The first problem with any objective analysis of what has happened is the lack of authentic data. Indira Rajaraman, who has been a member of the 13th Finance Commission, emphasised this in no uncertain terms. A large amount of data has been generated on various aspects of gram panchayats. This had led to large changes in the data on revenue collection of local bodies and panchayats. However, as pointed out by Professor Rajaraman, one cannot be confident about the authenticity of the data. This is largely because there is no uniformity across states on how these data are collected, categorised or monitored. This can often lead to wrong policy conclusions because the data, instead of being objective information on what is happening on the ground, could become manipulated information depending on what one expects, or wants, to see. For instance, the 12th Finance Commission had incentivised local governments to increase their revenue collections. By the end of its period, local governments in a number of states started showing large revenue increases that seemed inconsistent with other available data. In other words, the major point she was making was that if incentives were to be announced, they must be conditional on performances that could be objectively measured and should, certainly, not be based on self-reported indicators. The 13th Finance Commission, therefore, incentivised local bodies to achieve goals that could be easily observed by third parties.
In addition, the 13th Finance Commission had made another important observation and followed it up with a recommendation. Incentives have to be contingent on certain outcomes; if these outcomes cannot be objectively observed, the purpose of the incentives is lost. On the other hand, since the third tier is an elected body, there is an already built-in mechanism of accountability through the democratic process of regular elections. Therefore, the incentives that the 13th Finance Commission announced were directed towards enabling the political process in gram panchayats. Panchayats were assured of larger financial resources if they developed the platforms necessary for better governance. This would negate the possibility of elected leaders blaming the system for their lack of performance. Thus, the incentive scheme was broken into two parts: a basic transfer that was independent of everything else and a "bonus" transfer to those who developed these platforms.
Another way of enabling panchayats, or letting the democratic process implement the accountability that elected representatives must have, is to ensure rule-based transfers to panchayats. For this, S M Vijayanand of the ministry of rural development referred to the experience of Kerala. Kerala is an important example of what local governments can do simply because the third tier of government in the state is probably the strongest among all states. In Kerala, norms have developed in such a way that monies transferred to the panchayats by the state governments are completely non-discriminatory and rule-based. It is very difficult for the state ruling party to show any favouritism towards panchayats belonging to opposition parties. Third-tier constituencies know how much the panchayats have been given and elected representatives cannot pass the blame to an unresponsive state government.
It is, indeed, surprising that states that are most vocal when it comes to federalism are often the least likely to share power with the panchayats. The purpose of the third tier was to ensure that decision makers at grass-roots level were also the ones with the maximum capacity to absorb and assimilate the local information. However, if their powers to act on that information are restricted by the lack of power to take decisions, and lack of authority to implement them, then the entire exercise becomes counterproductive. It is unfortunate that, on the one hand, we want to use the democratic process to keep elected representatives honest; on the other hand, when it comes to the third tier of government, we want to bypass the process and impose non-political systems of accountability.
For instance, we do not discuss incentives to elected state or central political leaders when we discuss methods to prevent corruption among them or to make their ministries run more efficiently. Instead, we discuss methods to make the political system more conducive to throwing up better political leaders. We are yet to get a perfect system, but moving towards such a system is what we concentrate on. Why, then, do we have a different attitude towards the politics of the panchayats? I am afraid that this is a form of elitism. We simply cannot accept the notion that lower-level political leaders are as "good" as those who make it to the state or national capital!
If we want to reap the benefits of grass-roots democracy (and they could be many), we need to strengthen the political process at the level of panchayats. We need to give them more authority and power and stop getting worried about whether they are responsible enough - for that we have the election process. So let us concentrate on the democratic process, rather than worrying about whether they are capable or not. States are not answerable to Parliament; why should panchayats be answerable to higher forms of government?
The writer is research director of IDF and director of the School of Humanities and Social Sciences at Shiv Nadar University