#
I had a bad dream the other night. I dreamed I was naked. Now, being naked in public is
#
a common dream people have and some might even find it pleasurable. But I wasn't in
#
public. I was in a bathroom somewhere, as the white marble tiles below me made obvious.
#
And I wasn't alone. Alongside me, I suddenly realized, were two other men in a similar
#
state of unrest. One was tall and lanky, the other was kind of stocky. I suddenly recognized
#
them. Amitabh Bachchan and Amit Shah, the other two really famous Amits in this country.
#
Mr. Bachchan was singing, Rang Barse Bhige Chunar Wali Rang Barse. While Mr. Shah was
#
looking at me rather grimly, as if it was written on my forehead that I haven't got
#
an Aadhar card yet. Suddenly, we became wet. A blast of water came at us from the left
#
side of the bathroom. And as I turned, I saw that there stood Narendra Modi, fully dressed,
#
in a pinstripe suit with my name on it, holding a gigantic garden hose. And he was spraying
#
Mr. Modi, I said alarmed. What are you doing? Oh, hello Amit, he said. And Amit, and Amit,
#
I am bathing you guys. I am personally setting an example under my new government scheme,
#
the Swachh Amit Abhiyan. All Amits in India must be cleaned. You should see the cess I
#
am charging for it. Muahaha. The Swachh Amit Abhiyan, I asked, what's that? It's a centrally
#
sponsored government scheme, the Swachh Amit Abhiyan. And after your bath, you will go
#
to school under another centrally sponsored government scheme, the Verma Shiksha Yojana,
#
where you will be taught to behave yourself. Muahahaha. Muahahaha.
#
Welcome to The Seen and the Unseen, our weekly podcast on economics, politics and behavioral
#
science. Please welcome your host, Amit Verma.
#
Welcome to The Seen and the Unseen. I am your host, Amit Verma. As you may have understood
#
from the bad dream I just told you about, I really don't like centrally sponsored government
#
schemes. But why? To discuss the unseen effects of such schemes, I have with me in the studio,
#
Prane Kottasthane, my colleague in the magazine, Pragati, and a fellow at the Takshashila Institution.
#
Prane, welcome to the show. Thanks, Amit. Good to be here again.
#
Swachh Bharat Abhiyan, Sarva Shiksha Abhiyan, Pradhan Mantri Gram Sarak Yojana. These sound
#
like such incredible schemes with golden intentions at their heart. But you have an issue with
#
centrally sponsored government schemes, like all three of these and many others are. Can
#
you first tell me and my listeners, what are centrally sponsored government schemes?
#
No, to start with Amit, good intentions never make good policy or that's not the sufficient
#
condition anyways. So yeah, let's go back to what these schemes are. So essentially
#
in the Indian federal system, you have governments at three levels. And at each of these three
#
levels, governments spend money on various services. And each of these three levels also
#
So by these three levels, you mean center, state and local governments, right?
#
So now, as it happens, the amount that these governments spend is always more than the
#
amount that they earn. And because governments are not households or companies, they can
#
still survive even though they run deficits. So what do they do to make up for this deficit?
#
One, they take debts. So you have foreign debts, you also have debts from one government
#
to the other. And the other way that governments engages by supporting some other level of
#
government. So how that happens in India is, so now we have the state government, state
#
government will get some money, which is something like a cash transfer, which is in public finance
#
literature, it is called general purpose from the central government, from the union government.
#
So that is just like, I am giving you cash, you can do whatever you want to do with it.
