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I had a bad dream the other day. I dreamed I died and went to hell. A very large demon
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with orange hair and a 56 inch chest let me in and said, go forth and suffer. I went forth
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and as soon as I entered hell, I fell into a pot hole. It was full of dirty water. I
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somehow clambered out and walked over to a roadside restaurant. It was a hot day. There
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was no electricity there. I was sweating like a pig. I asked the waiter for some water.
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He said there was no water in the taps. I got up to go. I walked out and I fell into
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a pot hole again. As I clambered out, the large demon with orange hair and a 56 inch
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chest came and stood in front of me. I asked him, what's going on man? What kind of hell
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is this? Where is the eternal fire? Where are the torture instruments? What kind of
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hell is this? He laughed and replied, this is hell 2.0. It is a new improved version.
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We based it on Indian urban governance. Mu ha ha ha ha ha ha. Mu ha ha ha ha ha.
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Welcome to the seen and the unseen. Our weekly podcast on economics, politics and behavioral
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science. Please welcome your host Amit Bhatma. Welcome to the seen and the unseen. In today's
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episode, I will explore why urban governance in India's cities is so abysmal. My guest
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for today is Shruti Rajgopalan, an economist and lawyer who teaches economics in Purchase
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College in New York. Welcome to the show Shruti. Hi Amit. Thanks for having me. Shruti, you
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were born and brought up in Delhi. Yes. And you come to Bombay very often and now of course
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you live in New York. Yes. So every time you visit India, as you are now, thankfully you
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are in Mumbai right now at my studio, what is your impression of Delhi and Mumbai? How
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have these cities changed over the years? So one, the cities have really grown. Both
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Delhi and Mumbai are now the greater Delhi area and the greater Mumbai area. So they
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have sort of spread both in a geographical area and size and also in terms of how many
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people live there. The other thing is I find that people are actually richer. So people
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in Delhi per capita seem to have more cars, more goods and services. So there are some
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things where there's a very clear marked improvement. But if you ask about the city infrastructure,
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even though it seems that there is a lot of construction and the government always seems
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to be building some metro or monorail or flyover or something like that, the infrastructure
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hasn't kept up with the demand for that infrastructure. It's always lagging behind. And even before
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a road is built, it is congested. So it's clearly not built keeping in mind excess capacity
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for how the city will look three, you know, three years from now, 30 years from now, 300
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years from now. It's always reactive. You're chasing the demand. Exactly. So that's one
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part of it. While I say that the infrastructure, there's some work going on and it's improved
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and it hasn't kept up. I actually find a lot of other services much worse. I feel like
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garbage collection is worse than it used to be. Even though Delhi has built so many new
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roads and I'm guessing it must be similar for Bombay. They just seem to forget to build
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things like sidewalks and stormwater drains or pedestrian walkways. There's nowhere for
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a regular person to walk or for a bus to stop and for regular folks to get on. So all the
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activity just spills onto the streets and causes more congestion. So there clearly seems
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to be some kind of a service delivery problem either because the city governors or those
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responsible don't really understand what people need or because there's no reason to provide
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it and it's just easier to build a flyover than to build public facilities and toilets
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and you know, things like that. And our urban governance has been shoddy for so long that
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we almost take it for granted. Like just before we started recording, Josh our producer was
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talking about how someone asked him the other day that you know the trains in Bombay have
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no doors really and that's just something we take for granted. We don't think twice
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about it but the fact is around nine people die every day on Bombay's locals and it's
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just a throwaway statistic as if it doesn't matter at all. And all through these years
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urban governance has never really improved even though India's focus should really be
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on the cities. I mean, one-third of India already lives in cities which is a number
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which is going to grow by 2050 as you pointed out in your recent paper. Seventy percent
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of the world will live in cities which is natural because people gravitate to cities
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from poorer areas because there are greater economic networks therefore more opportunities,
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more productivity, a better life, you know people might idealize the rural life but very
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seldom do people travel in the other direction. It's always migration to cities. So you would
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imagine with so much of an inward movement into cities that there is also pressure from
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the people to the government to deliver good urban governance. What are the reasons it
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is not happening? So let me unpack the big questions into a few smaller bits. So first
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you're absolutely right. The cities is where the future is. It's already happening now.
