reducing the current, almost sole, reliance on the bureaucracy for policy advice and implementation. My Cabinet will seek a contest in the provision of all services that have been so far generally provided by the bureaucracy. The Cabinet, as the ‘board of directors’ of India’s governance, will delegate the implementation of its policies to the best instruments available to it, including, but not limited to, the existing public services and agencies.
To initiate this change, the position of Cabinet Secretary will no longer be held by the public service but by an elected representative in the rank of Minister of State who will not have voting rights in the Cabinet, being responsible for the overall process. The new Cabinet Secretary will be located in the office of the Prime Minister and will be able to bring to Cabinet meetings a politically appointed Cabinet Clerk to assist in minute-taking and disseminating information. The incumbent public service Cabinet Secretary will be offered retirement plus a redundancy package, or given the option to revert to the state cadre. The Cabinet Secretariat will continue to serve the political Cabinet Secretary, but will ultimately be merged with the Freedom Ministry
The Cabinet will then create a set of rules to enable Ministers to hire ministerial staff and advisers on short-term contracts. Public service members will not be eligible for these purely political appointments.
2.3 Compensation for peoples’ representatives
Being committed to providing a squeaky clean government, I simply cannot afford the luxury of my Cabinet members being paid poorly. As an interim measure – to be quickly ratified through legislation – my Cabinet will promulgate a significantly increase in the existing wages of all members of Parliament and request state governments to provide similar increases for legislative assemblies. The monthly wage of MPs would then go of from the current Rs 12,000 a month to Rs. 1,20,000, with proportionate increases for Ministers. Expenses incurred on the job will be reimbursed on actuals and all perquisites completely scrapped.
In addition, a performance bonus linked to economic growth will be introduced. For every 1 per cent increase in per capita GDP growth beyond 5% per annum, all our representatives will get the one-off 5% bonus. For every 1% permanent reduction – sustained for at least two full years – in the number of people below the poverty line, they will get a 1% permanent increase in their base salary, over and above the annual adjustment based on the cost of living. Finally, for every 10 ranks that India rises on a sustained basis (of at least two years) in the Transparency International rankings, there will be a 5% one-off bonus, and a permanent 20% increase on the base salary, upon India becoming the world’s least corrupt country for three years in a row. The sum of all bonuses will be limited to a total of 50% of the base salary in any given year.
Through these incentives, a ‘virtuous’ cycle will be established that will overcome the vicious, negative, cycles of corruption set in place by socialism over the past six decades.
Simultaneously, legislation will be introduced to create an independent Political Representative Incentives Commission with a permanent secretariat charged with research on, and making annual or occasional recommendations on:
the level and type of compensation and incentives for peoples’ representatives that will eliminate all reasonably foreseeable incentives for corruption, and will otherwise promote the freedom of citizens; and
any matter related to the mechanisms of political representation.
The Commission would widely consult with the community in its research, apart from looking at international best practice, and publish its findings. The recommendations of the Commission, made at its sole discretion and whenever considered fit, would bind the public exchequer; there would be no voting on these recommendations. This method will prevent the political jeopardy and dilemma faced by political parties or representatives who try to vote in Parliament to increase their own, which is an extremely unpopular thing to do, and creates the need for subterfuge and corruption. This new method will allow sanity to prevail.
2.4 High priority electoral reform
Interim electoral reforms based on the arguments outlined in chapter 5 would be introduced in Parliament, such as:
eliminating the requirement for political parties to adhere to socialism in the Representation of the People Act;
eliminating limits on elections, or on any other receipts and expenditures by political parties or candidates wanting to represent us;
very stringent requirements on the public disclosure, by all candidates and political parties, of funds received or spent for political purposes; with this information to also be placed on the Election Commission website;
rigorous audit of political association or political party accounts by full time independent experts commissioned by the Election Commission, and publication of these reports;
severe punishments including jail terms of up to three year for failures to accurately report on, or otherwise declare, all receipts and expenditures related to political activity including elections;
state funding of future elections by which candidates who secure more than one-tenth of the valid votes polled will be reimbursed Rs. 15 for each vote polled on a formula linked to the population and geographical extent of the constituency, normalised to an assumed 100% voting; and
security deposit for elections increased to 5 lakh rupees and forfeited when less than 1/20th of the valid votes are polled by a candidate, instead of the current one-sixth. This, much lower forfeiture limit (than the 1/6th at present), will allow many more candidates to contest, while the higher security deposit will prevent non¬-serious candidates from contesting elections. There is clearly some arbitrariness in these numbers which may need to be fine tuned over time to ensure that the gate is kept open for serious candidates who will also, then, receive a reimbursement on the per vote basis if they receive a fairly large number of votes, but shut that gate for frivolous contestants.
2.5 Freedom Ministry and re-writing the Constitution
A new Freedom Ministry will be created immediately, charged with promoting our freedom as citizens. It would deal with political affairs and advice Cabinet on the extent to which all new laws and regulations proposed are compatible with the freedom of the people. An advisory Indian Policy Office (IPO) – comprising of selected world-class professionals in policy, analysis who have demonstrated a capability to use freedom as the criterion for analysis – will be created under the Freedom Ministry to conduct research as requested. While it will be more or less a division of the Freedom Ministry, it will retain some degree of independence, and be able to advise on policy options in any manner that it deems fit.
Its job will then be to provide policy options that are compatible with freedom. All decisions on the proposed options would of course remain with Cabinet. A review of existing laws to verify their compatibility with freedom, will also be undertaken, over time.
The Freedom Ministry would also be commissioned to coordinate the delivery of a number of new urgently needed Acts for improved governance, more particularly, a new Public Administration Act and a Superannuation Act by month 9 (details later). Where possible, other ministries would lead.
In chapter 4 we saw how a re-write of the Constitution can be ‘fast tracked’. As this is an enormous task, requiring the consent of all States, processes relevant to such re-writing will be co-ordinated by the Freedom Ministry immediately, such as convening a new Constituent Assembly (with approval of all the states) within 6 months, and having the (5-10 pages long) Draft Constitution so prepared, put to a referendum within 6 months of its delivery.
The associated simultaneous task of translating the existing Constitution into relevant Acts would be co-ordinated by the Freedom Ministry to ensure that, subject to the referendum being successful, the new Constitution should come into effect on or before the first day of the 31st month.
2.6 Phase 1–Build up (first 2 ½ years)
Now for the speicific governance reforms focused on the bureaucracy.
To signal the major shift in mindset, my government would make it clear in its first written communication to the public service heads that it expects the bureaucracy to examine all their current work in the light of freedom of the people, and explore ways to step back from the needlessly interventionist activities they have performed (or supported) in the past. Further, Departmental Corruption Surveys will be commissioned by the government through an independent body, and results made public every quarter. These will be the counterpart of the Transparency International reports, but for different departments.
The first two and a half years of my government are being characterised here as Phase 1–Build up. These would be the years needed to build up to the second half of the five-year term, which could be characterised as Phase 2–Breakthrough.