#
So now this type of thing is formulaic based. So it is determined by something called as
#
the finance commission, and it just comes to the state government. Now, the objective
#
of such transfer is basically you want to have comparable levels of public services
#
at comparable tax rates across across the country. So this is sort of that cash component
#
of the money which is given. The other part, and that is what the topic of today's discussion
#
is something which is called discretionary transfers. Now, these transfers are these,
#
this money is meant for specific areas. So this money is not meant for you. It's not
#
a cash transfer. Think of it as a voucher. So the central government gives these vouchers
#
to the state governments to be used on things like or things like education or roads or
#
something like that. So that is what is called a centrally sponsored scheme. So again, from
#
public finance literature, the objective of such a type of transfer is to ensure minimum
#
standards of services in these particular areas are met. So that is the idea why union
#
government would want to give this specific vouchers on these schemes. So that is about
#
centrally sponsored schemes. And states therefore have no option but to use the amount allocated
#
for say swach Bharat on swach Bharat initiatives, they can't decide that hey, locally, these
#
issues are more important and therefore we will spend on these instead. Yes, that's the
#
whole problem. So this the problem with centrally sponsored schemes is these are designed at
#
the union government level. These are funded by the union government. But the implementation
#
is left to the states. So now it's maybe the states might say, for example, Kerala might
#
say that primary education is no longer important for me because I've already hit 99% literacy
#
rate, probably I want to use the money that you're giving for something else. But because
#
you are forcing and you have this big scheme called Sarva Shaksha Abhiyaan, there are enough
#
political economy interests in Kerala, which will say let this go on and we'll keep putting
#
some money in primary education as well, though even it might not be my focus anymore.
#
India set up as a sort of a federal state where you have different states with the independent
#
budgets and they compete with each other for labor, for investment and so on and so forth.
#
And that's the intention. But over the years, that's of course been subverted and the central
#
directs more and more top down, especially back in the good old days of the Planning
#
Commission. Now with the Modi government, everyone thought that okay, he's going to
#
focus more on federalism, but the centrally sponsored schemes have just gone up. Why do
#
centrally sponsored schemes keep increasing in numbers?
#
Yeah, that's a good question. So basically, this very much comes from this idea of a planned
#
economy and that someone can direct from Delhi that how should India be governed. So one
#
main reason why these schemes have taken place is because every PM wants to give a stellar
#
speech on 15th August from the ramparts of the Red Fort announcing great new schemes.
#
What is a speech if they doesn't announce 10 new schemes, right? That doesn't make
#
cut the it's not very popular. So that's the whole idea. Why is union governments want
#
to announce a whole host of schemes? Now, earlier in around 1969, etc., when we were
#
in the plan period, still pretty much in the plan period, that was the time when the union
#
government started sort of increasing the number of schemes, which are called centrally
#
sponsored schemes. And consequently, the amount that the union government can give is depending
#
on how much tax it collects, etc. Right? So what they did is over the years, the union
#
government said that this cash component that we are giving, we'll reduce that because you
#
guys can't do much without it. Instead, what we'll do is we will tell you how to spend
#
it. We will design the schemes. And then you either have to implement them or give some
#
amount of money from your side as well to run this scheme. So this started proliferating.
#
And apart from centrally sponsored schemes, here is one more jargon. There is something
#
called a central sector scheme. So these are schemes which are run by the union government
#
itself. States doesn't come into picture like railways, for example, Air India, for example.
#
So combine these two central sector and centrally sponsored schemes, these started or started
#
taking priority and these started proliferating. And at one point of time, believe me, there
#
were around 960 such schemes. Okay. So how can you expect a government at the union level
#
with as diverse states in India that we have to run 960 schemes and that too by subverting
#
what many times should have been done by the state governments. So this started increasing.
#
And like we always have in India, there were lots of commissions and committees set up
#
to investigate this. So there is a Chaturvedi committee, there is a Sarkaria committee,
#
there is a Punchi commission. All these commissions basically said the same thing that central
#
government can't do this. You can't run so many schemes for no reason and let the state
#
governments decide what they want to do. What you need to do is there are certain critical,
#
critical areas in which you definitely need to ensure minimum standards, which I said,
#
like health, education. These are critical areas which have interstate externalities,
#
right? The impact of those are felt across India. So you would want union government
#
to fund these. But apart from that, there is no reason why union government should run
#
a host of other central sector schemes. Like you have Khelo India and there is blue revolution
#
and things like that. Absolutely no reason why union government.
#
I've never heard of the blue revolution. What is that?
#
Blue revolution is for fisheries.