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We are in the midst of the greatest migration in human history except that that greatest
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migration is happening within borders of nations. So it's already started and it's accelerated
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in China and it's happening in India. So by 2030, 600 million people in India will live
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in cities. Right now the number is just a little over 350 million. So either the number
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of cities need to double or our cities need to grow twice in size to accommodate these
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people and everything that they have to offer. The second part of it as you rightly pointed
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out is that these cities are also going to be the drivers of economic growth and productivity.
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So I've always held the belief that people are not poor. It's just people are trapped
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in low productivity and poor areas. The exact same worker who is trapped in a low productivity
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area in the village comes to the city, finds work and his wages immediately double or triple
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or quadruple. Right? And that's the reason to come to cities. So the great migration
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in total is an excellent thing for India and for Indians to get out of this sort of poverty
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trap. Now having said that, this also puts a lot of stress on urban governance and people
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who are migrating may not be, it may not be their top priority to demand urban governance.
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They sort of just showed up in a city like Mumbai and they're just trying to make a living.
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If making a living involves taking a train, which is almost a death wish to get to work
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and get back, that's what they do because that's what they need to do to get to work
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on time. Right? They have fewer choices. People who are already settled and entrenched in
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cities such as you've been living in Bombay for a long time.
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You become apathetic to all this.
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So technically you are the people who are more likely to demand better governance and
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some of that does happen. But as you said, a lot of apathy and you just get used to it
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and more importantly, all of us have found our own jugards. Right? So if the garbage
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collection provided by the state doesn't work very well, the resident society or association
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figures out a way to have some kind of garbage association and collects a small fee for it.
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I see this happening in all sorts of suburbs all over the place. So between these two things,
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because people do have to get on with their life, right? Everything can't be a big protest
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over everyday issues. I think that's sort of the trap that's going on in terms of the
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The other part of it is there is something a little messed up going on structurally in
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terms of how we have set up urban local bodies or municipalities, which are actually supposed
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to be responsible for city governance. We have created these urban local bodies through
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a constitutional amendment in the mid nineties. Having said that, we democratized it. We created
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an entire layer of elected officials and also staffed bureaucrats to help those officials,
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but we gave them no authority and we gave them no revenue raising ability, which basically
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means we have an entire new layer of government, which is essentially toothless. And this is
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the most important layer of government in my mind when it comes to delivering services
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to people, especially if most of the people in the country are eventually going to live
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in cities. So I think that structural problem that we have in the Indian federal system
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is what needs to be addressed, because even though Delhi's problems might be stormwater
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drains and Mumbai's problems might be roads and Surat's might be garbage collection or
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something else, it's actually the same problem structurally. It's the governance delivery
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mechanism which is broken.
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So let me go through that again. Now, typically people who believe in governance would say
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local government is a great thing, especially if there's democracy, because your leaders
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are accountable to you. You elect your local corporators, counselors, whoever, and you
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hold them accountable. If they don't deliver, if they don't collect the garbage, if they
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don't clear up the potholes outside, then you vote them out. But where you are saying
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the system is broken is that, yes, you want them in and out, but they are powerless because
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they can't, A, they don't raise their own funds and B, often they don't have the power
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to actually affect the kind of change which you elect them to do. So how does the system
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Okay. So India is a federal country or when we used to be young and we had these civics
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textbooks, it used to have this throwaway line. India is a federal nation with a unitary
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bias, which I never knew what it meant until I grew older. And now I realize it means that
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in India is not federal. It just has a lot of states. But the way the Indian federation
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was set up was there was a far greater level of centralization than say many other federal
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countries like the United States. Now, the way the Indian federation was set up was while
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you have state elections and local elections and so on, it is not fiscally federal, right?
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This means that there was a body that was created when the constitution was adopted
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called the Finance Commission. The revenue that was collected all over the country would
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be centralized and then the Finance Commission would determine how much of that revenue needs
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to go back to which state and which area. This basically means that the link between
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where the revenue is collected and where the expenditure is made is broken, which is normally
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not the case with local government. Now note that when the Indian constitution was adopted,
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there was no such thing as an urban local government, constitutionally. There was no
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provision for local governments. The simple assumption was state governments will take
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care of it. Like why wouldn't they? And every state is different. Some of them are more
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rural. Some of them are more urban.
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So the assumption was the states would have these local arms. As a voter, your voice really
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is to elect your chief minister.
