Thoughts on economics and liberty

What Would I Do If I Became India’s Prime Minister? #4

Phase 1

Now to the bureaucracy. The first two and a half years of my government are being characterized here as Phase 1 – Build up, following Jim Collins. The second half of this five-year term is being characterized as Phase 2 – Breakthrough. Since much of the improvement in India’s governance will depend on the active participation of states, they will be provided incentives to initiate similar reforms. I will immediately write to public service heads, asking that the bureaucracy start examining all its work in the light of freedom of the people, and explore constructive ways to systematically step aside from needlessly interventionist activities.

After the Phase 1 restructure the number of departments would be brought down to ten, with around 20 ministerial portfolios and 20 Ministers of State (the latter to ensure orderly succession). Each portfolio would be served by one of the ten departments with a total of ten secretaries in all. Apart from the Freedom Department, other departments will be: i) defence, ii) justice (including internal security, police, support to the judiciary and protection of consumers), iii) external affairs, iv) public finance, v) physical infrastructure, vi) social infrastructure (e.g. public health, poverty elimination through negative income tax, and the regulation, not direct management, of education and medical facilities), vii) commerce (including regulation of industry and agriculture), viii) social capital and community (fostering voluntarism and conducive social relations in the community), and ix) sustainability (managing the ecology – with a time horizon of 1000 years).
Two principles will underpin the change programme in the Build up phase: (1) the need to move the structures from the current to the new in a systematic and effective manner, and (2) to do so in a manner by which everyone involved is enabled to understand the rationale for the change and through which no one becomes financially worse off, or experiences distress, for up to five years at the end of Phase 1. This commitment would be on a sliding scale, from one year for staff with less than five years service, up to five years for staff with greater than 15 years service.
The part relating to significant distress bears some elaboration. The idea behind it is that nobody should experience either financial or psychological distress in consequence to this change programme, for that would violate the principles of justice. These employees were not responsible for the policy mess and culture of incompetence created by politicians who adopted Nehruvian socialism. Therefore, my government owes them a duty of care to ensure that they are given a reasonable time to rebuild their life where their departure becomes necessary. The government must always be a model employer and set the highest standards of behaviour and people management. Ensuring the health and safety of employees will be a major duty of managers of this change programme. Managers will be empowered to make relatively small adjustments to the speed of the change to humanely manage employee well-being. Throughout this process, collective bargaining will also be encouraged, without sacrificing decisiveness. Collective representation is an opportunity to understand the concerns of employees and to engage them actively in the change process. We definitely don’t want the current styles of authoritarian management to continue.
The timelines and deliverables for Phase 1 are outlined below. The month in the sub-headings refers to the time when an activity will be completed:
  • Month 1: The Planning Commission will be shut down from day one. Its policy analysis functions will be transferred either to existing departments or to the IPO. All commitments made under the Five-Year or other Plans will be scrapped. All previously committed funding will be up for review at the time of renewal or extension of funding on a case-by-case basis. Files of the Planning Commission will be sent to the National Archives for recording and open access to researchers.
  • Month 2: My government will not undertake a useless reshuffle of IAS officers. Instead, as a first step, all deputations and postings to and from the IAS, IPS and IFS state cadres to the Central Government will be frozen from the sixtieth day, after which the system of transfers and deputations at the level of joint secretary and above would be scrapped. All new appointments except new recruits to the civil services (and the IPO) will be frozen until Phase 2, urgent requirements being met by ad hoc contracting. The annual intake of new civil service recruits by UPSC will continue till Phase 1 is completed to prevent shortages of trained personnel at the grassroots in the states. These recruits will be treated at par with other employees at the end of Phase 1, and will be able to apply for Phase 2 positions either in Central or State Governments, keeping in mind that traditional roles like sub-divisional magistrates and district magistrates would no longer exist in Phase 2 in states which participate in these reforms.
  • Month 2: Secretaries of existing departments will be given two months to come up with a well-defined set of core competencies including knowledge and leadership standards, as reviewed by internationally reputed consultants, for each position in the rank of joint secretary (and above) to the Government of India.
  • Month 3: Upon approval of these competencies by the relevant Ministers – and the Freedom Minister, to ensure consistency in the standards – all civilian positions at senior executive levels will, without exception, be advertised publicly on the first day of the third month of my government assuming office. There will be no reduction in the number of senior positions in Phase 1. However, all such positions will henceforth be recruited entirely through the open market.
    • As most departments do not handle security matters, there is no reason why non-citizen permanent residents can’t work in such Ministries. Therefore, except for civilian positions in the defence and external affairs ministries, and some positions in the Freedom Department, senior positions in all other departments will be open to anyone with appropriate merit from practically anywhere in the world.[i] All they would need to do before appointment is to apply for permanent residency in India.
    • Compensation payable for these newly advertised positions would be at par with that of senior managers in multinational corporations in India, in the range of Rs 40–100 lakhs annually, to be individually negotiated – noting that a few senior policy analysts hired by the IPO from abroad will earn similar amounts as well.
