I was at the Stanford University last week to participate in the 14th conference on India by the Stanford Center for International Development (SCID).
This conference each year selects a special theme for its annual deliberations. This year it focused on the economic performance of the states in India.
The conference attended by policy makers, academia and the corporate sector has in the past influenced government policy in multiple areas.
It was the harbinger of far-reaching changes in the telecom sector by persuading policy-makers to adopt policies in an area where India has many comparative advantages.
Other areas of significant discussions in the past included tax reforms, financial sector reforms and infrastructure. The selection of the states as a broad theme this year has more than symbolic significance.
It recognises that given the present weakness of the central government tangible reforms are possible in states where there is enabling governance.
The role of the states in the next stage (and steps) of the India reforms story would be fundamental.
While compulsions of coalition politics may continue to stymie changes for the central government, states may continue to adopt policies which could spur growth. Recognising the role of the states and even regional parties and using them as catalysts of change was being both practical and timely.
Naresh Gujral, Piyush Goyal and Bhartruhari Mahtab made presentations on Punjab, Gujarat and Odisha. There was a very interesting paper entitled, ‘Learning from the States to Mainstream Best Practices’ by Mihir Shah, member of the Planning Commission.
Montek Singh Ahluwalia gave the overall architecture of Centre-State relations and their importance in achieving the XIIth Plan targets. Mani Shankar Aiyar chose his favourite subject of Panchayati Raj and shared his findings from the recently constituted ‘Expert Committee on leveraging Panchayati Raj Institutions for the more efficient delivery of public goods and services’.
Shaibal Gupta and I spoke about the recent developments in Bihar.
The broad conclusion that the states have a lot to learn and unlearn from each other has lot of merits. For instance, the best practices by the states in water resource management such as irrigation and aquifer management in Andhra Pradesh, watershed management in Karnataka and flood management in Bihar, address some of the critical challenges facing the water sector today.
In terms of water resources regulation, the critical issues are the inter-sectoral distribution, bulk water tariffs and water resource management.
A regional approach based on hydro-geological considerations, agro-climatic zones, cropping patterns, climatic factors, ground- and surface-water potential, ground-water quality, and levels of urbanisation and industrialisation should be the way forward.
In order to ensure sustainability of systems and water sources, appropriate cost recovery measures like user charges need to be incorporated in planning.
Similarly, in other areas such as sanitation, energy pricing and distribution, education and health services some states have evolved best practices worth replicating in other states.
The effectiveness of implementation also varies greatly from state to state, with many examples of good implementation but also examples of abject failures.
These failures can be traced to one or all of three problems: poor design, underfunding and poor implementation. In practice all three are probably present to some degree leading to poor outcomes which the states have to unlearn to ensure sustainable development.
However, in actual practice the institutional framework of Centre-State relations affords little learning opportunity. The National Development Council (NDC) is a forum to approve the overall Plan or its mid-term review.
Consultation with states is held by individual ministries, but they act in silos. If there are cross-cutting issues where replicating best practices is the way forward what is the mechanism to do so? The following suggestions for interactive learning may be useful.
First, the Planning Commission, which is the only body for Centre-State relations, should be reorganised somewhat differently. Consultative mechanism with states in six sectors could be constituted, particularly in energy, water, agriculture, education, health and urbanisation.
A path forward report based on interaction among the states and conclusions drawn from such engagements could be sent to the states to create a benchmark for best available practices.
Second, the Inter-State Council, which lies moribund, should be restructured to consider issues not only of relevance to the states but where the states can articulate their problems and what can be done to learn from each other.
Given the fact that the home minister is tied up in pressing issues of internal security, the Inter-State Council should be chaired by the prime minister and its secretariat should become part of the PMO.
Third, each of the line ministries on the aforesaid subjects should at least hold an annual conference with states and apart from discussing problems to explore commonality of solutions. In many areas model legislations based on best practices can be crafted and circulated to the states.
While the theme of learning from best practices has merits one must not over-simplify the complexities. The problems of each region and states vary enormously in terms of factor endowments, comparative advantages, governance fabric and economic strategy. These would need to be reflected in any conclusions that are hastily drawn.
Learning from best practices and using technology to replicate examples has attractions. The limitations of such learning do not destroy its basic rationale. It is a pity that India has not yet devised an institutional framework that enables us to do so.
The Planning Commission must take the lead. Other entities and institutions of the government also need fresh initiatives.
Stanford, by focusing on the states has struck the right cord in combining sensible politics and sensible economics in an era of coalition politics. Over the next few years the dominant role of states is likely to strengthen. This will encourage them to have multiplier benefits.
NK Singh is a Rajya Sabha member and a former revenue secretary.
The views expressed by the author are personal.