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Exactly. Then through the decades, they figured out that this kind of centralization is really
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hurting local governance, most importantly, the villages. So there was a huge push to
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have local level institutions. This was a fairly revolutionary move at the time and
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even today. So this happened through the 73rd amendment, which set up Panchayatiraj institutions
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in rural areas and the 74th amendment, which set up ULBs or urban local bodies in urban
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Now what the 73rd and the 74th amendment did, if you actually look at the text of these
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amendments, it sets up in detail what that government structure would look like. How
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will these people be elected? How many of those seats will be reserved versus general
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seats? How many of the different categories you will have? How many women? Once you elect
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them, there is a long list of responsibilities. So the way you have the seventh schedule,
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which gives you the union, state and concurrent list, which determines what the central government
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and the state governments can legislate upon, there was something introduced called the
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twelfth schedule, which had details of all the areas such as town planning, garbage collection,
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all the things that local governments must take care of. So all this was very clearly
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drafted and specified. Having said that, there was one crucial problem with the 73rd and
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the 74th amendment. The way you have a central finance commission, which splits the money
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between the central government and various states, they enabled an entire new set of
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finance commissions called the state finance commission. So Maharashtra will have one,
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Gujarat will have one. And these finance commissions only have recommending power. They don't have
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any authority to execute their recommendations. So they recommend to the state legislature
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how much of the revenue will be split between the state government and the local governments.
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In this case, they are Panchayati Raj institutions and urban local bodies. Now, despite repeated
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recommendations by various state finance commissions, the amount or the percentage of the revenue,
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which is actually devolved to the lowest level of government is very small. That's one. The
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second issue is it's extremely arbitrary and not consistent. So some of the governments
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actually devolve a fair bit. Sometimes they'll do it as a one time thing because of the push
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from the central government or something like that. And then the next year it won't happen
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or it stops. So if you just think about the way fiscal theory works, you can raise your
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own money by actually collecting taxes. You can raise it through bonds or by the state
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issuing bonds and going into debt, or you can get it through intergovernmental transfer,
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which is what the finance commission does. It gives money from the center to the states.
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It transfers money between states. State finance commissions give money from state to local
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government. The theory suggests, and this is played out empirically everywhere, that
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the less you rely on intergovernmental transfers, the better it is. Simply because intergovernmental
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transfers break the link between the citizen and the people who are governing those citizens.
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So let me give you an example. Now, let's say that the residents of Khar, where we are
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recording this, actually want sidewalks to be built and want better garbage collection.
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Those are their top two demands. And you have some kind of a municipal authority and someone
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from Khar is a representative there. Now, he is elected by these people. He will take
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all the demands to the powers that be. Now, since he doesn't control his own purse strings
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and he has no revenue raising authority, he finally needs to please some bureaucrat in
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the government of Maharashtra to allot those funds. So now, let's say the bureaucrat wants
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a flyover named after Ambedkar. And that's his preference. Remember, initially we started
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out with the citizen's preference was garbage collection and building of sidewalks. Now,
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whose preference should he cater to? The representative from Khar. The people who voted for him want
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one thing and the person who's going to give him the money wants something completely different.
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So one is, he has all this responsibility and he can be removed in the next election
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so on, but he doesn't have much power. He needs to finally bow down before someone else.
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And that someone else is not the voters or the taxpayers. Second is, all these fine residents
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of Khar are actually paying taxes. And they think that their taxes should fetch them
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all these local services, but their taxes actually go towards building the Ambedkar
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flyover in Malad instead of Khar. Why? Because the bureaucrat or the legislator in Maharashtra
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wanted an Ambedkar flyover in Malad. So that's exactly what ends up happening. You have extremely
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disgruntled voters. You have extremely disgruntled taxpayers. All that money is being spent.
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And yet the actual connection between our demand for a specific service and the supply
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of that specific service is broken. So let me unpack it for a moment from the
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perspective of incentives. Ideally, if you had an accountable local government, you'd
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have a corporator who has a budget, he needs to do whatever and his incentives are to please
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the people who elected him and to give them what they want, which in this case is a sidewalk
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and the garbage collection. However, that is not his incentive because he doesn't hold
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the purse strings. His incentive is to please the bureaucrat or the legislator. The bureaucrats
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incentives will be something different entirely. It might be to build a flyover in Malad where
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he gets kickbacks from the contractor and so on and so forth. All the incentives are
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messed up simply because of, because of fiscal purse strings are not where they should be.
