The Hindu Business Line : The importance of outcomes

The economic policies are producing considerable revenues but little of desired outcomes. Probably due to opposition from both the bureaucracy and politicians, the idea of outcomes has receded into the background. But had outcomes been the criterion for evaluation, the Finance Minister would have got top marks, his colleagues would have been hauled over coals, and the Prime Minister would have been saved much embarrassment, says P. V. INDIRESAN.

On the occasion of the third anniversary of the United Progressive Alliance Government, the Prime Minister got a particularly bad press. Considering the many problems with our polity, it is understandable that many are critical of the Prime Minister. However, it is not so understandable for him to be singled out the way he was. There was not even a whiff of complaint against any of the other constituents of his UPA Government. His own colleagues in the Congress Party were spared and absolved of any responsibility.

Political commentators went overboard finding umpteen reasons why the Prime Minister should be taken to task. Not one took the trouble to ponder why everyone else was declared not responsible. In truth, much of the Prime Minster's lapses are due to irresponsible conduct of his colleagues. However, they all seem to have acquired a Teflon coating; no blame sticks to them with the possible exception of the Finance Minister.

Human nature has its own angularities, biases. People pay hard-earned cash and go to the circus to watch an elephant walk on two legs. It does not occur to them that walking on two legs is child's play even for toddlers. They applaud the elephant walking on two legs because that is more than what it can do normally. The converse also is true. They criticise a person for not performing what they expect him or her to do. In other words, criticism depends on expectation, and not on absolute performance.

High Expectations

Apparently, the critics have such high expectations from the Prime Minister that even the fact that economic growth has touched all time records does not satisfy them. At the same time, they have such a low opinion of his colleagues that they will applaud, if like the circus elephant, if the ministers merely walk on two legs.

The Prime Minister (and the Finance Minister too) should be wondering where they have gone wrong. The Finance Minister, in particular, should be wondering what more could he have done. Whether they like it or not, the Prime Minister and the Finance Minister should accept that their policies need change, that they have to try something different.

For a start, the Finance Minister would do well to return to his pet idea of `outcomes'. His economic policies are producing considerable revenue but little of desired outcomes. Probably due to opposition from both the bureaucracy and from ministerial colleagues, the idea of outcomes has receded into the background. If only outcomes had been the criterion for evaluation, the Finance Minister would have got top marks, his colleagues would have been hauled over coals, and the Prime Minister would have been saved much embarrassment.

It is a fundamental principle of management that in the absence of functional autonomy, no one can be held responsible for outcomes. Operational ministries get away with murder because they have the excuse that they do not have enough autonomy. Only when you delegate you acquire the power to ask questions. When you control, and keep power to yourself, you will be asked questions.

That is the case with the Finance Ministry: It controls. Therefore, it attracts criticism. When it delegates, nobody can question the Ministry. Where it stipulates what should be done, and how (as in the case of the innumerable Yojanas), the Finance Ministry attracts much criticism for itself, for the government and for the Prime Minister too.

The Comptroller and Auditor General probably considers himself to be a person of much power. If truth be told, he cannot say boo to a sheep. The meanest village politician can turn up his nose at him, pocket the money that is supposed to be spent for public purpose. There is nothing, the CAG can do.

Essentially Powerless

That is where the rot starts. As matters stand, the Finance Ministry is like the Mughal ruler who said he was Badshah of India but his power extended from the Red Fort to Mehrauli, a village barely 20 km away. The Finance Minister may think he is powerful. In truth, he holds no sway even up to Mehrauli. Petty officials and politicians take the money he has garnered with great skill and squander it any way they like. Nobody praises him for 9.2 per cent growth but every Tom, Dick and Harry points his finger at him (and at the Prime Minister) for not producing desired outcomes.

Power comes from the authority to question. Political sagacity lies in avoiding having to answer questions. Both power and immunity from questions are achieved through genuine (and transparent) delegation of authority to produce desired outcomes.

Let us take as an example: The PMSY, the Prime Minister's Sadak Yojana, is a laudable project. It should have brought kudos to the Prime Minister. It does not. It does not because there is little check on outcomes, because it is measured by the money spent and not by the utility of the roads that are built.

Here is a management problem. Experience spread over several decades has shown that prevailing administrative practices are less than effective. If only the government had devised a better delivery mechanism for PMSY and other projects, it is more than likely that the Prime Minister would have escaped much criticism.

Linking government grants to outcomes is one possible reform. Taking the case of PMSY, outcome is not the number of roads built but how many vehicles use them. Then, suppose funds are released to help village panchayats operate a negative toll tax, that is, pay a commission every time a commercial vehicle enters their village.

Let each panchayat get a grant in proportion to its population and have, further, the authority to decide how much commission it pays per vehicle. In that case, poor villages will have fewer vehicles per capita and be able to pay more than richer ones. That way there will be a greater incentive for transport operators to serve poorer villages. There will also be an incentive to keep rural roads serviceable.

Flawed Approach

Many government officials will find many flaws in the idea of negative toll tax. That is fair enough; it is their job to find flaws. However, they should not stop at finding flaws; they should look for new ways for better utilisation of public money.

Unfortunately, by training and temperament, they do not innovate. They do not even experiment. That is how the bureaucracy lets down their political masters. As the Prime Minister once admonished, one should not reject a better solution merely because it is not the ideal one.

Once before, as Finance Minister, Dr Manmohan Singh, had overruled the bureaucracy on the issue of foreign exchange for travel abroad. He should do the same in the matter of control of central grants. In this computer age, delegation of power actually enhances authority.

Computer communications make it possible to monitor the performance of even remote stations with precision. Then the Centre can stop telling how anything should be done and start asking what has been done. Then, the Yojanas that are bringing ill repute will begin to deliver the goods. The country will wake up to a new dawn.

To return to the basic theme: Both the Prime Minister and the Finance Minister should position themselves to ask questions and not be answerable to questions.

(The author is a former Director of IIT-Madras. Response may be sent to: indiresan@gmail.com)