Governance and Governed

Madhushree Sekher
S. Parasuraman
Ruth Kattumuri Editors
Governance
and Governed
Multi-country Perspectives on State,
Society and Development
Governance and Governed
Madhushree Sekher S. Parasuraman
•
Ruth Kattumuri
Editors
Governance and Governed

Multi-country Perspectives on State, Society
and Development
123
Editors
Madhushree Sekher Ruth Kattumuri
Centre for Study of Social Exclusion and India Observatory
Inclusive Policies London School of Economics and Political
Tata Institute of Social Sciences (TISS) Science
Mumbai London
India UK
S. Parasuraman
Centre for Study of Social Exclusion and
Inclusive Policies
Tata Institute of Social Sciences (TISS)
Mumbai
India
ISBN 978-981-10-5962-9 ISBN 978-981-10-5963-6 (eBook)

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In Memory of Professor Chandan Sengupta
The governance discourse has been dominated by a language of apparent rationality

with implications that have not always been unpacked or spelt out. Although the
term governance has much currency, it is more easily used than defined. This
volume seeks to unpack meanings, actions, processes and institutions in the dis-
course on governance, not deductively but through grounded, interpretive accounts
of country experiences to interpret how various driving forces shape governance
practices. Keeping this in view, two authors’ workshops were organised by Tata
Institute of Social Sciences (TISS) in Mumbai, to deliberate on emerging issues
pertaining to ‘governance and governed’.
The authors’ workshops brought together scholars from different countries to
discuss the practice of governance, focusing on country-specific responses to local
issues. The endeavor was to bring together a volume on disparate experiences on
governance that focused on empirical and historical explanations for the new pat-
terns and changes in its practice. The volume would not have been possible without
the efforts of many scholars who took part in the workshops. Our sincere thanks are
due to many who were involved in organizing the workshops, and those who
participated. We are also thankful to the support of Tata Institute of Social Sciences,
London School of Economics, and the Tata Trust in facilitating the workshops.
On this occasion, we would like to remember the contributions of Late Professor
Chandan Sengupta, who was the spirit behind this initiative of developing a decen-
tered understanding of governance that privileged the perspective of the governed. He
was an outstanding scholar with deep social concerns, passionate about human dignity
and welfare, and a mentor for many scholars working in the realm of development
studies. He was the prime mover of the TISS – London School of Economics part-
nership over 5 years that provided impetus to advancing knowledge base on several
governance and social transformation ideas. We recognize Prof Sengupta’s contri-
bution to the Governance area and we dedicate this volume to his memory.
Madhushree Sekher
S. Parasuraman
Ruth Kattumuri
v
Contents
Part I Introduction: Setting the Scene

Governance and Governed: Why Governance? . . . . . . . . . . . . . . . . . . . . 3
S. Parasuraman, Madhushree Sekher and Ruth Kattumuri
Understanding Governance as a Process . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Madhushree Sekher, S. Parasuraman and Ruth Kattumuri
Part II From Government to Governance

The Emergence of Governance Discourse in Liberalizing India . . . . . . . 27
Manali Desai
Searching for Democratic Developmentalism? Twenty-Five Years of
South Africa’s Macro-governance and Administration
Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Chris Landsberg
Local Governance in Rural India: Tracing Institutional Voids . . . . . . . . 65
Madhushree Sekher
Part III Rethinking and Restructuring Governance

Fiscal Reforms at the Local Level in India: An Overview . . . . . . . . . . . . 91
Anita Rath
People’s Participated Governance Performance Evaluation
and New Governance: A Case Study on Hangzhou . . . . . . . . . . . . . . . . . 105
Xunda Yu and Shunji Cui
Rethinking Environmental Regulation in India . . . . . . . . . . . . . . . . . . . . 129
Geetanjoy Sahu
vii
viii Contents
Technology as a Driver for Governance by the People

for the People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Ruth Kattumuri
Electronic Technology and the Changing Dynamism
of Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
M.N. Roy
Part IV Governance and Inclusion: Navigating the Roadblocks

Corporate Governance: At the Crossroads? . . . . . . . . . . . . . . . . . . . . . . . 189
Hema Bajaj
The Problem of Democracy in Two Brazilian
Governance Experiences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Pedro Novais and Carlos Vainer
Identity, Politics and Violence: Shiv Sena in Retrospect . . . . . . . . . . . . . 229
Abdul Shaban
About the Editors
Madhushree Sekher is a Professor at the Tata Institute of Social Sciences,

Mumbai. Institutions, political economy of representation, governance, inclusive
development, and policy implementation are her core research interests. Her current
research is on institutions for food security, inequalities and social welfare systems,
and democratic representation in India. She has received a number of grants,
including the Australian Research Council (Discovery) Grant. She is currently
associated with an international research consortium to study ethnic power relations
funded by the Swiss Development Council and the Swiss National Science
Foundation. She was a visiting faculty at the International Food Policy Research
Institute (IFPRI)—Washington, the Universities of Hohenheim, Sydney and
Alberta, and Cornell University, USA. As the author of many research articles and
books, she has a Ph.D. in Political Science and was the recipient of World Bank
Robert S. McNamara Fellowship for postdoctoral research.
S. Parasuraman has been the Director of the Tata Institute of Social Sciences,
Mumbai, since 2004, and has had a high-profile professional career spanning
teaching, research, and policy advocacy. He has four decades of experience as a
teacher and researcher in Rural Development, Education, Health, Public Policy,
Social Protection, Inclusive Development, Governance, Water and Energy. His
current research interests include governance and accountability framework for
social protection, understanding and addressing agrarian distress, collectives of
women and farmers to strengthen livelihoods, capacity building of elected leaders,
decentralised governance, corporate social responsibility, and youth for social and
economic transformation. He has published extensively on development and
disasters. He has held key positions in the World Bank, International Union for
Conservation of Nature (IUCN), Oxfam, Action Aid International, and the UN.
Ruth Kattumuri is the Codirector of the India Observatory at the London School
of Economics (LSE) and an Associate at the Grantham Research Institute on
Climate Change and the Environment. She is a Fellow of the Academy of Social
Sciences in the UK. Kattumuri is involved in transdisciplinary research, advisory
and policy engagement concerning sustainable growth, inclusion and development,
ix
x About the Editors
focusing on human capital development and equal opportunities; water resource

management and governance; adaptation and mitigation for climate change;
technology and innovation. She was formerly a professor of Statistics and
Computer Science in Madras, India. She has a Ph.D. from the LSE and is also a
Cambridge Commonwealth Fellow.
Part I
Introduction: Setting the Scene
Governance and Governed:
Why Governance?
S. Parasuraman, Madhushree Sekher and Ruth Kattumuri
The idea and practice of governance have been much discussed particularly during
the last two decades, and the theme now occupies a critical place not only in the
development discourse but in the context of the legitimacy of a regime as well. At
the very level of practice, the issue of governance is now beset with qualifications
such as ‘good governance’ or ‘good enough governance’. One dimension of the
governance question that has acquired significance in India as elsewhere in recent
past is the changing position of the state vis-à-vis the market, the society in question
and the larger transnational forces. While the neoliberal paradigm of development
of the 1980s and 1990s pushed for a minimalist state, a renewed recognition of the
state-centred development or at least seeing it as a facilitator1 has made the
state-governance equation more complex than before. The thrust of this changing
role is on institutional restructuring that will set the patterns of productive relation
between state and the people. But unlike early institutionalism when the design of
the institutional system, underlying the working of state at different levels, was the
key consideration of governance, now it is seen in the context of state–society
interrelationships and collaborative partnerships among various stakeholders.
In this context, a need to re-look at the state and the processes of governance
becomes important, because we are familiar with the understanding of state that is
based on the presumption of an ‘entity’ and assumes a pre-existing relationship
between ‘state’ and ‘society’. In today’s changed scenario, governance can be viewed
1
For details, refer—Evans, Peter B, Dietrich Rueschemeyer, Theda Skocpol, eds., (1985). Bringing
State Back In. Cambridge University Press, Cambridge UK.
S. Parasuraman M. Sekher (&)

Centre for Study of Social Exclusion and Inclusive Policies,
Tata Institute of Social Sciences (TISS), Mumbai, India
e-mail: madhusekher@tiss.edu
R. Kattumuri
India Observatory, London School of Economics and Political Science, London, UK
© Springer Nature Singapore Pte Ltd. 2018 3

M. Sekher et al. (eds.), Governance and Governed,
https://doi.org/10.1007/978-981-10-5963-6_1
4 S. Parasuraman et al.
as an outcome of human endeavour, and is not a ‘neutral phenomena’ or an ‘auto-

mated solution’ to development concerns with people merely being ‘undifferentiated
receivers’ of development interventions and the state as an ‘apolitical provider’.2 In
the context of globalisation, issues of governance and democracy have gained cur-
rency. The debates raise concerns about the viability of effective institutions of
governance and their interface with the nation-states. All these have posed a bigger
challenge to the ‘state as a bewitching reification that simplifies and obscures the
diversity and contingency of concrete political reality’ (Bevir 2011, p. 8).
While ‘governance’ is, today, one of the most commonly used concept in
development discourse, yet it is also one of the most contested concerns, particu-
larly in the context of issues of implementation and its effectiveness. The concerns
about governance and its dynamic link with the governed have become more vocal
in contemporary times (Mukherji 2017). The vast literature and the different ide-
ological views on governance often display scarce recognition of the complexity or
values that underlie the process and its institutional space, so that we are often left
with the question of the relationship between governance and governed weighing
one against the other.
A simplistic understanding is that governance is the state’s responsibility. This
definition is good point to start with, although it seems narrow and has a limited
connotation. But, it cannot be denied that interventions for development have a
heavy ‘political’ element seen in the interplay between the state and its agencies of
governance on one hand, and its ‘political society’ on the other hand, which allows
for politicians and bureaucrats (the elite leadership) to legitimise interventions for
development, and actions purported to help the poor that could be inefficient and
corrupt (Mukherji 2017). An important concern in this context, in an understanding
of ‘governance’ in terms of—What is the larger canvas of the issues that underlie
governance? How does governance, as a process, operate in relation to the
‘governed’? In other words, there is a need to demystify the concept of governance
and examine the relationship between ‘people’ and the ‘state.’
The contemporary understanding of redistribution to combat widespread poverty
and inequality has led to stronger state action on issues like land ownership and
tenancy, rural landless and small landholdings, support for the small enterprise,
besides livelihoods needs, access to public services and social protection of the
vulnerable populace, including those engaged in the informal sector. While this
move is in the right direction, the process of governance continues to comprise a
major challenge. The current attempts towards understanding the meaning, process,
action and institution of governance have arisen from its understanding as a
practice, the politics in the interplay of government institutions and their func-
tioning, the notion of exclusion and incremental inclusion in governance processes,
and governance challenges in reaching development to the poor. This has enhanced
2
The intellectual context for this argument can be found in James Ferguson (1994), The Anti-
Politics Machine: ‘Development’, Depoliticization, and Bureaucratic Power in Lesotho, published
by University of Minnesota Press; and, John Harriss, K Stokke and O Tomquist, eds (2004),
Politicizing Democracy: the New Local Politics of Democratization, Palgrave Macmillan, London.
Governance and Governed: Why Governance? 5
the scope of debate and divergence in the understanding of ‘governance’ to achieve

effective development.
A basic understanding of governance needs to acknowledge that an interest in
public issues is not confined to government as action of the state system. The
transition in the understanding of governance now suggests a shift from the more
traditional pattern of governing, which was basically seen as ‘one-way traffic’ from
those governing to those governed, towards a ‘two-way traffic’ model in which
aspects, qualities, problems and opportunities of both the governing system and the
system to be governed are taken into consideration (Kooiman 1993). Looking at the
knowledge gaps, and neglects in the idea of governance, therefore, the attempt in
this book is to deepen the understanding of governance and its interaction with the
governed, by providing an in-depth discussion of the players of governance in
different context and country scenarios.
1 Debates and Discourse
The signing of the Magna Carta in 1215 as a charter by King John of England
brought up a radical shift in governance structures. Prior to this, the King enjoyed
absolute authority. The Magna Carta was a monumental idea that, for the first time,
recognised the idea of civil society and that power of government can be limited by
the people who are governed. However, its acceptance and implementation faced
several challenges. Resistance to this idea continued over generations and is well
capsulated in the work of Thomas Hobbes in his 1651 book, ‘Leviathan’. He stated
that the control of power must be lodged in a single person, and no individual can
set their private judgments of right or wrong in opposition to the sovereign’s
commands. John Locke’s work ‘The Second Treatise on Civil Government’, pub-
lished in 1690, on the other hand, spelled a completely different philosophy of
governance. He brought in the idea that labour of one’s body and work of one’s
hands are one’s own. This gave birth to the notion of individual freedom and private
property. This laid the ground for two strands of thoughts; where one school
believes that state is the epitome of authority which grants right to people and
manages every dimension of society, while the other school believes that people
form the authority that creates the government and has the inherent right to limit its
power. And, it is these two strands of diametrically in-opposition positions about the
state’s role that underlie the debates in the understanding of governance, even today.
The starting point of understanding governance, thus, lies in the two-end
spectrum of defining governance—seeing it as a synonym of government (Stoker
1998a, b), on one hand; and on the other, seeing governance as a process without
government (Rosenau 1992). The whole process of governance lies somewhere
between these two. The idea of governance was first problematised in a World Bank
document of 1989 on sub-Saharan Africa that looked at crisis in governance and
recognised good governance as ‘sound development management, in the ‘manner in
which power is exercised in the management of a country’s economic and social
resources for development’ (World Bank 1992, p. 3; cited in Jayal 1997). In turn,
the discussion on poor governance is often analysed through failure to make a
separation between public and private, thereby facilitating the appropriation of
public resources for private gain; the failure to establish a predictable framework of
law and government conducive to development; excessive regulatory rules which
impede the functioning of markets; misallocation of resources following from
priorities not consistent with development; and non-transparent decision-making
(Jayal 1997).
From a democratic perspective, the advantage of the classical model of gov-
ernment through the nation-state was its ability to provide clear institutional
channels for the participation of citizens and the representation of their interests
and, also, clear lines of accountability for executive action (Rosenau 1992; Rhodes
1996; Merrien 1998; Stoker 1998a, b; Pierre 2000). This wider understanding of
governance accepts the inclusion of non-government and community-based insti-
tutions in the system, which according to Rhodes are ‘non-state’ actors (Rhodes
1996), and this recognises the role of government in governance as a contextual
phenomenon. Government in the context of governance is to learn an appropriate
operating code that challenges past hierarchal model of thinking.
The importance of the reforms in the governance process determines the pace
and pattern of inclusion in growth (GoI 2013). The architecture of governance
impacts trusts in institutions of government and large business. Lack of trust in
institutions increases impatience in society, leading sometimes to a political logjam,
which could cause difficulties when attempting to make reforms that the system
needs. For instance, strengthening local governance is more effective than imposing
centralised models if the difficulties in governance are contingent to diversity in the
system, as locally adapted solution can be more effective. In this process, it is
important to break the silos and create convergence. In a devolved structure with
autonomy closer to where results are required, and with different parts of the system
working collaboratively, adaptation and learning are faster (GoI 2013). This inter-
pretation points to the debate underlying the process of governance. Strengthening
local governance to cope with highly diversified societies, when structured into the
overall framework of governance, thus, will contextualise a dynamic model of
governance having different layered actors (state, private and civil society) inter-
acting together to achieve socio-economic changes through convergence of various
institutional mechanisms shaping the process (i.e. accountability, transparency, rule
of law and people’s participation in decision-making).
2 Rethinking Governance
Bevir (2010) in his earlier work ‘Democratic Governance’ provides a compelling

historical and interpretative account of governance, tracing the term governance as
routed in the state and its machinery that were propounded in early twentieth
century to later references to it as policy ideas and changes within the state
structured through interactions with society. He argues that while policy makers are
increasingly adopting newer methods of governing by relying on markets, networks
and technocrats, the formal edifice of government continues to function in the name
of very different ideals of government through representative democracy.
Today, governments across the world are increasingly relying on non-state
organisations and networks (Putnam 1993). Situated within the larger discourse on
state and its role in development, governance involves a fundamental shift in the
understanding of the role of state from ‘provider of services’ to ‘arbiter’ and a
‘facilitator’. This shift is reflected in three broad forms of governance reforms—(a)
disinvestment policies and shrinking public sector, (b) adjusting sectoral policies
for economic efficiency and market responsiveness and (c) simplifying the
bureaucratic and legal constraints to encourage people’s interactions in the process
reflected through procedural and participatory practices of citizenship (Bardhan
2005). The initial debates were on definitional approaches and its rhetorical use. For
long, it was viewed as an ‘act of governing’ through various activities undertaken
by the government and the policy decisions made by it. This implied a hierarchical
functioning of the state. The need to differentiate between government and gov-
ernance emerged with emphasis on new modes of governing as an act involving the
governed, conditioned by the institutional context.
In the upsurge of interest in the term and its usage in recent times, a significant
body of work on governance has emerged, which have sought to define governance.
However, different actors define governance differently. There is the common
perception that governance seeks to capture the paradigmatic and ongoing change
in the process of governing around the world. From the significant body of work
that has emerged, there is a need to identify the advances made regarding the actors
and processes involved, to be able to arrive at an informed perspective on the
subject. The progression in literature defining governance is also a manifestation of
various trends and transitions involved with the conceptualisation of governance.
The economic and political reforms of the 1990s in many developing countries,
including India, ushered in market-like situation where the role of the government
became minimal. Rather those delivering services, conditions were created that
encouraged competition in the provisioning of public services with governments
having a facilitative role (World Bank 1992). In the same period, governance
discourses began to take a ‘good governance’ approach, at least in donor-driven
contexts. The broad scope of definition began to move from management towards
accountability and better state responsiveness. This gained clarity by the late 1990s
with focus on rules, enforcement mechanisms and institutional structures defining
interactions between state and society. UNDP (1999) observes that governance is
the framework of rules, institution and practices that set limits on the behaviour of
individuals, organisations and companies. Going a step further, World Bank (2002)
relates governance to three broad conditions—the process by which governments
are selected, monitored and replaced; the capacity of the government to effectively
formulate and implement sound policies; and the institutions that govern economic
and social interactions among citizens, and their interaction with the state.
This progression is also very visible in the ways academia and practitioners deal
with definitional aspects of governance, In the early 1990s, governance was
described as a change in the nature and meaning of government. By the turn of the
decade, in the 2000s, governance became a ‘set of guidelines’ involving resources
used to facilitate collaboration and communication, and to accommodate multiple
identities with unequal powers and different interests existing in the spheres’ public
interactions. Much of the debate in recent years has, thus, focused on the reality of
reduced government, the growing relevance of market and private initiatives, and
the important contributions of the civil society in providing public services and a
people-centred complexion to governance. Korhonen and Mehrotra (2007) defined
governance more on the lines of economic, political and administrative manage-
ment, and coordination. The emphasis was on the role of governance in eliminating
misalignment between organisational strategy and process endeavours. Jeston and
Nelis (2008) also write about the alignment among processes, process designs and
performance strategy which is instrumental for governance. The broad elements of
governance which are, today, unanimously accepted by all are:
• Process by which elements of the society wield power and authority, and enact
policies.
• Capacitate government to manage resources and enforce policy regulations.
This entails (i) creation of legitimate spaces of interactions for separate identities
in public policy making and a (ii) recognition for local initiatives in the governance
process. Thus, today, governance involves multilevel institutional linkages and
shared responsibilities between diverse actors—the government (public sector), the
private businesses, and the community or local resource users—within a multi-
layered structure of processes and deliberative mechanisms. This paradigmatic shift
in governance processes, entailing a relationship with the governed as against the
first-generation approaches that were bureaucratic and offered a command-and-
control regulatory regime, underscores three fundamental premises for action as
follows:
• The need to reconceptualise the aims and organising principles of governance so
as to reflect the existing risks and interdependencies at the different levels of the
federal government—national, sub-national and local levels of government;
• The need to reconnect with the citizens/stakeholders in the development,
implementation and assessment of any policies pursued; and
• The need to redefine administrative rationality to accommodate the existing
challenges, choices and opportunities, and to adapt to information and oppor-
tunities by developing networked approaches.
However, the broad similarities in the actions do not easily lend themselves to
either understanding what is governance, nor what constitutes governance. The
interplay of different interests, how these get organised to make claims on the
system and the underlying politics, is important element of governance, and this
needs to be explained. Particularly, considering a plural and diverse populace, and
the complex social structures, an account of the governance and its interplay with
the governed is needed to form a critical thinking on how people’s affairs are
getting managed within the state. It is this that forms the central aim of this
volume—to critically look at the status, models and new challenges of governance
across countries and to throw light on what implications they have on the gover-
nance in practise.
3 Organisation of the Book
This volume amalgamates grounded accounts of various state experiences in the

interface between the state, market and society, and provides an analysis of the
issues that concern the relationship between governance and governed, and
the attempts through which they are sought to be resolved. Through the lens of the
different contributions, the volume examines the relation between those who govern
and those who are governed. Arguing how the agency of government is being
relooked, the volume articulates how power is captured in ‘politics’ and ‘gover-
nance’. Politics can either be consensus seeking or can extend to conflict at the
other end. Governance relates to concerns about how to maintain political power.
Through the different contributions, the following questions are explored in the
volume—
• If governance is about how the institutions, rules and the organs of the state
behave in their interaction with people and lager society, how do governance
practices manifest?
• Within a democratic regime characterised by huge diversity and deeply
entrenched social inequalities, what are the best instruments of governance? Can
governance be neutral to class, culture and social division?
• Is governance conceivable beyond the power and authority of the state? How
communities organise to make demands on the state?
• What is the politics of governance, particularly in the light of increasing pres-
sures from dwindling resources and insecure livelihoods, and how this impacts
entitlements? This is critical in providing an understanding of governance that is
responsive to the governed.
The introductory two chapters introduce the theme and identify the contested
issues that are addressed in the volume, with the second chapter specifically
discussing the analytical framework for analysing governance as a process. The
section, thus, sets the scene for the discussions that follow on the dynamic link
between governance and governed. The book has been further categorised in
understanding the practice of governance, politics of governance and governance
and exclusion in different societies.
3.1 From Government to Governance
This section in the volume provides an insight into the discourse from government
to governance. The discourse of governance in liberalised India in completely
intertwined with political progression in India. The ways, in which ‘governance’
has emerged in political discourse in India since the start of liberalisation in 1991,
focusing particularly on the period from 1991 to 2009 when the reforms became
increasingly consolidated. This is the central argument in the chapter by Manali
Desai. The embedding of the market in India has been simultaneously an economic,
political and cultural project of incremental distancing from Nehruvian socialism.
Looking at this, the paper subsequently argues that the Nehruvian legacy has been
substantially modified rather than abandoned.
The case of South Africa provides an interesting journey of governance in
post-apartheid South Africa, namely pre-1994 apartheid period when minority
white governed a majority in a racially and spatially divided society; post-1994
when there were democratic transformations and institution building; and, further
the 1999–2004 phase which witnessed an integrated approach to strengthen gov-
ernance. Christopher Landberg has studied governance and administration in the
post-apartheid period in South Africa in light of the contemporary history of the
country, which has seen South Africa moving from a ‘transforming’ state to a
self-declared ‘developmental’ state, and then towards a ‘capable’ state. He argues
that the years of post-apartheid administration in the state has been inward looking.
The paper by Madhushree Sekher talks about local governance in India,
examining the government-to-governance discourse with broad-brush strokes. It
portrays the contours of governance practices and challenges, looking specifically at
the structural and institutional issues of rural local governance. The paper is less an
attempt to draw policy lessons than to understand what has happened and what
constraints local governance process. It highlights issues that are often overlooked
in current debates on local governance and service delivery, such as the role of
informal institutions, multilevel governance and political realities of relationships
from people’s perspective.
3.2 Rethinking and Restructuring Governance
The next section in the volume presents a set of paper that articulates a rethinking of
governance and a restructuring of processes. One dimension which offers a com-
mentary on the government-governance narrative is fiscal situation of local bodies.
Theory of Fiscal federalism holds that the higher degree of decentralisation opened
up alternative local options for taxation and generated investment incentives which
in turn lead to a higher the ratio of new investment, at least in the long term. It is
assumed that fiscal devolution of powers will bring a change in the nature of the
powers of and interactions among the different levels of power structures in local
bodies. Anitha Rath’s paper reviews the nature and extent of engagement of local
bodies in India in fiscal reform processes. The paper explores various reform ini-
tiatives and its emergent political economy.
The chapter by Xunda Yu and Shunji CUI looks at the transition in the process
of communist governance and more so the governance in China. In China, the state
has always played a dominant role in the promotion of social development, while
democratic accountability and constraint have been either weak or absent. Recent
developments in Hangzhou, however, point to the possibility of a rather different
balance. In Hangzhou, there has been significant public involvement in the eval-
uation of the performance of the municipal authorities, especially in respect of the
resolution of ‘livelihood’ issues (or ‘quality of life’ issues). This has effectively
placed limits on what the authorities can do and made them more responsive to
public needs. These new arrangements have proved extremely popular and have
certainly helped the local authorities to make progress towards the solution of major
social (livelihood) problems. While it is based on the overarching principle of
public participation and involvement, the implementation is flexible and is evolving
as a result of experience and practice. The practice of the Hangzhou system is
important, and its implications for democratic development throughout China are
definitely worthy of attention and investigation.
Continuing the discussion on rethinking governance, Geetanjoy Sahu’s paper
discusses emerging issues in the state of environmental governance in India. Over
the last three decades, the Ministry of Environment and Forests (MoEF) of
Government of India has enacted a number of environmental laws and also has
restructured the environmental regulation process to ensure successful enforcement
of environmental law in an effective manner. However, a plethora of such enact-
ments and Constitutional provisions has not resulted in preventing environmental
degradation in the country. In this context, the move by the Ministry of
Environment and Forests (MoEF) to restructure environmental regulation and the
monitoring process is welcomed. But there is also a larger question about whether
the basic assumptions going into thinking about the restructuring of environmental
governance process are defensible. Geetonjoy Sahu’s paper examines historical
changes in policy related to environment in India and shaping of environmental
governance in India. This paper makes an analysis of environmental governance
and regulation in India in four selected states to explore whether we need a mul-
tiplicity of authorities to ensure effective implementation of environmental laws, or
do we need to reorient and redesign existing institutions.
Technology and media have been the two key propagators in the transition of the
process of governance. ‘Governed’ has discovered the ability to transform ‘gov-
ernance’ through the use of technology, such as social media. The last two years, in
particular, have seen the global community being enamoured and even caught by
surprise by the ways in which some governed have discovered the ability to engage
actively and transform their governance. Ruth Kuttumuri in her paper draws on
examples from the UK, Middle East, Pakistan, India and China to understand the
interface between technology and media, to argue that communities around the
world are increasingly involved in securing their right to be governed for their
benefit.
This changing dynamism of governance through the progression of technology
is equivocally pronounced by M.N. Roy in his paper which shows electronic
technology is playing a growingly important role in the dynamics of governance
through various applications, broadly referred to as e-governance. His paper
examines the ways in which e-governance can be an asset to governance processes
and argues it has the potential of redefining the processes of governance for both
engagement of the citizen in policy making as well as in improving delivery of
goods and services resulting in a paradigm shift in how government functions. The
author recognises that technology is always a tool, and it is the political leadership
and the economic and social forces which determine the extent to which technology
can drive governance.
3.3 Governance and Inclusion: Navigating the Roadblocks
This section vividly deals with the idea of differential needs of the governed, lack of
accessibility to resources, social inequality and the processes to navigate roadblocks
for inclusion of the governed in governance. This leads us to the crossroad of
understanding governance as an evolving dialogue between the realm of adminis-
trative aspect and technological aspect. The importance of the state has been well
recognised until now. But the role of the private player in expanding its definition
from being a merger of a profit-making machine to a social institution is a recent
phenomenon, especially in India. Highlighting this domain, Hema Bajaj’s work
focuses on the scope of corporate governance and how corporations, especially in
India, are trying to expand their objectives from purely financial to social, aligning
roles of their various stakeholders, especially shareholders, and the larger society.
The paper by Pedro Novias and Carlos Vainer critically looks at the idea of
governance as a solution to social inequality that the authoritarian state-led intense
economic development had created during earlier military rule in Brazil. The paper
observes that the notion of governance, at least in Brazil, does not express interests
emerging from society. Instead, it originates, circulates and targets the state. It then
argues that participatory governance might, in fact, be an illusion for the partici-
patory exclusion of democracy without universal suffrage, where poverty is
‘managed’ by actors from the state, non-government organisations or who the
beneficiaries are, and they are brought together according to their relevance.
Compatible with this context of governance and exclusion, Abdul Shaban in his
work looks at the socio-cultural diversity in cities in India and examines the
challenges of governing diversity. It argues that the ‘state’ is highly differentiated,
and it is this that often poses a challenge and influences its role in effectively
governing conditions like religious strife, nativities movements, poverty and con-
ditions of the marginalised.
The volume, thus, weaves together a picture of ‘governance’ and the potential of
how the agenda can be more strategically linked to those who are ‘governed’. It
attempts a renewed thinking about the governance process and, in doing so,
articulates—(i) how processes of governance evolve; (ii) the state–society relations
seen in terms of differences between institutions and ground reality, and the blurring
of formal processes and lines of authority; (iii) the politics of resource-use in
governance, both as an input (technology) and as a constraint (environmental
concerns); and (iv) the questions of aspirations of the ‘governed’/citizens in the
process.
References
Bardhan, P. 2005. Scarcity, Conflict and Cooperation: Essays in the Political and Institutional
Economics of Development. Cambridge, MA: MIT Press.
Bevir, Mark. 2010. Democratic Governance. New Jersey (USA) and Oxford (UK): Princeton
University Press.
Bevir, Mark. 2011. Governance as Theory, Practice and Dilemma. In The SAGE Handbook of
Governance, ed. Mark Bevir, 1–16. New York: SAGE Publication.
GoI. 2013. Scenarios: Shaping India's Future. Planning Commission, Government of India
(planningcommission.nic.in/reports/genrep/rep_sce2307.pdf).
Jayal, Niraja Gopal. 1997. The Governance Agenda: Making Democratic Development
Dispensable. Economic and Political Weekly 32 (8): 407–412.
Jeston, J., and Johan Nelis. 2008. Business Process Management: Practical guidelines to
Successful Implementations. Oxford: Elsevier Publishers.
Kooiman, Jan. 1993. Modern Governance: New Government-Society Interactions. London: SAGE
Publication.
Korhonen, Iikka, and Aaron Mehrotra. 2007. Money Demand in in post-crisis Russia:
De-dollarisation and Re-monetisation. BOFIT Discussion Papers, No. 14, Institute for
Economies in Transition, Helsinki. https://helda.helsinki.fi/bof/bitstream/handle/123456789/
8144/DP1407[1].pdf?sequence=1. Accessed on 22-01-2017.
Merrien, Francois-Xavier. 1998. Governance and Modern Welfare States. International Social
Science Journal 50 (1): 57–65.
Mukherji, R. 2017. Governance Reform in a Weak State: Thirty Years of Indian Experience.
Governance, 30: 53–58 (wileyonlinelibrary.com/journal/gove).
Pierre, J. 2000. Conclusions: Governance Beyond State Strength. In Debating Governance, ed.
J. Pierre, 241–246. Oxford: Oxford University Press.
Putnam, Robert D. 1993. Making Democracy Work. Civic Traditions in Modern Italy. Princeton:
Princeton University Press.
Rhodes, R.A.W. 1996. The New Governance: Governing without Government. Political Studies
44: 652–667.
Rosenau, James N. 1992. Governance, Order, Change in World Politics. In Governance Without
Government: Order and Change in World Politics, ed. James N. Rosenau, and Ernst Otto
Czempiel, 1–29. Cambridge: Cambridge University Press.
Stoker, G. 1998a. Governane as Theory: Five Propositions. International Social Science Journal
50 (155): 17–27.
Stoker, G. 1998b. Private-Public Partnership and Urban Governance. In Partnership in Urban
Governance: European and American Experience, ed. J. Pierre, 34–51. London: Macmillan
Press.
UNDP. 1999. Human Development Report, 1999. New York: Oxford University Press (for the
United Nations. Development Programme).
World Bank. 1992. Governance and Development, Washington, DC. http://www.gsid.nagoya-u.
ac.jp/sotsubo/Governance_and_Development_1992.pdf. Accessed on 20-12-2016.
World Bank. 2002. Building Institutions for Markets (World Development Report 2002). New
York: Oxford University Press (for the World Bank).
Understanding Governance as a Process
Madhushree Sekher, S. Parasuraman and Ruth Kattumuri
1 Conceptualizing Governance
The notion that the term of governance refers to new processes but involves existing
government has much currency (Finer 1970; Jayal and pai 2001). In fact, the output
of governance is not very different from government (Stoker 1998). In substantial
scholarship available on the subject, the changing nature of government and,
therefore, of the state is inevitably an object of analysis. Additionally, the reform of
the public sector (Bevir et al. 2003) has been a major preoccupation of studies on
governance.
While providing a lucid account of governance as theory that articulates features
of this emerging domain of study, Stoker (1998) holds that despite the varied
meanings attached to the term, there is a general agreement that governance refers
to governing styles in which the boundaries between public and private sectors have
become blurred. Calling it a ‘social economy’ that has emerged between the market
and the public sector, the focus of governance needs also to be on mechanisms that
do not rest on authority and sanctions of governments (Stoker 1998). This suggests
that the constitutional–institutional model of governance, such as the Westminster
for instance, is limited. Systems of government that have been projected as unitary
and centralized structures are in fact a complex architecture built on an edifice that
is not divorced from wider societal forces.
M. Sekher (&) S. Parasuraman