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Absolutely. I think it's a very, very important principle of governance, which we never really
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appreciated much in India and it seems to be completely lost now that there needs to
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be democratic accountability and also fiscal accountability. India is a very, very staunchly
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democratic country at every level of governance. Like you actually see people showing up to
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elect representatives at local elections and Panchayat-e-Raj elections. So we're very democratically
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inclined Indians like to vote. They like to protest. They like to register their voice.
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And we do have an involved citizenry. You should look at the people in my society.
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Yes. So you have a very involved citizenry. Having said that, given that it's not a fiscally
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devolved state or we seem to have lost the concept of fiscal accountability and all the
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fiscal governance is completely centralized in New Delhi or in the state capital of every
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state and it's not being further devolved to the people, the link between the voice,
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which represents it democratically in the voting booth and the actual payment that accompanies
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it in local taxes is completely broken. So that is one very big part of the problem.
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The other very big part of the problem is this kind of heavy reliance on intergovernmental
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transfers. So what happens right now? I see a lot of disgruntled people in Mumbai whose
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taxes are going to be spent on loan waivers in UP, right? This is a typical intergovernmental
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transfer problem. So the money that is raised in Mumbai that even within the current system
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should technically go to the coffers of Maharashtra government and then come back to the people
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of Maharashtra, even if not just Mumbai, now actually goes away centrally to a different
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pool and then goes to other states which don't have the same revenue raising capacity as
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Mumbai because they're not as productive in terms of urban areas as Mumbai is and it goes
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to loan waivers in UP. So this is the other reason for being disgruntled. We have people
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paying taxes and we have people registering their voices.
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So you could say no wonder people want to evade taxes and don't take the responsibility
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seriously because they're like, look, I'm not getting bang for my buck.
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Exactly. So that's the unintended consequence of this. On the face of it, it looks like
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we live in a regular democracy and a regular federal nation and there's local governance.
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But actually when you unpack the structure of it, we do live in a democracy, but we have
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no federalism because all federalism needs to be backed by fiscal federalism. So if you
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give the power and the responsibility to various layers of government and finally you don't
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change, devolve the revenue raising capacity, that kind of federalism is absolutely meaningless.
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The essential thing here is that the power and the responsibility should be with the
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same person. And here you have the local corporator you elect having the responsibility, but the
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power being with someone else who is not accountable in any way.
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So let me just tweak what you said a little bit. In a country that's both democratic and
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fiscally federal, the power is always with the people. It's not with the corporator or
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the legislator. So they have the power to either vote you out or to protest when taxes
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are raised to claim loan waivers somewhere else. So if you keep raising taxes without
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giving the residents of car their garbage disposal and storm water drains and sidewalk,
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then they'll stop voting for you and they'll protest any kind of tax increase. And that
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is what is broken in India. So just to put this in perspective, since you asked about
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governance, my parents moved to Noida to a beautiful condo association. That condo association
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has incredible politics, which is fascinating for me to watch. Every decision on the maintenance
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of the generator, should we put a new water filtering unit? Should we have speed breakers
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in front of every individual building within the larger complex? Because there are kids
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that come back from school and you don't want cars driving fast. Every decision is vigorously
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debated with a lot of high emotion when you go to the association meetings. And you think
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about it and you're like, why isn't all this emotion seen anywhere else? It's because they
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know that their voice will be heard and they pay maintenance fees and they want to get
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bang for their buck. And whoever is the local elected representative is their neighbor.
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He'll have no choice but to hear them and to execute the wishes of the larger group
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This energy would be wasted anywhere else except within the larger complex.
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Exactly. So now if I think about it, there are about, I believe, 3000 flats and you know,
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a little over 10,000 residents in that particular condo association. And it has a lot of small
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and big governance problems. I mean, it maintains its own parks, it has its own roads, it has
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its own parking garage, it has its own power backup unit. So it's not really running a
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city, but it's like running a tiny neighborhood, a microcosm of a city. And so the problems
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are the same at a smaller scale. And because it is more local and the people who are voting
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are also paying maintenance fee for the condo association, which is a sort of tax equivalent
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in this case, they are able to demand their service delivery. And when I see that in action,
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so my recommendation is not that we should move everything to condo associations. That's
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not where I'm going with this. My, the insight I would take from this example is simply that
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you need to make both the voice and the tax paying or the revenue raising ability to be
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aligned in purpose and between the same groups of people for the whole system to work.