By the end of the Phase 1, the number of departments would have been brought down to 10, with around 30 ministerial portfolios (and possibly 30 Ministers of State, to ensure the continuous development of political leadership). Each portfolio would be served by one of the 10 departments, with a total of 10 secretaries. Each department will have a lead Minister to whom the secretary will directly report, while also being responsible for other Ministers. Apart from the Freedom Ministry and Department (which will include all policy matters such as economic, financial, social, consumer, and environmental policy), the other departments would be: i) defence, ii) justice (including police, and support to the judiciary) iii) external affairs, iv) public finance, v) physical infrastructure, vi) social infrastructure (eg. public health, poverty elimination through negative income tax, and the regulation, not direct management, of education and medical facilities), vii) commerce (including environmental and safety regulation of industry and agriculture) viii) social capital and community (fostering voluntarism and conducive social relations in the community) and ix) sustainability (managing the ecology).
Two principles will underpin the change programme in the Build up phase: (1) the need to move the jigsaw of change in a systematic and effective manner, and (2) to do so in a way by which everyone involved is enabled to understand the rationale for the change, and through which nobody becomes financially worse off for up to five years of the end of Phase 1, or experiences personal distress.
The second part of the second objective bears elaboration. The idea here is that nobody should experience financial and psychological duress as a consequence of this enormous change programme, for that would be violative of the principles of justice. These people were not directly responsible for the mess created by Nehruvian socialism, and therefore my government owes them a duty of care to ensure that they are given a reasonable time to readjust and rebuild their life where their departure from government jobs becomes necessary.
Further, a government must set the highest standards of behaviour and people management; therefore, ensuring the health and safety of employees involved in the restructure will be a major requirement for managers of the change programme. Adjustments to the speed of the programme to more effectively and humanely manage change will be made when appropriate. Throughout this process, collective bargaining will be permitted, and the views of government employees heard and paid attention to, particularly with regard to the organisational structures of Phase 2.
States will be encouraged through financial incentives to initiate similar reforms, as much of the improvement in governance can only occur if the states actively participate in this process.
The timelines for Phase 1 will be:
Month 1: The Planning Commission would be shut down from day 1 with all its policy analysis functions transferred by the Freedom Ministry either to relevant existing ministries or to the new IPO within a month. All commitments made under any Five-Year or other Plan in place will be scrapped with immediate effect. All committed funding would then be up for review by the concerned Ministry.
All the documents and files in its mammoth secretariat would be sent off to the National Archives for public display and access. Its officials would be transferred to relevant departments in New Delhi, and encouraged to start thinking completely afresh to produce knowledgeable, innovative and effective policy advice, firmly grounded in the requirements of freedom. Those few among its officials that have displayed extremely high-quality thinking would be seconded to the IPO subject to the quality of their output meeting the standards of the IPO.
Month 2: When new governments come to power in India, they generally reshuffle the set of incumbent IAS officers as part of their ‘new-look’ management team. Unfortunately, this merely ensures that the inefficiencies embedded in the IAS and other civil services continue, but with different nameplates outside the various offices. My government will not do this cosmetic refurbishment. To ensure the complete overhaul in the analytical skills and productivity in the public services, the Cabinet will put in place a comprehensive plan to rebuild the top management in all government departments.
As a first step, all deputations and postings to and from the IAS, IPS, and IFS state cadres would be suspended indefinitely as of the 60th day of the government assuming office, and the system of transfers and deputation at senior levels above joint secretary would be permanently disbanded. All new appointments (with one exception) would be held in abeyance until the reforms, outlined below, come into effect. Urgent requirements would be met by ad hoc contracting for relevant services.
The exception would be the annual intake of new recruits by UPSC will continue till Phase 1 is completed, to ensure that there is no shortage of trained personnel at the grass roots. These recruits will be treated on par with any other employee at the end of Phase 1, as discussed a little later, and will be able to apply for Phase 2 positions, either in the central or state governments. keeping in mind that ‘traditional roles’ such as sub-divisional magistrates and district magistrates would no longer exist in Phase 2, or at least in the states that agree to implement these reforms.
Month 2: Secretaries of existing departments will be given two months to come out with a well-defined set of core competencies including knowledge and leadership standards, reviewed by internationally reputed consultants within the first month of the government’s assuming office. This will be done for each position in the rank of joint secretary to the government of India and above.
Month 3: All civilian positions at senior executive levels, without exception, will be advertised publicly on the first day of the third month. While there will be no reduction in the number of senior positions in Phase 1, recruitment to these positions through the open market will mark the beginning of the new year of merit-based public services.
Except for civilian positions in the defence and external affairs Ministries, and some positions in the Freedom Ministry, positions in all other ministries will be open to anyone with appropriate merit from practically anywhere in the world. All they would need to do is to immediately apply for permanent residency in India and commit to taking full Indian citizenship at the earliest opportunity. We need to make sure that we attract the world’s best public sector talent. Also, most Ministries do not handle security matters, and so there can be no objection to non-citizen permanent residents working in such Ministries.
The compensation of these newly advertised positions would be on par with that of senior managers in multinational corporations in India. These salaries would be in the range of, say, Rs.25 lakhs annually.
Members of the all-India services and others who currently hold these positions would have an equal opportunity to apply to these positions and provide proof of their capability to meet the core competencies designed for these jobs.
Multiple interviews (using a variety of techniques such as making public presentations on complex policy matters) of short-listed candidates would be conducted by a team headed by two Cabinet Ministers and possibly an invitee Chief Minister. Existing public servants who are short-listed would be encouraged to bring along with them conceptual strategic plans for their departments, as outlined elsewhere. A discussion of such plans during the interviews will help demonstrate their capability to deliver on the new challenges.
Months 5 and 6: It is expected that appointments to these positions would be made within five months of the government being elected, with new appointees starting at the commencement of the seventh month (and the unsuccessful being simultaneously relieved of these roles a day). If some of these positions are not filled by candidates who meet the required standards, or if there are unforeseen delays in recruitment, experts of international or national repute may be offered short-term appointments on mutually acceptable ad hoc terms, possibly at a significantly higher pay.
All Phase 1 appointments will be on a 24-month contract, extendable by another three years if the incumbent is successful in obtaining (the much fewer in number) Phase 2 positions in due course. Members of existing civil services who are successful in obtaining these contractual positions would need to resign from their civil service.
Current incumbents who apply but are not selected, would be given the option of reverting to the rank of a Director on their existing salary, going back to their state cadres (where applicable), or given an individually negotiated redundancy package plus pensionary benefits under the relevant rules. No other permanent employee of government will be offered a redundancy package till the end of Phase 1.
Month 8: Departmental strategic plans: Each of the newly appointed Secretaries would be given 60 days to work closely with their relevant Minister and the Freedom Ministry, both of whom would already have commissioned very significant background work over the past few months through the IPO, to prepare a 21 month high level strategic plan for their department by the end of the 8th month, that will be published upon Cabinet approval in the 9th month. These plans would highlight the pathways to the design of the forthcoming restructure and contain sufficient detail to guide precise implementation. The plans will include, among other things, the following deliverables:
High-level review of each activity currently performed by their department. A 2-3 page summary on the review for each major activity would have to be presented to Cabinet in months 9 to 12. The following (illustrative) questions guide these reviews. 1) Is there conclusive evidence that citizens are (i) unable to resolve a particular problem (“Problem”) on their own initiative, or (ii) have tried but failed to solve such a problem?
2) If the answer to (1) is No, steps need to be initiated to close down all government activity in that area.
3) If the answer to (1) is Yes, the relevant governmental activity would need further analysis in order to determine whether the government can solve the Problem better that what the citizens are currently able to achieve on their own, alternatively, would citizens be able to solve the Problem through some additional support from government?