R. Kattumuri

https://doi.org/10.1007/978-981-10-5963-6_2
16 M. Sekher et al.
The tendency of scholarship to view government and governance as two ends of

a theoretical spectrum is not very useful in capturing changes in form and function
of governance. Governance is a societal organization which emphasizes processes
that can be independent of the state and involve non-state actors. (Jordan et al.
2005). A comprehensive statement along similar lines is also made by Kohli (2012),
who recognizes that the authority structure and socioeconomic forces condition
each other, creating patterns of change that locate diversities in the resource base.
Thus, governance is the product of its instrumentation. As already mentioned,
governance lies somewhere between ‘governance as government,’ and is in addition
to or outside the purview of government. The distinctive feature of governance is
that it combines established administrative setup of the state, interplaying with the
market and society, leading to hybrid arrangements of interactions involving
multiple stakeholders. This understanding of governance draws attention to the fact
that, increasingly since the 1970s, government arrangements, different jurisdictions
of governance, and multiple stakeholders are linked together in networks, in con-
trast to earlier hierarchical bureaucratic arrangements as characterizing governance.
Accordingly, this chapter attempts to build an analytical framework to analyze
governance as a process. Through this normative frame, the volume provides the
lens to unravel the complex and interlocking social, cultural, economic, political,
spatial contexts underlying idea of governance, and an exploration of the pathways
for the incremental inclusion of the governed and their concerns through a focus on
processes and mapping of opportunities.
2 Governance: A Brief Articulation of the Landscape
Issue of governance not only involves concerns about administration and policy
regulations but also livelihood’s needs and demands of citizens, associated with
development and poverty-related risks (World Bank 2007). A strong policy envi-
ronment, legislative framework, and well-established institutions at the national and
state level are central to effective governance. As documented through various
success stories, progressive existing institutional arrangements for addressing needs
of the governed are central to effective governance and for enforcing compliance
(World Bank 2007). However, despite an enabling institutional environment,
demand for change and for more effective institutions to meet governance chal-
lenges characterizes the governance debates.
Looking at governance worldwide, three elements can be identified as funda-
mental for effective governance—(i) clearly defined objectives, with a good
understanding of the roles and responsibilities of all players concerned; (ii) access
to decision-making and opportunity for people to participate; and (iii) access to
redress. This involves three distinct institutional systems:
Understanding Governance as a Process 17
(a) the legislative efforts and constitutional directives that spell out the objectives
of governance, while delineating the roles of different players—the regulator,1
the regulated community, and the affected community or the general public;
(b) multilayered administrative process shaping the involvement of government
and society; and
(c) the mechanisms for local governance for informed and location-specific
responses.
Accordingly, the state of governance can be examined along the following three
lines.
• Legislative Efforts and Constitutional Directives
This reflects that besides the necessary institutional system in terms of both the
structures of governance and the rules of governance that regulate both public and
private behavior for sound stewardship, the process is an integral part. While
linking governance with development is an integral part of state functioning,
national development agenda needs to be tailored around the needs of the governed
at different levels of governance—central, state, and local levels. But, as
acknowledged, there are deficiencies in the existing framework and reforms, par-
ticularly in the regulatory system, particularly in command and control type of
regulatory instruments. The situation, as it exists today, reflects a weakness in the
administrative process, particularly when it comes to the three fundamental steps for
enforcing deterrence—(i) detecting violations, (ii) swift response to violations, and
(iii) initiating appropriate sanctions against offenders (World Bank 2007).
• Multiple Stakeholders and Multilayered Processes
While the legislative branch of the government is responsible for the enactment of
policies, and the judiciary is responsible for its enforcement in case of any trans-
gression, it is the function of the executive branch (central government, state
governments, and local authorities) to determine policies and its administration in
actual practice. Here, it needs to be noted that federal entities hold the major
responsibility in terms of ownership over resources,2 providing institutional pro-
visions for their management, and the establishment of governance standards. The
governance scene is also dominated by comparatively strong mesolevel government
agencies. They not only have responsibility, but also authority and legal rights. It is
true that governance rests on the fundamental notion of ‘shared ownership of and
responsibility for action’ involving three core institutional players in the process—
the regulators, the regulated community, and affected community. But, evidence
1
In India this has reference to not only the Executive Branch or government departments within the
federal government structure, but also the Judiciary which is an important institutional player in
the country’s governance because of perceived inabilities of the executive and the legislature to
enforce regulations.
2
For example, majority ownership of all forestlands rests with the federal government.
18 M. Sekher et al.
shows that the responsibility of governance primarily rests with the government
(Hueglin 2003; Durant 2004).
At the same time, the process of governance is also characterized by the plu-
ralistic decision-making arrangements to accommodate diverse actors/interest
groups. Thus, while government policies are institutionalized through formal pro-
cesses, the task of implementation is organized both formally and informally
embodying local decision-making structures, non-governmental organizations, and
private businesses besides the government agencies and transitional institutions.
This has made governance both a multi-stakeholder and a multilayered process.
The local participatory organizations contribute to the governance process in
broadly three ways:
• Meeting the twin objectives of livelihood security of the affected community
and conservation/protection.
• Ensuring that the governance process is built on consensus around the issues
critical to all concerned. And,
• Contribute to the capacity of governed to participate in negotiations over
resource rights, ensure accountability, and ensure equity in the community,
which are in turn the three crucial elements for effective governance.
There is no doubt about the importance of institutional strategies as being key to
the environmental governance process. On similar lines, one also needs to
acknowledge the presence of numerous non-governmental organizations and citizen
movements that are organized as institutional stakeholders in the governance pro-
cess, which implicitly suggests the existence of ‘network governance system’ for
seeking negotiated solutions. Broadly, the different institutional stakeholders in the
governance process can be grouped into four categories—the regulators, other
government agencies involved in the policy making and implementing in related
sectors, the civil society players as the ‘affected community,’ and private businesses
primarily constituting the ‘regulated community’ (Fig. 1). The biggest challenge
facing governance process is the gaps in policy-implementation mechanism that
indicates a rather weak enforcement policy, which at times is non-existent.
• Decentralization and Local Governance
The link between governance and the governed has much to do with the power that
democracies give to citizens to affect decision-making processes and hold gov-
ernment officials, and other individuals accountable. Under decentralization
reforms, power is transferred from central government to institutions and actors at
lower levels of political and/or administrative authority. The rationale behind
decentralization is that these reforms foster increased efficiency and equity in
development activities by virtue of the proximity of the local institutions to the
people they represent. In this scenario, the central government (and the state gov-
ernment, where it may concern) commonly maintain control over the resources
through extensive bureaucratic procedures, and management plans like price con-
trols, marketing and permits for processing and transporting (Bardhan 2005). This
Fig. 1 Key stakeholders in governing the governed. Source Adapted from (World Bank 2007)
often represents a loss of local decision-making authority (Jessop 1997; Alesina and
Rodrik 1994).
One important aspect of the governance process centers around the issue of
federalism. The last few decades have witnessed a paradigm shift in governing the
governed from the state to a situation where policy making does not emanate from a
single unitary authority but is the outcome of a multilayered structure. In this
situation, it is not just a case of centralization versus decentralization in the gov-
ernance process, but also an issue of aligning specific responsibilities and regulatory
instruments with different levels of government to achieve the government objec-
tives (Ostrom 1999). This entails not only a consideration toward the issue of
flexibility in policy making, but also the range of policy instruments and hierar-
chical tiers that are inseparable to designing a system governance for governing the
governed.
20 M. Sekher et al.
Fig. 2 Progression of discourse on governance and governed
Figure 2 provides a synoptic picture of the progression of discourse on gover-

nance and governed, since the nineteenth century. During the early 1900s, which
primarily was period that stood for public symbolism, governance was the act of
government as ‘a monolithic structure.’ The period between 1950s and 1980s saw
the beginning of the idea of governance as an action of a layered governing body

which provided for ‘inclusion’ of the private sectors and citizens in the process.
Today, governance is a networked process that is multilayered involving multiple
stakeholders.
3 Understanding Governance: A Conceptual Framework
Figure 3 displays the conceptual framework developed for this book. As indicated
in the center of the figure, the concept of governance used here refers to the
institutions and processes by which affairs are managed in three sectors: the state
(comprising the political system, the public administration, and the judiciary), the
private sector (comprising various types of enterprises ranging from small-scale
entrepreneurs to multinational companies), and civil society (also referred as ‘third
sector,’ comprising citizen groups ranging from community-based organizations to
international NGOs).
Just as in the case of the private and the third sector, this framework does not
only include public sector institutions at the national level, but also those at the
sub-national level (e.g., local governments) as well as those at the international
level (e.g., UN organizations). This is indicated by the different ‘layers’ of the
circles above. The concept of governance used here refers both to institutions and
processes within a sector (e.g., corporate governance in the private sector) as well as
Fig. 3 Conceptualizing the governance and governed link

22 M. Sekher et al.
to relations between the sectors, which are indicated by the arrows between the
circles in the above diagram.
The different dimensions of governance discussed in the first part of this chapter
can be located in the ‘triangle’ that forms the center of the conceptual framework.
For example, the governance dimensions ‘voice and accountability’ and ‘rule of
law’ refer to the relation between state and citizens, whereas the dimensions
‘regulatory quality’ and ‘investment climate’ refer mainly to the relations between
the public and the private sector. ‘Government effectiveness’ can be seen as relating
to the effectiveness of public sector institutions vis-à-vis both the citizens and
private sector enterprises. ‘Corporate social responsibility,’ as another aspect of
governance, mainly refers to the relations between the private sector and civil
society.
The framework used here takes into account that actors within each sector may
use the concept of governance strategically to pursue their interests. For example,
state actors may refer to governance to reclaim their legitimacy, whereas civil
society actors may use it to justify their claims vis-à-vis the state by demanding
voice and accountability. Likewise, the private sector demands a conducive
investment climate, and it may point to its corporate social responsibility to avoid a
negative public image.
The framework shown in Fig. 3 places the concept of governance into a dynamic
perspective. It considers major economic and social/political driving forces,
depicted on the left-hand side of the diagram. These include economic shocks such
as national and global financial crises as well as national and global political shifts,
such as the end of the Soviet bloc. The framework also shows the in-depth inter-
relationship in the process of developing a governance decision that is mutually
constructed, assessed, and evaluated by the different actors. Depending on the
already existing governance conditions in the public, private, and third sector, the
changes induced by the driving forces may have rather different outcomes. In fact,
the approach used in this book, based on grounded accounts, makes it possible to
study the factors that influence how various driving forces change governance. As
shown in the right-hand side of the diagram, this book also aims at understanding
how these changes influence socioeconomic outcomes, such as growth, poverty
reduction, and equity, as well as political outcomes, such as the rights and roles of
citizens. The dynamism of governance is mainly added by interaction with the third
player. The quality and capacity of civil society play a major role in the process of
governance, which is determined by the environment in which it functions.
While it is important to understand in detail the scale and operations of the
above-mentioned sectors, it is also interesting to notice how blurred; unambiguous
lines are formed across each sector. The whole idea of parastatal bodies being
reflected in different levels of governance leads to a different way of conceptual-
izing governance. Present governing structures are not only characterized by plu-
rality and multiplicity but also by horizontal and vertical uncertainties regarding
who does what and who does not.
It is in this context; the different contributions to this volume reflect upon
governance and governed. Governance as a process is not anymore restricted to
administrative and official spaces; rather it has begun to define the scope and
possibilities of power balances between different groups. In this volume, the authors
attempt to engage with the practiced realities of governance, where multiple players
and procedures are assumed to be involved.
While all country case studies use the above conceptual framework as guiding
concepts, they employ different methodological approaches and different disci-
plinary perspectives. Still, based on the above framework, each of the country case
studies aimed to address the following set of common questions:
• What changes in governance were observed in the focus area of the study during
the period under consideration? How can these changes be explained? What
were the driving forces behind the observed changes, taking both national and
global changes into account? What role did the existing governance conditions
play?
• How did different interest groups interpret and use the concept of governance in
the process?
• What are the observed or expected outcomes of the changes in governance that
are observed? What feedback loops can be observed or expected?
4 Conclusion
While there has been an unprecedented increase of interest in governance in recent

times there continue to be debates about its essential nature and effects. While some
scholars view new hybrid arrangements where markets and non-state actors are
increasingly involved in what was earlier the exclusive domain of the state as
changes in the continuum of the study of government, others view these as
developments independent of the state. Different actors view governance differ-
ently. However, there is consensus that far-reaching paradigmatic changes in recent
times have led to a reconfiguration of political power. There is a need, therefore, to
acknowledge the multiple stakeholders in conceptualizing governance today.
While the significant body of scholarship on the subject of governance includes
some rich descriptive accounts of specific cases that try to capture this change;
however, as has already been acknowledged, the sometimes ad hoc response to the
host of situations that governments have to deal with in today’s globalized times
lead to arrangements and governance practices that are quite different from any
grand theories. If governance is as Bevir points out, ‘about the constantly shifting
and contingent nature of practical political activity’ then theorizing about it should
emanate on the basis of grounded country experiences (Bevir 2011, p. 11). As
studies on governance challenge existing notions of the society and polity as
central, unified and bound by territorial boundaries, to unravel their interconnect-
edness, its significance for the better understanding of society and polity cannot be
underestimated.
24 M. Sekher et al.
References
Alesina, Alberto, and Dani Rodrik, 1994. Distributive Politics and Economic Growth. The
Quarterly Journal of Economics 465–490.
Bardhan, P. 2005. Scarcity, Conflict and Cooperation: Essays in the Political and Institutional
Economics of Development. Cambridge, MA: MIT Press.
Bevir, Mark. 2011. Governance as Theory, Practice and Dilemma. In The SAGE Handbook of
Governance, ed. Mark Bevir, 1–16. New York: SAGE Publication.
Bevir, Mark, R.A.W. Rhodes, and Patrick Weller. 2003. Comparative Governance: Prospect and
Lessons. Public Administration 81 (1): 191–210.
Durant, Robert F. 2004. Reconnecting with Stakeholders. In Environmental Governance
Reconsidered: Challenges, Choices and Opportunities, ed. Robert Durant, Daniel Fiorino,
and Rosemary O’Leary, 177–182. Cambridge, Massachusetts: The MIT Press.
Finer, S.E. 1970. Comparative Government. London: Allen Lane.
Hueglin, Thomas. 2003. Federalism at the Crossroads: Old Meanings, New Significance.
Canadian Journal of Political Science 36 (2): 275–294.
Jayal, Niraja Gopal and Sudha Pai, eds. (2001). Democratic Governance in India: Challenges of
Poverty, Development and Identity. New Delhi: Sage Publications.
Jessop, Bob. 1997. Capitalism and its Future: Remarks on Regulation, Government and
Governance. Review of International Political Economy 4 (3): 561–581.
Jordan, Andrew, Rüdiger K.W. Wurzel, and Anthony Zito. 2005. The Rise of ‘New’ Policy
Instruments in Comparative Perspective: Has Governance Eclipsed Government? Political
Studies 53 (3): 477–496.
Kohli, Atul. 2012. Poverty Amid Plenty in the New India. Cambridge University.
Ostrom, Elinor. 1999. Polycentricity. In Polycentricity and Local Public Economies: Readings
from the Workshop in Political Theory and Policy Analysis, ed. M. McGinnis, 52–74. Ann
Arbor, MI: University of Michigan Press.
Stoker, G. 1998. Governance as Theory: Five Propositions. International Social Science Journal
50 (155): 17–27.
World Bank. 2007. Strengthening Institutions for Sustainable Growth: Country Environmental
Analysis for India. New Delhi: Environment and Social Development Unit, South Asia Region,
The World Bank.
Part II
From Government to Governance
The Emergence of Governance Discourse
in Liberalizing India
Manali Desai
1 Introduction
This chapter will examine the ways in which ‘governance’ has emerged in political
discourse in India since the start of liberalization in 1991, focusing in particular on
the period from 1991 to 2009 when the reforms became increasingly consolidated.
The embedding of the market in India has been simultaneously an economic,
political, and cultural project of incremental distantiation from Nehruvian socialism,
although I will argue subsequently that this legacy has been substantially modified
rather than abandoned.1 Aside from dismantling the economic regime of the
pre-1990s, the marketization project has been accompanied by several different
discursive frames linking the nation, community, individual, and state. I argue that
governance forms the common theme within these frames. The increasing use of the
term ‘governance’ in the political domain suggests a growing concern with the
organization and use of state power at a time when the market is being promoted as
the key to India’s structural problems. But it has also emerged as a concern during
the period of the so-called democratic upsurge, wherein lower castes, in particular,
have challenged the power structures and development agendas of the state (Yadav
2004; Jaffrelot 2003). These concerns have therefore occurred across two sites
—‘elite’ (i.e., concerning how to reorganize state power) and ‘popular’ (i.e., the
ways in which mobilization from below makes demands on the state)—which have
come to be linked through the governance agenda.
1
Nehruvian socialism was not dissimilar to developmentalism in other parts of the third world
insofar as it placed central emphasis on the public sector, state intervention and regulation, and
socialist rhetoric which underpinned a protectionist, import-substitution model of industrialization.
M. Desai (&)
Department of Sociology, University of Cambridge,
Cambridge CB4 3SD, United Kingdom
e-mail: md644@cam.ac.uk

https://doi.org/10.1007/978-981-10-5963-6_3
28 M. Desai
This chapter will examine how the concept of governance came to be defined
during this period of major sociopolitical transformation, and, given its emergence
during the democratic upsurge, in what ways the term governance incorporated the
idea of popular political agency. In other words, how did the democratic citizen
emerging from marginalized groups figure in the new governance discourse? Was
governance solely a discursive frame linked to the attempt to forge a neoliberal
project, or did the democratization movements disturb this definition of governance?
1.1 Governance: Idea and Practice
The term governance is polysemic, employed in a variety of ways to communicate