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Right. So my next obvious follow up question then is that what are the changes we need
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to see, which I presume are just, you know, getting the fiscal reins into the hands of
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whoever you elect locally and how likely are they to happen? What are the interest groups
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against that? And you know, what is the process?
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Okay. So, you know, structurally the system that we have in India is such that no one
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is mandating that you need to devolve more revenue downstream. Having said that, there
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is nothing in the system that prevents any government from doing so. It is possible tomorrow
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for the parliament to say that the finance commission is going to only leave 10% to the
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center and 90% to the States. There's nothing that stops them from legislating on that.
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Similarly, there's nothing that stops the streets from legislating that we will have
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30% with the state government and 70% with the local government. So it's a question of
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devolution. It's not mandated. Who appoints the finance commission?
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Who appoints it? It's a constitutional body. Okay. Right. And they are, they only have
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recommendatory power. They don't have any power to execute. I remember the central finance
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commission. So who appoints it? I'm trying to figure out their incentives,
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Oh, think of them as high level bureaucrats and technocrats. So it's not an elected body.
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It's usually filled with experts. And of course, every government has, you know, a few favored
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people that they believe have the right voice and so on. And they look for them. Having
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said that the finance commission is actually an excellent body in that they invite a lot
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of recommendations from various interests, state, city, local, they write a detailed
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finance commission report. So, you know, you have, you can go online and have access from
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the first to the most recent finance commission reports. So it's actually an excellent body.
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So we don't have the typical like corrupt politician, bureaucrat kind of problem with
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them. The problem is everything that they recommend is typically not heard. So every
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time the finance commission has said, we need greater devolution of revenues and resources,
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we in the legislature has any incentive to follow that. So that is really the problem.
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Exactly. And just to just to like come to the Maharashtra level, I often hear people
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complaining about how so much tax is generated in Mumbai for the state, most of them are,
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but it goes out into the rural areas, because that's where the legislators votes comes from.
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And so that's natural. Those are the incentives that play and that is what they will do. Exactly.
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So here, I think the problem is more the incentives of the legislature, right? So this problem,
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some people will believe will get very quickly resolved because the largest number of people
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are going to live in urban areas. So very soon this problem ought to solve itself. Having
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said that we are in the midst of the greatest migration, most people don't live where they
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register to vote while they're moving from rural to urban areas. It's not like you and
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me who've lived in the same place for 10 years and so on and so forth. So it's difficult
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for them to come to a new place and find, I mean, most people in Mumbai don't even have
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a address. You know, the migrants, they just come and they have friends and family and
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some social networks that they stay with for a little while and then figure out their own
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housing situation. So the migrants, even though they're increasing in number, they are not
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going to be the ones who register as increasing in number of votes. So that is something that
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we need to keep in mind. So that's a force which will eventually even out. But why we're
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in the process of urbanization, I don't see more people coming to the cities necessarily
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translating as more votes. So that's one. I think the revenue raising ability of cities
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is only going to grow. Having said that, while the cities do raise a lot of revenue, we need
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to figure out a way by which the cities get to spend that revenue within. So right now
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we have some interesting data. So you have three kinds of urban local bodies. So you
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have municipal corporations, which are the largest, you know, something like the BMC
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or the Delhi Municipal Corporation, so on. Then you have municipalities, which are the
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next level, they're smaller. And then you have Nagar Panchayat, which is like the really
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small semi urban sort of areas. Now, this is an interesting detail. Think about your
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own sources of revenue and other sources of revenue. So your own sources of revenue is
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what you raised through property and local taxes. Other sources of revenue is what you
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get through intergovernmental transfers. The debt raising ability of most urban local governments
#
is very small. So we'll leave that out of it for the moment. So if you're a large municipal
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corporation like the BMC and the Delhi government, Delhi municipality, you have, which is I think
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the MCD, you raise almost 65 to 70% of your own revenue. If you are a municipality, which
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is the next smaller local urban local government, it's about between 25 to 30%. And if you're
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a Nagar Panchayat, you are raising only about 20% of your own revenue. So now just think
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about these numbers. If you're raising only 20% of your revenue from your constituents
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or your taxpayers, and hopefully they're the same or they should be the same, then 80%
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has to come from somewhere else. That is either a central government bureaucrat or a state
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government bureaucrat. So 80% of the spend is determined by somebody else and only 20%
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is determined by the residents who actually voted for you. This creates the big mismatch.