#
Okay. So yeah, I mean, we often use the term mybap government for how the government relates
#
to its people. But now we see that there's a level of mybapness internally also within
#
government where central government is telling state governments, I'm your mybap boys. This
#
is your pocket money, but you got to do with it what I say. So you'd say that the unseen
#
effects essentially are that the states are not able to allocate these resources efficiently
#
because the central government, which has much less local information and incentives
#
around, you know, unaligned incentives are determining what they do with the money.
#
Yeah, that's true. Before going to the unseen effect, just one point I wanted to make is
#
that the number of schemes at least notionally are have decreased after all these commissions
#
made their recommendations. So two, three years back we had 147 of them. Then it came
#
down to 66 and currently the centrally sponsored schemes, not the central sector schemes are
#
30 in number. Now, how did they go about reducing this? It was not that the union government
#
went out of these areas. What they just did is they clubbed two or three schemes, gave
#
a new name and they said this is one mega scheme. So that rationalization was just a
#
hogwash and they, what they just did is renaming. Okay. So now we are at the current level.
#
We have 30 schemes. Now I still feel even 30 is a lot more and because the critical
#
areas that we discussed are not 30, they can do a lot lesser. Now coming back to the unseen
#
effects. Yes. The first point is the requirements across states are very, very diverse, right?
#
So what Bihar needs is very different from what Tamil Nadu need or, or what Punjab needs,
#
right? So how is it that the union government will be in a better position to determine
#
what is good for that particular state? Isn't it better that the state governments decide
#
what they should do? I would argue not even state level. We probably the local governments
#
are the best ones to determine, but we've some distance to go till we reach there.
#
So let's just say that at least state governments are in a much better position than the union
#
government. And hence you should do more cash transfers to the state governments and let
#
them determine what their priorities are. That is one thing. Another thing is a very
#
fundamental question of the constitutionalism. Now many of these schemes, which we have been
#
talking over the years actually fall in something called the state list and the concurrent list
#
in the constitution. By these two lists, I mean state lease explains what should be the
#
areas in which state governments have a priority or state governments can act that concurrent
#
list is where both union and state governments can act. Now ideally you would say union government
#
can do a lot more in the union list schemes, like defense, right? That's the, in the purview
#
of the union government. But over the years, all these centrally sponsored schemes, for
#
example, health, right? Health comes under a concurrent list, some parts here, and that
#
is still done by, there is a rastriya swasthi mission, which is trying to do things on health.
#
Education is in the purview of the state list, but again, there is a big centrally sponsored
#
scheme there. So the unseen effect of all this has been that all the areas which the
#
state government should have, which even the constitution determined that state governments
#
are better placed to do are being clearly subverted. And there is no debate on that
#
So in a sense, the constitution itself is being subverted and therefore the intentions
#
behind those specific parts of the constitution have just been thrown out of the window.
#
Exactly. So the rate of the constitution is sort of getting subverted because of this
#
and this has happened over the last 30, 40 years. So that is the problem. And one big
#
change that has happened last year, and that's why this topic is of interest is what, with
#
what the 14 finance commission did, what it actually did is it increased that cash component
#
So now state governments technically have more money at their hands. So now this is
#
the right time where you can make this argument that central government should just get out
#
of some of the big, big things that it is doing and try to do things which are much
#
more concentrated. Now here, one important data point I want to add is it's not that
#
as countries become richer, governments start spending lesser. For example, there is a very
#
strong correlation between GDP per capita and the percentage of government spending
#
in your economy. For example, US governments, all levels combined spend a lot more than
#
Indian government does. And Sweden does a lot more than US does. It's around 60% of
#
their GDP is just by the government. Can you believe it? So that is a given that will happen.
#
But the way they do is as you become richer, governments and particularly the union governments
#
start reducing the areas in which they operate and they focus on just social security, health,
#
education, for example, treatment of the elderly, etc. and put in a lot of money in there so
#
that you ensure minimum standards that are met. Now that is what we want India to get
#
And you say if you want the money to be spent more efficiently, A, you get it as local as
#
possible to the state government or even beyond to local governments, or you just get it directly
#
to individuals who, you know, who know their priorities the best.
