With Gujarat Chief Minister Narendra Modi being annointed as the BJP's candidate for the Prime Minister's position in the forthcoming elections 2014, attention will increasingly shift towards the Gujarat model of economic and social progress. Govindraj Ethiraj speaks with Bibek Debroy, author of the book, Gujarat: Governance For Growth & Development, on what this model means as a way to extrapolate the Modi blueprint on the challenges faced by India at the State, were he to become Prime Minister. Or for that matter, what are the key takeaways from good governance across states in general which could be applied at the federal level ? More importantly, can these lessons be applied ? Or are they fundamentally different ? A conversation & Primer to understanding this interesting and evolving equation. Govind: There have been some very interesting developments; Narendra Modi being anointed as the BJP’s candidate for the Prime Minister’s position. This is going to raise or increase the focus on the state of Gujarat of which he has been CM for several terms. The question is can a model that has been successful in the state, be replicated at a national level. To what extent should one look at the social indicators against the economic indicators to form a judgment on whether or not the same thing can be delivered at the central level. Let me introduce our guest. It is Bibek Debroy, economist and also author author of the book, Gujarat: Governance for Growth & Development. Thank you very much for speaking with us. Like we discussed, this is going to be a primer and we are going to build the argument slowly. All the discussions we have on using a state as a model for growth and development, economically and socially. Is that correct, is that fair, is that something that is easily replicable, are there issues that fall outside, are they in control and that is what we are really trying to understand today. Gujrat is in the news, because Modi has been anointed and we have elections in 2014. Gujrat development model has come in for a lot of discussion and debate on both economic and social. Most people believe that the economic indicators have been sound and social indicators has been weak. Let me throw the first question. Looking at Gujrat, if I were to ask you for the headlines the economic and social indicators, what do you think has worked and what has not. Bibek: Well, I think when most people debate the Gujrat model, they unnecessarily get fixated on the numbers. Numbers in terms of the GSDP, numbers of social sector indicators. I don’t think that is the Gujrat model is that. Of course, they are outcomes. When people talk of the social sector indicators, what they often forget is that the indicators that float around for Gujrat, they are dated. There have been implements in the social sector indicators even in Gujrat. Let’s forget the numbers and look at the core elements of the Gujrat model. Point one, a lot can be privatized. I’m not talking about corporate sector industry. Even in the social sectors, a lot can be privatized through outsourcing. Point number two is, you need to get agriculture going and the agriculture story is fundamentally based on roads, electricity and water. Roads have somewhat been generally good in Gujrat. But what has happened recently is a great improvement in electricity and water. Given a large part of the population in the rural sector. You really need to get agriculture going to get those poverty reductions. Point number three is an enormous amount of decentralization. That has been partly possible because Gujrat has had a healthy tradition of Panchayat raj that goes back to the 60’s. One must recognize that there has been an enormous amount of decentralization of planning it. Point number four is an empowerment of the bureaucracy, and by bureaucracy I do not mean the All-India civil services. I mean BDO’s. I mean insulating them from political interference in the form of transfers, posting, etc. The last point I’d like to make is, unfortunately India is too centralized and we have a large number of central sectors and centrally sponsored schemes. Even if they are partly funded by the centre, the state has to pitch in with money. Quite often there are problems with the rigid templates of centrally sponsored schemes. Therefore the state must have its fiscal resources to plug-in those gaps in the centrally sponsored schemes with its own state level schemes. These to my mind are the most important elements of the Gujrat model. See, I have described it, therefore it is a template of every state. This is not a Gujrat model, it’s a template that can be applied to every state. Govind: If you had to cast your eyes wider, which state would come closer to the template you have just defined? Bibek: Let’s take them one by one. As I said, roads have been somewhat better in Gujrat. However, the improvement is also a function of the decentralization. When we are talking about the roads, we are not talking about the highly visible national highways, we are not talking about the state highways. If I look across states, I find that several states have done reasonably well in cases where the national highway has happened to pass through the state. Some