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So now what I see in the future is a small Nagar Panchayat, which organically should
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eventually grow into a municipality and eventually into a large municipal corporation, is never
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going to be able to do so unless the intergovernmental transfer system supports it. And right now
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where is the incentive for the powers that be at the center and state to say, I'm going
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to give a disproportionately large amount of money to a very small city, hoping that
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it will become a very big city. That incentive absolutely doesn't exist. So what happens?
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More money goes to established cities. There is no money spent on creating new urban capacity
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and there is no money or no effort spent on increasing local revenue. The other part of
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this is urban local bodies actually don't end up spending all the money that they raise.
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And when you actually, I haven't done so myself, but there are other people who've written
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papers and surveyed all these local corporators and so on. And they ask them, you have all
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this money, why haven't you spent it? And they say, we don't have any idea on whether
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this source of revenue is reliable. We got some one-time money from the state government.
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We got some one-time money from the federal government and we don't know if it will come
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again in the future. So we can't start a big infrastructure or a governance project. So
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we just let the money sit, right? Which is a very sensible thing to do because if you
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start doing something and you can't finish it, it's highly visible and the voters will
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vote you out. If you just don't do anything and the state of affairs is as they were yesterday
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and no promises were made and no promises were broken, you are less likely to get booted
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out. And people continue with their inertia and apathy. Exactly. So this is sort of the
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way the current system works at the moment. So for a moment, contrast the state of Bombay
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and Delhi, which had the same structural deficiency that you just described with the city where
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you now live, New York. How is it different? I don't have the exact data for New York City
#
off the top of my head. So first things first, the United States is far more federal and
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far more fiscally federal than the Indian Republic ever was or ever intended to be.
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So there is a really big difference in the constitutional setup of these two countries.
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So the states were always supposed to be responsible for all state and local issues and the federal
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government was only supposed to be responsible for defense and foreign affairs and so on.
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That's how the original United States Constitution was set up. Now, every state like the Indian
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system is supposed to devolve power to urban local bodies. The difference is that that
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happened in America and it didn't happen in India. The second thing is urban local bodies
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came as an afterthought in India. In America, it was the reverse. Immigrants went and settled
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in small clusters. Those clusters formed small local governments and then those local governments
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became aligned or got absorbed into some kind of a system within that state government.
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So the process was bottom up almost in the United States, at least in the initial period,
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as opposed to India, where it was completely top down, where we disconnected what happened
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during the colonial times and said, we will reboot in 1950 with this new system. And the
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new system had no mention of urban local governments or rural local governments.
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In fact, even now, the kind of reforms that you're saying you'd like to see are again
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fundamentally reforms that will come top down itself. Yes. And that's sort of what worries
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me. How realistic is it then to expect that given the incentives of the so there are two
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ways to think about this. Now, one way is we actually mandate that the revenue that
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is raised locally stays local. We change the rules. Yes, we change the rules of the game.
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We say that there are certain taxes which are reserved for local bodies. Those taxes
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can only be imposed locally and the money will stay with the urban local government
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or the rural local government. And that's one way to do it. Now, if you think about
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it, who votes on constitutional amendments, parliamentarians, right? These kinds of constitutional
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amendments need to be ratified by half the number of states. So the other people who
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will vote on this is the state legislators. Both have no incentives of cutting off the
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cutting off. Yes, exactly. So it's almost like killing the goose that gives the golden
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egg, right? So the only hope really is that cities grow more and more populated and then
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the demand side takes care of it. So that is the other way of thinking about. So right
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now, I don't think there is any incentive among legislators to actually devolve more.
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Now there are a few things that can happen. Now, even though institutions and rules of
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the game are really important, individuals are also really important. I think it's a
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great move in India that the chief minister of a state after a very long time became the
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prime minister of a country, right? I think he had a vast experience as chief minister
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to really understand how we need to be a more federal nation. Now, whether Modi has made
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India more federal or not is debatable, but a lot of his rhetoric talked about competitive
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federalism and, you know, devolving greater power to the states, so on and so forth. And
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it must be said that during Modi's time, the finance commission's recommendations
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have actually been taken and greater proportion of the central finances have been devolved
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to the states more so than ever before in any government. So there is some move made
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by some individuals who strongly believe in federalism. And I don't think we should underestimate
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that push because once a push goes in that direction, then, you know, it may continue
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to gain momentum and go in that direction, whether or not this government lives to see
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I mean, the default state of all systems in a sense is inertia. So any push can go a long
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way. Exactly. Exactly. And I think this this push will continue further. So right now,
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I think Modi government devolved an additional 12 to 16 percent, I don't remember the numbers
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off the top of my head, to the states than the governments before. And maybe that trend
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will continue. And that would be great. So I would not underestimate a really strong
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and charismatic chief minister of any state attempting to devolve greater funds to the
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local governments, right, to urban local and rural local governments, especially urban
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local governments, because that's where a vast majority of the population is going to
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be. But I don't see why any of this shouldn't apply to rural local governments. Their problems
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are different. They might need irrigation systems and they might need better health
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I mean, that's what their problems are. So they should be the ones to decide. Exactly.
