At the start of the period of the economic reforms, the total central budgetary outlay for centrally sponsored schemes on social sector and anti-poverty programmers was of the order of Rs 75 billion. At the start of UPA I, the prime Minister estimated it at Rs 700 billion. Now, the outlay is Rs 2,000 billion. So, over the period of economic reforms, the outlay in the central budget on social sector programmes has increased by a factor of 25. No other country has allocated so much money for social sector welfare and anti-poverty programmes in such a short period of time as India.

However, the fundamental governance challenge we face today is that while the outlays have increased, the outcomes virtually remain the same as what we obtained in 1991. There have been improvements on human development value from 1991 to date, but they are negligible in comparison with the amount of money spent on anti-poverty or social welfare programmes. There is a complete mismatch between outlays and outcomes. Therefore, delivering the government’s social sector and anti-poverty outlays to the intended beneficiaries at the grassroots constitutes the fundamental governance challenge facing the country. The government claims the direct benefit transfer (DBT) scheme as the panacea, but it’s a chimera that just by transferring money, people will get human development if the governance system at the grassroots — the Gram Panchayats and urban local bodies — is weak. The DBT cannot get rid of the human hand at one stage or the other. So, the government has to first strengthen the Panchayati Raj system and then think about getting the desired outcome.

In 1992, after the economic reforms process was launched, governance reforms through Panchayati Raj were also enacted by Parliament. The plan was to yoke economic reforms and institutional reforms together so that the chariot of progress could run on two wheels. Sadly, what has happened in the last two decades is that while the wheel of economic reforms has progressed very fast, the wheel of governance reforms, or what the Prime Minister calls institutional reforms, has either been punctured or allowed to fall apart from the chariot altogether. Increased economic growth bolstered government revenue, which in turn translated to increased government expenditure on socially inclusive and anti-poverty schemes. Ironically, result has been an ever-widening income disparities. The government obviously continues to face the problem of reaching the social sector, anti-poverty programmes to intended beneficiaries. In my view, this is primarily because institutional reforms — in other words, the empowerment of the Gram Panchayats and their urban counterparts — were simply not given the same attention as economic reforms. In fact, the attention deficit has got worse over the years.

The fundamental governance challenge we face today is that while the outlays have increased, the outcomes virtually remained the same as what we obtained in 1991. There have been improvements on human development value from 1991 to today, but they are negligible in comparison with the amount of money spent on anti-poverty or social welfare programmes

The 12th Five Year Plan has put all the responsibility on state governments to devolve funds, functions and functionaries (3Fs) to local bodies. The Plan assumed that states are neglecting their responsibilities to transfer the 3Fs to local bodies. Unfortunately, state governments by and large have not been able to devolve the 3Fs. The reason is very simple: the centrally-sponsored schemes (CSS) have created parallel bodies which in effect subvert the purpose of local bodies. The bulk of the development funds to local bodies comes through the CSS and such funds are generally transferred to registered societies which are parallel to the local bodies. Then state governments have to make their own contribution to the CSS. The structuring of the CSS through parallel bodies means that it is the central government which is principally responsible for not allowing proper devolution to take place. It is hardly worthwhile to do the kind of scientific devolution our local bodies require with the much lesser money that remains with them for implementing the state-sponsored schemes.

Therefore, we must get the central government to follow the order the Prime Minister issued through the Cabinet Secretary on 8th November 2004 that all central ministries concerned must, within two months, modify their CSS guidelines to bring them in conformity with Article 243 (g) and the Eleventh Schedule. Not a single central ministry has done that so far, even though many new schemes have been launched for flagship programmes and Bharat Nirman in the last eight years. So, the idea of scientific devolution to the Panchayati Raj Institutions (PRIs) has simply been cast aside. The one exception is the Backward Regions Grant Fund (BRGF), where after plans are prepared by each panchayat at the district level, the money is released as untied block grant and left to the panchayat system to be able to utilise it. It is regarded as such a success that the outlay for BRGF has been increased from Rs 20 billion when I was the minister to Rs 115 billion in the Union Budget 2013-14. What is the point of making district planning and implementation as sine qua non of only the BRGF, and not of other CSS?

For Fifth Schedule states, Panchayat’s Extension to Scheduled Areas (PESA) Act of 1996 was passed, but it has not been implemented on the ground. The Act was not passed with proper discussion. Almost all states have till date not drafted the rules which they were supposed to have done within one year after the legislation. Further, even in states where rules are framed, there has only been token implementation of them. Worst of all, all other state and central laws which are contrary to the provisions of PESA have not been amended. There are moral guidelines to rule-making to the states concerned. However, the political will to implement PESA in letter and spirit is lacking because it is perceived to be a stumbling block in the way of the private sector ruthlessly exploiting the natural resources in the tribal states. Let us not forget that the ruthless exploitation of natural resources is the main cause for the naxal problem. To confront the naxal issue, we have the Integrated Action Plan (IAP), which is a completely bureaucratic construct, with enough scope for corruption and mismanagement. I believe PESA can be a good instrument to fight naxalism, but it is a tragedy that the Union Home Ministry has not adequately invoked the law to defeat left-wing extremism in the country.

Resources can help social democracy penetrate into every village in India. The problem of participatory development is not just a matter of corruption but that our bureaucracy is very reluctant to allow devolution of funds to the local bodies. The political class keeps asking what will happen to it if its powers of patronage are taken away or devolved to the grassroots.