states have done reasonably well in implementing the PMGSY. One example of that would be Bihar. You recognize that some states also have very difficult terrain. Where I find what most states haven’t been able to deliver is what is called district roads. So the district roads have been the missing link between the PMGSY on one side and the national highways on the other. This is good example because I mentioned the rigidity of the central templates. The PMGSY enables you to build roads. It does not enable you to build bridges for those roads to become accessible. So you need to funds to plug-in a state level scheme to now build those bridges. I expanded on the roads. Now talking about electricity. Fundamentally one is talking about generation, transmission and distribution. To mention the obvious thing in Gujrat, the in distribution what has worked in the agricultural sector is the bifurcation. If I’m going to use it for irrigation, I get assured 24x7 but I don’t get it free. This gets into issues of power subsidies and very few states have been able to link this problem. Water of course is a much more complicated issue depending on the state. In Gujrat a large part of it is not the Sardar Sarovar, it is the dams, the smaller water reservoirs that have been built. Essentially Gujrat has built the pipelines so that you can carry the water from the surplus area to the deficit areas. This still has not happened in the northern tips of Gujrat. But it has happened in traditional deprived areas toward the east and the west. Govind: A quick interjection. Gujrat like many states has its share of among the poorest districts in the country Bibek: it depends on how you are evaluating it. The criteria you are using for deprivation but traditionally there are districts like Daks that have been deprived. They no longer are. If you go there you can see what the improvement in the water and connectivity have done. If you look at Gujrat, yes there are deprived districts towards the north like Mesana, Sawarkanda those kinds of places. Govind: Let me come back to the first point you have made. One of the peak components of this templates is privatization. You said privatization of some services at the state level and not necessarily the most visible state public sector enterprise and so on. Can you give us one or two examples where services that have been privatized have delivered in the state of Gujrat or in other states and something that people should be aware and look forward to? Bibek: You take something like health. We know that the public health system does not work. We know that the doctors are not there, that the paramedical staff is not there at the primary health centres. The traditional reaction is that we must build more PHC’s. But there is an alternative way of doing it. For example, much of the research work being done by Bishnu Das and his colleagues, the world map shows that it is a complete myth to presume that there is a lack of medical staff in rural India. There may be unregulated and may not have the requisite qualifications but there are medical staffs in the remote areas of India. Except that most of them are private. Now if I am going to insist that a poor person only has to go to a PHC, I am not going to get very far. But if I say I’m going to have an insurance scheme, in Gujrat it is called the Chiranjeevi Health Yojna where it means if I am BPL, I can go to whichever doctor I want and get reimbursed. India is a very large country and people talk about the Kerala model which talks about building a PHC everywhere. On the other hand, you have the Gujrat and the Tamil Nadu model which can best be described by saying, I don’t need to have a PHC everywhere as long as I can insure if the patient is referred to the hospital and gets there fast. Quickly let me also mention the 108 services which have worked well not only in Gujrat but also in Madhya Pradesh. Finally, one example to another. The mid-day meal scheme. Why has the mid-day meal actually have to be administered by a school and cooked by teachers in the school? In Rajasthan we’ve had the mid-day meal outsourced by Akshay Patra. Govind: Let me move to the next point. Now the question is really understand these templates can be replicated at the central level. Let’s begin with the fourth point you made about empowerment of bureaucracy. To what extent is that replicable in a layman sense at the federal level? Bibek: We are talking about two or three different things here. I’m not talking about the All-India services here. One of the thing that happens across a whole lot of states is political interference in the matters of transfers, postings and ministers interfering. We already have some kind of template which various states have or have not implemented which said there must be stability of tenure. I must have someone in a particular position for atleast 3 years. If I move that person, there must be satisfactory reasons. More importantly, whatever scheme you have, it is fundamentally delivered by what in most states in India is called the Block Development Officer, the BDO. In Gujrat there is a certain way they have handled the civil services. They have trifurcated the roles of the Deputy