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So this applies for both urban and rural areas. So one is I would not underestimate the the
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importance of individuals in key positions who make such a move. So that would be number
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one. The other is I think eventually when the urbanization process sort of starts to
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plateau and a large population already lives in urban areas, you have to eventually see
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that push come bottom up. Right. The third way of thinking about this is we've already
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privatized a lot of public goods services. Right. A lot of if you go to certain neighborhoods
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in Delhi, they get private water tankers, rich and poor neighborhoods. There are a lot
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of neighborhoods where garbage collection is now completely private because the municipal
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governments just stop bothering to collect garbage. Exactly. Once you dump garbage in
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the municipal dump, it's actually rack pickers who separate the garbage also privately. Right.
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They do it so that they can collect the plastic and the recyclables and make money off of
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it. So I would also not underestimate the importance of private enterprise to help solve
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a lot of quasi public good issues. Now, the trouble with this is you end up paying taxes
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and then you again end up paying the maintenance fee for a condo or for garbage collection
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or whatever it is. And so far Indians are doing it because these services are so incredibly
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important that even the poorest of people end up paying money for better sewage systems
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or garbage collection systems, even in slums. They don't have a choice. I mean, just to
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put it harshly, the government is basically a parasite if not a service provider. So they
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have to get the service provided from elsewhere. Exactly. And you see this in a lot of slums
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in Bombay and in other big cities or other emerging cities that there is a completely
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different political economy of slum governance and a lot of it is government and public,
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but a lot of it is also privately funded. And there is a local dada or a slum leader
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who collects the money and actually ends up delivering the service. So this is already
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happening. The problem is when you pay twice as much tax, you lose a lot in productivity.
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So that's a problem. The other is you have a lot of disgruntled citizens who feel like
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the state is oppressing them and they are not getting their bank for the buck.
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Correctly so. Yeah, absolutely. So let me try to sum up everything we've discussed so
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far. The reason our cities are in such a bad state is because we need genuine fiscal federalism.
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Even though we do have local governments in a nominal sense, those elected representatives
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can't really be held accountable because they don't have the power. The money comes from
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elsewhere. And to fix fiscal federalism, you basically see three rays of hope. One is enlightened
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individuals at the top who push these reforms through and make sure more and more money
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is devolved to the states. Second is as more and more people move to cities, a bottom up
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demand side led movement for change. And the third is private individuals just doing jogar
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and managing for themselves and essentially organizing themselves to do what the government
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has failed to provide them. Absolutely. So you can either reform government
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or you can make it irrelevant. So we don't know where the push will be, whether we will
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end up reforming government or making it irrelevant. But it has to be one of those two choices.
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Otherwise, you will just see vast heaps of garbage everywhere.
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Shruti, on that delightful note, thank you for coming on the show.
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Thank you for having me. If you enjoyed the show, do follow Shruti on
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Twitter at S Raj Gopalan. You can also follow me at Amit Verma, A-M-I-T-V-A-R-M-A. You
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can stay in touch with my published writing at India Uncut on IndiaUncut.com and check
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out the online magazine I edit, Pragati, at ThinkPragati.com. If you want to listen to
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the archival episodes of The Scene and the Unseen and what better use could there be
#
of your time, go over to sceneunseen.in. If you enjoyed listening to The Scene and the
#
Unseen, check out another hit show from Indusworks Media Networks, Cyrus Says, which is hosted
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by my old colleague from MTV, Cyrus Brocha. You can download it on any podcasting network.
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Good evening, ladies and gentlemen. This is your captain speaking. Sorry to say, but there's
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been a slight delay due to the apocalypse having suddenly begun. As you can see, there's
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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 Podcasts to get
#
some of your favorite Indian podcasts. We'll keep you going till this whole thing blows