    • Current civil service incumbents could apply to these positions along with others.
    • A series of interviews and presentations from shortlisted candidates on a range of complex policy matters would be held by teams headed by the lead Cabinet Minister of the concerned department and another Cabinet Minister. Existing civil servants who are short-listed would be encouraged to bring along with them a summary of their perspectives on the strategic plans for their departments (as outlined later). Strategic and persuasive discussion of such plans could help civil servants demonstrate their capability. The selected secretaries will be appointed first – under my signature – and given the option of forming a part of the interview team for joint secretaries. Each secretary would then formally appoint the joint secretaries and retain complete oversight of them, including the rights to dismissal.
    • All these appointments will be on 24-month contracts, extendable by three years if the incumbent is successful in obtaining the fewer Phase 2 positions.
  • Months 5 and 6: Appointments will be completed in five months and appointees will start work at the commencement of the seventh month. Unsuccessful incumbents will relinquish their roles simultaneously.
    • Civil services incumbents appointed to these positions will have to resign from their civil service before taking up these appointments. They would also get the benefits admissible to them on voluntary retirement from their service, over and above their new contractual benefits. If they are not yet eligible for voluntary retirement, they would be deemed to have completed 20 years of service.
    • Unsuccessful civil service incumbents could either revert to the rank of a Director in the Central Government on their existing salary or revert to their state cadre. They could also select an individually negotiated redundancy package plus pensionary benefits under the relevant rules. No other government employee will be offered a redundancy package until the beginning of Phase 2.
    • If some of these positions cannot be filled because suitable candidates cannot be found, or if there are unforeseen delays in recruitment, experts of international or national stature may be tapped on the shoulder and offered short-term appointments on mutually acceptable ad hoc terms at salaries potentially much higher than those indicated earlier.
  • Month 8: Departmental strategic plans: The newly appointed Secretaries would be given 60 days to prepare a 21-month strategic plan for their department to be delivered by the end of the eighth month to the Cabinet. They would work closely with their relevant Ministers and the Freedom Department which would have already conducted background work through the IPO on each potential restructure. These plans will be published on the first working day of the ninth month, after Cabinet approval. These would specify the pathway to the restructure in sufficient detail to guide implementation. These plans will include, among other things, the deliverables and milestones listed below:
    • A high-level reviewof each major activity undertaken by each department to be completed by the end of the ninth month. A two to three page summary on each major activity would be presented to the Cabinet from the ninth to the twelfth months, and all reviews published on the internet after Cabinet endorsement. These reviews would provide the rationale for either continuing with an activity or reverting it to citizens (Box 13 in the Online Notes[ii] outlines the principles that will guide these reviews[iii]).
    • The strategic plans will specify the timelines for implementing organizational and structural change, even asthere is no let-up in the delivery ofcore functions.
    • Regulation should not be directly implemented by departments. Regulatory enforcement and implementation will be de-linked from policy making to minimize capture of policy by regulators. Where such regulatory bodies do not already exist, the strategic plans will specify when a relevant independent regulatory will be established. As part of this process, the Reserve Bank would be made completely independent, tasked with focusing solely on inflation; in the longer term, the concept of central bank will be reviewed and most functions decentralized to the private banking system. To ensure independence of regulatory bodies, appointments of their chief executives would need to be endorsed by relevant Parliamentary Committees from the beginning of Phase 2. This would eliminate perceptions of bias in the delivery of regulation. The delivery of laws will thus become independent of political considerations.
    • The strategic plans will also specify when a separate strategic plan for each departmental public sector body, regulatory body, or undertaking dealt with by the department will be delivered – latest by the eleventh month. Without exception, all business undertakings including defence manufacturers will either be auctioned off in the international market or their shares sold to the people of India by the end of Phase 1. The government will stop being a businessman. Period. Not one business will remain in the government’s hands. Buyers would need to protect the financial outcomes of staff of these undertakings for up to five years after Phase 1 on a sliding scale similar to that for public services. Defence undertakings will be sold only to companies fully owned by Indian citizens who live in India and employ Indian citizens; these companies will also provide periodic reports to the defence ministry and permit random inspections by authorized defence inspectors at any time of the day or night. Exports by such private defence companies would be vetted by the Defence Minister.
    • A key element of the strategic plans will be the comprehensive modernization of the trappings of government administration. During Phase 2 there will be no concepts of clerks, peons, or drivers. Offices would be completely modernized and made ‘open plan’ with senior managers seated in the same work environment as their support staff, excluding joint secretaries and secretaries who could have their own rooms. There would be a number of small and large meeting rooms. State-of-the-art technology and facilities would be made available, including modern workstations with access to global databases and international standards, electronic document and records management; and more importantly, high quality toilets and kitchens for staff.
