The Central and state governments have accumulated too much administrative power and this power must be dispersed to lower levels of government, the Panchayti Raj institutions (PRI) and Nagar Palikas (NPs). This requires further changes in the PRI and NP & municipal acts. The principle of subsidiarity must be applied so that all functions that are best carried out at the lowest level are devolved to them, and a similar allocation is done to the next higher level and so on up the ladder. In particular responsibility for provision of local public goods (drinking water, primary school, PHC, irrigation water distribution, local roads) must be devolved to PRIs & NPs along with the power over local taxes and any additional funds required. This is, however, only the first step. These PRIs must also be made accountable to the local public, so that powerful caste and other sub-groups do not hijack them.
1. User Groups
One way to ensure accountability for provision of particular services is to require the setting up of specialised user groups for monitoring the availability and quality of specific services. Thus for instance a user group that includes parents & grand parents of school going children along with the teacher would have a much greater incentive to ensure proper functioning of the local primary school. The user groups for Primary health centres must have majority representation from senior citizens, potential mothers and mothers of pre-school age children, and disabled/ infirm/chronically sick or their close relatives. Similarly an oversight group for a ‘food for work program’ must have adequate representation of the landless and marginal farmers and a water distribution user group must have adequate representation of farmers.
2. Non-governmental Organizations
The government must also actively support and strengthen self-help groups and civic groups doing social work (NPOs). The existence of NGO entrepreneurs siphoning off funds for personal use cannot be used to discredit the entire movement, just as the existence of numerous charlatans who have made religion into a virtual industry does not discredit all religious figures. Vested interests, whether bureaucratic or political, will inevitably make such charges and demands to preserve their own rents.
The inter-state co-operative law as well as the co-operative laws of States must be modernized to exclude ad hoc intervention by government and increase their autonomy & accountability to members. Any over sight by government must be through transparent institutions such as an independent professional regulator, who can ensure professional management of co-operatives and accurate audited accounts.
There are three sectors of the market economy that clearly need regulatory systems for over seeing private (or government) provision and supply. These are infrastructure service segments that have ‘natural monopoly’, the financial sector because of its fiduciary responsibility and two social sectors (education & health) because of potentially large and irreversible human consequences. The modern approach to regulation is to ensure availability of information, transparency and detection & punishment of fraud, lying in the grey area between outright illegality and bad luck.
Honest, professional suppliers of these services therefore welcome and support such regulation, making them the first line of administration through self-regulatory organizations. Given the deterioration in Governance in the private sector itself, though for different reasons than in the Public sector (e.g. the low probability of detection, prosecution and punishment for breaking the law), this cannot be taken for granted. Though regulation can never substitute for a deteriorated police-legal system, there is a need for a quantum jump in the quality of regulation in the financial sector (e.g. co-operative banks, NBFCs, Chit funds). Development of Regulatory institutions to meet such grave challenges will inevitably take time. It follows that privatization of Public sector banks must be done in a gradual manner (i.e. “with all deliberate speed”). It also follows that entry of foreign banks that have a much stronger culture of corporate governance than old private banks, will be an asset to the financial system and the economy.
There are several reasons for removing the regulatory functions from government proper and putting them in a separate organization. First, the generalist government has neither the expertise nor the professionalism needed to do a good job of regulation. A professional organization staffed with adequate specialized skills and knowledge is essential for efficient regulation and this is best created within a separate autonomous and independent organization. Second, such an organization can be better insulated from the day-to-day pulls and pressures of democratic politics as has been demonstrated in the case of the RBI. Third, it allows government to act as a higher court of oversight in that it is available to act in the (hopefully) rare situation in which the regulator is tempted to extract rents.
Even if the government restricts itself to its basic functions, the civil service will still be needed to perform these functions. One view is that the service is too politicized to even perform these functions effectively, unless its autonomy is restored to levels that prevailed during the first few decades of independence. This requires the process of selection, appointment, posting and promotion to be distanced from politics and made relatively autonomous. Another view is that once the government sheds all the lucrative rent generating functions that it has accumulated over the years, it will become less attractive to those who view politics and government as a (privately/ personally) profitable business or occupation. The extreme forms of deterioration can then be controlled through the creation of countervailing power and new checks and balances. Though efforts must be made to reform the system as proposed in the first viewpoint, in our judgement these are either unlikely to take place or will be effectively undermined by the system. These efforts must therefore be focused on the most critical area, namely the police. For the rest of the bureaucratic system it would be more pragmatic to take the latter viewpoint as the working hypothesis.
There is an urgent need to strengthen the checks and balances in the political system. Though the framers of our constitution paid a lot of attention to the potential for corruption in the bureaucracy, they made the fatal mistake of assuming that all future elected representatives would incorruptible and self less like those who fought for independence. They could not imagine that the judiciary could also be corrupted.
There is an urgent need for electoral reform to reduce the currently overwhelming incentive for corruption. If the Neta-criminal nexus is not broken a time will come in the not too distant future when it will become virtually impossible to stop the criminalization of the entire police force. In our view the minimal elements of a solution are, (a) State funding of elections through a matching funds approach. (b) Freedom to companies to donate funds subject to shareholder approval. (c) Transparent accounting and mandatory auditing of the accounts of political parties that receive State or company funds. (d) Mandatory bar to running for any political office by any one against whom criminal charges have been legally framed, (e) Special courts to try politicians/potential candidates against whom such charges have been framed so that those who are the object of motivated/false charges can be tried and cleared quickly.
The police force has over time become an important instrument of political power. The police are therefore no longer an independent instrument for enforcing and upholding the rule of law and for providing personal security to all its citizens. The misuse of police by the political masters for personal ends as well as the use by the police of state power vested in them, for their own personal ends, is not merely a theoretical possibility but a frightening reality. This enormous power of the police to do harm must be checked before it becomes uncontrollable.
A number of commissions from the Dharam Vira commission to the Law Commission have suggested the creation of a buffer between the political bosses and the day-to-day operation of the police. One approach is to set up an autonomous police commission in each state along with open and transparent process for appointing the senior officers of the commission. There is also need for an independent public prosecutor whose job is to take cognizance of, oversee investigation of and prosecute major crimes (e.g. murder, armed robbery/dacoity, kidnapping, rape, police crimes). To ensure accountability to the public, which has become the object of police harassment, each police commission & public prosecutor would be accountable to an oversight committee of representatives from all walks of life (including the administration & judiciary). This would ensure that the police themselves obey the law and the law-breakers among them are given exemplary punishment.
A free media has a vital role to play in checking the abuse of power by the State. One of the less remarked benefits of economic liberalization during the nineties has been the flowering and expansion of the media. Even traditional media such as newspapers and magazines have been galvanized by the entry of new private TV and other media. A responsible and responsive media can be an invaluable protector of the rule of law and the civil rights of its citizens. Our media has demonstrated over the past decade that it can do so while taking due care to guard the national interest against hostile foreign nations and the terrorists sponsored by them. This role can be further strengthened by further decontrol and strengthening of self-regulatory media organizations.
Extract from, "A New Development Paradigm: Employment, Entitlement and Empowerment," Economic and Political Weekly, Vol. XXXVII No. 22, June 1-7, 2002, pp. 2145-2154. [ NewParadigm4nf ]
 A few states such as Andhra Pradesh have already reformed their law.
 This approach contrasts with the control approach that assumes that the policy maker or administrator knows exactly what the producer should or should not do in the interest of some higher purpose.
 Penalties could also be prescribed against those who wilfully make false charges.