different things about the exercise of power and its consequences. Nevertheless, its
increasing global currency suggests that a new mode of exercising state power is
gaining legitimacy. This turn toward ‘governance,’ and away from government as is
often suggested, follows the democratic transitions across many parts of the world,
not least in Latin America and the former Soviet bloc, which prompted growing
concern with legitimizing the domination of the state even as its relevance to the
globalization project was increasingly in question. The fundamentally polysemous
quality of the term ‘governance’ has allowed it to be put forward as a panacea to the
myriad problems of state legitimacy, of which violence, corruption, endemic
poverty, and ‘democratic deficits,’ i.e., lack of representation and accountability in
formal democracies, are seen as key symptoms. Governance can replace the
functions of the traditional state in some ways without explicitly eroding its
relevance.
The most common use of the term ‘governance’ is to indicate outcomes with
regard to the exercise of power by a governing body. These outcomes, as defined by
the World Bank, for example, are stability, voice and accountability, and the rule of
law.2 Other uses of the term are often conjoined to these three key definitions. The
World Bank coined the term ‘governance’ in the aftermath of the failure of
sub-Saharan African states to repay loans (Chakrabarty and Bhattacharya 2008,
p. 1), which also gave rise to the concept of the ‘failed state.’ The Bank viewed the
core symptoms of poor governance as interlinked—the failure to separate private
and public domains, in other words, the use of the state for private gain, poor rule of
law, excessive regulation, mismanagement of resources, and non-transparent
decision-making (Jayal 1997, p. 407). A key aspect of ‘good governance’ is a
reinforcement of the Weberian state insofar as it must be rational and impartial, but
different from the traditional state overseeing the workings of society and therefore
2
These criteria encompass other requisites such as effective public sector, competition in delivery
of services, absence of violence, transparency, and absence of corruption. The three criteria stated
above are not meant to be exclusive, but they are central to any definition of governance.
The Emergence of Governance Discourse in Liberalizing India 29
standing above it.3 Instead, the concept as employed by organizations such as the
World Bank draws on neoliberal ideas of reducing the size of the state through
decentralization and devolution. The state is instead conceptualized as a ‘network’
that enables rather than directs and regulates social activity.
The affinities between neoliberal discourse and that of governance as critics
argue concern the technocratic and managerial emphasis on results and perfor-
mance, which subordinates the procedural aspects of democracy (Chakrabarty and
Bhattacharya 2008, p. 15; Jaeger 2007). Such depoliticization and technicization of
public administration treat the market as the paramount mechanism for ensuring
economic stability, with the state’s role being to enable this regime of accumulation.
There is a perceived hollowing out of the welfare functions of the state, its repre-
sentation of the Rousseauian general will. In this view, the progressive degradation
of the state’s role renders democracy both antithetical and irrelevant to governance.
It would appear also that good governance is discursively constructed as a means
rather than end in itself, i.e., despite the concern with accountability, human rights,
and democracy, the end result is economic management and developmental goals.
The World Bank, for example, notes under a web document titled ‘Governance in
India’ that:
India has made tremendous strides in its economic and social development in the past two
decades and is poised to realize even faster growth in the years to come. India currently
stands at the threshold of a unique opportunity regarding governance and public man-
agement reform. However, with 17% of the world’s people, India accounts for less than 2%
of global GDP and 1% of world trade.
The major governance reforms proposed by the World Bank are in essence
neoliberal—‘improving the composition of public expenditures by reducing the
share spent on wages, pensions, interest payments, and agricultural subsidies, and
increasing investment and operations and maintenance for priority social, infras-
tructure, and agricultural programs.’4 Discursively, this assessment equates gov-
ernance with the type of state that promotes the conditions for private property and
the market to flourish, with a post-Washington consensus emphasis on social and
infrastructural programs.
The critique of governance discourse as anti-democratic may have some validity
in certain contexts where technocratic management has emerged as a dominant
conception of state activity (possibly more so in western contexts and developed
neoliberal states). However, it is important to recognize that as with neoliberal
ideas, the institutional application of governance discourse does not necessarily
follow the ideal. Likewise, governance as a model of the rule does not necessarily
materialize in practice. This gap between discourse and practice can be better
understood by using insights from a new institutional theory which holds that
3
It is not clear that an increase in the size of the bureaucracy is part of the good governance agenda
(Jayal 1997, p. 409). Rather, it involves a qualitative shift in the state’s capacity to enforce
outcomes. I will discuss this point subsequently.
4
‘Governance in India’ at http://go.worldbank.org/JZ4EGDJQ30. Accessed on October 27, 2012.
30 M. Desai
policies are implemented through reflexive mechanisms, whereby past policies and
their outcomes, and prevailing institutional rules, constitute the context for partic-
ular actions (Pierson 2004; Immergut 1998). Thus, institutions shape, that is, enable
and constrain, the translation of discourse into practice. Does discourse then have
any independent effects? As I will argue, discourses are more than simply reflec-
tions of underlying interests; they shape institutional change by providing a source
of legitimization and justification for what actors do (Schmidt 2008, p. 308).
Nevertheless, we cannot assume that discourses will accomplish what they set out
to do in effect; they are continually contested and negotiated through institutionally
bound political struggles.
The main focus of this chapter is on how governance discourse within India
since the 1990s reflects key political changes, and in doing so, how it reflects
changed meanings of democracy. Discourse can be understood as a set of utter-
ances, texts, and speeches that establish a set of relations between various objects
and practices, and in doing so also constitute social relations (Bourdieu and
Thompson 1991; Fairclough 1994).5 In thus granting discourse a degree of
autonomy, I suggest that we can see how they both reflect and constitute key social
transformations, without assuming that the use of a particular term such as dis-
course has a single meaning. Substantively, I will argue that in India governance
discourse has emerged within a fluid democratic arena in which no particular
ideology or project has gained hegemony. The discourse thus incorporates the
political influence of both elite actors, who are seeking to implement the market
project, and popular sectors, whose inclinations are more focused on winning
concrete concessions in the areas of welfare, infrastructure, jobs, and various forms
of patronage.
Observers argue that since 2004 there has been a shift from identity politics to
development and good governance as key discursive elements in Indian politics, in
part, reflecting a rise in democratic demands. If so, I wish to trace the different
meanings of democracy within this discourse and examine whether it is seen as a
key aspect of good governance or as a hindrance, and how the role of popular
agency depicted in this discourse. We need not adopt a single definition of gov-
ernance discourse; indeed, part of my argument is that this definition has shifted
over the past decade, and reflects political contestation and struggle. Nor do we
need to assume that discourses are coherent or stable over time. By addressing
governance as a discursive concept rather than purely as an administrative or policy
issue (although these will also be discussed), this chapter will uncover its evolution
in the Indian context particularly in relation to the liberalization process which has
been under way since the early 1990s.
5
This definition allows us to examine the more enduring features of ideas at certain historical
junctures, by including, but not exclusively focusing on the immediate pronouncements of gov-
ernment actors, as defined by Schmidt for example [discourse is ‘whatever policy actors say to one
another and to the public more generally in their efforts to construct and legitimate their policy
programs…’ (2008, p. 169)].
II
2 Why Governance in India?
The era preceding liberalization was viewed as one of declining governance and
political disintegration in India. Caste wars in Bihar, secessionist violence in Assam
and Punjab, and ongoing Naxal violence in central and southern India were among
the forces representing what some have called a weakening of the center. Most
authors and observers characterized this period as one of growing criminalization of
the state and a hollowing out of party-based democracy. This was compounded by
the political weakening of the catch-all Congress Party, and the rise of serious
challenges from smaller regional parties, as well as the slow but steady rise of the
BJP. If political factors were seen as causing problems of governance, the economy
was viewed as structurally flawed as a result of over-regulation and state control. It
is interesting to note that as these two factors converged by the early 1990s in the
midst of an economic crisis of balance of payments, a concern with stability
assumed paramount importance.
On January 1 1990, a year before the major liberalization push began the Times
of India noted in an article titled ‘A year drenched in blood’:
The year will go down as one of the most violent in the history of independent India. The
rising tide of militancy in Punjab, Kashmir and Assam and the communal polarisation over
Ram Janambhoomi-Babri Masjid stoked the flames of violence…
Another event which led to divisions in society was the Mandal commission report on the
backwards classes. It triggered off violence on an unprecedented scale resulting in several
incidents of self-immolation by youth across the country and damage to property worth
crores of rupees….
The sense that there was a vacuum at the center, leading to a rise in violence
brought together concerns that included religious violence, demands for affirmative
action, and separatist militancy. Political instability was, moreover, portrayed as the
root cause of inflation in the prices of primary products, while the state’s subsidies
to weaker sections were discursively constructed as unviable.6 As initially framed
by the Congress Party under Rajiv Gandhi during the mid-1980s, the structural
repair of the system was to be economic liberalization, but without a clear break
from socialism (Sharma 2011; Kohli 1989). Thus, starting with Indira Gandhi’s
liberalization reforms (1984–5) under the mantle of socialism to Rajiv Gandhi’s
more strident (but ultimately weak) attempt to break with socialism (1986–87), the
aim was to reduce the state’s control of the economy without disturbing its reach
within society. By 1991, undoubtedly the immediate problems posed by the balance
of payments crisis precipitated the dismantling of India’s regulatory regime and the
‘Economic growth will hinge on political stability,’ Rao, Jan 1, 1990, Times of India.
6
32 M. Desai
economic reform process. But it would be rather narrow to view the reforms as
merely ‘economic’ in nature and purely in response to an economic crisis. India’s
‘governance crisis’ had emerged in the context of longer-term economic shortages,
inflation, and the large pockets of economic deprivation that provided fertile soil for
radical mobilization against the state. Nehruvian developmentalism had come to be
viewed from all sides as a failed project. Aside from Maoist violence, large-scale
strikes and lower-caste mobilization (and retaliatory upper caste violence) were in a
sense symptomatic of deeper structural changes brought on by the Green
Revolution. Agrarian modernization had brought about a growth in political
assertion among newly enriched farmers and peasants of middle-lower castes, and
increasing challenges to Congress hegemony through new farmers’ parties and
movements. From the right and left, the project of Nehruvian development was seen
as a failure, although institutional change, as I will argue, demonstrated far greater
resistance than the ideological realm.
Ironically, it was the Congress Party that initiated economic reforms in 1991,
albeit as a minority party in coalition with other parties. The rise of coalitions that
occurred after 1991 represented a decline in the Nehruvian pact that drew together
dominant and subordinate castes and classes. By attempting some reforms ‘from
above’ through liberalization, however, the Congress had failed to address its
relationship with emergent and restive classes and castes, who sought political
representation through other parties. It was in part the challenge posed by these
sections of the middle-lower castes and classes that created a crisis of existing
modes of rule. This gave rise to a political logic, whereby economic reforms ‘from
above’ had to contend with the popular (and populist) momentum ‘from below.’
Yet, this momentum, rather than engendering a clear shift on the basis of political
power ‘from below’ [as argued by Yadav (2004)], has resulted in a political logic
that is more like a seesaw. Contention between the elite and mass realms leads to
concessions, compromise, and accommodation, rather than direct confrontation,
whereby there is no clear victory for either big business/middle class/state elite or
lower castes/agrarian and urban poor/working classes. It is within this political logic
that I locate the relationship between governance discourse and democratic agency.
III
The post-1991 period can be divided into three phases during which governance
discourse shifted. In each phase, different conceptions of governance and its rela-
tionship to democracy can be discerned.
1991–98:
Although the Congress Party initiated the first round of liberalization in 1991, with
a package of reforms aimed at de-licensing, deregulation, and liberalization of trade,
currency exchange, and decentralization, it is ironic that it did so despite lacking a
majority in parliament (Varshney 1998, p. 315). The lack of majority seats signaled
the organizational decline of the Congress Party in the 1980s, and its tenuous hold
in several states where parties representing farmers, lower castes, and traders
interests challenged the old Congress behemoth. Nevertheless, the political
consensus for economic reforms had begun to broaden to other parties, even though
there was significant opposition from the left (including the socialists) and trade
unions. We cannot fully understand the reform push of the 1990s without taking
into account the challenge posed by the as yet insignificant Bharatiya Janata Party
(BJP) to the political order.
The BJP had emerged from the ‘rightist’ Jan Sangh in 1980, and while largely
representing the interests of primarily Hindu businesses, traders and shopkeepers
had begun to look beyond these classes for a political base. It thus also tried to woo
lower castes and tribes (even while espousing upper caste ideas and ethos) to win
seats and defeat the Congress Party (Dasgupta 1991). By the early 1990s, it had
emerged as the only serious challenge to the Congress at the national level. The
BJP’s discursive challenge to Nehruvian socialism aimed at offering an alternative
theory of governance, albeit in a language that had not yet appropriated the
neoliberal and managerial concept of governance. The BJP’s core tenet was
anti-secularism, through which it developed a more strident anti-Nehruvian ideol-
ogy. Nehruvian secularism was blamed for balkanization and the failure to integrate
Muslims into the mainstream, while Hindutva (Hindu nationalism) was offered as
an alternative governing philosophy (Times of India, January 21, 1991). Thus,
before a more globalized governance discourse had entered the Indian political
lexicon, the BJP was promoting religious nationalism as a solution to India’s
governance crises. In 1996, the BJP’s primary electoral strategy was Hindutva,
which it defined as ‘one nation, one people, one culture.’ This overt nationalist
agenda was joined to a strident neoliberal program (in theory), which was aimed at
solving the deficiencies of Nehru’s socialist legacy of big, ineffective, and inter-
ventionist state. This included disinvestment, cutting back bureaucracy, allowing
free markets to work untrammelled, and a positive attitude toward foreign invest-
ment in export sectors (Times of India, April 7, 1996, BJP Manifesto 1996). Its
priority would be to ‘contain fiscal deficit, [and] to do so BJP government will
severely cut back on bureaucracy, shed controls and regulations and re-equip itself
for its new role in providing a framework for free market operations for growth…’
(BJP Manifesto 1996, p. 19). The BJP also promised sweeping administrative
reforms aimed at ‘cleaner public life,’ thus appropriating the discourse of
anti-corruption, which has a long and distinct lineage in India (Times of India, April
5, 1996; BJP Manifesto 1996). But because the BJP maintained a focus on Hindu
nationalism by first taking up the issue of the Ayodhya temple for the 1989 elec-
tions, its concept of governance was defined in distinctively cultural terms and
aimed at making the state the guardian of the interests of the Hindu majority.7 Its
7
The temple at Ayodhya had been allegedly destroyed by a Mughal general in 1528 and since then
had been under dispute by Hindu and Muslim groups. Several suits were filed by both sides since
Independence, but the issue was first directly politicized by the BJP in 1989–90. In 1992, the
mosque was destroyed by the members of and sympathizers of the BJP and associated groups such
as the RSS and VHP. Months of communal violence followed in several parts of India after the
event.
34 M. Desai
manifesto, in fact, stated that Hindutva would be the framework within which the
reforms would be played out (ibid.).
One could argue that within this definition of governance the liberal concept of
democracy, namely the language of rights and freedoms, played a minimal role.
Instead, the BJP’s use of the ‘nationalism versus pseudo-secularism’ frame pro-
moted the idea of a strong, resurgent nation where minorities would assimilate into
the ethos of the majority. The argument presented was that Nehru had left Hindus
out of his model of secularism, which was essentially the root cause of repeated
communal riots and thus political instability in India (Times of India, January 21,
1991). The use of violence on the part of Hindus (e.g., to assert their right to the
Ayodhya temple) was seen as an essential part of nation-building, in effect equating
strength with stability. Thus, governance was equated with political order imposed
from above, yet the violence of ‘the people’ (majority) was offered as its legiti-
mating principle.
The response from the Congress Party to this discursive recasting of nation,
market, and community was somewhat weak, given that it was seeking to distance
itself from the tenets of Nehruvian socialism itself. Both parties were in their own
distinct way promoting the market during the 1990s and attempting to pursue
business-friendly policies. Thus, essential differences between the two major parties
came down to a ‘secularism versus Hindutva’ frame. We can understand this
period, therefore, as marking a gradual shift away from the ideological positions of
‘left’ versus ‘right’—which had been meaningful during the Nehruvian era—
toward an inter-party consensus on market policies and liberalization8.
The democratic upsurge of lower castes, in the meantime, had specific effects on
this reconstituted political field. The field at the national level shifted decisively as it
became multipolar—combining so-called third front parties including the left with
regional parties who based their support on caste or religion.9 The capacity of the
Congress and BJP to govern at the national level increasingly depended on parties
such as the Bahujan Samaj Party (BSP) and Samajwadi Party (SP) (Uttar Pradesh),
and older parties that held the balance of power in the south such as Telugu Desam
Party (TDP) and Dravida Munnetra Kazagam (DMK). However, arguably, even as
multi-party democracy and the representation of lower castes and marginalized
groups grew and electoral competition intensified, the substance of politics
expanded in very specific ways, representing both a shrinking of possibilities and
the rise of new ones. Discursively, the more or less decisive closure of the
Nehruvian era (as it was expressed at the time) meant the removal of certain key
phrases that related to socialism, egalitarianism, and redistribution from the political
lexicon. Indeed, claims for affirmative action as demanded by lower castes had
8
The left parties and certain social movements were left holding the antineoliberal position, but
their electoral influence was weak compared with the Congress and BJP.
9
I have not dealt here with the Janata Dal which played a key role in the so-called Mandal
agitations, pursuing affirmative action for lower castes. By 1996, the Janata Dal had split into
factions and declined as a viable party, yet its legacy for lower caste assertion was clearly
important.
already begun to give rise to a political imaginary based on state largesse as a means
to upward mobility. To this was added the architectural imagination of the market
as a ladder and aspirations as a means to upward mobility. The inter-party con-
vergence on economic reforms (even with some differences between them) meant
that institutional change and governance became a ‘top-down’ process using
incremental changes that left largely undisturbed the local and regional bases of
power and social hierarchies. The sole exception to this ‘top-down’ conception of
governance can be seen in states where lower castes (OBCs) challenged Congress
and BJP hegemony (and in UP where former untouchables (dalits) launched this
challenge). In these states, the electoral victories of lower-caste parties resulted in
the direct occupation of the state using job reservations as mandated by law. These
policies of affirmative action shifted the caste basis of state power with clearly
positive consequences for dalits and OBCs. Speedy implementation of justice
against atrocities and the distribution of patronage toward dalits flowed as a con-
sequence of their political representation in the state (Lerche 1999). Dalits and
OBCs were transformed from clients into citizens, albeit a mode of citizenship that
was based on largely identitarian concerns. The case of dalits in UP is of particular
interest because we can argue that the social revolution which overturned centuries
of caste oppression had real effects on governance, insofar as various forms of
brutality, violence, and exclusion came to an end. On the other hand, the revolution
in caste relations has not led to an institutional transformation in areas such as
administration, corruption, transparency, and development.10
1998–2004
The ascendancy of the BJP at the national level reached its peak during 1998–2004
when it won enough seats to form the government in 1998 and more decisively in
1999 in coalition with other parties. Despite its tamed rhetoric on economic
reforms, in particular concerning the entry of foreign MNCS, the BJP pushed
through a strong liberalization agenda, linking together Hindutva, economic
growth, and nationalism in what came to be dubbed India Shining. This strong
pro-market orientation underpinned the governance discourse. A key example is the
governance reforms undertaken under the auspices of the World Bank in Uttar
Pradesh by the BJP (Kalyan Singh’s government) in 1998. These included fiscal
reforms, privatization of the power sector, and administrative reforms that included
a reduction in bureaucratic posts.11 These reforms signal the shift that was occurring
by 1998 in the concern to bring the administrative infrastructure in line with
market-friendly policies and to correct inadequacies in perceptions of the public
sector through both the policies and rhetoric of governance. In other words, the
performance of governments notwithstanding, the perception that governance
reforms in line with the recommendations of the World Bank, i.e., reforms of the
civil service, accountability mechanisms, and reduction in the size of government
10
World Bank [date n/a] Poverty in India—The Challenge of Uttar Pradesh.
11
Interview with Yogendra Narain, Principal Secretary in UP (1998), October 30, 2012.
36 M. Desai
were key to market-friendly development had built sufficient consensus within the
government as well as across parties.12 Nevertheless, the BJP’s mix of cultural
nationalism and markets foundered on two important political realities. First, there
were several highly publicized corruption scandals where BJP ministers were
implicated, leading to a critical devaluation of their claims to being the only
anti-corrupt party, that is, a party of governance.13 Second, in 2002, communal
violence in a key BJP state (Gujarat) was found to be orchestrated by the ruling
party. When the BJP lost national elections in 2004, its surprise defeat, given the
strident economic growth of the past five years, was attributed to these two factors.
Yet in retrospect, we can see quite clearly that the 2002 violence did not have any
serious consequences for Gujarat’s reputation as a state of ‘good governance.’14 In
order to understand why the perpetuation of violence by a ruling party could fail to
detract from its reputation, we have to see how the leader Narendra Modi utilized
liberalization as a means of promoting the notion that Hindutva and good gover-
nance were in effect two sides of the same coin. This was achieved by promoting
Hindutva as a marker of Gujarati pride based on its economic success and wealth.
Gujarat is a power-surplus state with wealthy indigenous businesses; combined
with the strong promotion of infrastructural development and liberalization in
petroleum, power, minerals, chemicals, jewelry, and a host of other industries,
Gujarat has become a highly attractive venue for investment. There are other factors
that have lent Gujarat its reputation—relatively low urban crime, lower levels of
rural violence (than north India), relatively high literacy rates, and low rural pov-
erty. By appropriating governance discourse, Modi could draw together these
historical features of Gujarat’s development with his political ideology and
repackage these as a market-friendly combination.
If anti-Muslim violence failed to dent Gujarat’s reputation in the global business
world, however, it had repercussions in national politics. During its campaign for
the 2004 national elections, the Congress Party sought to use the Gujarat pogrom as
a means of critiquing the BJP’s ability to govern. Governance became the rhetoric
of choice with which to critique the opposition. During this period (1998–2004), the
so-called post-Washington consensus was gaining wider currency, i.e., the idea that
market penetration was more effective and stable when combined with a liberal
commitment to social security and programs for the poor. This recombined liber-
alism directly informed the political realities facing the two parties, namely growing
assertion at the local level by a somewhat volatile electorate willing to vote out any
12
Although such reforms are seen as necessary by many reforming bureaucrats and politicians, it is
difficult to argue that these views are dominant within the state. There is considerable resistance to
these ideas and considerable institutional drag. As Yogendra Narain explained to me, despite the
fact that the ‘political class’ regardless of party had come to agree on governance reforms, the
reforms themselves did not succeed to the extent anticipated because of resistance from lower
levels of the bureaucracy and state institutions.
13
We can see this pattern being repeated during 2012, with the BJP leading the anti-corruption
charge against the UPA, yet clearly mired in its own scandals.
14
See US Congressional Report on Good Governance in Gujarat.
candidate (regardless of their party affiliation) that was seen as failing to deliver on
promises of development, infrastructure, or welfare (Suri 2006; Arora and
Lama-Rewal 2009). These demands on the state were often quite specific—water,
roads, electrification, sanitation, jobs, food, and security. Rather than the economic
tools of liberalization, it was these essentials that animated popular political agency
and conceptions of governance. For the major parties, moreover, it was the voters
who exercised their democratic agency at the state level that mattered, given that
state party candidates held the key to coalitional victory for both parties at the
national level. It is not surprising, then, that we see a shift toward a new governance
discourse among both the BJP and Congress after 1999.
Yet even as both parties converged on this idea, during the 2004 elections the
Congress could successfully portray the BJP as a callous, anti-poor party, arguing
that it had failed to generate inclusive growth. Its counter strategy was to develop its
‘aam admi’ or ‘common man’ platform as a means of moving away from
ethnic-identity politics toward ‘development.’ This does not mean, however, that
Congress was a party of governance, while the BJP was not. To the contrary, the
shift in discourse during this period did not signal any real differences between the
parties.
2004–2009
The defeat of the BJP in the 2004 national elections was probably the key event
marking the ascendancy of governance discourse in a public sense, that is, as a key
claim for the viability of each party as a governing party. Scholars and observers
have remarked that the defeat of the BJP signaled an end to identity politics; it is
perhaps more appropriate to argue that it signaled the rise of a certain conception of
governance as a political claim. This meant a shift in the way that the state relates to
its citizens, with the rise of the market as an autonomous mechanism for allocating
goods and services, buttressed by an effective welfare state.15 The Congress-led
UPA-1 took the lead in proclaiming a series of initiatives aimed at enhancing the
social security of those seen as effectively outside the market—with rural
employment guarantees (NREGA), rural health (NRHM), and mid-day meal
schemes among the most touted. The Right to Information bill enacted in 2005 also
recognized the rights-based claims of citizens to transparency, as did a host of bills
to secure tribal rights to forest and land, urban housing for the poor, etc. The
increasingly activist use of the vote by the poor, together with demands and debate
led by activists and NGOs, was jointly responsible for a merger between notions of
governance ‘from above and from below.’ The rise of this new governance dis-
course was underscored by opening up spaces for dialogue between the state and
activist groups in the area of welfare rights. The secular state had been reasserted as
the key to development, representing an institutional path dependency that has more
15
Although the BJP lost the 2004 and 2009 elections, there was a sense within the party that its
state assembly reelections in Chhattisgarh, Rajasthan, and Madhya Pradesh were a verdict on its
ability to deliver ‘good governance’ (Arora and Tawa Lama-Rewal 2009; Yadav and Palshikar
2009). The Congress interpreted its victories in similar fashion.
38 M. Desai
continuities than breaks with Nehruvian socialism. However, far from relinquishing
the market, this extended state was viewed as its complement, and citizenship came
to be understood less in oppositional terms as anti-market, than in the positive sense
of the assertion of rights in a fully capitalist society. This is the idea that underpins
the new governance model, one which connects state and society by encouraging an
active citizenry to increase the reach and legitimacy of the state.16 A key feature of
this new governance discourse as employed by the Congress Party thus also rep-
resented a retreat from the extremes of ‘market versus state’ toward what it called a
‘middle path.17’ Reading between the lines, this could be understood as an attempt
at politically articulating uncertain, differentially located voters in the absence of a
clear mandate from them, into a coherent historical bloc that would underpin a new
and stable market society.
3 Discussion
The paper began with the question of whether and how discursive frames of ‘gov-
ernance’ related to the ‘democratic upsurge,’ and in particular, with the question of
how the concept of political agency of marginalized people figures in these frames.
I argue that understanding governance as discourse allows us to examine shifts in its
meaning over time, its employment by different actors in different contexts, and the
silences and elisions that such a discourse entails. The idea is not to cynically
devalue the idea of governance itself because in essence, it incorporates many
aspects of popular demands across the world—for transparent, effective, accountable
government and for the rule of law. However, a discursive approach allows us to
examine the institutional field in which ‘governance’ is sought to be implemented,
and the power struggles entailed in using and concretizing its meaning.
The brief history of governance discourse in India as presented in this paper
highlights the institutional field and institutional dynamics in which it has emerged.
16
This is similar to Partha Chatterjee’s argument that the subaltern actors are increasingly ‘ac-
quiring a stake, strategically and morally, in the processes of governmental power’ (2008, p. 93).
17
‘The Middle Path—the Congress’s way,’ Congress Manifesto 2004.
Balance—or the middle path—has always been the hallmark of the policies of the Indian
National Congress.
As the world experiences a severe recession, it is this balance that is standing India in good
stead. It is a balance between the public sector and the private sector, with an important role
assigned to cooperatives and self-help groups. It is a balance between building a modern
economy and imparting a new thrust to traditional industries. It is a balance between promoting
employment in the organized sector and protecting livelihoods in the unorganized sector. It is a
balance between addressing the needs of urban India and improving the quality of life and
standard of living in our villages and towns. It is a balance between taking advantage of
globalization and ensuring that these benefits flow to local communities. It is a balance between
regulation by the government and unleashing the creative spirits of our entrepreneurs and
professionals.
Using a broadly new institutional framework allows us to both see the

path-dependent character of India’s governance discourse and reforms and under-
stand turning points and shifts in its usage. The rise of a reformist orientation in 1991
(following on its weaker implementation during the mid-1980s) can be ascribed to
both the perceived crisis and growth of so-called institutional entrepreneurs starting
with Rajiv Gandhi and including Manmohan Singh, Chidambaram, Montek
Ahluwalia, and various other bureaucrats and advisors in different Congress and BJP
governments who have sought to implement an ‘elite’ project of neoliberal trans-
formation in India. During this early period, governance discourse such as it
emerged was largely aimed at using economic tools to engender political stability
and reinforce sliding Congress popularity. The emergent discourse was paradoxi-
cally aimed at dismantling Nehruvian hegemony without disturbing the social order.
Although the economic reforms engendered some resistance from civil society, until
the post-1998 period it is not clear that such resistance was important in slowing
down the reforms. The agenda of stabilizing the polity was in effect largely a
top-down affair, that is, it mainly involved the two major political parties and state
institutions. In this regard, two key institutional factors were involved in the
path-dependent model of economic and political reform in India: inter-party com-
petition within the context of democratization and, a factor that I have not dealt with
in this paper, intra-party resistance within both the BJP and Congress.
Rather than arguing that democratization directly led to an increased emphasis
on governance (although these effects can be seen on the welfare state and in some
states where dalits and OBCs have benefitted), I suggest that the rise of governance
discourse represented a search among parties for electoral majorities in the context
of the fragmentation of the vote. The rise of lower-caste movements and parties,
regional parties based on identity, and parties of the third front represented sections
of society that increasingly chose not to vote for the Congress or BJP. Electoral
competition meant an emphasis on winning votes among these sections or forming
alliances with parties at the state level for whom votes were based on state largesse.
In either case, institutional entrepreneurs encountered a context in which
cross-governmental changes in institutional cultures (via liberalization) were diffi-
cult to implement because policies tended to represent negotiations and alliances
aimed at maximizing the vote.18 Democratic movements had some direct impact on
governance, in particular, because they could push for greater accountability at the
local and state levels through the vote. However, there is a reason to be skeptical of
the claim that there has been a dramatic increase in the ability of voters to improve
governance through a rise in the accountability of elected governments. While it is
true that movements such as MKSS in Rajasthan have set the agenda for a ‘people’s
18
For example, important cabinet posts or portfolios are often given on the basis of these con-
siderations rather than the past record of ministers. In addition, the temporal horizon of reforms
tends to be an immediate response to crisis (balance of payment, rupee devaluation, etc. in 1991,
1998, 2012) and aimed at minimizing the electoral impact of such reforms, in terms of both the
electorate and the ability of opposition parties to claim the mantle of being pro-poor (as happened
with the BJP in 2004).
40 M. Desai
governance’ agenda, using grassroots organizing to push for greater transparency

and accountability, such examples belie the general trend, especially at the national
level, toward institutional drag and resistance to governance based on a fully lib-
eralized market democracy (whether neoliberal or developmental). In other words,
the very fragmentation of politics at the state level that challenges a strong center
also has the effect of preventing a concerted challenge to the kinds of political
choices that exist at the level of national policy-making. I have traced this phe-
nomenon to a political logic in which there is neither a strong enough effort, i.e.,
political autonomy to implement developmentalism ‘from above,’ nor a concerted
or strong enough push ‘from below’ to reform the state and discipline capital. The
discourse (and of course the practice) of governance is subject to this logic.
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Searching for Democratic
Developmentalism? Twenty-Five Years
of South Africa’s Macro-governance
and Administration Architecture
Chris Landsberg
1 Introduction
While the study of government and governance in the “new” South Africa has
become a great academic enterprise in its own right, it is ironic that studies about
South Africa’s macro-governance frameworks had received very little attention.
This chapter seeks to make a modest contribution to this debate by helping to
unpack the governance regime and will do so on the basis of an explanatory,
interpretive, policy analysis approach.
In 2018, South Africa will have commemorated the 24-year mark of its
democracy, and the landmark 2019 election will mark the important 25-year
milestone. These occasions will all be marked by many reflections and analysis
about South Africa’s domestic and foreign policies as the quarter-century point of
post-settlement rule in the Republic will dawn. Even before the commencement of
democracy in 1994, the country has searched for an appropriate governance para-
digm that would help it both to address apartheid’s devastating socio-economic and
oppressive legacies and put the country on a future development path that would be
both inclusive and shared. Former Minister of Public Service and Administration,
Geraldine Fraser-Moleketi and her advisor, Hanlie Van Dyk-Robertson, put it this
way: “at the centre of the governance and transformation process in South Africa
has been the construction of a democratic society—one that would overcome the
political, social and economic problems of the past” (Moleketi and Van
This chapter draws from an earlier work by the author, published in—SAAPAM: Journal of
Public Administration, Volume 50, Number 3, September 2015.
C. Landsberg (&)
SARChi Chair: African Diplomacy and Foreign Policy, School of Leadership,
University of Johannesburg, Johannesburg, South Africa
e-mail: clandsberg@uj.ac.za

https://doi.org/10.1007/978-981-10-5963-6_4
44 C. Landsberg
Dyk-Robertson 2003). These authors went further to argue that “…the specific
objectives of the transformation process were defined to include the following:
• Democratising all sectors of society;
• Creating a better life for all South African people by building the economy;
ensuring sustainable economic growth and distributing resources more equi-
tably; and
• Removing all forms of discrimination and addressing the consequences of
apartheid” (Moleketi and Van Dyk-Robertson 2003).
The post-settlement era could be said to have gone through four interrelated
periods or phases of governance and administration as it attempted to reverse the
legacies of apartheid and decades of white minority domination.
The first phase of 1994–1999 could be depicted as the phase of democratic
transition and institution building. The Nelson Mandela government set out to
unscramble the apartheid institutional edifice, put in place new structures, pass new
laws that would be appropriate for a non-racial, democratic order and adopt the
Reconstruction and Development Programme (RDP), with its aims of job creation,
economic growth, housing development and the health crisis, including HIV/AIDS.
By 1996, the RDP was supplemented with the controversial and much-debated
Growth, Employment and Redistribution (GEAR) policy, which became highly
contentious and controversial.
This era coincided with what came to be known as the New Public Management
paradigm, (Moleketi and Van Dyk-Robertson 2003) through which Western con-
sultants steeped in the Washington consensus sought to export their “good” and
limited governance models to South Africa and other developing countries. Richard
Levin, former Director-General in the Department of Public Administration and
Service, corroborated the view that “we attained our liberation within a specific
global theoretical discourse of ‘good governance’, which emerged simultaneously
with a paradigm of ‘new public management’ that displaced a predominantly
Weberian approach to the bureaucracy… The underpinnings of the NPM were
extremely influential globally. Beginning in the late-1980s, countries started to adopt
precepts, which were to develop alternative service-delivery institutions, accompa-
nied by the hegemonic ‘structural adjustment’ position of privatisation” (Levin
2011). Some scholars have argued that NPM was obsessed with “disaggregation,
privatisation and private focus” (Hood 1991). According to Bale and Dale (cited in
Gumede 2011, p. 167), the NPM was “a move away from input controls, rules and
procedures towards input measurement and performance targets—the accountability
framework; the devolution of management control with improved reporting and
monitoring mechanisms; a preference for private ownership, contestable provision,
and contracting out of publicly funded services; the adoption of private-sector
management practices in the public sector, such as short-term contracts,
performance-linked remuneration schemes…” (Hood 1991).
The second phase coincided with and was introduced by the Thabo Mbeki
government during its first term of office. The emphasis was on transformation,
Searching for Democratic Developmentalism? Twenty-Five Years … 45
integrated and co-ordinated governance and administration, and the need to affect
more efficient governance that would ensure service delivery, closing the inequality
gap, tackling deep levels of poverty and the continuation of the fallout over GEAR.
The third phase, which coincided with 2004 and the second term of the Mbeki
government, was rife with the idea of transforming South Africa into a develop-
mental state, one that would see the state playing a more prominent role in driving
development and having the ability to intervene in the economy. The eight months
of the Kgalema Motlanthe government, from September 2008 to May 2009,
effectively saw out the Mbeki period, in both domestic and foreign policy.
The fourth phase coincided with the emergence of the Zuma government in 1999
and its emphasis on a capable, developmental state, a theme introduced earlier by
the Mbeki administration, but carried forward by the Zuma government.
Protestations to the contrary notwithstanding, evidence suggest that the Zuma
government borrowed heavily on the predecessor Mbeki administration, which
placed the emphasis on a developmental state and added the notion of a capable
state. We will assess the extent to which there was continuity rather than change.
Overall, this chapter assesses the gap between policy and implementation in
South Africa, and what the record suggests two decades into the post-apartheid
order.
2 1994–2004: The Nelson Mandela Government,