#
Exactly. So that's where it comes. We come to universal basic income, right? Think of
#
it. We were talking about cash transfers to the state government. UBI is just an extension
#
that it is a cash transfer directly to the individual, like you said. So now that there
#
is this argument for UBI, the best way to do about this cut a lot of these centrally
#
sponsored scheme where not only is the cost of you selecting people, but employing people
#
to select these people and then give them money is a lot more. So the better argument
#
is yeah, you give them universal basic income and then let them decide what they deem is
#
But one of the logics for the UBI is that you cut off all other spending and then you
#
empower individuals by giving them the UBI. But that will never happen in India, right?
#
Spending never gets cut essentially.
#
Spending does, yeah, it's always a political economy question. There will be entrance interest.
#
It is difficult. But for example, the big three subsidies at the union government level
#
are food, fertilizer and petroleum. Now, over the last one or two years, there has been
#
a decrease in the subsidy levels of all three. So there are pathways in which you can do
#
for example, they did this give it up thing, right? I don't know how many people subscribed
#
but they did show that the subsidy which was being availed out of this did get reduced.
#
So that is the way you would have to go. And some of these things can just be done today
#
if the government decides. For example, fertilizer subsidy is not given to the farmer. It is
#
given to the company which manufactures fertilizer. Now, there is absolutely no reason why the
#
government can take it off. Of course, it will be politically unpopular, but yeah, that's
#
Why not just give the cash to the farmer and let him decide what his priorities are.
#
That is what UBI would do. So if you want to protect the farmer, why are you taking
#
such an indirect route, helping a company and then company manufacturing, absolutely
#
inefficient way of doing it.
#
So at this point, I'll take a slight digression before I ask my next question. If you go over
#
to Pragati, the magazine that both Prane and I work for at thinkpragati.com and you go
#
to the reforms 2.0 section, you'll find a piece on exactly this by Prane where he argues
#
that centrally sponsored schemes should be reduced to 10 because that's a manageable
#
number that takes care of all the core areas in which you need to ensure that stuff happens.
#
Besides that, what other immediate suggestions do you have which are immediately implementable
#
in practical terms in the context of centrally sponsored government schemes?
#
Yeah, one thing that if they don't want to reduce the number of schemes, one thing they
#
can do and the government has been talking about it is make them outcome oriented as
#
in focus a lot more on what is the outcome achieved out of this spending. And according
#
to that, you give the next tranche of money. Currently, it happens. It's just on utilization.
#
So if you are a state and you have utilized all your money, you can apply for another
#
round of money. So some states have mastered the art of utilization without bothering about
#
how much of an impact it is having. So one way to in the short term to reform the centrally
#
sponsored scheme is just to have outcome monitoring and ensure that this money is spent on what
#
it is supposed to be spent on. Prane, it was a pleasure talking to you. And before I end
#
this episode, I want to leave with specific good wishes for you. I hope one of these days
#
you get a call from the PMO and they tell you that listen, we have a new centrally sponsored
#
government scheme and we are putting you in charge. And when you ask what that scheme
#
is, they'll say it's RCGSS, Reduce Centrally Government Schemes, Abhiyan. Yes. Thanks for
#
coming on the show Prane. Thanks Amit.
#
To read more about Prane's thoughts on this, head on over to our magazine, Pragati at thinkpragati.com,
#
go to the reforms 2.0 section and search for an article by Prane titled 10 little schemes.
#
And as for all of you sick of listening to my bad dreams, fine. I'll give you a break.
#
Next week, I'm going to read out a song instead.
#
Next week on The Scene and the Unseen, Amit Varma will be talking to Madhu Menon about
#
restaurant regulations. For more, go to sceneunseen.in.
#
If you enjoyed listening to The Scene and the Unseen, check out another great show by
#
IVM podcast, Made in India, hosted by my friend May Thomas, where every week she profiles
#
up and coming independent Indian bands.
#
Good evening, ladies and gentlemen. This is your captain speaking. Sorry to say, but there's
#
been a slight delay due to the apocalypse having suddenly begun. As you can see, there's
#
death, destruction and chaos taking place all around us. But don't you worry, food and
#
drinks will be served shortly and I would recommend checking out IVM podcast to get
#
some of your favorite Indian podcasts. We'll keep you going till this whole thing blows