    • The strategic plans will identify and deliver on thetrainingneeded to ensure that employees wanting to work in Phase 2 possess relevant technical skills. The stringent competency requirements of Phase 2 will mean that those who don’t shape up will have to be let go. In recruiting public service leaders for Phase 1, one of the important competencies will be their knowledge of the skill sets needed for modern governance. In particular, they must be capable of sourcing high quality trainers from across the world.
    • The Freedom Department will coordinate all departmental strategic plans and ensure that each major aspect is properly addressed. When these plans are added up it should become clear how the restructuring of the ten new departments will be completed.
  • Month 9: A new Public Administration Act: The Freedom Minister would introduce a Public Administration Billin the Parliament in the ninth month. This will essentially implement many of the suggestions already made in Chapter 5. For those interested I have provided details in the Online Notes. The Act would come into effect at the commencement of the thirty-first month.
  • Month 9: A new Superannuation Act: As indicated in Chapter 5, one of the key barriers to occupational flexibility in India is the absence of a uniform superannuation scheme that applies both to the public and private sectors. A Superannuation Bill, upon the commencement of which the Central Provident Fund legislation and General Provident Funds would be disbanded, would be introduced in Parliament in the ninth month. This would require each employer, including the government, to transfer 10 per cent of an employee’s gross salary, at a low rate of tax, into privately managed superannuation trusts that would invest these funds into risk categories selected by employees. This 10 per cent contribution would technically form part of the employee’s contribution, and will be included explicitly in all salary packages. I have discussed further details of this important piece of reform in the Online Notes.[iv]
  • In this manner, by eliminating tenured appointments at senior levels, by introducing redundancy for all permanent positions and by enacting superannuation legislation, significant flexibility would be introduced into the Indian labour market. A number of other, more generic, labour market reforms will also be introduced which I do not touch upon here for want of space.
  • Month 9: Constitutional amendment to abolish the all-India services: Also in the ninth month the Freedom Minister will introduce a Constitutional Amendment Bill to wind up existing civil services and repeal Articles 308 to 323. Approvals from states would be obtained and the Amendment enacted as soon as possible, to take effect from the thirty-first month at the latest. Through this process, there would no longer be any Constitutional barrier to the Phase 2 structures. Indeed, this amendment would be made effective as soon as the Public Administration Act is enacted.
  • The amendment would automatically abolish the Union Public Service Commission (UPSC) in its current form. However, under the Public Administration Act, the UPSC will be reincarnated and headed by a Public Services Commissioner. It will shed its recruitment function except for the armed forces, for which a longer and different transition will be separately laid out. It will largely convert into a research organization on public administration and provide recommendations to government on world-best-practice for the bureaucracy. Its periodic recommendations could lead to further streamlining of the public services and help to further increase their agility, productivity and effectiveness. It would also establish newer, and usually better, working conditions every three years for the public services in consultation with employees and their representatives, subject to Cabinet approval. The practice of setting up ad hoc Pay Commissions would cease.
  • Month 22: Advertisement for Phase 2 positions: Based on the details of the restructure, which should emerge clearly by the twentieth month, jobs for all individual Phase 2 positions will be advertised by the twenty-second month, eight months prior to the commencement of Phase 2. These will be open recruitments through the market using procedures prescribed in the Public Administration Act. Current employees of the government will be eligible (as will others) to apply for these, fewer, ‘final’ positions. All appointments made to these positions will be deemed appointments, effective only from the commencement of Phase 2.
  • Advertisements for these positions will be staggered, the senior-most roles being recruited by the twenty-fifth month, well before the junior ones. Senior managers so appointed will chair the selection panels to recruit their future direct reports. All appointments will be completed by the twenty-ninth month.
  • Phase 1 government employees not recruited to a Phase 2 position will be declared redundant with effect from the thirty-first month and suitably compensated. They would also be supported by the Freedom Department through training and guidance in setting up a business. It would be generally ensured that they do not become worse off for up to five years beyond the commencement of Phase 2 on the sliding scale mentioned earlier. It is expected that they will find something useful to do in the radically reformed economy of India. The Freedom Department will also monitor their health and well-being.
  • The performance indicators for Phase 2 secretaries will be significantly tougher than Phase 1 indicators. These will be linked closely to citizen perceptions of departmental performance and corruption. If an organization is perceived to be corrupt by more than a certain proportion of the public, this ‘target’ proportion being drastically reduced each year, Phase 2 secretaries will be dismissed automatically without recourse, despite not having been personally implicated in their department’s corruption.

To ensure a fail-safe transition to Phase 2, suitable transitional arrangements and redundancies will be built into all systems for the first three months of Phase 2 to ensure that no core function is compromised even marginally.

To be continued.

Note: This is an extract from my book, Breaking Free of Nehru]

[i] Citizens of a few countries will be ineligible due to national security concerns.

[iii] These principles will be revised and re-designed in the form of a checklist or guide before being used for the action strategic plans. The body of literature that will be used for such a checklist includes The Victorian Guide to Regulation available at [].

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