Democratic Governance and Institution Building
The first democratic government in South Africa inherited a governance machinery

and public service that were geared to serving the interests of the white minority
and to controlling and repressing the black majority. The challenge was, therefore,
to establish new democratic and accountable institutions and to transform those
existing ones, in particular, the public service, essential to the transformation of
society. What was needed was a new governance architecture that would cater for
the interests of all South Africans, not just a minority. Fraser-Moleketi and Van
Dyk Robertson argued in this regard that “the key focus during the period 1994–98
(roughly coincided with the first five-year term of democratic government) was
getting the new policy frameworks and legislation in place that would firmly set the
normative direction in which South Africa would like its public service to trans-
form. This period also set the broad guidelines and put the most important pillars
for transformation in place. During this period we experienced a policy frenzy at its
best!” (Moleketi and Van Dyk-Robertson 2003). The emphasis on policy and
transformation is palpable. Joel Netsitenzhe put it thus: “the South African
democratic movement inherited a state that it had to transform over time; at the
same time as it used the same state to start implementing policies of change.
Attached to this process was the danger of locking in inherited bad habits, and
tentativeness in reconfiguring the state to play a leadership role in directing eco-
nomic development” (Netshitenzhe 2011).
46 C. Landsberg
The negotiated transition and the constitutional order provided the

macro-framework for post-apartheid governance and rule, but the government also
backed up the constitutional provisions with a range of policy instruments to give
effect to post-apartheid governance. The new constitutional order provided a
framework for governance in the country. As the 2012 National Development Plan
put it, “the adoption of the Constitution, the establishment of institutions of
democracy, the building of a non-racial and non-sexist public service and the
transformation of many other institutions created the foundation for a new nation”
(NPC 2012a). In order to achieve this goal of a governance and institutional
overhaul, the government took its cue from the democratic transition and the
Constitution (Act of 1996) of South Africa.
The Constitution provides the foundation for the rule of law and entrenches
inalienable rights, including freedom of association and to demonstrate, assemble,
picket and present petitions; to form a political party; dignity and respect; equality
before the law; equal protection and benefit; protection against discrimination;
freedom of religion, belief and opinion; and the right to language and culture. Geoff
Budlender reminded us that “the Constitution says that the state must take rea-
sonable legislative measures, within available resources, to achieve the ‘progressive
realisation’ of… rights” (Budlender 2002).
The Constitution also made reference to the transformation of the public service,
aimed at rendering it capable of extending its services to the majority of South
Africa’s people who had been receiving inadequate services or no services at all.
Hanlie Van Dijk argued in this regard that the 1996 Constitution advances human
resource development, and “a public service that is development-oriented, one that
is characterised by good human resources and career management practices” (Van
Dijk 2005).
The Constitution recognises traditional leadership and makes provision for a
“Houses of Traditional Leaders”. Various institutions and mechanisms are provided
in the Constitution, such as Chapter 9 Institutions and co-operative governance to
promote democratic governance and ensure that economic, social, cultural, civil and
political rights as enshrined in the Bill of Rights of the Constitution are protected.
The advancement of women and gender equality through the establishment of the
Commission for Gender Equality is a major contribution to the protection and the
promotion of the rights of women.
To defend and promote the common rules to which all must subscribe in the
constitution, it provides for Chapter 9 institutions that jealously protect the rights of
the people and provide them with the political space to form their government and
keep it in check. When there is contestation on these rules, the Constitutional Court
is there not only to be an arbiter but also to clarify and even chart new paths along
which the Constitution is to be interpreted.
The Independent Electoral Commission is a constitutionally established inde-
pendent organ with a responsibility to ensure overall management and control of
conduct, counting and declaration of national, provincial and local elections.
Negotiators opted for a form of proportional representation (PR) in the electoral
process and believed it was the only viable way of institutionalising representative
pluralist democracy in the new South Africa after apartheid.
The Constitution declares South Africa to be a unitary state with federal char-
acteristics, and it provides for three spheres of government, national, provincial and
local, which are “distinctive, interrelated and interdependent”. Intergovernmental
relations, according to the Constitution, were managed through “co-operative
governance”, which stresses co-operation over competition. An institutional and
legal framework has been established to promote and facilitate intergovernmental
relations. However, co-operative governance proved itself to have many challenges.
Very early in the post-apartheid period, the local government proved itself to be
a major challenge, having to be capacitated and transformed. The government has
evoked the provisions of the 1996 Constitution to establish and institutionalise a
new system of local government from the scourge of the legacy of apartheid. The
challenge of achieving institutional development and transformation and building
democratic and participatory local government structures proved to be no mean
task. Between 1998 and 2003, the government enacted a series of legislation that
entirely transformed the systems, institutions and processes of local government,
key among which was the Municipal Structures Act (1998); Municipal System Act
(2000); and the Local Government Elections Act (2000). The Municipal Financial
Act of 2003 also redefined the financial framework of municipal operations. Indeed,
the relationship between local, provincial and national government puts the ques-
tion of co-operative government squarely on the agenda.
3 Three White Papers: The RDP; The 1995

Transformation of the Public Service; and the 1997
Human Resource Management in the Public Service
As stated above, apart from the macro-constitutional framework, the post-apartheid

government also embarked on a process of developing a series of macro- and
micro-policy frameworks to bolster the governance regime in the country, and in
1994 the government adopted the Reconstruction and Development Programme
(RDP). As Gail Motsi argued, “the principal policies guiding the development of
South Africa were initiated prior to the elections and finalised by the democratically
elected government. In 1994, the government’s socio-economic policy framework
was laid out in the Reconstruction and Development Programme (RDP)” (Motsi
2002).
One year after the democratically elected government assumed office, it felt the
need to develop a Reconstruction and Development Programme White Paper.1 This
was an ambitious, comprehensive vision document and policy blueprint, and
1
For an understanding of what the RDP contains, see African National Congress, The
Reconstruction and Development Programme (RDP), Johannesburg, 1994.
48 C. Landsberg
represented a vision for the fundamental transformation of South Africa. It sought

to mobilise all South Africa’s people and the country’s resources towards the final
eradication of the results of colonialism, racism, apartheid, sexism and repressive
labour policies, and to build a democratic, non-racial and non-sexist future. In terms
of the policy, attacking poverty and deprivation were the first priority of govern-
ment. As late as 2012, the government’s much vaunted National Development
Plan: Vision 2030 argued that “the Reconstruction and Development Programme
(RDP) formed the basis of government’s attempts to attack poverty and deprivation,
and to build a united, non-racial and non-sexist South Africa” (NPC 2012a).
“Informed by the principles of inclusivity”, the Report continued, “government …
translated the RDP into policies, programmes and budgets” (NPC 2012a).
The 1995 RDP had five programmes: meeting basic needs; developing human resources;
building the economy; democratising the state and society; and implementing the RDP. In
respect of democratising the state and society, the policy linked democracy, development
and a people-centred approach to government (Motsi 2002).
The White Paper stressed that government’s first priority must be to transform
the way government itself operates. It dealt with the need to establish new
provincial administrations and the development of a system of intergovernmental
fiscal relations, including the role of the Financial and Fiscal Commission.
The same year government released the RDP White Paper; it also developed a
White Paper on the Transformation of the Public Service (WPTPS), suggesting that
just one year after assuming the reign of power the ANC-led government realised
the need to fundamentally reorient the apartheid nature of the state and civil ser-
vice.2 The government also came to appreciate that the RDP was not a real
development strategy but at best a visionary document with a wish list of aims. The
White Paper was developed to address this vacuum, identifying eight pillars of
public service transformation (South African Government Information 1995)
• Restructuring and rationalising the public service;
• Institution building and management;
• Representativeness and affirmative action;
• Transforming service delivery;
• Enhancing accountability;
• Human Resource development and training;
• Employment conditions and labour relations;
• The promotion of a professional service ethos.
Three objectives were set in terms of rationalisation and restructuring: to create a
unified and integrated service; to restructure the senior management echelon; and to
create a leaner and more cost-effective service (South African Government
2
For an idea of the White Paper as the “guiding framework” for civil service reform, see
Director-General Mashwahle Diphofa, in Department of Public Service and Administration and
the German Co-operation Institute, Looking Back—a Shaping Futures, Public Service Reform
Programme, A Journey towards Good Governance and Organisational Efficiency, 2013, p. 6.
Information 1995). The third, longer-term objective was designed to improve

efficiency and effectiveness and to unlock resources for productive investment and
RDP-related project expenditure.
The White Paper was transformed into a policy directive, known as the Batho Pele
(People First) policy and evolved into a strategy.3 Batho Pele required public service
departments to adhere to eight principles regarding the nature of their interaction with
the recipients of services; the idea was to make the public service more
people-centred. These principles are (South African Government Information 1995)
• The users of services must be consulted;
• Departments must set service standards;
• Access to public services must be increased;
• Courtesy must be ensured;
• More and better information must be provided;
• Openness and transparency must be increased;
• Mistakes and failures must be remedied;
• The best possible value for money must be obtained.
In line with the expectation to make the public service pro-people, every gov-
ernment department was required to make develop a promissory note and a pledge
in favour of improving the quality and quantity of services that would be delivered
by the department each year.
Batho Pele was expected to be implemented especially at the provincial and
local level, where the need for improving service delivery was most acute. As
former president Thabo Mbeki put it, while still head of state: “the government is
also determined to ensure that the machinery of state is geared towards serving
people in keeping with the vision of ‘Batho pele!’. We will speed up the completion
of the Skills and Service Audits… This audit [was] aimed at defining service needs,
the availability of skills and the possibilities for redeployment to support the pro-
cess of the restructuring of the public service”.4 Mbeki admitted that both service
delivery and skills development were major challenges faced by the post-apartheid
government. While rhetorically, many municipalities, provinces and national
departments were committed to upholding high standards of service delivery, this is
exactly where the service-delivery bottleneck and crises were showing up.
In spite of the new post-settlement government’s commitment to pursuing
autonomous strategies, and not allowing itself to be dictated to by foreign interests
and powers, its strategies ironically borrowed heavily from the lexicon of the New
Public Management paradigm. This approach, we know, became very controversial
and was associated with undue Western influence, and the conservative advantage
of consultants and perspectives borrowed from the Washington consensus. Even
3
Department of Public Service and Administration and the German Co-operation Institute,
Looking Back—a Shaping Futures, p. 4.
4
President Thabo Mbeki’s A Nation at Work for a Better Life, Opening of Parliament Address,
Cape Town, 25 June 1999.
50 C. Landsberg
South Africa, which enjoyed a high degree of policy autonomy compared to other
developing countries, found itself influenced by this approach. It adopted typical
restructuring strategies: “rightsizing” the public service, in which both upsizing and
downsizing were envisaged; “a leaner service over time”; efficiency savings and
increased productivity (requiring incentives); adjusting remuneration structures
(streamlining allowances); retrenchment, early retirement and attrition; and rede-
ployment and retraining.
Given the legacy of apartheid and the history of racial oppression and white
minority domination in South Africa, it was not surprising that government placed a
major emphasis on “representativeness” as one of the key principles of the new
order. The White Paper on Human Resource Management in the Public Service of
1997 derived the concept of “equity” from the 1996 Constitution and defined equity
as following: “Where there has been unfairness, corrective measures must be
implemented so as to ensure that human resource practices are free from discrim-
ination, invisible barriers and unjustness which will impede equal employment
opportunities” (Wessels 2005).
4 1999–2004: Transformation and Integrated

and Co-operative Governance
The second phase in the chapter is that of the Mbeki period of 1999–2004, in which
the focus fell on consolidation and implementation of policy, the transformation of
government and society and integrated and co-operative governance. Mbeki was
the consummate rationalist foreign policy thinker and actor, believing that political
inputs carefully thought through could be managed in ways that could result in
certain predetermined outcomes; thus through a rationalist governance model,
apartheid and its negative consequences could be overcome. In the words of
Fraser-Moleketi and Van Dyk-Robertson, “the second term of democratic gover-
nance [was] marked by a desire to focus on implementation, and accordingly slow
down on the formulation of new policies. A general opinion prevails that from a
normative point of view South Africa has managed to place most exemplary and
progressive policies on the table” (Moleketi and Van Dyk-Robertson 2003).
They remind us that the slogan in the public sector became “continue, consol-
idate and co-ordinate” (Moleketi and Van Dyk-Robertson 2003). Here was an
explicit recognition that post-apartheid South Africa faced a challenge, not so much
of policy formulation but more of policy implementation and operationalisation,
and through careful planning and policy management, this could be overcome.
It should be remembered that the Mbeki government assumed office and had to
tackle governance in the aftermath of the Presidential Review Commission
(PRC) appointed by President Mandela. As Deputy President, Thabo Mbeki grad-
ually took over the reins of decision-making and governance and agreed to apply
many of the PRC recommendations so as to enhance the efficiency and effectiveness
of government and make significant recommendations on how to overhaul
government.5 The idea was to bring about in South Africa a meritocratic civil
service, with a competent bureaucratic cadre and senior executive service. Mbeki
took seriously the suggestions by the PRC that the state’s ability to recruit, retain and
develop senior managers and high-level professionals needed to be bolstered.6
The PRC identified many weaknesses and challenges faced by government and
advanced a series of recommendations about what needed to be done to bring about a
more effective state edifice. The PRC said about the national government that it was
beset with “weaknesses in the structures and practices of intergovernmental relations
led to poor coordination within the different departments and spheres of government
—creating an incapacity to implement national programmes and a consequent failure
to deliver basic services” (South African Government Information 1998).
As the PRC undertook its work, it was scathing in its assessment of the centre of
government. It identified “a vacuum at the centre of government” (South African
Government Information 1998) and found that there was also “serious weaknesses
in the current structures and mechanisms for co-ordination both within departments
and provinces and between the different spheres of government” (South African
Government Information 1998).
The Private Office of the President, together with the Cabinet Secretariat, was
established and the Cabinet Secretary would become the DG in the Presidency.
The PRC recommended that a newly established unit in the Deputy President’s
office, the Co-ordination and Implementation Unit (CIU), be transferred to the
Office of the President to facilitate the integration of its work with that of the
Cabinet Secretariat. The CIU was already structured in line with its focus on four
major sectors, the Social Sector, the Economic and Development Sector, the Justice
System Sector, and the International Relations Sector.
It was palpable to the PRC that, although huge financial resources had been
invested in technology and systems, by 1998 the IT assets were “not contributing
significantly to service delivery or transformation objectives” (South African
Government Information 1998).
The PRC said that Information Management, Systems and Technology (IMST)
“can and should play [a vital role] in public service reform and consolidation, not
merely as an important support function but as an integral component of improved
forms of governance and service delivery” (South African Government Information
1998).
The establishment in 1999 of the State Information Technology Agency (SITA)
in terms of the State Information Technology Agency Act 1998, was an attempt to
bring about the consolidation of the state’s IT interests, in line with the PRC’s
recommendations. In particular, there was an attempt to address four concerns: to
ensure economies of scale, to avoid duplication, to promote interoperability of
systems and to promote IT security.
5
The Presidency, Co-ordinating Mechanisms for Integrated System of Governance, Presentation,
Pretoria, 2008.
6
Same as Footnote 5.
52 C. Landsberg
By the turn of the century, already the capacity constraints faced by the gov-
ernment were glaring. One such weakness was the massive underspending of
resources by the state. Mbeki and his inner circle conducted an analysis of the
weaknesses of government and state. There was thus a problem at both the
policy-making and execution phases.
More evidence of capacity constraints was to be found in the over-reliance on
consultants to do government’s work. One of the intended effects of apartheid’s
legacy was how the government came to rely on consultants and external advisors
for work and ideas.
5 Integrated Governance and Planning
One of the things for which the Mbeki government was criticised was the purported
“over-concentration” and “over-centralisation” of power, a criticism often thrown at
the government without proper understanding or contextualisation. Mindful of the
findings of the PRC, and committed to his rational model of decision-making, the
Mbeki government set out immediately to strengthen the centre of government and
to overhaul the macro-governance framework.
In an effort to bring about greater co-ordination at the centre of government, the
Forum of South African Directors-General (FOSAD) was established and tasked
with developing Clusters similar to the Cabinet Committees, except that the
Economic and Employment Cluster addressed both Economic Sector and
Investment and Employment issues. There were five DG Clusters, each headed by
Co-chairs, who met regularly with the Co-ordinating Ministers of the Cabinet
Committees. These clusters were the Governance and Administration Cluster; the
Economic Cluster; the Social Cluster; the Justice, Crime, Police and Security
Cluster; and the International Relations, Peace and Security Cluster (Gumede 2011).
Mindful of the adage that information is power, and that intelligence can win or
lose wars, the Policy Co-ordination and Advisory Services (PCAS) was created to
replace the CIU, and its structure matched closely the five DG Clusters. The CIU
was tasked with monitoring and co-ordinating the progress of all departments and
served as a “think tank” that would also interact with civil society organisations and
international experts. That government placed great emphasis on strategic thinking.
Indeed, the Mbeki government became synonymous with strategic planning and
the need for effective co-ordination of organisational design as it introduced the
notion of “integrated governance” (Gumede 2011). A new planning matrix was
designed, with the “Planning Cycle” commencing in September every year, when
departments were asked to set short, medium and long-term priorities.7 During
October, clusters were asked to synthesise departmental priorities and in the second
7
The Presidency, Co-ordinating Mechanisms for Integrated System of Governance, Presentation,
Pretoria, 2008.
half of November FOSAD prepared the draft MTSF. The January Cabinet Lekgotla
considered and approved the final MTSF and is communicated to the nation in the
State of the Nation Address. From January to March, the MTSF was consolidated
for budgetary purposes. In June, departments submitted their MTEF submissions to
Treasury. The July Lekgotla reviewed progress and reprioritised, laying the basis
for the new Planning Cycle starting in September.
In the end, the Implementation of the Planning Framework had mixed results
and compliance had not been optimal. Government departments struggled to con-
duct strategic planning for the medium term, commencing every 18 months. While
from a policy and planning point of view, the MTEF processes were well spelt out,
a policy-implementation gap continued to reveal itself.
6 Intergovernmental Relations, Co-operative Governance,

and Monitoring and Evaluation System
The working method of government was a serious concern, and taking its cue from
the Constitution the Mbeki government prioritised co-operative governance and
intergovernmental relations. It moved quickly to place on the agenda intergov-
ernment relations and co-operative governance systems. According to Malan, “the
principles of co-operative government and inter-governmental relations recognise
the interdependence of the three spheres of government in South Africa (namely the
national, provincial and local spheres) which are distinctive and interrelated and
place a duty on the spheres of government to respect each other’s powers, functions
and institutions and to inform each other of new policies” (Malan 2005). This was
indeed a bold move by South Africa, but one that was bound to create many
challenges for it in practice. In terms of “horizontal co-ordination”, Richard Levin
argued that “there are certainly positive aspects of that system and it laid the basis
for very strong innovations in the area of monitoring and evaluation. Monitoring
and evaluation are important for accountability” (Levin 2011). Levin thus conceded
that the issue of state-society relations remained a key challenge in South Africa.
An Inter-governmental Relations Audit conducted in 1999 recommended that
legislation is prepared to address intergovernmental structures, and legislation was
introduced to this effect. The Presidential Co-ordinating Council (PCC) was
established in 1999 and met two to four times a year.8 The membership included the
President, key national ministers and the provincial premiers. Matters of national
and provincial strategic importance, as well as policy matters affecting the pro-
vinces, are discussed.
8
For a perspective on the PCC, see Vusi Gumede, 2011. “Public Policy-making in South Africa”,
in Albert Venter and Chris Landsberg, op. cit., p. 244.
54 C. Landsberg
7 Anti-corruption and the Promotion of Good Governance
Corruption is of course not something that started in 1994; the apartheid state was
highly corrupted, serving as it did the interests of the white minority. As early as
1994, when the Mandela government was inaugurated, the government stressed
anti-corruption drives as a goal of their good governance initiatives and recognised
that fighting corruption had become one of the most serious challenges for the
liberated Republic. In this regard, the 2012 National Development Plan
(NDP) correctly observed that “high corruption levels frustrate society’s ability to
operate fairly and efficiently and the state’s ability to deliver on its development
mandate”. “In Transparency International’s global corruption survey”, the NDP
observed that “South Africa has fallen from 38th place in 2001 to 54th place in
2010, out of 178 countries” (NPC 2012a). In 2012, another document emanating
from the Presidency, Development Indicators 2012 stated that “the 2012 Corruption
Perception Index (CPI) results show a setback in perception regarding the fight
against corruption in South Africa. According to CPI, perception about corruption
in South Africa has increased between 2011 and 2012, pushing the ranking of South
Africa from 64th to the 69th” (DPNE 2013).
Since the inauguration of the Mandela government, several anti-corruption
programmes and projects were put in place by the new government, and in March
1997 the ministers responsible for the South African National Crime Prevention
Strategy (NCPS) established a committee to tackle corruption in the criminal justice
system. As early as June 1997, the Code of Conduct for the Public Service had
become part of the regulations for every public servant and was the subject of an
ethics promotional campaign by the then Public Service Commission.
During a Public Sector Anti-Corruption Conference, held in Parliament in
November 1998, then Deputy President Thabo Mbeki emphasised the duty of
government to take a firm stand against corruption and to adopt a “zero tolerance”
approach to offenders, including a ten-point ethical management framework for the
public sector.
To prevent corruption, the following were set out: the blacklisting of individuals
and organisations; the establishment of anti-corruption, sectoral and other hotlines;
disciplinary action against corrupt persons; consistent monitoring and reporting on
corruption; and the promotion and implementation of sound ethical, financial and
related management practices. A central database of corrupt businesses has been
established, and the government has in principle approved that corrupt employees
be blacklisted from employment in the public service. However, it has struggled to
operationalize this in practice.
In 2001, the launch of the National Anti-Corruption Forum adopted a charter
which required members to establish a national consensus through the co-ordination
of sectoral anti-corruption strategies, advise government on the implementation of
strategies to fight corruption, share information on best practices in sectoral
anti-corruption work and advise all sectors on the improvement of sectoral
anti-corruption strategies.9 The assumption was that there was a buy-in by all
stakeholders but, as had become customary by then, a typical policy-
implementation gap emerged in South Africa.
8 2004–2008: Towards a Developmental State, South

Africa Style
Having learnt some important lessons from preceding governance experiences,

including the contentious macro-economic strategy, GEAR experience, the Mbeki
government (1999–2008) approached its second term with confidence and wasted
little time in introducing one of the most important debates in post-apartheid South
Africa, the idea that South Africa wished to become a developmental state. The
Mbeki administration placed a huge emphasis on implementation of policies,
recognising that there was a problem on this score (Gilder 2015, p. 582).
Henceforth, the Republic would embark on a new developmental path—it would
start the long and painstaking process of transforming South Africa into a
Developmental State. Vusi Gumede has argued that “South Africa has tended to
refer to itself as a developmental state, and this remains a source of much debate”
(Gumede 2011).
In its most basic sense, the concept “developmental state” denotes a state that is
able to direct development and to get the key interest groups in its society to all
support and follow a particular development trajectory. It is thus a state that
endeavours to steer economic development in a particular direction and determine
the pace at which such economic progression is achieved.
A developmental state furthermore places a high premium on education as it
seeks to efficiently utilise human capital so as to achieve growth (Evans 2008).
Indeed, education and health are major policy priorities to be championed by the
government, and South Africa faces enormous backlogs in these areas, caused in
the main by decades of apartheid health and Bantu education.
One of the doyens of the concept, Peter Evans, was invited to South Africa on a
number of occasions to engage policy gurus on his idea of a developmental state.
Evans identified a number of key characteristics of the developmental state (Evans
2008).
• A preoccupation with bringing forth rapid, sustainable economic growth;
• A well-developed, meritocratic bureaucracy, which is efficient, possesses
capacity and is relatively autonomous in relation to the state and the political
elite;
• Existence of a “pilot agency”, a navigating unit, often a super-ministry, within
the governmental bureaucracy tasked with driving and co-ordinating the
developmental process;
9
Same as Footnote 3.
56 C. Landsberg
• Devotion to the public interest and the welfare of the public sphere. This is
illustrated by the prioritisation of the expansion of social infrastructure and
human capital by placing issues such as education and health high on the
developmental agenda;
• Embedded autonomy, which is defined as the concrete set of social ties that bind
the state to society and provides institutionalised channels for continual nego-
tiation of goals and policies.
The South African government became a key study of Evans’ developmental
state discourse. The key point to stress here is that a developmental state comes
about to staunch following of all these criteria, not cherry-picking which ones we
like and which ones we would like to discard.
In his 2004 State of the Nation Address, Mbeki declared government’s policy
intentions, a process which had begun in 1998. Determined to meet their strategic
aims of overcoming poverty and equality, and convinced that the pursuit of a
developmental path was the best means of realising this strategic goal, Mbeki
insisted that government had crafted a new “comprehensive programme to grow the
economy”.10 Having depicted South Africa as a country of “two economies” and
“two races”, with one of these racialised economies being largely poor and black,
and the other predominantly white and prosperous, Mbeki vowed that his gov-
ernment would11 pursue “interventions in both the first and second economies”.
Mbeki’s Minister of Finance at the time, Trevor Manuel entered the debate when
he declared government’s strategic intentions to “accelerate the pace of growth and
job creation and extend the scope of development and empowerment”.12 Manuel
was emphatic: the post-2004 government would pursue a “changed trajectory”, that
of “a more agile state and more vigilant state institutions”.13
Mbeki made sure that the developmental state discourse would enjoy the buy-in
and blessing of the ruling African National Congress (ANC), and by the end of
2004 it was able to assert that “the state everywhere, including in our country and
the rest of Africa, should discharge its responsibilities to the people, fully under-
standing that development without an effective state is impossible” (African
National Congress 2004).
By 2005, the Mbeki government opted to back up its developmental state vision
with a strategy that would give practical expression to the aspiration. The gov-
ernment adopted the Accelerated and Shared Growth Initiative for South Africa
(ASGI-SA), a broad modernisation framework of steps to raise the levels of growth
too much higher levels. It focused on
10
President Thabo Mbeki, State of The National Address, National Assembly, Cape Town,
February 2004.
11
Same as 9.
12
Minister Trevor Manuel, Minister of Finance Budget Vote Speech, National Assembly, Cape
Town, February 2004.
13
Same as Footnote 11.
• Building infrastructure to grow the capacity of the economy;