If conclusive evidence cannot be adduced to prove that the government can actually deliver better outcomes than citizens acting on their own, then the activity must revert back to the citizens. It is preferable for citizens to continue to solve a Problem imperfectly, than pay a government to do it equally imperfectly but at much greater cost.
Various support solutions may exist that help citizens to solve their Problem better, by themselves. For instance:
There might be a coordination or information problem in some cases which could be resolved by encouraging citizens to work together and to jointly fund their Problem-solving activity. Citizens could then be persuaded to establish their own voluntary standard that they agree to abide by. This may be particularly attractive to citizens (such as businesses) where not doing so will mean that the government will have little choice but to actively get involved through a more heavy-handed approach.
In a few cases, pooling information or making information available in a more coherent and explicit manner may be sufficient. Where governmental support for such voluntary work, including research, is critically needed, some government funding, subject to delivery of measurable outcomes, may be provided.
If the matter relates to heath and safety of people or the welfare of the sustainability of the environment, the government may need to enunciate socially agreed standards for all citizens to comply with (which it will then have to enforce consistently and uniformly). Where it is found necessary to regulate a particular activity, for example, occupational health and safety in workplaces, the most light-handed approach feasible would need to be chosen. For instance, while self-regulation by the industry would be most preferred, if industry fails to deliver its own safety performance standards, the government would enforce the socially agreed standard immediately, precisely, and proportionately. In any event, the days of roving inspectors who harassed industry for their personal gain are over for India.
If it is found that citizens do require direct government support to preserve their freedom, and that it appears prima facie that a government will do that job better than citizens left to their own devices – despite the much higher costs and inefficiency associated with government activity – that job can then be given to government ‘on probation’. The questions raised in the introductory section of this chapter would become particularly relevant at this stage:
Will the implementation of these proposed activities enhance the levels of freedom (and its obverse, accountability) in society?
Will these proposed activities help us in creating governments that are efficient and accountable?
Will these proposed activities encourage us to take responsibility for ourselves and reduce our dependency on governments?
If a task is given to government, even on probation, arrangements for its first-rate implementation would have to be made. If adequate resources cannot be raised for such high quality delivery through the tax system, the task would have to be put on the backburner. Having commenced that task, though, if the government actually delivers on what was expected, and within time and budget, then the government can be allowed to continue, subject to an annual exploration of other options starting from Q.1 again.
There would always be activities such as the effective provision of justice that strongly favour government involvement. Such activities will most likely need to be considerably strengthened from their existing levels.
Constantly changing technology and the use of new economic analysis would aso throw light on innovative ways of managing problems of accountability experienced in society. Wherever possible, this new information should be used to redesign governmental activities that are otherwise justified, in order to make them more effective and efficient. The second component of these strategic plans would be the timeline for implementing organisational change while mainintaing the delivery of key functions. For instance, where regulation is shown to be absolutely necessary, appropriate independent bodies would be established where they don’t already exist, to ensure that regulatory implementation is de-linked from governmental policy making. To ensure that these bodies are independent, appointments of their CEOs would be directly approved by Parliament from the beginning of Phase 2. That would avoid any perception of bias in the delivery of regulation.
The third deliverable will be a plan, by month 11, for each departmental public sector undertaking (PSU), including independent statutory bodies, banks, or manufacturing or service delivery undertaking (including those in the defence sector). Without exception, by the end of Phase 1, all PSUs including defence manufacturing undertakings will either be auctioned off in the international market, or their shares sold to the people of India. Defence undertakings will be sold under a regulatory regime that ensures that only Indian citizens or companies fully owned by Indian citizens who live in India, will be able to own them. These buyers will also have to provide reports to the defence ministry, apart from allowing periodic or random inspections by defence officials.
A key element of the strategic plans will be the comprehensive modernisation of government administration. During Phase 2 there will be no further hiring of clerks, peons or drivers. Offices would be completely modernised, being converted into open plan wherever possible, with permanent staff and executives sitting together for the most part, and provided with state-of-the-art technology and facilities, such as modern workstations, access to global databases and international standards, computerised document management with relevant tools and amenities.
The plans will also deliver on the training needed to ensure that every employee who wishes to participate in Phase 2 possesses sufficient technical skills. Secretaries would be responsible for training employees to facilitate their suitable placement in Phase 2. The stringent competency requirements of Phase 2 will mean that those who don’t shape up will have to be let go. Employees will be given the opportunity to brush up their skills during Phase 1 through significant re-skilling at all levels of the public service. In recruiting public service leaders in one of the more important competencies expected would be knowledge of information and document management; in particular, they must be capable of sourcing relevant high quality skills to train all employees appropriately.
These departmental strategic plans will be endorsed for implementation by Cabinet by the end of the 9th month. When the plans of all departments are added up (the Freedom Ministry will coordinate them), it should become clear how the jigsaw fits and how the restructure to the 10 departments would be completed.
Month 9: A new Public Administration Act. The Freedom Minister would bring to Parliament in month 9, a new Public Administration Act.
This Act, to come into effect at the beginning of the 31st month, would allow the Prime Minister to appoint Secretaries on the recommendation of the Departmental Lead Minister and with agreement of Cabinet. The appointment would be based on a contractual agreement for three years, that would specify the performance indicators and deliverables by which the Secretaries’ performance would be measured, and closely linked to performance bonuses.
The Act would require each Secretary and head of a regulatory body to demonstrate, through the Departmental annual report, awareness of and compliance with world’s best-practice in accounting, economic and regulatory policy, and health & safety of employees. These reports would also demonstrate how their organisation is meeting community expectations and strengthening voluntary initiatives of the people.
The Act would contain strong provisions to protect – and reward where appropriate – whistleblowers in the bureaucracy who bring to public notice through the Ombudsman or through the media, any ethical discrepancies that may be taking place in their departments.
Secretaries would have full delegation and powers in making appointments to their departments under the Indian Public Administration (IPA) system. They would, however, not be the appointing authority for their departmental statutory bodies, appointments to which would be at the sole discretion of the relevant CEO (who would in turn be bound through performance contracts with the Prime Minister, as endorsed by Parliament).
There would essentially be two grades under the IPA system:
a) Executive grades: This would comprise four contractual bands (E1 being the highest) for positions that require significant judgment and leadership skills. All positions at the contractual level will be under a three-year, performance-based contract. An Under Secretary would be at the lowest band, and the Secretary at the highest.
b) Permanent grades: This would comprise eight permanent bands (the 8th being a senior specialist level for people such as senior scientists, paid at the E1 level, through market ‘loadings’ where necessary to attract outstanding candidates).
All existing positions would translate into a grade or band based on a set of detailed core competencies, to be specified under the Act.
The concept of promotions and transfer will end. Persons wanting to move to particular positions as part of their personal career aspiration will need to prepare themselves to meet the competitive requirements for these positions, and apply for such jobs when advertised.
A well-defined concept of redundancy would be introduced in the legislation, ending lifelong job security at all levels. The only requirement would be that departmental Secretaries, upon a position becoming redundant, would need to find alternative positions wherever practicable – only for those in the permanent grades. If alternative placement is not feasible, certain types of payment would be made to redundant employees.
