Intergovernmental Systems and Service Delivery

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Intergovernmental Systems and Service Delivery
Geeta Sethi Washington, DC May 9, 2006
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What is India

• Federation of 28 states.
• Over 1 billion people, 700 million live in
  villages, almost half of worlds poorest.
• 400 ethnic groups, and about as many languages.
• Fast growing economy, increasing rural/urban
  disparities.
• Fiscal deficit in double digits (10).

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Decentralization is Govt. of Indias Initiative

• Two Constitutional Amendments, urban and rural in
  1992.
• Central Finance Commissions
• State Finance Commissions
• State Acts

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Intergovernmental structure
All sub-national governments are directly
elected There are seats reserved for women, SCs
and Sts
Central Government
States (28) Average Pop. 36.3 millions
RURAL LG Raj Panchayats 72 of total population
URBAN LOCAL BODIES 28t of total population
DistrictZP (515) Average Pop. 1,351,228
Block or TalukTP (5,930) Average Pop. 117,349
VillageGP (240,588) Average Pop. 2,892
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Structural Flaws with the current system

• Complicated inter-governmental system with no
  control or discretion poorly designed (new
  information)
• Transfer system is scheme based (tied),
  non-transparent, unpredictable, non-equalizing
• Unclear expenditure assignments and overlaps
  between different tiers
• Gram Panchayats are the relevant LGs in terms of
  revenue powers and discretion.
• But, smallest fiscal role
• Revenue raising powers not effectively used in
  both states.

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Improving Accountability relationships for rural
people
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Expenditure Assignments

• First unbundle by activitycritical activities
  that define primary education and also have a
  budget line item.ed

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First principles of public finance

• Economies of scale
• Externalities
• Equity
• Heterogeneity of demand

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Five elements of service provision sectors and
sub-sectors
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Status Quo
Unbundle
Assign
Standards Monitoring Evaluation
Unbundle functions in to activities sub
activities
Center/State
Standards
Planning
Asset Creation
Center/ State
Local Government
Planning Asset Creation Operation
Private Sector
Operation
Monitoring Evaluation
Planning Asset Creation Operation