• Boosting sectors of the economy with special potential for faster growth;
• Developing the requisite skills;
• Addressing inequalities that marginalised the poor in the second economy;
• Continuing with the policies that have created a good climate for growth;
• Making government more effective and more efficient.
A key focus of ASGI-SA was to deal with and remove a set of binding con-
straints that inhibited faster growth—a theme in line with Mbeki’s modernisation
project (African National Congress 2004). These constraints were currency
volatility and macro-economic stability; cost and efficiency of the national logistics
system; skills shortages; high levels of inequality; barriers to compete in the sector;
the regulatory environment for small- and medium-sized enterprises; and defi-
ciencies in the capacities of government and parastatals.14
By the time of the ANC’s Polokwane Congress of December 2007, the devel-
opmental state debate was well institutionalised within the ANC, the broader tri-
partite alliance of the ANC-COSATU-Communist Party. As Joel Netshitenzhe
reminds us: “…the discourse on the developmental state has gained prominence
both within government and in the ‘ruling party’, the African National Congress
(ANC). At its National Conference in 2007, the ANC for the first time elaborated
extensively in its strategy and tactics document on the desire to build a develop-
mental state” (Netshitenzhe 2011). However, there was talk that after Mbeki would
be dealt with there would be a move away from his policy trajectories, the
developmental state included. Did it happen? Was there a move away from the
Mbeki government’s ideas?
9 2009: The Jacob Zuma-Led Administration

and the Search for a Capable, Developmental State
All the promises made during the Polokwane Conference were a change from
Mbeki’s developmental, modernisationist trajectory and proved to be just that:
promises. Instead of moving away from the Mbeki posture, the Zuma government
continued along Mbeki’s developmental path, so much so that the new adminis-
tration proclaimed in July 2009 that it was committed to “build a developmental
state” (National Treasury 2009). As with the Mbeki government’s developmental
agenda, the new Zuma administration was placing the emphasis on improving state
capacity for growth and development. Further priorities for the new administration
included: improving the delivery and quality of public services; building
14
For a perspective on what a developmental state is, and challenges faced by South Africa, see
S.S. Sangweni, It does not matter what slant or take you have on a Developmental State, at the end
of the day a Strong, Coherent and Astute Public Service is Critical, paper delivered at the
Developmental State Seminar, Burgers Park Hotel, 19 October 2007.
58 C. Landsberg
partnerships with society for equitable development; and strengthening democratic

institutions. As a sign of their commitment to the developmental state discourse,
they moved quickly to institute the National Planning Commission (NPC).
The purpose of the NPC, according to Manuel, would be “to prevent government
from being trapped in its own institutional preconceptions”. South Africa was in
need of a “long-term perspective, focus and determination to realise our vision”; the
issues of “growth and development, strengthening of institutions, nation-building
and the making of a developmental state” were dubbed “long-term projects”.
In September 2009, the Presidency released a Green Paper on National Strategic
Planning, which recognised that “two striking weaknesses in government are the
lack of a coherent plan and poor co-ordination” (NPC 2009). It identified the need
for “better long-term planning to inform shorter term plans, resource allocation,
trade-offs and the sequencing of policies” (NPC 2009). In making a rationale for its
existence, the Green Paper asserted that “markets alone cannot initiate and lead
such fundamental change. The state has to play a leading role in reshaping the
economy so that it is better able to meet the needs of the majority” (NPC 2009). It is
a fast-developing state, able to meet its development goals. Countries that have
developed rapidly, argued the Green Paper on Strategic Planning, have had three
critical characteristics (NPC 2009)
• Rapid economic growth;
• Education and skills development;
• High quality, strong and credible public and private institutions.
In order to meet its goal of bringing about a developmental state, there was a
need to ensure “policy coherence, policy co-ordination and performance monitoring
and evaluation” (NPC 2009). The Green Paper cautioned that “fragmented
policy-making can lead to duplication of efforts and contradictory outcomes”. It
described co-ordination as “essentially about ensuring that government as a whole
can develop and effectively pursue its objectives and priorities through a myriad of
institutions, spheres, agencies and public corporations” (NPC 2009). According to
the Green Paper, many, if not all, of government’s objectives—for instance,
increasing employment, reducing poverty and improving skills—would require the
interaction of several departments, all three spheres, numerous public entities and
state-owned enterprises (NPC 2009).
In recognition that strategic planning is a broad process involving multiple
institutions, government decided to recognise and establish, where they did not
already exist, five key planning institutions, viz: Cabinet; the President’s
Co-ordination Council; a National Planning Commission, consisting of external
commissioners; a Ministerial Commission on Planning to provide guidance and
support to the planning function; and a Secretariat to support the work of the
commission (NPC 2009).
The NPC would be responsible for developing a national plan for South Africa
in consultation with government, and “in partnership with society”; it would consist
of respected intellectuals, leaders and experts in South Africa, with the Minister for
National Planning as the chair (NPC 2009). The NPC would be a permanent
institution with part-time commissioners, and its mandate would be updated and
renewed annually.
The Ministerial Committee on Planning for its part would be established to
provide collective input into planning. This Committee would be appointed by the
President, with the President and Deputy President as ex officio members. The
Minister in the Presidency for National Planning was to feed the work of the NPC
into government and Cabinet through the ministerial committee. The Committee’s
overarching role would be to (NPC 2009)
• Provide political guidance to the planning process;
• Support the planning ministry in driving strategic planning;
• Ensure consistent and integrated policies and programmes across multiple layers
of policy-making, planning and implementation.
While the objectives and institutional design of the NPC had been clearly spelt
out, there was what I have called elsewhere the “Polokwanisation” of this issue,
suggesting that there were major fallout and tension within the ranks of the ruling
alliance which came as a direct result of that 2007 ANC congress.15 For example,
there was the major political fallout in the tripartite alliance ranks over the estab-
lishment of a Ministry in the Presidency for National Planning, in particular the
appointment of the first Minister to head that Ministry, Trevor Manuel, a fallout
which had to do with major suspicions between the so-called Mbeki and Zuma
camps in government. Manuel was viewed by COSATU and the SACP as a Mbeki
loyalist bent on turning the NPC and his Ministry into a superstructure. COSATU,
in particular, accused Manuel of wishing to dominate macro-economic
policy-making and of continuing to foster “neoliberal” policies which, according
to them, was the hallmark of policy during the Mbeki years. This they dubbed the
“1996 class project”, named after the establishment of the macro-economic policy,
GEAR.16 This reaction by COSATU was a crude personalisation of the develop-
mental state process, engaging in a la carte politics, picking and choosing what
they like and what they do not.
While these tensions were playing themselves out, it was difficult to gauge the
views of Zuma on these matters. One interpretation was that he was highly indebted
to the alliance partners for their role in helping to challenge Mbeki and securing the
former president’s recall, and for helping to elevate him to the presidency.
The SACP leader, and Minister of Higher Education, Blade Mzimande was accused
by ANC NEC member Billy Masetla of trying to control the direction of govern-
ment. With some in the ANC seeking to fight back against attempts of a leftist
takeover, the SACP accused this of trying to liquidate them (Brown 2009).
15
For an elucidation of the concept “Polokwanisation”, see Chris Landsberg, “The Jacob Zuma
government’s foreign policy: Association or Dissociation?”, in AUSTRAL: Brazilian Journal of
Strategy and International Relations, Vol. 1, No. 1, Jan/Jun 2012, p. 75.
16
See Mail and Guardian, “ANC backlash against the left”, October 9–15, 2009.
60 C. Landsberg
Tensions in alliance quarters were not confined to disagreements over the role of
Trevor Manuel in government. There were also bitter feuds over economic policy,
and tensions between the minister of Finance, Pravin Gordham and newly
appointed Minister of Economic Development, Ebrahim Patel. So serious did these
tensions become that Zuma had to seek legal advice on who was responsible for
economic policy.17 What made the President’s role so curious was that he created
new positions in government, including those of Minister in the Presidency for
National Planning and Minister for Economic Development, in efforts to ease
tensions and suspicions in alliance ranks, only to find that these new positions
actually helped to heighten tensions.
Not only did the NPC metamorphose into something other than the desperately
needed super-ministry, but it was patently clear that the social compacting needed
to help construct a developmental state was at an all-time low and the fractures and
schisms between social partners even deeper than during the Mbeki era.
10 The Elusive Quest for a Capable, Developmental State
By 2012, we saw yet another attempt at tabling a mode of the ANC-led govern-
ment’s search for a rational governance-cum-development model. The government
had released its much anticipated National Development Plan (NDP), supposedly to
give details about how the government would give practical expression to the
developmental state concept, and how it would place the emphasis on implemen-
tation. As it continued to struggle to introduce its rational governance model, it
began to recognise openly that the issue of state capacity and implementation
capability may it a huge challenge confronting the government. In the words of the
Executive Summary of the NDP, (2012), “there is a real risk that South Africa’s
developmental agenda could fail because the state is incapable of implementing it”
(NPC 2012b). The NDP identified the need for a new approach, premised on (NPC
2012a)
• People being active champions of their own development;
• Redressing injustice;
• Faster economic growth and higher investment and employment rates;
• Effective capable government;
• The need for leadership, unity, cohesion and trust, in other words creating a
national consensus.
No sooner had the Zuma government promised to focus on making sense of and
deepening its understanding of a “developmental state”, than it introduced the idea
17
See Ray Hartley, “Furious battle over economic policy—has Zuma stuffed it up?” 4 October
2009, posted on http://blogs.timeslive.co.za/hartley/2009/10/04/furious-battle-over-economic-
policy-has-zu.
of a “capable state”, which it regarded as a “precondition for development” (NPC

2012a). It believed that it “requires collaboration by all sections of society” (NPC
2012a). Such a state also requires strategic leadership.
The NDP was very explicit in recognising that South Africa faced challenges of
uneven state capacity, including political deployments; policy instability; skills
shortage and lack of clear vision of where the next generation of public servants
would come from (NPC 2012a). A human resource skills crisis is thus an important
challenge faced by the state crisis, and the NDP tackles this issue squarely.
According to the NDP, the following proposed actions need to be redressed:
(1) building professional public service (graduate recruitment programme); a Public
Service Commission, which should be given the power to develop and monitor
norms and standards for appointment, make public service a career of choice, have
a public service that is both skilled and representative; (2) stabilise the political–
administrative interface, hybrid appointments; Heads of department report to a
Head of the Civil service on admin matters; (3) respond to inward migration and its
strain on resources; (4) state-owned enterprises should be globally competitive
(clear mandates; clear governance structures; deal with capacity constraints); and
(5) improve relations between national, provincial and local government. What is
interesting about the narrative that is emerging is that while the emphasis remains
on what the developmental state literature calls a “meritocratic civil service”, it is
surprising that the NDP seems to place emphasis on a “capable state” on staffing
issues. While human resources and staffing issues are key determinants of capa-
bility, it is important that emphasis is also placed on political capability; technical
capacity; organisation capacity; and indeed ideational capacity.
No sooner had government placed the notion of “capable state” on the agenda,
and the issue of fighting corruption again enjoyed centre stage; there was a
recognition that corruption is a serious challenge facing South Africa. The NDP
called for the development of a resilient anti-corrupt system, stressing deterrence,
prevention and education. It proposed actions such as centralising the awarding of
large long-term tenders, while also strengthening the tender compliance monitoring
office. The NDP states that there was a need to strengthen accountability and
responsibility of public servants, while also bolstering judicial governance and the
rule of law, as well as a multi-agency corruption system. To cite the NDP, “there is
a real risk that South Africa’s developmental agenda could fail because the state is
incapable of implementing it” (NPC 2012a). By the end of 2017, it was not
apparent that the NDP still remained government policy, at least not politically.
While officially there continued to be rhetorical commitment to it, in practice that
was scant references to it, and instead of serious talk of such a meritocratic state
merging, the country’s popular and scholarly discourses became replete with sug-
gestions of a mafia, securocratic, captured state being in the making.
62 C. Landsberg
11 Conclusion
This chapter has made the point that the South African governance debate and its
search for a rational governance and development model in the aftermath of
apartheid should be viewed against the backdrop of the much-celebrated
Constitution, and the motivation to overcome the legacy of decades of white
minority domination, discrimination, inequality and poverty. There is no gainsaying
that South Africa introduced a new post-settlement governance ethos after 1994.
The governance regime of post-settlement South Africa is spelt out in the 1996
Constitution, which is regarded as “supreme”. Thus, South Africa has a Bill of
Rights, and the Constitution makes provision for Chapter 9 institutions and
strengthening their capacity (both human and financial). In trying to build a gov-
ernance culture, the new government was to take its cue from the Constitution.
Since 1994, the South African government has been committed to transforming,
and since 2004 it has committed itself to the transformation of the state into a
developmental one. The reality, of course, is that South Africa learnt that neither a
transformed state nor a developmental state comes about through mere declarations,
proclamations and edicts. A state becomes neither transformed nor developmental
in the absence of a lack of commitment to a process. Both a transformed and a
developmental state evolve through a continuous commitment to fast economic
growth and putting all the elements in place that would help to realise that goal, in
particular building the strategic, planning, administrative and operational capacities.
Such states, furthermore, evolve through dedication and building of a meritocratic
civil service, populated with the best talent to serve in government and the
bureaucracy, and ensuring that people with the best technical, vocational and
intellectual training join the civil service.
A key feature of this meritocratic civil service is the idea of putting at the centre
of government a lead agency, a powerful navigating unit, which could become over
time a super-ministry. In a democratic context, social compacting, and partnership
building between government and important social actors—labour, capital, and
civil society organisation more broadly—is a sine qua non. A developmental state
is after all one in which the broad spectrum of society agrees on the development
path to be followed by the state, and key social actors commit to joining the journey
to such a destination. Such a state’s autonomy is embedded in independence, not
the narrow self-interests of powerful elites. It is captured, but by the legitimate
interests of the people and broader.
However, the problem with governance in South Africa during the course of the
past two and half decades has not been with policy-making and overhauling the
legislative landscape but rather with policy implementation and operationalisation,
and a struggle for capturing the state. In the end, it was not so many policies and
policy-making that proved to be the challenge faced by South Africa but rather an
implementation and operationalisation gap, and even the emergence of some shady
state. At times, this read more like a governance crisis and not a stable, functioning
state, one in which a legitimate, constitutional order lived side-by-side with the
shadow. The government appeared to underestimate the managerial, technical and

operational skills demanded from governing the new society. State-society relations
also proved a problem, and the connectedness between government and especially
the previously excluded appeared a major problem. Twenty-five years into
democracy, an implementation crisis is haunting South Africa, and this has been
coupled with the emergence of a parallel and appended state, not to augment and
support, but to rival the democratic state. These are disconcerting developments as
they could trigger greater levels of social violence, and bedevil the Republic, at
national, but especially at provincial and local government levels, as South Africa
grapples with greater levels of poverty, inequality and joblessness.
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Local Governance in Rural India: Tracing
Institutional Voids
Madhushree Sekher
1 Background
In the current discourse on governance, positive relationship between decentrali-

sation reform, good governance, local economic and social development and
poverty reduction is a well-recognised fact. The comprehensive development
framework (CDF) as explained by James Wolfensohn1 (1999) states that decen-
tralisation serves for seven of the structural concerns of good governance, i.e.
transparency, openness, accountability, probity, well-supervised financial systems,
social programmes, violence and social unrest. Though political pressure probably
drives most decentralisation efforts, whatever its origins, decentralisation can have
significant repercussions for resource mobilisation and allocation, and ultimately
macroeconomic stability, service delivery and equity, thus hugely contributing to
economic development and poverty reduction at a macro scale (Litvack et al. 1998).
At the same time, it is a stated fact that each of these relations are inherently
complex and are subjected to number of additional factors and conditions which are
both facilitative and constraining to government action and external agency support
The field research for this study was jointly conducted by the Tata Institute of Social Sciences
(TISS) in Mumbai, the Institute of Social and Economic Change (ISEC) in Bangalore, and the
International Food Policy Research Institute (IFPRI), in Washington, DC, with financial support
from the German Federal Ministry for Economic Cooperation and Development (BMZ) and the
World Bank.
1
Wolfensohn, James D (1999). “A Proposal for a Comprehensive Development Framework”.
URL-http://web.worldbank.org/archive/website01013/WEB/0__CO-87.HTM. Accessed on 18
January, 2017.
M. Sekher (&)

https://doi.org/10.1007/978-981-10-5963-6_5
66 M. Sekher
(Romeo 2003). In fact, the whole idea of decentralized governance is driven by key
institutional concerns like people’s participation, accountability, transparency and
fiscal transfers (Cheema 2007; Bergh 2004; Bardhan 2002; von Braun and Grote
2002; Blair 2000; Tanzi 1996; Romeo 1999, p. 137; Crook and Manor 1998;
Litvack et al. 1998). But, as rightly observed in Crook and Manor (2000, p. 1):
For democratic decentralization to work well, elected bodies at lower levels must have
substantial powers and resources (financial and administrative), and strong accountability
mechanisms must be created—to hold bureaucrats accountable to elected representatives
and elected representatives accountable to citizens
While many countries have chosen this strategy, the decentralization reforms
adopted in India in the early 1990s has been described as perhaps the largest
decentralization project in modern history (Widmalm 2005). India has, also, played a
pioneering role in combining decentralization with affirmative action, most notably
the reservation of seats for women and disadvantaged groups in elected local gov-
ernment bodies, giving the local government institutions a crucial role within the
federal governance structure. However, decentralization in India is a state affair and
the institutionalization of the panchayats comes under the jurisdiction of the
provincial/state governments2 and goodwill of the politicians (Vyasulu and Vyasulu
1999). Consequently, while the broad frame of decentralization is similar, there are
considerable differences in design and pace of implementation in the different states of
the country (Aziz et al. 2002). States like Andhra Pradesh and Tamil Nadu have given
primacy to the district-level institutions for decentralised governance, while
Rajasthan has given importance to the block-level institutions, and Karnataka has
focussed on Gram (village) Panchayats. Difference is also seen in the implementation
of the provisions of local government system—for instance, in the state of Kerala
there is a focus on providing fiscal resources to the local government institutions
(particularly, the panchayats/rural local government institutions) through the provi-
sion of untied grants, while in Maharashtra the move has been to bring sectoral staff
under the control of the rural local governments. Some states like Chattisgarh have
taken further measures to improve local governance and public service provision
through use of modern information and communication technologies (ICTs), reform
of public procurement measures and innovative training programmes for public
officials, as well as elected representatives to the local government institutions.
It is true that the institutions of modern local governance have existed in India
since 1882.3 However, though ideas of giving power to people materialized prior to
1990s, it did not have constitutional guarantee till 1992/93 which saw the
2
In India, the local government institutions have been an institutional reform from above, provided
by the state to the people. There was no movement of the people, demanding local democracy and
devolution of power to the elected local government institutions. Besides, the Constitutional
Amendment only provides the overall framework for local governance in the country, leaving the
specific details of the local government system to the decision of the state governments.
3
Lord Ripon’s well known resolution on local self-government passed in 1882 had a series of
enactments in which larger powers of the Local self-government were given to the rural and urban
bodies and the elective people received some wider rights.
Local Governance in Rural India: Tracing Institutional Voids 67
Constitutional Amendment Acts to give statutory position to local government

institutions in the country. During 1950s and 1960s, the leadership of the newly
independent nation was sceptical about the concept of strengthening local govern-
ment bodies as there were fears about regional disputes based on caste, class, reli-
gion, etc. But later there was an increased demand for more power to local people
from different national and regional spheres, as a part of larger process of political
transformation. The political and economic reforms in 1990s transformed the
development landscape placing globalisation and localisation as manifest phe-
nomenon. The pressure for a change in site of governance, also, came from various
supranational agencies like International Monetary Fund and World Bank, to open
the scope of international investment. All this, along with political demand, finally
lead to the implementation of the 73rd and 74th Constitutional Amendments in 1992
and 1993, respectively, under which about 3,000 urban and roughly 250,000 rural
local government bodies were created and which were given constitutional status as
institutions of local self-government. These local governments were expected to
become vehicles for social transformation. Decentralisation, thus, aimed at
strengthening local democracy, and it was expected that these local-level governing
institutions could articulate the needs and requirements of the community, especially
those of marginalised groups. They were expected to prepare plans for economic
development and social justice at the local community level, and coordinate the
management and mobilisation of local resources effectively. But how far have been
these objectives materialised? Did decentralisation in India bring about the expected
redesigning in the power equations between various levels of governance? After two
decades of devolution of powers, now is a right time to have a critical gaze on the
performance of local governments in India. It is this that the present chapter seeks to
attempt, particularly looking at system of rural local governance in India through the
Panchayati Raj Institutions (PRIs). In this exercise, the paper takes only a brief
overall look at the decentralization efforts made in the country.
2 Methodological Issues
This paper draws on two surveys conducted between 2006 and 2009 in the state of
Karnataka, to study the factors that matter for local governance and rural public
provision.4 Thus, the two data sources are: (1) the survey of staff members in five
departments involved in agriculture and food security conducted in 2008/09 and
(2) the survey of households, as users of the services, conducted in 2006. The two
surveys were carried out by the Institute for Social and Economic Change (ISEC) in
collaboration with the International Food Policy Research Institute (IFPRI) and the
Tata Institute of Social Sciences (TISS). In the following, the 2006 survey is
referred to as “ISEC-IFPRI Survey” and the 2008 survey as “ISEC-TISS-IFPRI
4
For details of the survey, refer—World Bank and IFPRI (2010).
68 M. Sekher
Table 1 Number of units surveyed in Karnataka in 2006

Units covered in the survey Number
Districts covered 12
Blocks covered 85
Gram Panchayats, where GP questionnaire was applied 80
Villages, where village questionnaire was applied 225
Households included in the survey 966
Gram Panchayat members included in the survey 272
Survey 2008”. As part of the 2006 survey, a household survey was carried out to
elicit information on variety of aspects related to local governance and rural service
provision. Besides, 272 Gram Panchayat members were also interviewed. Data
were also collected at the Gram Panchayat level (covering 80 Gram Panchayats),
and at the village level (covering the 225 villages in which the sampled households
were located). Table 1 shows the number of units surveyed at each level of gov-
ernment, including the number of households and Gram Panchayat members
covered. Interviews were conducted with households and user organisations in
different sectors, using handheld computers and paper questionnaires.
The 2008/09 survey covered 155 senior staff members of the five departments—
assistant directors of agriculture, assistant directors of animal husbandry, block food
and civil supplies officers (Shristhedars), child development project officers and
assistant executive engineers. Moreover, 155 representatives of community-based
organizations associated with each department were also interviewed. These
included farmers’ cooperatives, dairy cooperatives, vigilance groups for the public
distribution system, women self-help groups, and water and sanitation committees.
In the following text the field-level staff members are also referred to as frontline
service providers as they directly interacted with the people receiving the public
services. The blocks (administrative units) where the survey of the frontline service
providers was conducted were selected to match the 2006 household survey.
It needs to be noted that the interpretation and discussion in the following
sections based on the above-mentioned data sources are indicative in nature that
may hopefully encourage further research on these lines.
3 Devolution of Power and Function
Decentralization as a governance process addresses the efficient utilization of

resources and equitable distribution of development benefits at the local level,
managed and facilitated by elected representatives in the local government insti-
tutions. As mentioned, the Indian experiment with local governance received a fillip
with the 73rd and 74th Constitutional Amendment Acts (CAA) that gave consti-
tutional status to the “Panchayati Raj Institutions” (PRIs) for rural local governance
and to the “Municipalities” for urban local governance, respectively. The PRIs,
which are focus in this paper, were implemented as a three-tier system of gover-
nance, where the Gram Panchayat or cluster of villages formed the lowest tier,
Taluk Panchayat formed the intermediate tier at the block level, and the Zilla
Panchayat at district level constituted the upper-most tier. The idea of devolution is
key to democratic decentralisation focusing on the sharing of decision-making
powers to local levels of governance. It deals with transfer of powers, rights, assets
and resources to a local government within a legal framework. The spirit of
decentralization of local governance in India is not only about devolution power,
but also responsibilities. This is determined by the levels of engagement and
interventions made by local government institutions in planning, fiscal and service
delivery mechanisms.
Local government institutions are primary delivery mechanisms for ensuring the
provision of public services for people in the sectors like water, sanitation, pro-
viding basic infrastructure like roads, public health and education. For necessary
administrative and financial decentralisation of powers and functions from the state
to local government institutions, the following matrix, drawn on the Karnataka
Panchayati Raj Act 1993, broadly illustrates the powers and functions of the Gram
Panchayats regarding different administrative sectors.
Powers and functions of the Gram Panchayats in Karnataka

Sectors Power and Functions
Agriculture Promotion and development of agriculture and horticulture
Roads Construction and maintenance of village roads and drains
Drinking water Construction, repairs and maintenance of drinking water wells, tanks
and ponds
Sanitation and Instruct construction and repair of drainage and sanitation facility for
drainage private owner
Poverty alleviation Selection of beneficiaries under various programmes; coordinating
programmes programme implementation and monitoring
Public health and Participation in programmes of human and animal vaccination
family welfare Regulation of sale of perishable food
Education Ensuring full enrolment and attendance in primary schools
Some relevant Acts Karnataka Panchayati Raj (KPR) Act. 1993, version 2011. Act 29 of
1997 w.e.f. 20.10.1997 and KPR Act. 1993, version 2011,
Sections 3 and 3A Substituted by Act 37 of 2003 w.e.f. 1.10.2003
Source Karnataka Panchayat Raj Act (Act No. 14) of 1993 (GoK 1993)
The GPs formed an important administrative structure of local governance in the

state, mainly responsible for economic and social welfare, education and health
within the panchayat. The Eleventh Schedule in the constitution lists 29 functional
areas to be brought within the purview of local governance, and resources and funds
flowing from various state government and centrally sponsored schemes to the
panchayats can be fitted into a local plan of the GPs to ensure better resource
utilization according to priorities assigned by local needs. In Karnataka, the
Karnataka Panchayati Raj Act, 1993, and the subsequent Karnataka PRI
70 M. Sekher
(Amendment) Act, 2002, has accorded the functions and duties to the panchayat
institutions in conformity with the Eleventh Schedule. Attempts have also been
made to assign development administration to the panchayats, and activity mapping
have been carried out by the state to overcome overlapping of functions between the
three tiers of panchayat institutions. The GPs were specifically responsible for
carrying out development works at the local level and had responsibilities for
activities relating to rural water supply, forestry, housing, employment and various
rural development and welfare programmes (Sekher et al. 2006b). Of these, rural
water supply, housing and employment were their major spheres of activities.
Other rural services, such as health, education and agriculture remain under the
administration of specific line departments. These line departments have adminis-
trative staff placed at the Zilla Panchayat and the Taluk Panchayat level. For
instance, studies on decentralization in health services, have noted that the strong
role of the line departments has limited the actual transfer of functions for health
service delivery (Singh 2008; Raut and Sekher 2013). In the case of health, the
District Health and Family Welfare Officer (DHO) is the administrative head of the
Health Department at the District (Zilla) level and is responsible for the imple-
mentation of all programmes and the management of the health centres in the
district. The DHO is answerable to both the Zilla Panchayat and the State Health
Directorate. The district hospital functions directly under the control of State
Headquarters and not under the Zilla Panchayat.
In fact, one can note that there is a trend to devolve those functions that are
transaction-intensive in terms of space and time, that which require local knowledge
for evaluation, and which do not have major economies of scale (such as construction
and maintenance of small-scale infrastructure) to the lowest tier of government—the
Gram Panchayats. For discretionary activities, such as implementation of health
programmes and teaching, the lowest tier of government has mainly a supervisory
role, while the primary responsibility of execution remains in the higher tiers of
government. Activities such as construction of health facilities and schools remain
mainly at the district level.
4 Decentralisation and Devolution in Practises
To understand the governance challenges, both at an institutional level and in the

functioning and implementation process, it is important to analyze how local
governance is practiced. Looking at the performance of GPs through specific
indicators like their source of income, their spending priorities, the responsiveness
of the local governments to local needs and local government capacities will help
build an image of how decentralization has had an effect in the government’s
execution efficiency.
4.1 Analysis of Source of Income of GPs
Capturing efficacy of the local governance system is a very perplexing task.