The Act would articulate a fundamental compensation principle, namely, that roles and responsibilities in the public sector are to be rewarded on the basis of the ‘comparable’ market value of the work involved (except at the E1 and E2 levels, where such parity is impractical; another exception would be made for high-risk rules such as soldiers and policemen who need to be exceptionally competent in order not to miss use their power over the lives of people). These actual, ‘comparable’ market values, will be confirmed through periodic market surveys. This principle should lead to a significant increase in salaries for most public servants in Phase 2.
This principle to reward public servants at competitive market rates would not only prevent corruption, but would ensure that governments only undertake those things that they can deliver at the going market rate.
Secretaries would be permitted, indeed strongly encouraged through their performance contracts, to dismiss anyone, including permanent staff, for proven inefficiency – while ensuring, full regard to the principles of natural justice.
Month 9: A new Superannuation Act: As indicated in chapter 6, one of the very significant barriers to occupational flexibility in India is the absence of superannuation legislation that applies equally to the public and private sectors. A Superannuation Act – upon the commencement of which the existing Central Provident Fund legislation and General Provident Funds would be disbanded, would be initiated in Parliament at the 9th month. The Superannuation Act would require each employer, including the government to transfer 10% of an employee’s gross salary, at a reduced tax rate, into privately managed superannuation trusts that would invest these funds in the investment categories selected by employees. This superannuation would form a part of the employee’s contribution, and will be included explicitly in salary packages. Funds contributed would be available for withdrawal by employees in the form of annuities at age 60, or under special circumstances, as a lump sum prior to 60.
As an associated step, the net present value of the eligible pension benefits of all public servants under current laws will be converted into an appropriate lump-sum superannuation contribution when the superannuation law comes into effect (by the end of the 25th month). For instance, the lump-sum contribution made for a public servant with 24 years of service would be equal to the net present value of the future pensions that would have been permissible had this person retired immediately for reasons not within his control. An appropriate readjustment would also be made for the Central Provident Fund scheme.
Thereafter the concept of pensions for existing public servants would be disbanded.
Those who retire before the Superannuation Act comes into effect would not be affected, and their pensions will be paid as usual.
The elimination of permanent appointments at senior levels, the introduction of the concept of redundancy for permanent levels, and the Superannuation Act would, taken together, bring about significant flexibility into the Indian job market, leading to major improvements in productivity. In addition, a number of other labour market reforms will be introduced, that I will not touch upon here for want of space.
Month 9: Constitutional amendment to abolish the all-India services: The Freedom Minister would introduce a Constitutional amendment in month 6 to wind up the existing civil services and to repeal Articles 308 to 323. This will ensure that all approvals by states are obtained, and the Amendment enacted to come into effect from month 31. The sooner this is enacted, the easier will be the transition to Phase 2.
Month 22: Advertisement for Phase 2 positions: Based on the details of the restructure, which should be emerging clearly by the 20th month, jobs for all indiviual Phase 2 positions (irrespective of the level of the job, and including those recently recruited to the civil services) will be advertised eight months prior to its commencement. Any one, including persons appointed though open selection to positions in the rank of joint secretary and above for 24 months in Phase 1 would be able to apply for these ‘final’ positions (which will, in general, be much fewer in number, particularly at the senior levels).
The performance indicators for Phase 2 Secretaries will become significantly more stringent than in Phase 1, and include the active use of regular surveys on corruption and performance of their departmental services, as perceived by citizens. If an organisation is perceived to be corrupt by more than a certain proportion of the public (this proportion to be drastically reduced in each successive year) Secretaries can expect to be dismissed instantly, and without compensation, despite not being personally implicated in their department’s corruption. Secretaries could also lose their jobs for other, relatively less significant failures, but for such things they may be partially compensated for the remaining period of their contract.
Phase 1 employees to be made redundant with effect from the 31st month as a consequence of the shutting down of governmental functions would be compensated and directly supported by the Freedom Ministry for one year through training opportunities and assistance in setting up small businesses. It would also be ensured in each case that they do not become worse off for up to 5 years beyond the commencement of Phase 2, by which time they should have found something useful to do. The Freedom Ministry will closely monitor the health and well-being of those officials made redundant during this period. This one-off function of the Freedom Ministry will cease after five years.
2.7 Phase 2–Breakthrough (second 2 ½ years)
On the mid-night of the first working day of the 31st month, existing civil services will be disbanded and all government functionaries who have been successful in obtaining Phase 2 appointments deemed to have been transitioned to their new functions at relevant pay points under the IPA system, as planned and indivually informed during Phase 1.
Many public sector employees will probably move into brand new, sparkling and well-equipped modern offices that day, offices which will have no resemblance to their earlier offices. Presumably the states will also have transitioned in much the same manner, or will do so possibly a few months later. This would ensure that public servants across India will move into a far more dynamic, flexible, and challenging – but more remunerative – system.
Under the new Constitution effective on that same day, the UPSC, to be headed by a Public Services Commissioner prescribed under the Public Administration Act, would shed numerous layers and functions such as its recruitment function, and convert itself into a body that researches and provides advice on world-best practice in public administration. This research would include proposals for further streamlining public services with a view to increasing their agility, responsiveness, productivity, efficiency, effectiveness, and integrity. It would also establish newer, and usually better, working conditions every three years for the public services, subject to Cabinet approval, and to be implemented by Secretaries. The practice of setting up of ad hoc Pay Commissions would be scrapped.
All roles transitioned to Phase 2 would be deemed to be fresh appointments, with the relevant Secretary being the appointing authority. Service records will be started afresh by Secretaries, and earlier records largely archived, while retaining information on prior disciplinary proceedings, health and safety matters, or other relevant information that may have some bearing on operational management.
Among other things, each Secretary would be responsible for setting in place performance management systems that document and proactively deal with underperformance. In each such case the secretary would explicitly work towards the earliest possible termination subject to natural justice. While free citizens are happy to pay government employees well in return for high quality services, we should never be short-changed. There are no intrinsic or innate rights to be a government employee. All employees are obliged to deliver on the requirements of the job; that is part of their accountability.
During Phase 2 many Ministers who were appointed to Phase 1 portfolios may no longer have be required to supervise those portfolios, since the original portfolios are also likely to have been consolidated. Sucn MPs will be tasked with working with the Freedom Minister in completing a full-scale review of all existing policy and laws, supported by specialist teams from the Indian Policy Office.
2.8 Local government reform
A major action of the Cabinet by the third month, coordinated by the Freedom Ministry, would be initiating the reform of local governments in India.
The unregulated growth of ill-equipped and ill-planned cities poses a serious threat to India’s progress. Smoggy urban areas have come to resemble garbage dumps with running streams of sewage, and are racked by problems of spasmodic electricity supply and polluted drinking water. Some Indians take pride in this ‘functional anarchy’ as a sign of our ‘freedom’ and resilience, but this is definitely not the way of freedom. We must distinguish between freedom, which is always coupled with accountability, and anarchy, which has no such requirement. Freedom is good, anarchy is bad.
Today, super-sized municipalities like the Municipal Corporation of Delhi or the Calcutta Municipal Corporation manage, or rather mis-manage, our urban areas, and are at best very remotely accountable to citizens. Urbanisation is going to get much worse unless action is taken urgently. Local governments that are professionally run and efficiently supervised by citizens have to be immediately put into place. These must be converted into accountable governments where local citizens regularly get to input into the decisions regarding their locality. Citizens should be able to veto decisions made about their local environment that they do not agree with, a veto exercised by their representatives.