Commissioner. All I’m saying is that one has to recognize that there is a development function and one needs to ensure that the bureaucracy going upward from the BDO to the DC actually delivers that development function because increasingly across all states the role of the DC is not going to be the magisterial one nor is it going to be the revenue collection one but that of the development functions. Govind: That is the empowerment angle, we have talked about privatization of services. Let me throw the first bottom line question. To what extent should we expect a state level model success at the central level? Is that even possible because India is such a vast and complex country. Bibek: There are two ways I can react to that. Firstly you used the expression central twice. Let me talk about states first. This template is a standardized template that can be applied to every state. But I cannot apply it to the same degree in every state because fact of the matter is that Gujrat has had a healthy tradition of private sector entrepreneurship. Now if I go to Jharkhand, I cannot possibly expect that I will the NGO’s whom I can get involved in delivering healthcare or education. One must also realized that Gujrat has somewhat been favourably placed geographically. It has got the ports, it is placed on the Delhi-Mumbai industrial corridor. So several things that have happened in Gujrat may not happen in other states to the same degree. Coming back to your question about the centre. Forget Mr.Modi as a person, this is the first time if he becomes the PM we will have someone who has been a Chief Minister for a long time in a major state. If he becomes the Prime Minister, he will therefore argue, we need to decentralize much more. He will hopefully relax those centrally sponsored schemes. The social sector are fundamentally under the 7 schedule state government subjects. What I hope will happen, is if become PM we will have that decentralization which will facilitate all states in implementing this developed template. Govind: You are pointing some of the elements that could or could not have happened. What is the other side? If someone were to show success at the state level were to come to the centre what are the challenges he/she could face which perhaps are no way comparable or are far greater than what he faced at a state level. Bibek: In Delhi there are two different kind of issues that we need to grapple today. The first what I would do as the government in Delhi and the same kind of issue I need to grapple with in India as a federal country is how do I handle Delhi vis-à-vis other states. The second point is someone with a state level experience is more likely to be disposed to the idea of centralization and delusion. Coming back to the first point, the two are actually linked. In my view we are stuck with a deal of profligate public expenditure. I won’t get into a debate like the land acquisition bill, food security bill, etc. well, I would only like to point out that these are there and I don’t see them being reversed for the next 20 years. The best you can hope for is greater efficiency in these. This involves getting rid of many central ministries and departments. This is one point I would like to flag. Much of what is spent does not reach the beneficiaries because of high administrative cost. I would expect a pruning of the bureaucracy in Delhi. Secondly, in my view, much of the aids of the recent paths has nothing to do with legislative problems. It is fundamentally an administrative failure because of the role of the PMO, the Cabinet has not functioned, it has been taken over by GOM and EGOM’s. Anybody with strong administrative capacity are I’m not rooting for Mr.Modi alone. Anybody with strong administrative capacity will be able to rehabilitate the PM and the PMO. I would say this is the second most important issue. The third is, particularly under UPA II, there has been a great deal of enchantment amidst the bureaucracy. One of the problems under UPA II as opposed to UPA I is that bureaucrats have the sense of being disempowered and they simply have not taking decisions. So rehabilitating the bureaucracy would be the third most important item. The fourth item of course would be the traditional one, which is persevering with reforms. We can have a long list of reforms and many of them are domestic and not so much catered to the external world. Of course external sector reforms like FDI etc. are important but the basic domestic are endogenous to the country. Govind: Thank you Bibek. We have run out of time. If I had to put things in perspective, I would say revival, resurrection and rehabilitation. Three challenges and tasks at the central level and of course you have defined for us the ideal template at the state level, which if implemented correctly for any state can deliver and social progress as some states have clearly done in this country and of course the larger question of how much of this can be replicated and what are the kinds of challenges we would face. Bibek thank you so much for speaking to us and we are obviously going to connect with you as this issue gets hotter and provide more insights as you did just now. Thank you. Bibek: Thank you.