Looking at the major sources of income of Gram Panchayats, this study of pan-
chayats in Karnataka provided useful insights on the nature of the power and
interactions of the local bodies at various levels of governance structure. Devolution
of financial power is ideally a key element of the policy to decentralise governance,
and knowledge about the financial system of any local body is relevant to under-
stand its capacity and limitations in the governance structure.
Table 2 shows the major sources of income for GPs in the state of Karnataka.
Their own resources accounted for approximately 12% of their total budget.
Government transfers accounted for another 38%. The funds under rural employ-
ment scheme and the rural housing scheme comprised the major chunks of the GPs’
sectoral funds, accounting for 36% of the total financial resources with the GPs.
Under the umbrella of rural employment scheme, installation of Hydrams for minor
irrigation projects, marketing rural goods, improvement of milch livestock, rural
development through diversification in agriculture, self-reliance through sericulture
and dairy development and programmes for skill development of rural youths
through Grameen Labs, get their funds from the central government and this is the
biggest source of development fund for GPs. Also, the funds received by the GPs
from central government under Indira Awas Yojana (rural housing scheme) has
enhanced the beneficiary assistance from Rs. 27,500/- per beneficiary, to
Rs. 38,500/- per beneficiary, and is being given to poor families (households that
are listed under “below poverty line”—BPL category) for the constructing houses
from 1st April, 2008. Gram Sabha does the selection of beneficiaries under this
scheme, which is financed by center and state government on 75:25 sharing basis
and the fund is handed over to GPs.
A report on fiscal devolution in Karnataka (Sethi 2006) noted that the capacity of
local governments to raise tax revenues was rather limited. An analysis of the fiscal
transfers to different tiers of local government showed that less than 6% of the total
transfers to local governments were devolved to the GP level. The Taluk Panchayats
received around 54% of the transfers, while 40% went to the Zilla Panchayats.
Table 2 Major income sources of GPs (2006–2007)

Income source Percent (%)
Own resources 12
Statutory development grant 33
11th finance commission grant 5
Rural employment scheme 19
Water supply scheme 4
Rural housing scheme 17
Subsidized credit scheme (for setting-up self-help groups) 4
Rain water harvesting scheme/agriculture 5
Total income 100
Source ISEC-IFPRI Survey (2006)
72 M. Sekher
4.2 Prioritizing Spending on Local Needs
A significant criticism of centralized government in administrating villages was its

failure to understand and respond to the different needs of local communities and its
inability to reach the locals. Decentralisation and statutory administrative bodies
like GP with the elected member representation from the local areas were an
institutional response to this limitation of the government and was important for
reaching out responsive governance to people. With respect to the range of finances
deployed in development-related activities, different degrees of emphasis can be
observed in public spending of the GPs. However, this need to be interpreted with
care, as the source of finance from which the expenditures are undertaken are
markedly for the GPs. Specifically, the nature of the source of finance, i.e. tied or
untied grant may stipulate the end-use of the funds (or the range of potential end
uses of the funds). Most of the sectoral-related grants are tied, while the develop-
ment grant and funds from “own resources” (raised through local cess and taxes)
can be untied.
Notwithstanding this, it is seen that a consistent and major proportion of inter-
action between local villagers and local government functionaries, particularly at
the GP level, was due to issue of availability of water facility in the villages and a
demand for expansion of this service. Figure 1 provides a snapshot of the various
heads of functional expenditures in the GPs budgets, and the development activities
undertaken. It is evident that members of GPs, in the study areas, invested heftily in
solving the issue of drinking water for households. Another thrust area of expen-
diture, in the priority of investment, was on drainage and sanitation and rural
Fig. 1 Investment priorities of GP members. Source IFPRI-ISEC Survey-1 (2006). Note Figures
refer to percentage of interviewed Gram Panchayat members
housing. The analysis clearly shows how efficient the decentralisation policy,
especially at GP can be if effectively channelized. However, the fact which needs to
be highlighted here is that the thrust of GP activities lies in the sphere of
construction-oriented infrastructure projects, unlike issues relating to livelihoods,
for example, which do not figure upfront in the list of the panchayat’s priority
investments. The implementation of the rural employment schemes is one of the
most important activities undertaken by GPs. This primarily drives the
construction-oriented infrastructure projects carried out in the panchayats as more
funds are available with the GPs under the employment schemes, relative to funds
available to GPs for other development activities.
This GP-level study also showed that the GPs differed in their capacity to spend
the funds received under the different schemes. While the funds received by the GPs
for the housing schemes still constituted a major share of the resources received,
and a number of GPs were not able to spend the funds they received. In case of the
rural employment schemes, about half of the GPs were not able to spend all the
resources they received. While almost 40% of the resources received for housing
scheme went unspent, about 10% of the resources under the employment schemes
were unspent (Table 3).
4.3 Responsiveness to Local Needs
The rationale for support and efforts to build local government capacity is provided
by the paradigm linking public sector decentralisation reforms to poverty reduction
via improved local governance (Romeo 1999). Citizens’ perception about the local
government is a significant component of process monitoring and, at the same time,
a key indicator of the functionality of the process that, in turn, forms the basis for
accessing the local government functioning. The major challenge is the cost,
logistics, orientation of the survey and the issue of undertaking responsibility for
this component of system monitoring, to make it as representative as possible.
Keeping in view these constraints, an attempt has been made here to undertake a
functional analysis of the GPs in the study area to have an insight on the impact of
decentralization, and local governance by looking at how approachable the local
government functionaries are and how the locals perceive their availability, and the
fulfilment of the local development needs.
Table 3 Capacity to implement schemes

Year Housing scheme Employment scheme
No. of Resources unspent (mean) No. of Resources unspent (mean)
GPs (%) GPs (%)
2004 13 43.1 41 12.9
2005 25 34.6 38 10.5
2006 24 27.2 44 10.5
Source ISEC-IFPRI Survey-1 (2006)
74 M. Sekher
4.3.1 Approachability5 of Local Government
The decentralization of power is a prerequisite of local autonomy. Though the

modern nation-state established the local government system, the authority of local
governments has been limited. A fallout of this is the limited accessibility of poor
and the underprivileged to the government system, and this could manifest in terms
of problems in information availability and in the quality of public service delivery,
thus making government failures acute (Bardhan and Mookherjee 2000). However,
since mid-twentieth century, every country has begun to promote decentralization
reform (Niikawa 2014). Decentralisation has in some cases been part of the general
civil service reforms or of the structural adjustment programmes to reduce central
government administration and make it more effective. Decentralisation has been
linked with local governance and worked more on establishing downward
accountability to citizen levels, as opposed to upward accountability from local
elected governments to the central government level (Olsen 2007). The patterns of
interaction between different stakeholders at the local governance level, which is
generally between the local people and the government system, are a major indi-
cator of the nature of interactions achieved, if any, due to the measures of
decentralization.
In India, since independence several attempts have been made to organize
panchayats as institutions of self-government in rural areas. As in other countries,
decentralisation in India has made its progression with functions and powers
devolved to the local government institutions as laid down by the basic principles in
the 1992 CAAs and in accordance to the discretion of the state governments. Recent
literature on decentralization and public service provision has placed a strong focus
on accountability and local democracy, which can be seen as the “demand-side” of
rural service provision—that is the citizen’s ability to demand better services and
hold service providers accountable (Goyal and Sekher 2015).
Local government personnel are the first order of connections between for
people with their government. Figure 2 shows the major reason cited by villages for
contacting different officials of their local government, which reflects how
approachable the local government is. It is observed that issues related to road,
drinking water and housing are the most crucial issues of interaction with the
officials. While the Zilla Panchayat president and other Zilla Panchayat officials are
mostly approached with regard to concerns relating to drinking water and housing,
issues related to roads and connectivity, and drainage/sanitation are mostly com-
municated to GP functionary and members of the Taluk Panchayat.
This distribution of responsibility is a major functional characteristic of decen-
tralised local governance. Decentralisation in the processes of public sector insti-
tutional reforms, thus, empowers local governance, whereas local governance itself
relates more to supporting the creation of an enabling environment for
5
Approachability here refers to the receptiveness and responsiveness of the local government
functionaries to the locals and their needs.
Fig. 2 Reasons for contacting government personnel by households (percentage of total). Source
IFPRI-ISEC Survey-1 (2006). Notes: GP Gram Panchayat; TP taluk (block) panchayat; ZP zilla
(district) panchayat; MLA Member of the Legislative Assembly
multi‐stakeholder interactions, including public, private and civil society, to foster

local development (Olsen 2007).
A shortcoming of centralized government lies in its lack of flexibility to carter to
local needs and the lack of trust that locals have in it and their hesitancy to approach
it for assistance. And in most situations the higher levels of governance institutions
are inaccessible and almost impossible for the local people to navigate. The local
governments were expected to address this shortcoming in governance, by taking
government closer to the people. Still unfortunately, due to persistence of the long
traditional perception of administration incapability and ineffectiveness in the
structure, a large share of the population even at village level do not have trust in
the local government institutions, and hence prefer not to seek assistance from its
functionaries. Table 4 reflects this phenomenon by looking at whom the locals
contact in the event of problems relating to two development activities important for
the local communities—drainage/sanitation and health issues. It clearly reveals that
even our decentralized institutions are trapped in the crucial question of lack of
approachability.
A large level of apathy is noted among the locals as a large majority reported that
they did not contact anybody to express their dissatisfaction with draining or
76 M. Sekher
Table 4 Whom do rural citizen contact?

Person contacted to report drainage Person contacted to report health facility
problems problems
Nobody 63.1% Nobody 86.4%
GP Member 14.2% MLA 6.3%
GP President 11.6% GP President 3.6%
GP Secretary 6.6% GP Secretary 1.4%
MLA 2.3% Taluk Health Officer 0.8%
TP Member 0.9% GP Member 0.6%
ZP 0.8% TP Member 0.5%
Discussed in Gram Sabha 0.2% Chief Doctor 0.3%
Ex-GP President 0.1% District Health Officer and MLA 0.2%
Ex-GP Member 0.1%
Water Man 0.1%
Total 100.0% Total 100.0%
Note In case that the respondent contacted more than one official, the official who is highest in rank
is listed
drinking water (service decentralised to the local government), or public health

facilities (a service directly under the health directorate). However, comparatively,
in case of the sanitation service with a decentralised mandate with the local gov-
ernment, higher proportion of citizens contacted the panchayat functionaries to
report problems. They mostly contacted GP-level officials. A similar picture was
observed with regard to other development functions where the local governments
had decentralised administrative jurisdiction, like in the case of drinking water,
provisioning of subsidised food and employment. Contrarily, in the case of health,
the Member of State Legislative Assembly was the main person to be contacted.
What do rural citizens do, if they are not satisfied with a service? What mech-
anisms to exercise voice and demand accountability do they use? On the one hand,
citizens may engage in general forms of political participation, such as voting and
attending village assembly meetings. And, as discussed above, they can contact
elected and non-elected officials at different levels of government to report their
problems. And they can join specific governance bodies, such as parents–teacher
associations
4.3.2 Key Issues Discussed in Gram Sabha Meetings
The effectiveness of decentralisation lies in the enhancement of audibility of local

needs to the government, and the efficiency of government lies in taking actions to
solve those critical issues. Expanding our understanding of reasons of interaction at
the lowest level of decentralized government, Fig. 3 shows that expansion of
drinking water facility has been the most important reason for locals to meet with
their GP elected representative and discuss the concern in Gram Sabha meetings. It
Fig. 3 Concerns discussed in Gram Sabha meetings based on households’ perspective

(percentage of total). Source IFPRI-ISEC Survey-1 (2006)
is important to note that the issue listed in Fig. 3 is based on the perspective of
households. The expansion of water facility has also been given the top investment
priority (refer Fig. 1), which is corroborated here by the thrust on drinking water
facility as the concern most discussed towards meeting people’s needs and
requirements.
4.4 Local Government Capacities
The evolution of local self-governing institutions in India has been through a series
of historical events, rules, regulations, Constitutional Amendment Acts and
Commissions, finally reaching its statutory form under the 73rd Amendment Act
(1992) and the Panchayats (Extension to the Scheduled Areas) Act, 1996 (PESA
Act). Reforming the governance structure through decentralisation consists of
devolution of substantial public sector responsibilities and resources to local gov-
ernments, which is often advocated to generate allocative and productive efficiencies
in public resources (Litvack et al. 1998; Romeo 2003). This enhancement of effi-
ciency is brought through strengthening of the human capital aspect in the
GP. Adopting efficiency improvement strategies through identifying significant
practises contribute to a dynamic governance structure. For instance, as cited in
Table 5, a number of trainings were given to junior engineers of the surveyed GP for
construction and maintenance of the resources required in the village, particularly in
construction and maintenance of drinking water and sanitation facilities. This comes
out as a very good example of coordination between the different tiers of the local
government (the Zilla, the Taluk and Gram Panchayats) to build capacities in the
investment priority areas under their jurisdiction. Adequate training and orientation
78 M. Sekher
Table 5 Training received by junior engineers

Training subject Number of trainings reported
Construction of water supply facilities 10
Construction of sanitation facilities 8
Maintenance of water supply facilities 5
Rehabilitating of water supply facilities 4
Rehabilitating of sanitation facilities 4
Water source management arrangements 3
Training of rural population in water conservation 2
Training of rural population in water harvesting 2
Maintenance of sanitation facilities 2
Community organization 1
Other subjects 27
Total 68
Source ISEC-TISS-IFPRI Survey-2 (2008)
of elected representatives will enhance their capability to function more effectively,

as illustrated in an experiment in Karnataka (Sekher 2003; Sekher et al. 2006a).
However, it needs to be noted that most of the public sector reform efforts of the
past decades, both in India and in other developing countries, have focused on
reforming the institutional set-up of service provision, such as decentralizing and
strengthening community-based organizations. However, evidences indicate that
more attention needs to be paid to the capacity and management constraints that
affect the performance of frontline service providers who are important in sup-
porting local governments and communities in achieving food security, agricultural
development and securing their livelihoods (Birner et al. 2012). Particularly it was
observed that, while staff capacity clearly differed across departments, it seemed to
be most limited for the agricultural extension service. In this service, the number of
unfilled positions of the frontline service providers in the department was high
(Birner et al. 2012). Besides, there were very few young staff and the older staff
lacked the motivation to work, and, also, often their education levels did not match
the service requirements (Birner et al. 2012). The share of young staff among the
food inspectors was also very low, but at least their qualification levels are higher
than those of the agricultural extension agents. Still, it is worth noting that more
than a quarter of the food inspectors, and more than a third of the junior engineers
did not feel that they had received adequate training to fulfil their service
requirements (Birner et al. 2012).
5 System Analysis for Service Delivery
Local governments provide the population they serve an opportunity to interact

with the government system to express their grievances and meet their development
needs, which is otherwise very difficult in a centralized medium. However, for
decentralised systems to work well, people need to acquire a sense of ownership of

development projects, while their elected representatives need to make decisions
that address local needs long overlooked by development programmes designed
from above. As more and more locals come to identify with local development
projects, they tend to maintain, repair and renew them more assiduously, and such
enhanced maintenance makes development more sustainable (Crook and Manor
2000). In India, decentralised local governance process was expected to provide an
ombudsman arrangement like grievance redressal mechanism, to settle disputes
between state and local governments, local governments and local communities,
and between the people’s elected representatives and the bureaucracy, thus
enhancing downward accountability which is an ideal characteristic of democratic
decentralization (Palanithurai 2009). But this does not mean that the idea of
decentralization is to create another layer of hierarchy within the governance
structure, but instead extending governing institutions and processes to the lowest
possible unit, and hence strengthening service delivery and other administrative
functions of the state at the local level.
In this process, it is important to assess the patterns and trends seen in the
interactions of people with local governments, and the coordination between the
different government units. Ideally, there need to exist a complete circle of coordi-
nation which is continuously flowing, leaving no information gap, to ensure trusts in
the institution. But now a major governance challenge is ineffective coordination
between different departments due to information gap. As Table 6 shows, presidents
of Taluk Panchayat, Zilla Panchayat and Members of Parliament (MPs) from the
same elected constituency hardly have any interaction with the local elected GP
representatives. In other words, within the structure of local governance there is
hardly any vertical coordination as the member of higher tier of government is hardly
Table 6 Contacts of GP members—a vertical coordination

Official met Percentage of GP members who met officials
GP President 80.1
Other GP Member 60.7
GP Secretary 91.5
TP Members/President 65.8
TP Executive Officer 50.4
TP Other Officer 8.8
ZP Members/President 56.3
ZP Executive Officer 13.6
Other District Officials 4.8
Member of Legislative Assembly 64.7
Member of Parliament 14.7
Traditional Panchayat 12.9
Others 8.8
Note: ZP Zilla panchayat (district, highest tier); TP taluk panchayat (block, medium tier); GP
Gram Panchayat (village cluster; lowest tier)
80 M. Sekher
Fig. 4 Reported last meeting time of user-group organisations. Source ISEC-TISS-IFPRI

Survey-2 (2008)
seen to have any coordination with the local GP members. It is expected that this lack
of coordination would impact the peoples’ efforts to use local political channels to
improve rural service provision. Elected officials at higher levels of local govern-
ment and at the state level are the main channels by which GP officials can address
problems of rural service provision. About 50% GP members, in this study, reported
that they were also able to meet the Executive Officer at the Taluk level, but less than
5% of the GP members had any contact with the Zilla Panchayat Executive Officer.
Another evidence for the weak coordination is the local government’s engage-
ments with other user organisations like water and sanitation committee and farmer
cooperatives, which can be found operating or in existence in the local space where
the local governments have their functional jurisdiction. Strikingly, Fig. 4 shows
that other than the women self-help groups (SHGs), other user organisations in the
GPs hardly had any regular group meetings. Concern arises from the fact that
substantial proportion of important departmental user groups like water and sani-
tation committee, dairy cooperative society and farmer’s cooperatives, which have
been constituted to provide a space for the user/beneficiary communities to meet
and discuss their concerns and coordinate with the local government institutions (in
this scenario, it is the GPs), hardly interacted once a year. This raises serious
governance challenges and is a major cause for the implementation problems seen
in the functioning of local governments.
6 Institutional Voids and Governance Challenges
At this point, it is important to mention that the utility of panchayats in India for the
average villager has been seriously limited because of corruption, inefficiency, scant
regard for procedures, political interference in day-to-day administration and
“parochial loyalties” (Birner et al. 2012; Tanzi 2001; Bardhan and Mookherjee
2000), though it has also been argued that fiscal decentralization, modelled as an
increase in the number of competing jurisdictions, leads to a lower level of cor-
ruption (Arikan 2004). On a similar note, Government of India report in the late
1970s (GoI 1978), also pointed out to the domination of economically or socially
privileged sections of society under the local government system, and the threat that
this could have in reaching public services to the poor and the less privileged as
much of this power-base facilitated the emergence of oligarchic forces that could
keep the weaker sections marginalised (GoI 1978).
The question that arises here is, whether now, after more than two decades since
the CAAs giving statutory status to the local government institutions in the country,
the situation regarding corruption, inefficiency and parochial loyalties, changed?
Has the true meaning of decentralisation and local governance being achieved in the
country?
According to Mathew and Mathew (2003), efforts to break the constructs of
barrier and bridge the institutional voids in India’s local government scenario have
taken place at two levels. First, we see increasing efforts being made to strengthen
the direct democracy forums like user groups (including neighbourhood groups),
and Gram Sabhas. Secondly, community level measures like those of the
non-government and community-based organisations, and the work of civil society
members are increasing gaining precedence and are playing important roles.
However, institutional voids and the associated governance challenges in the
functioning of the local governments can still be observed. Studies point out that the
efforts undertaken to maximise local government’s effectiveness and pace up local
governance still has a long way to go, particularly when it comes to the question of
public administration, as it continues to be a “black box” in most discussions about
strengthening governance at the local level (Birner et al. 2012). Most of the public
sector reform efforts of the past decades, both in India and in other developing
countries, have focused on reforming the institutional set-up of service provision,
such as decentralizing and strengthening community-based organizations. But, the
capacities and management constraints faced by the public administration and
frontline service providers who are important in supporting local governments and
communities have not received sufficient attention. Lack of human capital, eco-
nomic capital, complex and sluggish administration procedure followed by inade-
quate work environment and excessive political interference are the major factors
which effect the efficient functioning of the frontline administration and, conse-
quently, the functioning of local governments in India.
The question of human capital in the frontline public administration can be better
articulated here, if we map the scale of administration and responsibility of per-
sonnel in an administrative unit. Table 7 shows the self-estimated outreach of
different department-linked frontline service providers who have a functional
jurisdiction with the local governments. The figures show that there is a visible
over-burdening for employees in each position and this plays out as an important
institutional void affecting the quality of service provided at the panchayat level.
82 M. Sekher
Table 7 Self-estimated outreach of field staff in different departments–an indication of

over-burdening of staff (numbers given are as reported by the functionary)
Indicators Junior Agricultural Veterinary Food Anganwadi
engineer extension assistant inspector worker
worker
For how many Gram 4.5 4.0 7.2 16.4 NA
Panchayats are you
responsible for in your
work?
For how many villages 35 26 41 106 NA
(including hamlets) are you
responsible for in your
work?
What is the total population 23,795 26,288 22,037 120,460 1,796
in these villages?
What is the total number of 4,930 7,320 10,100 25,637 377
households in these
villages?
What is the total number of 1,048 1,023 569 2,482 NA
female-headed farm
households in these
villages?
Table 8 Constraints identified by frontline staff—inspecting the institutional void and gover-
nance challenges (in %)
Indicators Junior Agricultural Veterinary Food Anganwadi
engineer extension worker assistant inspector worker
Lack of staff 39 88 75 65 4
Political 51 51 40 71 8
interference
Lack of funds 27 7 18 12 12
Inadequate work 10 5 6 10 10
environment
Complex admin. 7 7 8 3 2
procedures
Note Number/percent of respondents who reported respective constraint; multiple answers possible
Table 8 lists five major constraints experienced by the field staff from the five
departments linked to local governance which were covered in this study. These are
an indicator of the major gaps in not only designing development programmes and
schemes, but also in there execution. For example, agricultural extension workers
and veterinary assistants find lack of staff as the most important constraint. The
nexus between political representatives and officials in corruption is the one wor-
rying aspect which has been very consistent malaise faced by public administrators
in the country. A citizen-oriented public service through the checks and balances
has been strived for long, but unfortunately this problem still prevails (Mathew and
Mathew 2003). For example, in the work of Roy et al. 2001, it is seen that pan-
chayat representatives often organise themselves as a lobby against transparency,
taking the cue from the Panchayat Secretaries (who are the Executive Officer in GP)
and the Block Development Officers, both frontline government officials with an
important role in country’s local government set-up. This reflects the line of vertical
corruption that can possibly surface within the chain of administrative hierarchy for
local governance. These types of collusions are prevalent all over the country, and
so says the data with the reference to “political interference” (Table 8). In fact,
political interference was reported most frequently as a constraint by almost all
frontline staff.
In spite of a general perception that the Indian bureaucracy is characterized by
cumbersome administrative procedures, the majority of field staff in the five
departments did not consider complex administrative procedures to be a constraint
in fulfilling their responsibilities and duties (Table 8).
6.1 Severity of Political Constraints
Most frontline administrative personnel alluded to political interference and staff

shortage as a major institutional void and a governmental challenge in executing
their functions under the democratic governance process (Table 8). To focus the
point made about political interference, we can trace the trend back to the whole
idea of local autonomy and how it has attracted a lot of attention in present day
politics. Although the classical thought about local autonomy recognises it as a “a
school of democracy” incorporating the concept of political participation, the local
government has extended its scope of activity extensively to respond to the changes
of modern nation states. Thus, in contemporary perspective, local government using
its local autonomy has started performing the function of a welfare state (Niikawa
2014).
Unfortunately, excessive political interference to sustain orthodox social and
cultural factors has perpetuated the hierarchical, unjust social system and this
stagnate development. The leaders that this system of local government produces
do not have an interest in changing this scenario, primarily due to the pyramid-like
rent-seeking structures of political parties, the command and control system of the
bureaucracy, and the organised class and caste interests. Moreover, elected leaders
at state and federal levels have a vested interest in maintaining the status quo, and
this is reflected in their not-so-friendly or even hostile attitude towards the
decentralisation process and the strengthening of local government institutions.
Here we see that traditional local leaders are equally concerned about holding on to
their positions and powers, as they want to keep their support structures within the
electorate and retain the social hierarchies within the local milieu. In this process,
84 M. Sekher
favours granted within the electorate and the clientage, and this becomes the most
important social relationship.
This scenario reiterates what has been amply acknowledged in literature on local
governance in India—that is, extensive local government control over local staffing
without the central impetus for ensuring sound personnel practises can lead to
corruption and nepotism and kills all the purpose of strengthening the governance at
village level (Mathew and Mather 2003).
6.2 Perceptions Regarding Work Environment
For administrative coordination within the institutional system for local governance
to run smoothly, it is essential to have an active, engaging work environment.
A significant development in the field of effective execution of governmental duties
within the domain of public administration is a need for due recognition given to
the importance of human resources. More and more attention is now being paid to
motivational aspects of human personality, particularly the need for self-esteem,
group belonging and self-actualization for enhancing efficiency within the subject
of human resource management, and this is true even in public administration and
for governmental employees. The scope of applying principles of human resource
management in organisations has been enlarged through new awakening of
humanism and humanisation all over the world. The main concerns of human
resource management are the development of people, their competencies and the
process development of the total organisation. Figure 5 shows that among different
kind of incentives and awards provided to the administrators associated with the
local governments to increase their efficiency and address the institutional voids
affecting their performance, recognition of work by supervisors and regular
Fig. 5 Incentives and transport in different departments (in %). Source ISEC-TISS-IFPRI
Survey-2 (2008)
monthly salary are most commonly cited incentives and which the functionaries
value. A major lag can be observed in unbiased recognition of efficient work and in
awarding good performance. Attention to this institutional void can enhance the
efficiency of employees and help in converging the gap in expectation and exe-
cution of decentralized governance.
7 Concluding Remarks
A key reason decentralisation has attracted so much attention is that it is often a

cross-cutting reform that can relate to a multiplicity of relation between elements
like fiscal and financial development; macroeconomic stability; poverty alleviation
and the social safety net; institutional capacity, corruption and governance;
investment in infrastructure; and the provision of social services. A local govern-
ment process to be successful needs institutional-specific design that cuts across
public sector performance and impacts decentralisation which provides scope for
equity and people’s participation (Litvack et al. 1998). The multidimensional aspect
of decentralisation—the dispersion of fiscal, political and administrative powers has
three implications that heavily influence the context for thinking through decen-
tralisation for policymakers and their advisers.
• Firstly, decentralisation changes the mobilisation and allocation of public
resources affecting a wide range of issues of service delivery and macroeco-
nomic stability.
• Second, the management of decentralisation requires intimate knowledge of
factors driving decentralisation in a country, development sectors and stake-
holders involved, which incorporates a nuanced understanding of public admin-
istration, local government institutions and of the process of decentralisation.
• Third is the critical issue of existence of limited empirical evidence about what
works and what does not.
All these three factors pose a challenge in designing and managing decentral-
ization and local government institutions. As summarised in Fig. 6, weak linkages
among institutions, inappropriate political interference and absence of effective
human resource management strategies (for example, the unsatisfactory perception
of the frontline service providers regarding their incentives and work environment)
are some of the key governance challenges to achieving smooth horizontal infor-
mation and action efficiency in the local governance process. On the other hand,
multiplicity of channels of determining fiscal decentralization and fund flows to the
GPs and local government institutions, the multiplicity of administrative institutions
linked to the functioning of the local governments, and complexity of the process of
execution also affects the pace of execution of governance in the panchayats to fulfil
local needs. The process is further hampered by political interference. While
undoubtedly decentralisation, especially at lowest level of governance, had high
astute for enhancing efficiency in governance, real-world barriers have impacted its
86 M. Sekher
Fig. 6 Tracing institutional

voids in decentralised local
governance
goal. While the barriers are there in its path, a sound institutional backup with a
little motivational action may help us to achieve an equally effective good gover-
nance in local level.
Factoring in above-mentioned issues in the decentralisation system helps us in
also understanding major challenges to public administration and the process of
local governance. While the institutional framework of governance has been given
much focus, mostly pertaining to the provisioning of service, there is need for more
focus on the capacity and management constraints of the decentralised local gov-
ernment systems per se. An important goal of the empirical analysis of decentral-
isation is to establish causal relations between decentralization and the performance
of rural service provision. This is a challenging task (Bardhan 2002). Since
decentralisation is implemented in the whole country, a counterfactual analysis of
the governance process is difficult to establish, even if before-and-after data are
available. Decentralisation is often associated with other policy reforms—in the
case of India with economic liberalisation, which makes it difficult to attribute
outcomes. Another problem is simultaneity—improved citizen participation may
improve programme implementation, but better programme implementation may
encourage more citizen participation. Moreover, the degree to which decentralisa-
tion is, in fact, implemented is likely to be endogenous (Bardhan and Mookherjee
2006). Hence, there is a need to better understand the political economy and the
political feasibility of decentralisation.
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Part III
Rethinking and Restructuring Governance
Fiscal Reforms at the Local Level in India:
An Overview
Anita Rath
The local budget as an element in the larger public finance picture is very modest in
developing countries and is abysmally low in India. After a decade and half of the
73rd and 74th Constitutional Amendments, which were implemented to strengthen
governance from below, the share of local bodies in the total expenditure by all
levels of government in India is less than 7%. Spending ability of the local bodies is
greatly circumscribed by the access to productive own sources of revenue. It is in
this context that major issues which dominate the fiscal arena of local bodies are
serious vertical and horizontal fiscal imbalance, expenditure implications of
unfunded mandates imposed by the higher levels of government, restrictions on the
choice of local revenue sources apart from controversies surrounding their major
fiscal instruments.
The process of fiscal decentralization in India, as in any other context, has been
one of ongoing adjustment and experimentation. The actual implementation of
decentralized governance varies greatly as the intent is supplanted by the reality of
central pre-emption of sub-national authority, or by the lack of institutional readi-
ness of sub-national governments (Bird and Vaillancourt 1998). The present chapter
is an attempt to review the fiscal frame of the local bodies and the progress they
have made in achieving fiscal solvency through their engagement in the fiscal
reform process. This chapter is structured as follows. The overall fiscal scenario of
local bodies in India is presented in the first section. The nature and magnitude of
intergovernmental grants are discussed in this section. The reform of two major
fiscal instruments constitute the subject matter of the second section. Apart from an
elaborate discussion of property tax reform, which is the main source of revenue of
the local bodies, an analysis of the octroi is the subject matter of this section. An
analysis of other possible sources of revenue is presented in the third section.
Finally, concluding observations are made.
A. Rath (&)
Tata Institute of Social Sciences, Mumbai, India
e-mail: anita@tiss.edu

https://doi.org/10.1007/978-981-10-5963-6_6
92 A. Rath
1 Local Fiscal Scenario
The critical issues related to local finance in India are discussed here. First, the
relative fiscal position of the local bodies in India has been very low and there is
hardly any improvement in this sphere since 73rd and 74th Constitutional
Amendments. The decentralization ratio, as represented by the share of local
government expenditure as a percentage of the total expenditure by all levels of
government, is very low in India. Available data, presented in Table 1, suggests that
local governments in India, consisting of about 3850 Urban Local Bodies (ULBs)
and 2,46,000 Panchayati Raj Institutions (PRIs), collectively spend less than 7% of
the total expenditure incurred by all levels of government. Second, a matter of
particular concern here is the increasing dependency ratio as indicated by the
declining share of the own source of revenue of local bodies among all levels of
government. Currently, local bodies only raise less than 3% of the total government
revenue by own sources. Third, the local bodies operate within a narrow fiscal base.
Some of its most buoyant sources of revenue, like octroi, have been abolished.
Again, major fiscal instruments of local bodies are included in the state list. State
Legislature's ratification, therefore, is required for any reform in these instruments.
Many such reforms are therefore caught in the state-local governments’ political
embroil. These hassles are particularly acute when different parties control the state
legislature and the dominant local bodies.
Fourth, the devolution from higher levels of government is shrouded in con-
troversies. The State Finance Commissions, the statutory body responsible for
suggesting formula based devolution from state to local bodies from time to time,
are either not constituted regularly or fail to make a dent on the arbitrary devolution
mechanism existing across many states. Hence, much is desired on this front. There
has been some flow of fund from the central level in recent times through the
allocations of National Finance Commissions (FC) and central funding for various
schemes directly to local bodies. National FCs have come forward, at least since
Table 1 Relative fiscal position of the local governments in India