Since local government is within the purview of state governments, the states would be provided significant financial incentives over two years to create Councils [Parishads] of a manageable size on the pattern of advanced free countries like Australia or USA. Thereafter all ‘imperial’ districts and municipalities will be disbanded. The ‘imperial’ Collectorates will be dismantled by the end of month 30, and land revenue staff transferred to the fully elected local Councils. The concepts of division and subdivision will also be scrapped, with administrative control of local areas being given to elected Parishads.
Each Council would be able to choose its local revenue sources such as land taxes and rates, and compete for wealthier residents through its independently determined set of incentives, such as providing better parks or infrastructure to residents. Land planning will be managed directly by Councils with the help of professional land planners, environmental scientists and landscaping specialists, who will be fully accountable to their elected local Councils though contractually appointed CEOs. World-standard zoning and other international standards would apply to all activities conducted by Councils, to be specifically provided for in the relevant legislation.
There will remain, for the purpose of record-keeping of land use (only), a regulatory role for state governments over local governments. States could also levy a tax on land over and above the Council’s land taxes, though a multiplicity of taxes must be avoided, as it increases needless paperwork and red tape.
The ratio of elected local representatives to citizens would be in line with international standards (eg. Delhi will get about 300 elected Councillors (including Mayors) in about 60 Councils, each with its specified responsibility for providing civic amenities). While many state inspectorates will be dismantled as part of Phase 2 reform, some of them, such as food inspectors, will be transferred to the Councils.
Given the very significant shift in the way governance will be provided through highly empowered local governments, local government legislation will be fully reviewed after five years to further improve the system.
3. Increasing transparency
The Official Secrets Act of 1923 was designed for an imperial, secretive and suspicious government, often disliked, if not detested, by Indians. It was certainly not designed for democratic, free India. It talks about not disclosing “secret” official information which is “likely to assist, directly or indirectly, an enemy or which relates to a matter the disclosure of which is likely to affect the sovereignty and integrity of India, the security of the State or friendly relations with foreign States”. However, while this principle is fine, it is cited far too often, even in situations where none of these provisions apply.
Since independence, socialist governments have used this law more to protect their corruption and misdeeds than our sovereignty. My government will not need this support. I know for a fact that there is amazingly little information in most departments of government that is ‘potent’ enough to affect the sovereignty or integrity a strong country like of India. Indeed, India’s defence and security has been compromised infinitely more by the politicisation and consequent rampant corruption introduced even in our armed forces by our politicians, than by potential leaks of information. In fact, much greater transparency is needed to reduce incentives for corruption; the decline in corruption will then strenghten our security.
In summary, almost the entire information handled by the Government will be made accessible to citizens through the internet. The Official Secrets Act will be abolished but some of its provisions will be integrated with the Penal Code, to deter public servants in the very rare instances where the country’s security can actually be compromised.
Once the new Constitution has been adopted, the provisions for the Comptroller and Auditor-General Act will also be changed. The office of the Comptroller and Auditor-General will be made far more oppositional than it currently is. “That which opposes produces a benefit” (Heraclitus, 500 BC). Transparency is best promoted by those who have a strong incentive to demand it and gain from exposing wrong doing. And who else has the greater incentive to poke around into the affairs of a government than the Opposition? The full value to citizens of having a Parliament is not being tapped in the current system.
Therefore, one of the first actions to amend the translated legislation generated while making a new and simplified Constitution in Phase 2 would be to hand over the position of Comptroller and Auditor-General to an Opposition MP elected amongst themselves. This parliamentarian would be empowered to appoint senior executives to this body (again, on contractual terms), and to commission enquiries on any subject. A generous budget will be made available to body. This strongly oppositional model, leading to the constant, independent, verification of the implementation of my government’s policies by my Ministers and bureaucrats, would lead India to much greater plane of transparency and accountabilty than we have ever experienced before.
Further, by month 48, in order to further increase the levels of public supervision of the government machinery, each public sector organisation, including departments, will be required to establish Local Boards in each physical location (details in Appendix 6), leading to an even further check on the bureaucracy.
4. Strengthening the delivery of core functions
All governments need to ensure the highest quality delivery of outputs in at least four core areas: defence, justice, police and education. These functions must be done outstandingly well; and if needed, to the detriment of all other government functions.
Justice: Justice is perhaps the single most important core function of a government after defence, and one which India, performs very badly. A society that constantly disregards the tenets of freedom – that is premised on the elemental significance of justice – cannot perhaps expect better.
To begin with, processes (eg. through an Amendment to the Constitution, or in negotiation with the Supreme Court) will be set in place for appointing as many judges to the Supreme Court as needed, each on five-year contracts, to dispose of the judicial backlog. Grants will be provided to states to initiate similar changes in the High Courts and lower courts. These grants would also allow for significant expansion and upgradation of the court infrastructure. Further, the salaries of judges would be brought up to the level of around two-thirds of what the best lawyers (at that level of court) command, evidenced by surveys.
Police: The third important core function of a government after defence and justice is providing internal security, and maintaining law and order. The changes made to recruitment practices at the executive levels in the administrative system will also directly apply to the police forces of the central government. Further, very significant (largely market-based ) increases in salaries, and funds for infrastructure reform, will be made available for the police force, through targeted grants to states.
The conditions on these grants would include requiring that senior officers in the police services be recruited through open competition – including internationally wherever possible; there will be no requirement of citizenship, except for its internal security branch. A complete modernisation of our policing systems would therefore be initiated, including very significant strengthening in its capabilities. Unskilled police who do not meet international competency standards would be let go.
School education: The fourth core function of government relates to the provision of equal opportunity for all. This mainly translates into our funding school education for everyone, to year 12.
A recent Goldman Sachs report showed that 44.5% of China’s mammoth population has been educated at least to year 9. Further, almost all over the world, 10 years of schooling is now considered to be the bare minimum education to equip children to face this highly competitive modern world. My government will guarantee support for the education of anyone who wants to study up to year 12 or age 18, including equivalent vocational training (noting that this support does not amount to compulsory education ).
Today, about 16% of children – in numbers adding up to tens of millions – in the age group 6 to 14 do not go to school in India. Under this situation, getting every Indian to complete year 12 sounds almost like a pipedream. But it can be achieved with the right policies that require getting this done, not doing it ourselves as a government. I’ll explain what this means, below.
First, if we apply the criteria in section 2.6 of this chapter to analyse current government activity in education, we will find that governments do not need to actually own and operate schools to successfully educate everyone to year 12. If the objective is to get every child educated, then effective ways to get it done have to be found. Indeed, it is crucial for government stay out of managing schools, not only given its well-known inefficiencies, but also given that governments are very soft on their own failures. A government regulator will generally demand stringent standards to grant a private school license while being indiffernt to the quality of government schools.
While the policies outlined below will apply to central government schools, the states will be given incentives to also follow this model.
In this model, ‘free’ education to year 12 (or partially subsidised education, where a school charges amounts over what the government funds) will be delivered through funding each child, individually, not through funding or managing schools.
As a first step, government would get out of school ownership and management.
