Realities of Governance I

There is a strong reality in governance. This reality our governors face is same, whether it is LDF, UDF, NDA or UPA in the helm. The charismatic power of this reality is so powerful that it is a major factor why opposition parties flip, 180 degrees, once they come to power. It is also what forces ideological parties to take a realistic approach on their economic policies, communist China to turn capital, India to open up its economy in the early 90s, Buddhadeb to declare he is a realist, etc..

It is important that as citizens of a democracy we should take the effort to at least understand pieces of this reality before exercising our god given right to blame our governments.

A big piece of this reality is the emptiness of governments’ pocket (aka ‘Gajanave’). What is the reality of governing a state (read Kerala) thats 86% of tax receipts is spent just on salaries/pension or interest? (6 years ago, the same ratio was 104%!). Is there any financial flexibility left for the executive to carry out its mandate in such a situation? Every new government is given a mandate to do the best, better than the previous government and people have very high expectation of them. But the question is without adequate funds how can they expected to deliver on these high expectations?

If it wasn’t for the international development agencies/banks and foreign government aid, there wouldn’t be any major development initiatives going on in Kerala currently. Take a look at the following list of foreign aided projects in kerala which ranges from making sure people wash their hands after using toilet to changing the organizational set up of the government itself.

World Bank Kerala State Transportation Project.
ADB Urban development project.
WB Kerala Fostery Conservation Project
ADB, Dutch Modernizing Government Program
WB,ADB, Swiss Local Government Decentralization Program AKA janakeeya aasuthranam
Japan Drinking water project
World bank Rural Water Supply project
WB toilet paper promotion project
WB health project

This list by no means is complete and excludes a number of domestic lending organizations GoK regularly rely on for day to day activities. It makes one wonder whether keralites should pay more attention on the elections for the board of governors of these lending institutions than that of their own elected representatives.
Generally, financial leverage is a good thing, up to a point, but unfortunately GoK has crossed that limit decades ago. It is purely selfish to make future generations pay for the present expenses of the government other than the cost of long lasting infrastructure projects.

The obvious but ignored reality is that governments need to have resources to act on its promises. In the world of development ‘resource’ is the key word. Don’t get me wrong, India is blessed with lots of natural resources, we also have an abundance of human capital. Nevertheless, Indian Governments lacks the resource in its most liquid form- Cash (aka Tax Revenue). If tax revenue is low, next logical conclusion is well demonstrated by usefulness of Indian governments to the people! In fact, this is the reality of developing countries across the globe. Our governments has enormous task in front of it, it has to adhere to very high expectations without having the liquid resources to make it happen.

India needs billions and billions of cash to spend on modernizing our infrastructure (an estimated 172,000 Cr over the next 7 yrs for roads alone.) The government needs thousands of Crores to fortify our defense capabilities and to assert ourselves as a major global power. It needs to spend at least 3 times more on the social sector than it does currently. To assure reasonable quality in primary education billions more needed. Even to reform our institutions and government bureaucracy to reduce corruption to a reasonable level, a large sum of money needed to be pumped in to the system. To modernize our police force and to create a law obedient civil society 1000s of Crore more Ruppees are essential. Resource aka Money is everything. There is no doubt that the quality of government services is directly related to the tax revenue. We get what we paid for.

Yet, the focus of the country is seldom on resource accumulation front. India’s tax base is pathetically low. Only 3% of the population pays income tax in our country! The need of the hour is to come up with a plan to widen the tax base to at least 10% in short term.

India’s Tax to GDP ratio is half as much of an average developed country. That means Indians have to pay twice as much tax than they do currently for India to be in par with the taxation levels of developed countries.

For the fiscal year ended in 2005, only 8 lakh people from Kerala paid their income taxes to the central government. Their collective payment was merely 1,724 Cr. In comparison recent hike in kerala government employees compensation did alone cost state govt exchequer an additional 1,600 Cr.

I am sure any top level political executive who has a shed of statesmanship in his/her blood has experienced this reality and forced to think with common sense. But the problem is those who aren’t able to experience this reality, which include overwhelming majority of politicians and influential citizens, ignores these obvious but crucial facts of governance.
Unfortunately, those few elite politicians who experienced it are hesitant to convey it to the masses because of the very nature of their profession and our media’s vested interest is better served by looking away from it. End result of this 'trap' is the continuation of the same old politics of fooling people, and substandard economic policies that undercuts the maximum potential of the country.
India has to bravely implement smart tax and economic policies that will double and triple the governments’ revenue- that can be used for development projects. But the challenge for the policy makers is to make citizens appreciate reality based governance as opposed to populist idealism so that the resistance against intelligent reforms will be in the low end.