Local govt. 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08
Share in public sector expenditure
PRIs 2.5 2.9 3.1 3.7 3.9 3.7
ULBs 3.0 2.2 2.5 2.7 2.8 3.0
All 5.5 5.1 5.6 6.4 6.7 6.7
Share in public sector own source of revenue
PRIs 0.4 0.4 0.4 0.4 0.3 0.3
ULBs 3.2 3.1 2.9 2.9 2.7 2.5
All 3.6 3.5 3.3 3.3 3.0 2.8
Source Calculations based on Thirteenth Finance Commission website data; Government of India,
Economic Survey for the relevant years and Reserve Bank of India, State finances: a study of
budgets for the relevant years as cited in Oommen (2010)
Fiscal Reforms at the Local Level in India: An Overview 93
10th FC, to support local bodies by instituting special grants-in-aid. Their alloca-
tions since 10th FC are reported in Table 2. The allocations made by the 13th and
14th FC are particularly noteworthy, as these FCs allocated about 2.3% and 3.1% of
the divisible pool for local bodies, respectively. In absolute terms these transfers are
equivalent to around Rs. 900 billion and Rs. 2900 billion respectively. These FCs
have also developed a system of comprehensive formula-based transfer (see
Table 3).
However, there are some concerns regarding these funding by the central gov-
ernment or National FCs. First, there is no predictability of these allocations. In the
last two FC awards, 2–3% of the divisible pool was earmarked for local bodies. But,
considerable uncertainty surrounds the devolution from the higher level of gov-
ernments and there is no stipulation regarding the share to be kept aside for the local
bodies by the National FC. Second, while the award of the 13th FC has been
significant, it is important to assess its impact. Thirteenth FC had put in place nine
conditions for the local bodies, which ranged from having a fire hazard response
Table 2 Finance commissions’ grants to local bodies

Commission Grants (Rs. in billion) Total grants as % to % Not drawn
PRIs ULBs Total divisible pool PRIs ULBs Total
10th FC 43.81 10.00 53.81 1.38 33.54 16.61 18.04
(1995–2000)
11th FC 80.00 20.00 100.00 0.78 17.48 12.41 16.46
(2000–2005)
12th FC 180.00 45.00 225.00 1.24 7.42 10.57 8.05
(2005–2010)
13th FC 630.51 231.11 875.19a 2.28 – – –
(2010–2015)
14th FC 2002.92 8714.4 2874.36 3.06b – – –
(2015–2020)
Note aIncludes Rs. 13.57 billion as special area grant; bTotal divisible pool is Rs. 9,400,444 crore
for 2015–20. Source Report of the Thirteenth Finance Commission and Fourteenth Finance
Commission
Table 3 Criteria for grants to local bodies (%)

Criterion 13th FC 14th FC
PRIs ULBs PRIs ULBs
Population 50 50 90 90
Area 10 10 10 10
Distance from highest per capita sectoral income 10 20 – –
Index of devolution 15 15 – –
SC/STs proportion in the population 10 – – –
FC local body grants utilisation index 5 5 – –
Total 100 100 100 100
Source Report of the Thirteenth Finance Commission and Fourteenth Finance Commission
94 A. Rath
and mitigation plan to establish a property tax board for accessing performance
grants which were about one-third of the total grant (0.78% of GDP). Some of these
conditions have been unnecessarily prohibitive. The actual allocation of funds and
its utilisation during 13th FC period is still not available. As evident from Table 2,
local bodies have only partially utilised the funds allocated by various FCs.
Prohibitive conditions certainly impose a deterrent in accessing necessary finance.
14th FC has simplified the conditions, and 90:10 and 80:20 is the ratio of funds to
be allocated as basic transfer and performance grants for Panchayats and ULBs,
respectively. Basic transfers shall be made on the basis of only two need-based
criteria: population (90% weightage) and area (10% weightage).
Fifth, National FCs are supposed to adhere to the recommendations of the State
Finance Commissions due to the constitutional mandate. However, complications
arise as neither the SFCs are constituted regularly nor are they co-terminus with
National FCs. 13th FC has mentioned about the Amendment of the constitutional
provision as mentioned in Article 280 (3) (bb) and (c). This would enable the
National FC to make devolutions to local bodies without being constrained by the
suggestions of the State FCs. 14th FC has reiterated this issue. This Amendment
would further dilute the role of the State FCs. It would be like throwing the baby
out of the bathwater. Strengthening the Sate FCs would be important in the federal
structure.
Finally, in recent times, a large part of the funding for centrally mooted schemes
was through society transfers and directly come to the local bodies bypassing the
state governments. It could have been to the tune Rs. 1000 billion ( Government of
India 2008). Monitoring and surveillance of these funds had been difficult as the
treasury is not involved. There is a concern here that greater role of the local bodies
as agencies of the higher level of government may compromise the core functions
of these institutions of self-government. This aspect also requires scrutiny.
Thus, limited own sources of revenue, uncertainty regarding intergovernmental
transfers, and issues with limited revenue instruments available to local bodies
characterise the contemporary scenario of public finance in India.
2 Fiscal Reforms at the Local Level
Fiscal reforms at the local level in India have been limited mainly to administrative
reforms and abolition of distortionary taxes, like the octroi. Concerted efforts were
made by many local bodies in India only recently to completely revamp the system
of property tax, the major own source of revenue. In this section, an elaborate
discussion of the property tax reforms undertaken by Indian cities will be done.
Subsequently, reform initiatives regarding other revenue instruments will be
analysed.
2.1 Property Tax Reform
Property tax has been one of the oldest taxes in the history of public finance. This
fiscal instrument is levied primarily as a recurrent ad valorem tax on real property,
i.e. on land and buildings. Property tax as a source of revenue has been highly
favoured among local governments due to certain important characteristics. Firstly,
a good local tax should be “resident-based” as opposed to “source-based”. There is
limited scope for tax-induced distortions due to tax exporting in the former kind
(Inman and Rubinfeld 1996; McKinnon and Nechyba 1997). Property tax conforms
to this basic criterion. Secondly, it is not in direct competition with the preferred tax
bases of the other levels of government. Thirdly, regarding the distortionary impact
of the property tax some studies suggest that economic factors like labour costs,
market access, and quality of infrastructure exert higher influence on the location
choice for the economic activity than the property tax (Ladd 1998). Again, the
property tax toll is adopted not only for revenue generation but also to achieve
certain objectives of allocative efficiency like encouraging the intensive use of
urban land, encouraging home ownership. It also can achieve the distributive
objective of shifting the maximum burden to higher income groups like big
property owners or business class. In addition, real property is highly visible and
relatively immobile. This facilitates the levy of this tax and also assures powerful
enforcement mechanism.
The local governments’ reliance on property tax as a source of revenue varies
across countries and also across regions within a country. The revenue from
property tax as a percentage of GDP varied from 0.60 in developing countries to
2.12 in OECD countries (Table 4). Within India, one can decipher significant
variations in the contributions from this important source of revenue.
The disparity in relative importance of property tax as a source of revenue across
cities is explicable by a host of factors. Firstly, the availability of an additional
lucrative fiscal instrument to local authorities has a significant bearing on the
proportionate contribution by property tax. In the case of India, the octroi levying
cities, in general, had a smaller contribution from property tax. In the case of Brazil,
Colombia, and Pakistan, the availability of alternative sources like municipal ser-
vices tax, tax on industry and commerce, and the octroi, respectively, explained the
Table 4 International experience on property tax collections (% of GDP)

Countries 1970–80 1980–90 1990–2000 2000–2009
OECD countries 1.24 (16) 1.31 (18) 1.44 (16) 2.12 (18)
Developing countries 0.42 (20) 0.36 (27) 0.42 (23) 0.60 (29)
Transition countries 0.34 (1) 0.59 (4) 0.54 (20) 0.67 (18)
All countries 0.77 (37) 0.73 (49) 0.75 (59) 1.04 (65)
Note Figures in parentheses indicate number of countries in a particular group. Source Bahl et al.
(2008)
96 A. Rath
limited share of property tax as a source of revenue. Secondly, an access to

important and productive non-tax revenue sources such as user fees and other
charges obviates the need to rely heavily on property tax. Thirdly, ceilings on the
tax rate and other restrictions by the higher levels of governments define the relative
role of property tax as a source of revenue. An estimate for the Philippines cited in
Dillinger (1988) shows that limits imposed by higher levels of government on
property tax rate, assessment ratios, and general revaluation are equivalent to an
effective tax on the urban land of approximately 0.2%. In the case of India, property
tax system is inexorably intertwined with some controversial regulations like Rent
Control Act, which has a debilitating effect on property tax collections. Last but not
the least “a degree of political resistance that is disproportionate to its absolute
yields” circumscribes to a great extent the role of property tax. There is a huge fall
in the relative contribution of property tax in case of local bodies in the USA since
1978 due to the tax revolts originating from California commonly known as
“Proposition 13”.1 Certain characteristics of property tax as a fiscal instrument
provoke wide-scale public resistance. Property tax is not a “wrapped up” tax like
sales tax. It is one of the most visible taxes as it covers all properties in a juris-
diction and entails lump sum payments. Moreover, a subjective assessment practice
which becomes inevitable in the absence of the market evidence of the actual value
of the property obscures the procedure of assessment.
Property tax system is extremely varied across countries in terms of its various
attributes: base, coverage, rate structures, and assessment practices. One important
reference point for distinction has been the base of the tax. Property tax is pre-
dominantly an ad valorem tax, i.e. it is levied on a base, which has some corre-
spondence with the actual value of the property. In general, one finds rental value,
capital value, or site value-based models in most part of the world. Countries
sharing a common colonial past have invariably a rental value-based system or a
rateable value system.
2.1.1 Issues with the Conventional System
The conventional system based on rental values has three major issues. First, the
conventional system has a hypothetical base. In many Indian cities, the rental
value-based systems are still prevalent owing to the colonial past. The rent con-
sidered here for the purpose of taxation is “rent at which the property might rea-
sonably be expected to let from year to year”. Getting accurate evident regarding
1
One of the most important events in the history of property tax took place on 7 June 1978 when
the Jarvis-Gann Amendment to the Constitution of the State of California was passed owing to
severe public demand for tax limitation. It restricted the property tax rate to no more than one per
cent of assessed value with other constraints put on rate revisions. Many other cities in USA also
witnessed such revolt subsequently and had to incorporate such tax limitation (see O’Sullivan,
Sexton and Sheffrin, 1994 and 1995; Preston and Ichniowski, 1991).
the rental value has been challenging. There is significant under-reporting of rent in
case of rental premises either by the taxpayers or due to the collusion of taxpayers
and assessors. In the case of owner-occupied premises, the procedure of arriving at
the imputed value of the property has its own set of problems and requires many
unrealistic assumptions. Thus, the base is hypothetical and subjective. The lack of
regular and efficient assessment practices and multiple concessions offered makes
the system more arbitrary.
Second, after the introduction of the Rent Control Act, a majority of the prop-
erties in the cities have come under its purview. This Act has brought in the concept
of “standard rent”. Thus, the rateable value for assessment purpose is the “standard
rent”, a controlled rent which actually accrues to the owner due to the rent control
provisions. Thus, not only the rents for most of the controlled properties have been
negligible in comparison with the market rents but also they have remained frozen
at the original level. It has greatly affected the revenues; however, a simple
delinking of property tax system from the “standard rent” is not feasible without a
revamping of the system. In recent times, the governments at various levels are
making attempts to rationalise or abolish the regulation. In fact, one of the pre-
conditions for accessing funds for urban projects from higher levels of government
is the abolition of the Rent Control Act. However, the academic debate over the
efficiency implication of such regulation is not yet settled. Though there was an
apparent consensus that rent regulations are inefficient in terms of their implication
for resource allocation (Alston et al. 1992), sufficient scepticism regarding this
viewpoint is gradually gaining ground in the last one decade. The arguments to this
effect are best articulated in Arnott (1995). Some writings have in fact established
that the presence of “second-generation” rent control or “soft control” is in fact
efficiency enhancing (see Kondor 1995; Shepherd and McDonald 1997; Fallis and
Smith 1984).
Third, due to the subjective approach, lack of regular assessment and the Rent
Act, the tax base of the properties have been frozen at the historical level of their
first assessment. In order to make up for the stagnation in the property tax base, tax
rates are often fixed at the highest possible level. In Mumbai, for example, the rates
of taxes were as high as 83.5% of rateable value in the case of residential premises
and 112.5% in the case of commercial properties in the conventional rental value
system. This had rendered the system highly iniquitous (Karnik et al. 2004; Rath
2012).
2.1.2 Property Tax Reform in India
In India in the post-1992 phase, a period which coincided with the major
Constitutional Amendments for more meaningful decentralised governance, draft
guidelines were circulated by the Ministry of Urban Affairs and Employment,
Government of India for reforming the property tax system. The process of property
98 A. Rath
tax reform was expedited to some extent due to the clarion calls made by the higher
level governments to abolish octroi, the most productive source of revenue for local
governments. Reform initiatives were undertaken with an understanding that a good
property tax system is expected to have the following features: low rate of tax so as
to make it acceptable to the public at large; minimum discretion on the part of the
assessors in levying tax; a simple and transparent process of assessment, levy, and
collection; assurance of equity; self-assessment of property tax by the property
owners/occupiers. Urban local bodies in many states have already brought about
reforms.
Reforms to the property tax systems have one common feature that is the
“standardisation” of the base value across fiscal zones which enables
self-assessment of property tax. Secondly, in some cases, it has meant shifting away
from the age old rateable value system. The discussion that follows reviews sep-
arately the “standardised ARV systems”, “area-based systems”, “capital value
system” (see Karnik et al. 2004).
Assessment of every individual property in the local jurisdiction has proved to
be a tedious task which also entails near impossibility of regular periodic assess-
ment. This has led to many cities to standardise the base values across fiscal zones
and use formula-based self-assessment procedure. Here, Andhra Pradesh model,
which was introduced by amending the AP Municipality Act 1989, and Bhopal
Model stand out as pioneering attempts. In these cases, tax liability was calculated
by taking into consideration various attributes of the property, which are expected
to affect the rental value, like location type, construction quality, age, and use of the
property along with the basic rental value of the fiscal zone and the area of the
property. The classification system and procedure for ascertaining the basic rental
value for a fiscal zone are not beyond dispute. The legal challenge of delinking this
system from the rent control regulation is also not clear.
In the composite area-based system, instead of a standardised rental value, a
unique location value is determined for various fiscal zones. These are estimated by
taking into consideration the locational factors like presence of amenities, proximity
to infrastructure, zonal land value. The rate of tax internalises the differentials in
property characteristics in terms of age, use, construction, ownership status, etc.
The unique location value, along with the area of the property and tax rate, renders
the tax liability of individual properties. Hence, this method also supports mass
appraisal of the property. Patna Municipal Corporation, which was the first local
body to bring about the property tax reform, introduced a composite area-based
system. It is highly simplified system which allowed tax determination through
self-assessment using a matrix of order three-three fiscal zones in the city; three
types of use and construction were challenged on the ground of inadequate clas-
sification of properties. It was also suggested that unique location values unless
explicitly associated with land or property values shall remain frozen. This can pose
problems for the buoyancy of the system. However, the judicial system in a
landmark judgement allowed the Patna system to be implemented upholding the
fact that a new system needs to be tried.
The Ahmadabad city also implemented a new system with effect from 1st April
2001 via the Taxation Rules Amendment made under the provision of Sect. 454 of
the Act. Its area-based system is different from Patna in two ways. It has a more
detailed classification of property attributes, and its location value is linked to the
market value of land in various locations.
Municipal Corporation of Delhi implemented the new area-based model with
effect from 1 April 2004 (Expert Committee on Property Tax 2003). Its unit area
values are neither linked to rental value as in AP nor to land values as in
Ahmadabad. The base rate in the original proposal was determined as a residual
value which ensured a revenue neutral system. However, it lacks inbuilt buoyancy.
The property tax reform attempt made by Bangalore is unique in some ways.
Karnataka is the first Indian state to shift over to a capital value-based system. The
Amendment to the Sect. 109 of the Karnataka Municipal Corporation Act, 1976,
which permitted a move from the ARV system to CV system, was effective from
April 2002. This implied imposing property tax on the basis of market value of
properties as obtained from the Stamp Duty Offices. The tax rate was supposed to
range between 0.3 and 0.6%. Each zone is assigned a rental value per sq. ft. Though
the assessment of buildings is as per their capital value, it is converted into rental
value using a formula. The sum of the value of land and improvement constitutes
the tax base. The owner-occupied properties are granted almost 50% reduction in
the taxable value. The assessment of the success of this reform programme shows it
has rendered increased revenue and a very high compliance rate.
Greater Mumbai, like other Indian cities, also initiated efforts to reform its
property tax system since the late 1990s albeit without success. Finally, in March
2012, Municipal Corporation of Greater Mumbai (MCGM) has implemented the
new capital value-based property tax system. The new rule says: “These rules may
be called the Factors and Categories of Buildings and Lands (Assignment of
Weightages by Multiplication) Fixation of Capital Value Rules, 2010”. It also says
that “They shall come into force forthwith”. It has been applied with retrospect
effect from 2010. Property tax bills were issued on the basis of the new model in
2013 (see Rath 2015).
It specifies the rules for calculating the property tax for various kinds of prop-
erties. The formula for calculation of the tax base (capital value) for various cat-
egories of built properties is as follows:
CV ¼ BV UC NTB AF FF BA
Where
BV Relative rate of base value of a building according to Ready Reckoner;
UC Weightage for the user category;
NTB Weightage for the nature and type of building;
AF Weightage for the age of building;
FF Weightage on account of floor factor;
BA Built-up area.
100 A. Rath
Table 5 Property tax rates

User category Properties with water metre Properties without water metre
Category with lowest tax rates 0.36 (0.32) 0.78 (0.74)
Category with highest tax rates 2.61 (2.30) 5.63 (5.32)
Note Figures in parentheses refer to tax rates exclusive of state government taxes
User categories are specified in Schedule A. For the built properties, user cat-
egories are specified separately for residential buildings (10 sub-categories with
weights ranging from 0.10 to 1.25), shops and commercial buildings (50
sub-categories with weights ranging from 0.10 to 1.25), and industrial buildings (7
sub-categories with weights ranging from 0.25 to 1.25). Schedule B presents four
major categories of nature and type of buildings with weights ranging from 0.50 to
1.20. Schedule C outlines discounts for buildings with different age groups. It
specifies 11 categories of buildings on the basis of age cohort, spaced by a five-year
span starting with the recent one. With 3% discount given to each cohort in
comparison with its successive group, the weights for an age range from 0.70 to 1.
Schedule D presents the details on 13 floor categories with weights ranging from
0.70 to 1.35.2
Five broad user categories are specified which include apart from the built
properties, special category of properties like vacant land, salt pan, hoardings. Tax
rates are given separately for these five categories of properties. There are six
municipal taxes (general tax inclusive of fire tax, street tax, municipal education
cess, water benefit tax, sewerage benefit tax, and tree cess), and two state-level taxes
(state education cess and employment guarantee cess) are levied on every property.
In addition, properties without water metre have to pay two more taxes—water tax
and sewerage tax. The tax rates for the lowest and highest user categories are
presented in Table 5.
MCGM’s attempt is a departure from other such reform initiatives in several
ways. First, it has a linkage with property value, unlike area-based models where
the base may not have a direct linkage with property value. Second, it has taken into
consideration several attributes of the property. Third, there are certain provisions
for circuit breaking to allow concessions for certain class of properties. It is also
implemented in a phased manner to provide cushion from system change shocks.
A consolidated picture of property tax reform in India is difficult to portray
without a comprehensive study of the experiences. The time is ripe for such an
exercise. The ex-ante analysis only suggests that some of the problems which
bedevilled the earlier system might creep into the newer versions as well. One of the
fundamental changes brought about by the reform initiatives is the mass appraisal
of properties. However, equity and efficiency gains from the changed system are yet
to be ascertained at the overall level.
2
This version was changed in 2015 by MCGM.
2.2 Abolition of Octroi
The octroi, which is a metaphor of a customs duty at the local level, was an
important source of revenue for local bodies. In fact, it had been the single most
important source of revenue wherever it existed. It was abolished everywhere
except in Greater Mumbai. It has been recently withdrawn in Mumbai with the
introduction of Goods and Services Tax (GST) in July 2017. With this, Octroi
recedes into history. Time and again researchers and other stakeholders have
underscored several problems with the octroi as a source of revenue. The often
reiterated objections clearly insinuate at economic and administrative inefficiencies
of octroi. Primarily, it violates the basic canon of a good local tax that it should be
resident-based and not source-based as the former reduces possibilities of tax
exporting and thus mitigates tax-induced distortions (Inman and Rubinfeld 1996;
McKinnon and Nechyba 1997). Secondly, this tax has been highly distortionary
and widens regional divergence. Again, being a check post-levy it has wasteful
effects and thus is beset with huge dead weight loss. Further, collusion of collection
officials and the tax payers has also been the cause of a lot of leakages. A review of
various contentious issues and the verdicts of several committees clearly indicate
that the octroi is certainly not one of the favourable taxes. To locate an equi-yield
alternative, however, has remained an unfinished agenda. None of the alternatives
in practice elsewhere has proved to be equally productive (Rath 2009).
The octroi has been replaced in many places by similar taxes like LBT (Local
Body Tax) in Maharashtra, Entry Tax in Navi Mumbai/other states. Alternatively,
state governments compensate the local bodies for the loss in revenue by making
special grants. In character, the alternatives like LBT or entry tax have a same
distortionary impact except for the administrative delays due to barriers at toll
points, as the only difference is that these are based on account statement and not
physical verification at the entry points of the city. Now, Goods and Services Tax
(GST) has subsumed all indirect taxes at the sub-national level as well. Hence, the
local bodies have to look for other own sources for revenue.
3 Other Fiscal Instruments
3.1 Other Taxes
Betterment tax or land-based taxes are important sources of revenue that can be
resorted to by the local bodies. However, there is no systematic plan by local bodies
to levy taxes on these important avenues. The fiscal duress of local bodies can be
eased even by sharing a part of the land conversion taxes which are levied by the
state governments. Similarly, advertisement taxes can be a good source of revenue.
Currently, some municipal corporations levy this tax and state legislations do not
permit the local bodies in certain states to have an access to this source of revenue.
Again, entertainment taxes have been successfully utilised by some local bodies to
102 A. Rath
enhance their revenue base, while others have not been able to raise such revenue.
Taxes on professions, trades, callings, and employments are another important
source of revenue which is permissible as per Article 276 of the constitution.
However, its potential is limited as per the current mandate that it cannot exceed
Rs. 2500 per taxpayer per annum. There is a demand for increasing the ceiling of
this source of revenue. Fourteenth finance commission, in fact, has appealed for
amending the Article 276 (2) so that the ceiling can be enhanced to Rs. 12,000.
3.2 User Fees
It is widely accepted that taxes are “unrequited transfers” that bear no specific
relation to the services that taxpayers receive. In the context of ULBs, many ser-
vices possess the private good characteristics and thus, there is a possibility of
imposing user fee on such services. In many Indian cities, the water and related
services are supposed to be charged as per the consumption levels. However, the
actual implementation of the user fees is not satisfactory. In the case of MCGM,
almost 35% of the water and sewerage revenue is collected as surcharges on
property tax due to the non-availability of water metres in old premises.
Strengthening user charges is an important area of fiscal reform at the local level.
3.3 Borrowing
Municipal bonds are important instruments for financing the third tier of govern-
ments in developed countries and can be useful avenues for financing urban
infrastructure in India (Pethe and Ghodke 2002). The municipal bodies’ issuance in
the US capital market is, in fact, comparable to the issues made by their corporate
bodies. In the case of India, subsequent to the proposals made by the Expert Group
of Commercialisation of Infrastructure projects in 1996 and the follow-up ground
work, the Ahmedabad Municipal Corporation was the first one to access
Rs. 1 billion. To facilitate the access to such avenues of resources, the Ministry of
Urban Development and Poverty Alleviation specified the guidelines regarding the
issue of municipal bonds in February 2001. However, almost after a decade and a
half, only ten states reported such borrowing. In 2012–13, Rs. 9.2 billion was
borrowed mainly by the municipal corporations. Sixty per cent of the total amount
was availed by local bodies of Madhya Pradesh and Maharashtra only. Thus, the
municipal bodies’ access to the capital market is only nominal.
Municipal banks have been used as funding options by southern states in India.
Such resources may be tapped, especially, for funding capital projects. As Sandhu
and Bhartwaj (2004) mention such financing ensures, along with the finances, the
sharing of technical know-how. Credit agencies also keep a close surveillance on
the fiscal performance of the local bodies. Many commercial banks and finance
institutions like HUDCO (Housing and Urban Development Corporation) also fund
capital expenditure of the local bodies. However, not much is known about the
extent of such funding.
4 Discussion
Decentralised governance would be seriously deficient without properly addressing

the fiscal aspects as the revenue-raising powers of the government are crucial in
determining the degree of local autonomy. The fiscal reforms at the local level are
important in enhancing the own sources of revenue of local bodies. A review of
various reform initiatives at the local level reveals that while the single most important
source of revenue, property tax, has been reformed across many local bodies, a
comprehensive a picture of their overall impact is yet to emerge. These reform
attempts have been highly disparate in terms of their structure and impact. Local
bodies have not resorted to many innovative avenues for expanding their revenue
base. Inter-governmental transfers, especially from national-level FCs, have increased
but without any certainty and predictability of their availability in future. The intro-
duction of Goods and Services Tax can affect the fiscal situation of local bodies.
The political economy of local fiscal reform requires specific attention. Local
governments are too close to the citizenry. Their taxes and expenditures are under
the close scrutiny by the alert citizens who demand quid pro quo for their payments.
Visibility of some of their taxes like property tax and any changes in it, in terms of
their impact, invites mass protests. In fact, when the village panchayats in the
periphery of the metropolitan cities are brought under the municipal corporations,
as the cities undergo metamorphosis, there are protests by the villagers against such
mergers in anticipation of higher taxes and less control over expenditure in the
larger body. Such protests have been observed in villages in the periphery of Navi
Mumbai as well as recently in the Vasai-Virar region. At the local level, it is less
costly for the interest groups to come together and organise such protests. The
impact of protests in a local jurisdiction is experienced at a different scale as it
affects the quotidian services of immediate importance. Thus, amid many chal-
lenges, successful mobilisation of resources in a sustainable manner is crucial for
the autonomy of local bodies. Carrying out fiscal reforms successfully seems to be
the hobson's choice for the local bodies at this juncture.
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Journal of Economic Education 28 (4): 316–322.
People’s Participated Governance
Performance Evaluation and New
Governance: A Case Study on Hangzhou
Xunda Yu and Shunji Cui
Carl Cohen insisted that ‘Democracy is constituted by participation—the partici-