This is how the entire package will work:
Over the course of the first 30 months, all existing government schools would be privatised completely. Their land, buildings and equipment will be sold at market value through competitive bids in which consortiums (largely private companies under the Companies Act) of teachers and educationists working in these schools will be encouraged, through a small preference in the terms of the tender, to bid for the schools.
A few conditions would apply to the sale, namely, that the school’s land cannot be sold for 50 years, and that while other businesses can be established and operated from the school campus after school hours, or to otherwise share its infrastructure, only businesses that are approved both by parents and the local government Council will be allowed to use these facilities. Similarly, the other condition of privatisation will be that existing staff are not disadvantaged for up to 5 years from the sale of the school.
It doesn’t matter whether these privatised schools are run for-profit or not-for-profit. Today, the lands and buildings of government schools are clearly not being utilised in the most efficient manner. Privatisation will ensure much better resource utilisation. Further, by giving ownership in most cases (through educational consortiums) to teachers themselves, their commitment to the direct maintenance of buildings and school infrastructure would be strengthened enormously. If at the end of this process, namely, of maintaining the schools and providing high quality educational services, schools consortiums are able to make a profit, this will only help, not hinder, the supply of more good schools. The incentive of profit will lead to competition and improved quality of suppliers, just as in all other markets. Educational markets are conceptually no different to any other.
We know that in general parents prefer to send their children to private schools (“public schools” in India) because the standards of accountability in these schools are much higher. Parents get full value for the extra money they invest in their children’s education in private schools. Privatising schools will ensure that all schools become accountable. Only the most efficient schools, fully accountable to parents for the quality of education provided, will survive in this competitive market; else they will be forced to sell off the school to other, more efficient suppliers.
The funds raised from the sale of schools will form part of a one-off increase in government revenues that will be used to offset increased expenditure in the core services of government, outlined earlier.
There would be no limit to the number of schools that can be established. Subject to quality assurance requirements enunciated by an independent education regulator (no licensing would be needed ), anyone could set up a school anywhere, charge whatever fee they wish, and try to attract sufficient students to the school. Having done that, they would seek funding – through reimbursement of vouchers, and as outlined below – on a per-child basis. This would create an extensive, and very agile, competitive market for schooling.
By month 31, each child in India up to age 18 would have been allotted a unique identification number. A new number would then be allotted to each child born subsequently. This number will be linked to an annually generated voucher of a value linked to the previos year’s income tax return of the child’s parents. Depending on the information provided in the parents’ income tax returns, vouchers would differ in value, with children of very poor parents entitled to a voucher of much higher value than, say, the children of wealthy parents.
All parents would then be able to choose to send their children to any school they wish, and pay only amounts over and above what the government voucher will reimburse (the school) for that child. In most cases, particularly for children of poor parents, the parents would not pay anything since they would have a high-value voucher. Richer parents will pay an additional top-up, on the same principle as a progressive tax; and also given that they are likely to continue to send their children to the more expensive schools.
Given that some corrupt schools and parents will attempt to rip off the government by lodging for reimbursement the identification numbers for children who have died or dropped out of school for some reason, or transferred to another school, the management of the voucher system would be outsourced to a range of service providers under very strict conditions of accountability. An independent education regulator would then monitor the quality of these contractors and the integrity of the voucher system. Extremely stiff penalties would apply if fraud is detected.
To prevent the possible financial collapse of some schools through mismanagement, schools would be required to purchase compulsory bankruptcy, fire, workers compensation, and public liability insurance from reputed private sector insurance companies, reinsured initially by the education regulator until the rates of school collapse are better assessed, and premiums set appropriately by the private insurance companies. When buyers of schools in Phase 1 turn out to be bad managers, or worse, this insurance would prevent the schools from going belly-up.
Education departments and directorates, as well as inspectorates of schools, would be disbanded by the end of month 30. The only responsibility of the social infrastructure department will be to manage the overall budget for school education and work closely with an independent education regulator to ensure that schools standards are met and vouchers administered properly.
Higher education: While school education provides equal opportunity for each individual, public funding beyond that is inappropriate. University or other tertiary institutions such as tertiary vocational institutes act as fishing nets for ‘trapping’ the society’s talented and gifted people. Those who successfully complete tertiary education earn, on average, significantly more than those who could not enter tertiary institutes. This means that the benefits of educating talented people are captured almost entirely by these people, in exchange for services they provide to society when they join the workforce. Given that these people will also, on average, live longer and healthier lives than the less talented members of their cohort, there is absolutely no reason to subsidise them.
And yet we must be mindful that not all talented students can afford the enormous costs of university education. But that defect is very easily overcome, and at only a moderate cost to the public exchequer, as outlined below.
Any Indian citizen (not overseas citizen of India), irrespective of caste or religion, who gains admission into an approved university course will be eligible for a loan from government that will cover all fees and reasonable living costs, at the (variable) Reserve Bank rate of interest, to be repaid through the tax system after the student starts earning beyond a particular level of income. This loan – much cheaper than any comparable private bank loan – will therefore be repayable only after the student starts earning sufficiently. This amounts to a significant subsidy for higher education students, particularly through the taxpayer meeting the cost of administering these loans, and bearing the risk of non-payment that can happen for a variety of reasons. This subsidy is more than enough to encourage higher education in the society.
Further, just as in the case of schools, there is no reason whatsoever for the government to directly manage the delivery of tertiary education. Therefore, all government managed technical colleges and institutes will be privatised on the same pattern as schools. For universities, similar provisions will apply except that, after making a small amendment to the Corporations Act (that universities under the Act would be unable to sell their lands for 999 years), all existing universities would be converted exclusively into for-profit corporate bodies with the sole business objective of providing tertiary education, and with shares listed on the stock market. Universities would function like private corporations and set any salary structure they consider appropriate to attract the best academic professionals and students. They would also independently set the quality of service that they wish to provide, the mix of subjects and activities they offer to students, and any other matter that universities generally undertake.
From the 31st month, the government will issue debt instruments to the market (predominantly to banks) against the total amount of student loans expected to be issued each year, and will incur a revenue expenditure equal to the difference of interest repayment costs of its debt and the Bank rate. Significant current revenues currently spent on higher education will thus be released for more essential uses. Universities will become much better funded than earlier as they will be able to charge full fees and pass on all their costs to students. They could also subsidise meritorious students through scholarships funded by donations from alumni or in partnership with the private sector. The government will issue the student loans to any student who gains admission, for any amount that a higher education institution charges. As a result, the quality of university education and infrastructure will receive a desperately needed boost.
The reason why universities will not hike their fees to astronomical levels on opening up the market is because of their critical need to attract high quality students in a very competitive tertiary education market. Students will be on the lookout for good quality, and cheap, education, forcing the prices down to competitive levels, and only that much of higher education will be provided as the market (students, anticipating their ability to repay loans through future earnings) considers necessary.
There is an argument advanced in some circles that such privatisation will affect the supply of courses in the general arts and philosophy. This argument is without basis as modern private sector corporations recognize the great value of a liberal education in broadening the perspective and horizon of managers. In fact, it appears to me that more arts graduates now prosper in modern businesses than technical graduates, because innovation does not depend upon technical skills. Therefore there is no basis for a subsidy for specific academic courses. The market should decide what is needed.
5. Environmental sustainability
A large, poorer, and illiterate population is usually the consequence of low levels of freedom prevailing in a country. Thus, Nehruvian socialism has directly contributed to our large and illiterate population. The pathway from low levels of freedom (and its consequent bad economic policy) to the demand for children is described in the Box below. Box
Freedom and population growth
Without going into the many debates that this subject has raised over the past 200 years since Malthu first proposed his theory, I’m summarising here the child mortality and economic arguments that have been found, quite capable of explaining population growth. These arguments model how couples figure out how many children they need to have. Using fairly simple assumptions, these models are successfully able to explain a significant part of the number of children ‘demanded’ by parents.
These arguments run on the following lines.
a) “How many of our children will survive?” Parents are aware in the back of their minds that not all the children they have will survive due to infant and child mortality. They look around them and form an estimate the risk of their children not surviving. In poor countries (often driven by bad economic policy such as socialism) high infant mortality usually prevails. Therefore parents are behaving quite rationally if they choose to have five to seven children with the hope that at least two to three of them will survive into their old age. This, therefore, is the first pathway from freedom to high population growth, particularly when the parent’s estimates are wrong, and more children survive than estimated.
b) “What will our children earn during our old age?” Second, parents in countries without old-age pension or welfare systems, as in the case of India, need to take into account, implicitly if not explicitly, two economic returns from their children: one, as ‘help’ for parents when the children are young, and two, as ‘insurance’ in the event of the parents needing to be looked after in old age. This insurance comprises of two components, a financial return if needed, and physical and emotional ‘old age care’, too if needed, as in sickness.
Parents use the current economic policy scenario to visualise the economic condition of the society in the future. That tells them what their surviving children are likely to earn in the future when they (the parents) become old.
c) “Should we use children as labour or educate them?”
The calculation of the child mortality and future returns from children then impact on parents’ decisions not only of the number of children they need to have, but also on how much they need to educate their children.
As far as investing in their children’s education is concerned, parents have the following two options: (1) to have fewer but well-educated children, or (2) to have a larger number of children but not educate them well, instead ‘using’ them mostly as labour to supplement their incomes when the children are young.
To determine which of the above two options is best suited to them, parents compare the expected returns that children can provide both at present and in the future, and compare these returns with the expected costs of educating children, including the (opportunity) cost of income forgone by parents from the labour that the children would have undertaken had they not been studying.
They choose to educate their children today and lose current income, if, through educating their children today, the future income of these children becomes significantly larger than without education, and therefore acts as a buffer for the parents in old age.
That parents do decide ‘broadly’ on this basis is seen to be statistically valid in aggregates (as in large surveys), even though no parent makes a conscious calculation of the sort described above.
Choices that parents make in socialist India
Now, in predominantly socialist India – the India till the late 1980s, the future income of children was only marginally affected by ordinary educational effort, say of the sort that a school in an average Indian village would impart. Future incomes of the children were more likely to be affected by nepotism, bribery, and corruption. Further, jobs requiring education were very scarce, anyway. Even many Master of Arts degree holders reputedly could not get jobs beyond that of junior office clerks – jobs that (if the incumbent was honest) hardly paid more in comparison to a poor farmer, after factoring in the quality of life of a junior clerk.
All this signalled to parents in India that education was a total waste; and where opportunities existed to use children as labour, parents made use of them, instead of sending children to school. Only some ‘high castes’ – generally used to a minimalist lifestyle dedicated to knowledge – sent their children to schools. But they too had plenty of children, since who would take care of them when they grew old?
However, parents have begun to see, with the increasing liberalisation from mid-1980s, and the greater job opportunities generated for skilled people, that education of their children can make a genuine difference to their childrens’ future incomes, and have started switching to option (1).
In summary, policies compatible with freedom lead to (a) an increased demand for education, and a consequent (b) reduction in demand for children.
The desirable equilibrium or ‘balancing point’ for a free society is for parents to have 2.05 very highly educated children per family, a number that is likely to be sustainable for the planet. Conversely, had India not followed socialism, its population would have been much smaller and wealthier by now. That would have also meant leaving a much smaller footprint on the environment.
Unfortunately, now that we have a ‘backlog’ of a large but illiterate population, we have to prepare for a significant pressure on the environment, particularly after the economy has been opened up, as it should be. With even a slight increase in incomes, as has been happening for a while now, energy and transportation usage, and the consumption of manufacturers, that are often based on chemicals, rises.
Had governance structures of freedom been in place earlier, much of this increased pollution could have been prevented, or at least that the managed. In a free society, accountability would have been placed squarely on the polluting parties. However, under the current governance scenario, the costs of pollution are largely passed on to the society without any remedy being available to us.
There is another factor at play, namely, that a society begins to pay attention to pollution only once it becomes reasonably rich. After incomes become sufficiently high, funds are then available for research and technological improvement which can help reduce pollution.
Under the situation that prevails today, we can generally expect the environment to get much worse for the next 30-40 years before it begins to get better. India, today, simply does not have the kind of resources to clean up its rivers, lakes, or to rehabilitate its forests. Neither do we have a justice system that can hold people accountable for the pollution they cause. Corruption, filth, and squalour is ‘written’ in our fate for the next few decades unless we radically reform our governance.
My government would do exactly that.
Freedom is not license to pollute. Passing on costs to the rest of the society is not acceptable. These costs must be recovered from the polluters. To the extent that the polluters can be easily identified, these costs need to be recovered from them directly. To the extent that polluters cannot be directly identified, taxes may have to be imposed on the activity that closest approximates the activity being undertaken by the polluters. Carbon tax on electricity production by coal is an example of a tax imposed on producers who can be readily identified. A range of other economics-, or incentives-, based solutions are also available to reduce pollution.
Being conscious of the need to reduce the problematic environmental impacts of our large population that will consume more manufactured products and energy over the coming decades as it gets richer, my government will act swiftly, as follows.
Rapidly phase in, through regulation, of the world’s highest standards in the use of non-polluting technology wherever it is available.
A range of other policies that do not call for direct government expenditures, but enable the polluters to pay the community that is affected by the pollution, would be put in place. In particular, developed countries – that have historically been the largest polluters in terms of carbon emissions – will be asked to make compensatory payments to India for increasing forestry in India, as well as in those countries itself.
For example, carbon taxes will be collected from electric and petrol companies and paid out in the form of (compensatory) subsidies to companies that increase afforestation in India. These compensatory subsidies will be paid based on the actual growth of these forests, confirmed through satellite imagery. This subsidy will also fund (Indian) private sector investors who can build nuclear power stations for India while meeting the world’s highest standards of safety and security, under government, and international, regulation.
A proportion of these taxes (and compensatory payments from developed countrieseloped countries) will also be provided to industry and universities – based on demonstrable results – to increase research in, and application of, non-polluting methods.
6. Eliminating subsidies and poverty
My preliminary estimates, made a few years ago, showed me that the cost of existing subsidies in India – paid out ostensibly in the name of the poor – is almost exactly equal to what would be needed if we were to directly pay the poor and lift them straight out of poverty. These subsidies, of course, do nothing to help the poor escape from poverty, being swamped by corruption and inefficiencies.
But even if the money needed to eliminate poverty is found, upon further analysis, to not be exactly cost neutral, such as requiring an additional revenue expenditure over and above what we allocate for subsidies today, this is something that must and will be done. The mind-numbing poverty experienced by millions of our citizens has to be abolished if we want to provide everyone with an equal opportunity to live life the way it should be led, and not reduce their human existence and potential through malnutrition and illiteracy.
As indicated in chapter 3, in discussing a negative income tax (NIT), a direct mechanism to transfer funds (using electronic technology) to millions of poor people in India will be established, based on annual income tax returns (and advance estimates where necessary) filed by each family. The world’s largest IT companies will be invited to propose methodologies and systems to implement the mechanics of this system. About half a dozen pilots will be rolled out by the end of Year 1 and the most effective (not cheapest) method will be selected for national implementation.
NIT payments will be fully operational in the 4th year across the entire country, and once successfully implemented, all subsidies will be stopped, and the entire public distribution system shut down.
Over the subsequent years, the rapid growth of the market economy and improvements in education and infrastructure (including public health) would make this policy largely redundant as most people will no longer be poor. However, as there will always remain some people who will be unable to cope with the demands of the market, NIT will continue.
7. Enhancing innovation
The fundamental driver of innovation in any society is the unhindered flow of technology and knowledge. The defeatist and negative concept of ‘appropriate’ technology has haunted India’s socialist and collectivist corridors for too long now. By this is largely meant the deliberate, and planned, dumbing down of technology to provide a small productivity gain while using primitive, labour-intensive methods of work; essentially encouraging stone age technology, rather than promoting innovation through the free flow of the world’s best technology. A typical example is the use of hand-made roads in India that take hundreds of labourers many months to make, but which then crumble into pieces at the slightest monsoonal shower.
There is no reason why the market cannot decide what is appropriate for its needs, and why anyone should spend taxpayers’ money for this. For instance, Microsoft or Intel did not require a government subsidy for their innovations, which were found to be quite appropriate by the market. Appendix 7 discusses this issue in further detail, and reminds us that technology is nothing but the distillate of the most creative human minds yet born on this planet. By not always using the best (or optimal, in the case of private consumer decisions) technology at every step, we go backwards in time, and reduce our potential. This is of particular importance in infrastructure and similar governance services, which need to be first rate or not done at all, but also in the core functions of government.
Professor Ludwig Von Mises wrote of India’s urge to use primitive technology, as follows (underline mine):
“American wages are higher than wages in other countries because the capital invested per head of the worker is greater and the plants are thereby in the position to use the most efficient tools and machines. What is called the American way of life is the result of the fact that the United States has put fewer obstacles in the way of saving and capital accumulation than other nations... The economic backwardness of such countries as India consists precisely in the fact that their policies hinder both the accumulation of domestic capital and the investment of foreign capital. As the capital required is lacking, the Indian enterprises are prevented from employing sufficient quantities of modern equipment, are therefore producing much less per man-hour, and can only afford to pay wage rates which, compared with American wage rates, appear as shockingly low.”
In order to ensure that India is able to get access to the world’s best technology in everything it needs, the socialist man-made barriers to our self-actualisation, including all restrictions on investments, barriers to trade, controls on the currency, and any limitation on the importation or use of technology, will be abolished on the first day of ‘my’ new government – or as soon as technically and legally valid orders can be churned out.
Openness is not only critical to wealth creation but for the rapid increase in our knowledge, both as a nation and as a species. This openness, as a way of thinking, may also give us new insights and the opportunity to learn about ourselves, and become truly free as a people. Only by achieving that state of mind can we become the world’s greatest country, ever.
* * *
This, then, was the high level outline of some ways to break free of Nehru, and to make India the world’s greatest country, ever (sorry for the endless repetition; but that is the ultimate reason for this book, and one cannot repeat it often enough).
Once we find ways to implement the principles outlined here, we will be transported into infinitely open spaces of endless beauty that are found in Tagore’s “Heaven of Freedom” (Gitanjali 1912). Where the mind is without fear and the head is held high
Where knowledge is free
Where the world has not been broken up into fragments
By narrow domestic walls
Where words come out from the depth of truth
Where tireless striving stretches its arms towards perfection
Where the clear stream of reason has not lost its way
Into the dreary desert sand of dead habit
Where the mind is led forward by thee
Into ever-widening thought and action
Into that heaven of freedom, my Father, let my country awake.
In the end, this Heaven is more of a personal vision, a state of mind, that each of us can aspire for, irrespective of whether the society one chooses to (or is compelled by circumstances to) lives in adopts this vision. Despite much frustration and pain, I believe I have been able to experience many of the promises of this Heaven in my own life by following the principles of freedom diligently and overcoming the great many barriers to self-actualisation that are imposed by the society in which I was born, and lived in, for the most of my life.
Aspiring and working for freedom, and for the knowledge it brings, is something that each of us can choose for ourselves as the central beacon that adds meaning in this life. The good thing is that India’s history gives us many role models to guide us, outstanding people who chose this path of individual freedom, responsibility, and self realisation. Tagore, Gandhi and Vivekananda are just a few of the many who come to mind.
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I am keenly aware that I have offered solutions in this chapter (that I believe are compatible with freedom) which not everyone will agree with. Those who strongly believe in reservations or the universal civil code, or are unable to imagine that Nehru could ever have been wrong, may not see much value in many of my suggestions. There will be others who cannot see schools being run successfully by qualified teachers and people without the crutches of a mammoth and corrupt government bureaucracy. And so on.
I would therefore suggest that, following the democratic model nurtured so well by Nehru himself, let us have an open discussion on some of these dissenting views. For who knows, I may actually be wrong in some of my deductions. The free man doesn’t claim, can never claim, complete knowledge and understanding. My ignorance remains equally unfathomable, much more so than Newton’s. I therefore look forward to hearing about gaps in my arguments, and remain open to persuasion through better argument or evidence.
In the meanwhile, it may be worthwhile to extract for possible use by India anything that is found to be of value from amongst what I have offered here in good faith. I am happy to assist people in India, whether in the government or elsewhere, in clarifying the details of some of the things I had in mind, if that will be help anyone.
At the end of implementing these processes – that will unleash our freedoms – our billion plus people will be enabled to use their minds freely and innovatively. I see then, not very far away, the Indian economy becoming at least three times larger than that of USA, and becoming the world’s greatest country in many more ways than that. Now, wouldn’t that be something to write home about?
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In the meanwhile, too, I plan to continue working in my spare time on expositions on related ideas, and so we may meet again. And so, Au revoir!
But whether we meet again or not, we – ie. the people of India who were fortunate enough to be educated in India at the taxpayer’s expense – should ponder over how each of us can become, or help inspire, “leaders of ability, vision, and moral character” to represent the citizens of free India in their governance.
And while we are in this pondering mood, wondering how to get ourselves some good political representation, it may also be worth reflecting on the very foundations of our existence in India.
A question that we could ask ourselves could be: is it possible for anyone to live with self-respect in a country in which the corrupt rise to top; where knowledge is devalued and where the only thing that seems to matter is who one knows; and where the narrow walls of caste, tribe and place of birth have split the country into fragments? Is this the kind of India worth living for, worth working for, worth dying for?
Doesn’t life itself lose some of its meaning when freedom and justice are so severely discounted?
Would I therefore be off the mark to suggest that we – all of us – have a fight on our hands, for self-respect and freedom in India, everyday, in every way? For if we don’t advance the cause through our daily actions, what chance does freedom stand against the dark forces unleashed by socialism in India, forces that are writhing and hissing away, unchecked, all around us even today?