pation of community members affected by decisions in the making of those deci-
sions’.1 In the first place, participation requires the establishment of an appropriate
legal system that allows the public to participate in the decision-making process and
subsequent management of state and social affairs. In other words, public partici-
pation is a vital ingredient in the achievement of democratic politics. In the course
of the last decade, Hangzhou has advanced public involvement in various ways. It
is especially noteworthy that there has been a gradual formation a working system
of democracy based on extensive public participation in the way that how gov-
ernment administers public affairs. Here a working system of democracy is defined
as the totality of norms, rules, methods, institutions and mechanisms that together
produce a democratic style in local government. It must be stressed that there are
significant differences between this concept of democracy and systems of voting
and representation that are characteristic of western democracy.2 Indeed, the
Hangzhou model deserves careful investigation precisely because it offers new
patterns for democratic political development. This paper is divided into 6 sections:
Sect. 1 provides a brief introduction to the research background; Sect. 2 discusses
the major practice of performance evaluation in Hangzhou; Sect. 3 considers
Hangzhou’s other practices in public involvement; Sect. 4 accounts Hangzhou’s
achievements in solving social (livelihood) issues through a working system of
democracy; Sect. 5 explores the major issues in running the Hangzhou system, and
the final part offers some conclusions from the research.
1
Cohen (1988, p. 12)
2
On Western democracy see, Daniel A. Bell, Beyond Liberal Democracy, Shanghai: SDX Joint
Publishing Company, 2009.
X. Yu S. Cui (&)
School of Public Affairs, Zhejiang University, Hangzhou, China
e-mail: ssjcui@zju.edu.cn

https://doi.org/10.1007/978-981-10-5963-6_7
106 X. Yu and S. Cui
1 Research Background
Democracy is the essential element when assessing the legitimacy of any system of
government. It is true, however, that democracy has been absent for most of China’s
history. Ideas of democracy arrived in China from other countries only in the course
of the nineteenth century, that is, before notions of human rights were widely
accepted or the middle classes had become a significant part of the population. It is
also important to stress that China encountered western democratic theories at a time
of acute national peril and, in large measure, adopted those theories in an attempt to
ensure its integrity and survival as a nation. Inevitably, these circumstances affected
priorities and meant that perceptions of democracy were somewhat different to those
prevailing in Western countries—which were not facing such fundamental
challenges. The May Fourth Movement of 1919—which in many ways symbolises
the start of Chinese contemporary history—committed itself to two main causes:
democracy and science. The consensus of intellectuals at this time was that
democracy and science were the things that could ‘save’ China and the movement
became a powerful force in the dissemination of western democratic theories.
In practice, ‘saving’ China meant victory in the war for national independence, the
overthrow of the War Lords and a rapid transformation of what was essentially a
poor and backward society into something more modern and prosperous. There
could be little doubt that these ambitious objectives—involving both the achieve-
ment of independence and the transformation of society—could only be realised if
China acquired a really powerful central government. Thus, ever since the May
Fourth Movement, the democratic cause in China has always been associated with
the establishment of a new country. When the People’s Republic of China was
established, it was also associated with the extension of state power. It has, however,
gradually developed a political culture, one characterised by an emphasis on sig-
nificant democratic inputs (of a uniquely Chinese nature) into governance. Yet in the
context of this political culture, the public judges the democratic system in terms of
its outcomes—in particular, they ask whether it helps people to solve their problems
and whether it safeguards political stability and promotes government efficiency.
It is true that, since the Communist Revolution, China has been a one-party state.
This arrangement arose in the process of the revolution itself and was not deter-
mined by an electoral procedure. The relationship between the Communist party
and ideas of democracy is complex. While the leadership is not chosen by voting,
the party always endorses the idea of democracy and sets it as a goal to be realised.
The current situation is especially interesting. With the passing of the leaders of the
revolutionary period, the implementation of opening-up policy, the establishment of
rule of law, the enhancement of economic independence and sense of rights—
especially when coordination and resolution of conflictual interests have become
major challenges—the Party’s claim to practice democracy is becoming central to
the case for the continuation of one-party rule. Indeed, the Party insists that
democracy is the life of the party and the country. Of course, such assertions give
People’s Participated Governance Performance Evaluation … 107
rise to a number of major questions, in particular: Can the government design a

system of democracy that does not threaten the continuation of one-party rule? Can
such a system also advance political reform and improve the quality and perfor-
mance of government? What are the likely long-term consequences for the political,
social and economic life of China?
Ever since the establishment of the first democratic regime in the United States,
many studies have addressed the question of the effectiveness of democracy in the
achievement and delivery of high-quality administration and governance. As
Alexander Hamilton stated in The Federalist Papers, ‘I believe it may be laid down
as a general rule that their [the people’s] confidence in and obedience to a gov-
ernment will commonly be proportioned to the goodness or badness of its
administration’.3 A consensus has arisen among democratic thinkers that democ-
racy is indeed a means of ensuring good public governance. However, since
Schumpeter considered democratic voting as a means to select leaders for the
public,4 some scholars have come to equate democracy with voting and elections
and in turn to see these attributes of a political system as the touchstone of legit-
imacy. We have to face the fact however that multi-party and electoral democracy
may not always result in good governance. Thus, Lipset’s Political Man (1960)
investigates the relationship between perceptions as to the legitimacy of a demo-
cratic system of government and governance performance. He concludes that, if the
quality of governance is poor, confidence in the legitimacy of the democratic
system may decline or even disappear.5 The same theme is taken up in the works of
Larry Diamond who insists, ‘for democratic countries to endure—and be worthy of
endurance—they must listen to their citizens’ voices, engage their participation,
tolerate their protests, protect their freedoms, and respond to their needs’.6 Diamond
argues that there was a surge of democracy throughout the world until the 1990s,
but more recently, democracy has been in retreat—hence his concept of
‘Democratic Rollback’. He believes that this has been caused by the employment of
rigged elections, intimidation of opponents and expansion of executive power. In
other words, Diamond thinks that elections and voting rights are not enough to
confer legitimacy and other mechanisms need to be developed to allow popular
control of public affairs.7
While there are differences between the belief in the effectiveness of electoral
democracy in promoting good governance characteristic of western scholars and the
more cautious attitude found among Chinese scholars, the different traditions
actually have more in common than is sometimes appreciated. Both believe in
democracy, even though they may define it in different ways. Both think that, in
order to improve democratic performance, there should be more public involvement
3
Hamilton (1980, p. 133)
4
Schumpeter (1979)
5
Lipset (1997, pp. 55–66)
6
Diamond (2008a)
7
Diamond (2008b)
in the administration of public affairs and in the public decision-making processes.

Even if some sort of democracy is the sine qua non of political legitimacy, a
number of practical issues need to be addressed:
• What kinds of public involvement are required in order to improve the quality of
government performance in public administration?
• Is there any other way of participation—apart from elections and voting—
whereby the essentials of public involvement can be achieved in a country like
China where decision-making has long been dominated by the bureaucracy.
• Is it possible to find ways of ‘deepening’ democratic processes and politics as
means of solving problems in a previously over-centralised and self-constructed
governance framework?
• Should a democratic reform start in local government?
• If so, how would the systemic environment influence the progress and effec-
tiveness of local reform?
To answer these questions, we take Hangzhou city as a case study for a number
of reasons. First, Hangzhou is a provincial capital city and historically the capital of
Southern Song Dynasty. It has developed into a city with a permanent resident
population of 8.1 million, and a per capita GDP in excess of 10,000 US dollars. It is
one of the richest districts in China and one of the most developed in terms of
private enterprises. China is undergoing massive urbanisation at present, and as a
large and successful city, Hangzhou’s development and governance could well
provide a model for other urban centres. Secondly, the Chinese government cur-
rently faces three main tasks: continue economic development; improve the quality
of life; and to prevent corruption and safeguard rule of law. Of these, improvement
to the quality of life is probably the most pressing. The Hangzhou municipal
government is the only one which has committed itself to improve the quality of life
together with a wide application of democracy—as an integral part of overall
government strategy.8 Of course, other local governments in China have promised
to take steps to improve the quality of life, but their approach seems rather ad hoc
and random and is not properly integrated with government strategy—whereas the
Hangzhou model is more widely applied and also designed to complement and
fulfil government reform strategy. In other words, a case study of Hangzhou is a
useful way of approaching the relationship between public involvement in
decision-making and improvement to the quality of life. Thirdly, the author serves
as a Committee member of the Consultative Committee of the Hangzhou municipal
government, and over the years has been closely involved in the democratic gov-
ernance processes, and hence has acquired some understanding of what is involved
and the context in which these processes are operating. In short the author is well
placed to provide a detailed and in-depth analysis of the forces that are creating a
8
The strategy of improving the quality of life by democracy was set in the 4th session of 10th
Municipal Party Committee’s Congress in July 2008. But as early as in 2003, Hangzhou has set to
solve “7 tough issues”, including housing, medical treatment and food safety, as the primary task
of government administration.
successful and working system of democracy, of the extent to which developments

in Hangzhou can provide a template for local democracy and good governance in
China as a whole, of the magnitude of achievements to date and of remaining
problems and dilemmas.
2 The Citizen-Oriented Performance Evaluation System
The most important feature of the system of democracy developing in Hangzhou is

public participation in the performance evaluation of government on the municipal,
district and county/city levels.
In 2000, Hangzhou launched a campaign whereby residents were canvassed to
see whether various municipal services should be classified as ‘satisfactory’ or
‘unsatisfactory’. This process was undertaken in order to improve the operation of
services provided by the municipal government and to remedy deficiencies—
described as ‘The Four Negative Syndromes’—to which publicly-provided services
appear especially prone. These were identified as:
• men nanjin (Public Access restricted)
• lian nankan (Attitudes towards clients unwelcoming)
• hua nanshuo (Staff difficult to approach)
• shi nanban (Work inefficient).
In 2005 the campaign was expanded into a more comprehensive system of
evaluation which included: social evaluation (by votes); objective evaluation; and
leader evaluation. In addition, innovation and high-quality service were identified
as aspirations and those sections receiving this level of recognition were awarded
bonus points.9 Overall, social evaluation still has the most important role in the
totality of the comprehensive evaluation system. The establishment of the munic-
ipal evaluation office in 2006 symbolises the institutionalisation of the movement
and the office subsequently assisted the standardisation of both the evaluation
system and of personal and professional developments procedures. In 2007 the
system was extended to the district and county/city levels.
The voters who take part in the social evaluation process include: citizen rep-
resentatives; municipal party representatives; municipal NPC representatives;
retired members of provincial government-affiliated institutions; scholars; super-
visors; leaders of the district/county(city); heads of ministries/bureaux in the
district/county(city); heads of the street (town) party committee (including NPC);
heads of the community party committee and neighbourhood committee; business
representatives. Of these, citizen representatives and business representatives are
9
Evaluation can be classified into two types, namely, comprehensive evaluation and seeking
opinions; the former applies to the party committee, government and associations, the latter applies
to the general office, CPPCC organisations, court and procuratorate, development zone enterprises,
state-owned or state-controlled enterprises.
selected randomly; retired members of provincial government-affiliated institutions,

scholars, supervisors, are selected by invitation, while others are selected according
to their social status or occupations. They evaluate government performance in
various ways such as completing questionnaires, giving suggestions and comments
on the administration and governance of the departments.
The comprehensive evaluation is based on the principle of ‘let people judge and
make people satisfied’. Thus, both the starting point and the end result of the
evaluation focus on how to solve those urgent and difficult issues that people are
concerned with. The degree of satisfaction is taken as the fundamental standard for
the evaluation of the work of all organisations. During the comprehensive evalu-
ation, great importance is also attached to processes and results in the performance
of duties, the achievement of objectives and in the improvement of work on a day to
day basis. The voting campaign was held once a year, and, so, between 2000 and
2009, a total of ten evaluations were taken. During the same period, the number of
evaluators increased from 6000 to 15,000 (in which the number of citizen repre-
sentatives increased from 4000 in 2000, to 6300 in 2001 to 10,000 in 2003 and
subsequently; and 1000 migrant workers have been included since 2007). The
distribution and collection of questionnaires are well organised, and the average
return rate is above 99% while the number of suggestions and comments ranges
from 6000 to 11,000 (see Table 1).
It appears that suggestions and comments focus on social issues, especially those
affecting the quality of life. They make up ‘The 7 tough problems’:
• Traffic and parking,
• Housing,
• Medical treatment,
• Education,
• The needs of poor families,
• Sanitation,
• The work and lifestyles of public officials.
After 2006, food safety, environmental protection, rising commodity prices and c.
emerged as additional areas of concern. Therefore, ‘The 7 tough problems’ are
actually ‘7 + X’ problems (see Tables 2 and 3). Of the ‘7 tough/7 + X prob-
lems’10—apart from the work and lifestyle of officials—all are closely related to the
public interests and have been the focus of the social evaluation. Since the evaluators
are from all walks of life, their suggestions and comments may be taken as repre-
senting public opinion as a whole. However, different social groups have shown
different understandings and judgements as to the issues they see as most urgent and
pressing.
10
For the sake of illustration, the municipal government and public still use the word “7 tough
problems”.
Table 1 Distribution and return of questionnaires assessing the performance of departments/municipal government-affiliated institutions in Hangzhou (2000–
2009)
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Questionnaires distributed 5916 8919 15,310 15,516 15,232 14,990 14,447 14,786 14,808 15,076
Questionnaires returned 5736 8849 15,195 15,404 15,126 14,421 14,386 14,762 14,799 14,962
Number of suggestions 10,701 6242 6921 8434 9676 6794 7522 10,630 10,915 11,085
Sources Figures provided in the speeches and other published or unpublished materials
People’s Participated Governance Performance Evaluation …
111
Table 2 Issues identified as requiring immediate solution (2006–2009)
112
2009 2008 2007 2006

1. Traffic and parking 15.05% 1. Food safety 15.86% 1. Traffic and parking 19.72% 1. Traffic and parking 18.34%
2. Housing 14.22% 2. Traffic and parking 15.11% 2. Housing 14.94% 2. Medical treatment 16.49%
3. Medical treatment 13.80% 3. Living and 11.69% 3. Medical treatment 14.77% 3. Food safety 16.33%
employment of poor
families
4. Food safety 8.79% 4. Rising prices 11.61% 4. Food safety 14.47% 4. Living and 14.44%
employment of the
needy family
5. Needs of poor 8.33% 5. Medical treatment 11.46% 5. Living and 13.84% 5. Housing 11.29%
families employment of the
needy family
6. Prices 8.30% 6. Housing 9.99% 6. Environment 9.55% 6. Environment 10.76%
protection protection
7. Public security 6.97% 7. Environment 6.59% 7. Public administration 6.02% 7. Public administration 5.58%
protection
8. Relocation 3.76% 8. Public 4.89% 8. Education 3.41% 8. Education 3.48%
administration
9. Environmental 3.53% 9. Running of 4.53% 9. Sanitation 3.30% 9. Sanitation 2.61%
protection business
10. Care of care of the 3.51% 10. Relocation 3.57% 10. Others 0.68%
elders and the young
11. Public 3.42% 11. Education 2.73%
administration
12. Education 3.03% 12. Sanitation 1.96%
(continued)
X. Yu and S. Cui
Table 2 (continued)
2009 2008 2007 2006
13. Property 2.50%
management
14. Safety in working 1.92%
and labour protection
15. Public utility 1.60%
services
16. Sanitation 1.27%
Sources Based on the sources provided by Office of Hangzhou Performance Measurement Commission
People’s Participated Governance Performance Evaluation …
113
Table 3 Vote distribution of the top livelihood problems in Hangzhou (2009) among different group of people
114
Citizen Municipal Municipal Municipal Retired Leaders of the Heads of Heads Head of the Enterprises Migrant
representatives party NPC CPPCC cadres, district/county ministries/bureaus of the community representatives workers
(%) representatives members members scholars, (city) (%) in district/county street neighbourhood (%)
(%) (%) (%) and (city) (%) (town) committee (%)
supervisors (%)
(%)
Parking and 13.4 21.5 20.4 23.7 19.6 21.4 18.5 19.0 16.2 18.8 9.5
traffic
Housing 12.0 15.5 12.8 19.6 12.7 15.8 17.6 17.8 12.6 18.2 21.2
Medical 13.4 15.4 9.0 13.9 10.1 12.7 15.1 14.2 12.8 15.5 15.4
treatment
Food safety 9.7 7.8 13.5 5.7 10.3 6.8 7.2 5.9 6.1 7.1 5.2
Needs of poor 8.6 9.5 11.0 7.3 11.1 9.5 10.5 9.7 11.0 6.4 6.5
families
Prices 9.9 2.2 2.8 4.4 4.8 2.1 2.2 3.5 4.6 6.6 11.7
Public security 8.8 3.4 4.4 3.8 6.1 3.6 4.1 2.4 6.4 4.2 4.8
Relocation 3.6 4.3 4.3 1.6 1.9 8.4 5.1 7.4 7.6 3.2 2.3
Environmental 3.3 5.8 7.1 2.8 5.6 5.4 4.7 4.2 4.2 2.7 2.4
protection
Care of young 4.1 2.6 3.1 3.2 5.0 1.9 2.1 1.0 2.0 3.1 1.8
and old
Administration 3.4 3.5 2.5 0.6 1.6 3.9 2.5 4.1 3.2 3.9 4.6
Education 2.2 2.6 2.9 5.4 2.7 2.8 3.5 3.0 3.2 4.5 7.4
Property 2.9 2.4 2.7 1.6 2.4 2.4 2.4 2.5 5.0 1.5 1.2
management
Safety in 2.0 1.0 1.9 1.3 2.1 1.2 1.8 1.3 1.5 1.3 3.6
working and
labour
protection
Public utility 1.3 1.7 1.3 3.8 2.7 1.8 2.4 2.6 2.0 2.5 1.1
services
Sanitation 1.6 0.8 0.3 1.3 1.3 0.3 0.3 1.4 1.6 0.5 1.2
Sources Provided by Office of Hangzhou Performance Measurement Commission
X. Yu and S. Cui
One particularly valuable aspect of the Hangzhou campaign is that, while the
identification of “The 7 tough problems” was initially a by-product of the evalu-
ation procedure, since 2003, public pressure has compelled the municipal party
committee and city and local government to treat them as priorities. In effect, the
government and the whole city have joined together to find solutions to ‘the seven
tough problems’. Thus the voting campaign has forged a vital link between the
solution to social problems and the evaluation of government performance. Thus,
the municipal party committee and municipal government produce an overall plan
of solutions at the municipal level, but devolve their implementation to the affiliated
institutions, assessing them as part of their annual working plan. More specifically,
acting on instructions from the municipal committee, the Office of Hangzhou
Performance Evaluation Commission delivers the original complaints, suggestions
and comments to the municipal government-affiliated institutions, requesting them
to implement the improvement plans. When they have received the suggestions, the
target institutions have to investigate the problem more thoroughly and in greater
detail and then prepare appropriate plans to overcome difficulties and make
improvements. In 2003, twelve institutions published their working plans and made
serious efforts to seek opinions and suggestions. By 2009, the number of institu-
tions publishing their plans had grown to 92 and included all those providing public
administration and social services. To keep the public informed of developments
and to seek their participation in the campaign to solve ‘The Seven Tough
Problems’, Hangzhou has set up a special website on government portals and
Hangzhou.com.11
Under the comprehensive evaluation system, the public evaluates the success or
otherwise of major administrative units in solving issues relating to the quality of
life and the results of the surveys are published annually. These results affect the
size of bonuses paid to staff and the promotion prospects of heads of department.
Hence, in short, public participation in the evaluation of government performance
in Hangzhou provides a stable and institutionalised platform for people to assess
government performance and to participate in public administration. At the same
time, in the policy making processes, opinion is consulted by regular surveys and
by seeking comments and suggestions from the public at large. After being verified,
those suggestions and comments can provide an important basis for determining the
government policy and its details. Furthermore, new policies are exposed to scru-
tiny on more than one occasion so that new suggestions and comments will be
received as the policies are rolled out. Overall the cycle of annual performance
evaluation, represented diagrammatically below, promotes the development of
Hangzhou in a substantial and sustainable way (Chart 1).
11
Hangzhou Daily (2003, p. 7)
Chart 1 Flow chart of the

evaluation process of Evaluation Rectification
democratic performance
evaluation
Feedback Feedback
Rectification Evaluation
3 Other Forms of Democratic Governance
Performance evaluation is by no means the only democratic element in Hangzhou

local governance; rather it is complemented by appropriate regulations, procedures
and mechanisms that strengthen the overall democratic element.
Open-ended decision-making. What is known as open-ended decision-making
is based on a legal requirement for public engagement. Thus, when the Hangzhou
municipal government makes decisions on public services and public administra-
tion issues—including drafting and deciding proposals, organising decision-making
conferences, and the news release of the decision—the whole process is open to
citizens and the media. The system was first tried in 1999 and has been so suc-
cessful that, since 2007, the executive meetings of Hangzhou municipal govern-
ment have been open to the public. In January 2008, that is just prior to the
Municipal Chinese People’s Congress (CPC), the government also began online
notifications of the draft of its proposed Government Working Report so that it
could ascertain public response and begin discussions where appropriate. By 2009,
13 districts and county (municipal) governments had committed themselves to
open-ended decision-making. The Minutes of the municipal meeting of the
Standing Committee was the first broadcast online in August 2009 and the same
practice was adopted by the municipal Chinese People’s Political Consultative
Conference (CPPCC) in November 2009 and by the Municipal Standing
Committee of the CPC in December 2009. The most important characteristics of the
open-ended decision-making are:
• Extensive canvass of public opinion in advance of official meetings
• Open disclosure of what has happened at meetings and avoidance of secrecy
• Encouragement of public involvement either by video connection, net forums or
on-site participation.
These features facilitate interaction between the public and decision-makers and
allow for proper feedback to the comments and suggestions coming in from the
public. Of the various aspects of the open-ended decision-making process, public
access to meetings of the standing committee and to the people’s congress, the
public notification of Government Working Report (draft), and the CPPCC are
already institutionalised and normalised, though the disclosure of the Minutes of
party meetings is still selective.
Soliciting public opinion. In 2000, Hangzhou established the ‘Public Opinion
Soliciting Office’ which is responsible for soliciting and organising public opinion
both on a daily and topic basis. The basic way of obtaining the views of the public
is by post, phone calls, faxes, emails, online messages and by visits. The office
collects and organises the various suggestions and then forwards them to the rel-
evant department for processing. The government or department can also request
the Office to canvass opinion on particular issues and then inform them of their
findings. Since 2002 the office has consulted public opinion through annual
‘citizen-oriented projects’. The government chooses 10 projects to be included in
the Working Report which is ultimately presented to the Municipal People’s
Government. If approved, these projects become key components of the govern-
ment programme and progress with them is reported to the next year’s CPC under
the supervision of people’s representatives. To encourage public involvement, the
government encourages people to write to the newspapers and to organise seminars
where their suggestions can be delivered directly to the authorities. In all, every
year, the government receives more than 10,000 suggestions, many of which are
taken up. Thus, although the soliciting of public opinion is administered by the
government, it is heavily dependent on citizens’ involvement.
Creating a joint governance structure: government, social organisations
and the public. While establishing a variety of ‘multi-level social organisations’
directly, The Hangzhou Municipal Government also seeks to improve overall
governance structure by interaction with multi-level institutions where there are
significant inputs from social organisations and the public as well as from gov-
ernment departments. For instance, The Hangzhou Municipal Bureau of Sports is a
government office providing public sports services, while The Sports Federation is a
social organisation managing sports activities under the leadership of government.
To provide better public services, each street has a branch of The Sports Federation
and each community with a gym club, thus creating a sports service network, which
greatly enhances the development of public sports. Another example is Conflict
Resolution, which is the main responsibility of The Justice Department and The
Civil Affairs Department. In 2009, 71 communities in the Xiacheng District of
Hangzhou had ‘Peacemaker Associations’. These associations are mainly made up
of retired officials, teachers, psychologists, lawyers, and leaders of Autonomous
Community Associations. By that time, the total number of registered members of
Peacemaker Associations had reached 933. Members are familiar with the neigh-
bourhood, and hence they can actively participate in the resolution of dispute
between residents by visiting those involved and by arranging joint meetings. They
solve problems informally, using reason and empathy, without the constraints of
official procedures. In short, they provide an effective adjustment mechanism for the
resolution of local disputes, performing a function that could not be replicated in
more formal procedures. In short, Hangzhou has established a governance network
that brings together government (party committee of city district), residents’

committees and district public service centres. These overlapping yet coherent
arrangements effectively integrate the tasks of government, associations and vol-
unteers. In some districts, there is a Cooperative Coordination Committee that
oversees enterprises in the district governance network. Thus, the establishment of
the governance network does a great deal to enhance the efficiency of district
administration.
Public involvement in discussion and decision-making. It is an important
feature of the political system throughout China that local government plays a
major role in all aspects of public affairs while ordinary people both influence and
implement local public decisions. In the past decade or so, however, many local
governments in Hangzhou have developed an extra degree of openness, making
more issues open to public discussion before decisions are made and using those
discussions to influence final outcomes. There has been a gradual change in the
government-public relationship from a managing-and-being managed format into a
consultative and cooperative partnership. This new relationship between local
government and the public is well reflected in the process of creating a new brand
image of Hangzhou. The government first proposed about 10 images that Hangzhou
as a city should be associated with and then circulated them to the public for
discussion and voting; and as a result, ‘the city of living quality’ was selected as the
city’s brand. It is now the norm that when large public building projects are con-
templated, the government will be ready to reveal the proposed designs to the
public and seek feedback and even votes. The following major municipal engi-
neering projects all involved close cooperation between government and the public:
the West Lake protection project; the Xixi Wetland protection project; the
Hangzhou Grand Canal protection project; the run-down housing improvement
project, and the courtyard improvement project.
Another example of government and public interaction concerns the issue of
illegal parking, something that has caused considerable problems in Hangzhou. In
order to address this problem, the government engaged in extensive consultation,
including surveys, visits to families, newspaper debates, face-to-face dialogue with
local leaders, experts, traffic managers and the public. To take public involvement
still further, Hangzhou has also set up the Hangzhou Web Chamber on the internet
and broadcasts regular TV and Radio programs in which listeners can discuss
public affairs. This is especially the case when a new policy is about to be launched
or a specially pressing issue needs to be resolved. In most instances, the Hangzhou
Web Chamber and some local TV stations conduct a series of discussions and
conversations—both in order to allow the government to obtain a better under-
standing of public opinion and to improve public understanding of government
policies. Overall, public involvement in discussion and decision-making of public
affairs in Hangzhou has grown from the merely occasional and symbolic into a
deeply embedded and generally accepted dimension of the processes of govern-
ment. The principle has now become institutionalised as the public has become
accustomed to regular and well-informed participation in decision-making
processes.
The Communist Party initiates social management through democracy.

Modern democratic politics are run and coordinated by political parties. In China,
the operation of democratic governance depends largely upon the Communist
Party’s understanding of ‘democracy’. The case of Hangzhou certainly demon-
strates that the crucial role of the Party in creating a successful and effective
democratic system, one which used citizen participation to resolve major social
issues, to improve protection of human rights and to promote social justice. Thus,
First, in its overall guidelines, the Party stressed that government performance
assessment was to be conducted in accordance with the principle of citizen satis-
faction levels. It then launched the public participation government performance
assessment campaign, making the solution of ‘The Seven Tough Issues’ as the most
pressing task of the process. Secondly, the Party also proposed a development
strategy for Hangzhou, which centred on improving the life quality of the inhabi-
tants through the application of democracy. The strategy identified its overall target
as the transformation of Hangzhou into a city with a high quality of life. It proposed
that the government should follow people-centred norms—that is, it should
understand people, their feelings, their needs, and their desires. It should protect
people and respect their right to know; it should encourage them to participate, to
choose and to supervise; and to expand the scope of public participation in new
levels and fields. Thus, it is clear that, without the Party’s endorsement of the
principle of participation and its clear guidelines as to how this might be achieved,
it would have been difficult or impossible to provide the system of democracy with
such firm institutional foundations.
4 Assessing the Democratic System
The system of democracy in Hangzhou has been designed to handle basic social
issues and is especially intended to improve the quality of life. But to what extent
has it achieved its objectives? The following examples suggest that the system has
achieved some very positive outcomes. The system covers four stages of public
policy making and implementation: the identification of issues; planning and
assessment of selected issues; policy making; and policy evaluation. In the process,
party committee and the government not only respect public opinion but also work
within specified rules to enhance effective governance.
First, at the stage when issue areas are to be identified, the public opinion is the
chief element in determining the most pressing concerns to be addressed. Here, the
Government’s role is to pay close attention to what the public thinks, what they care
about and what they regarded as the most urgent issues. While the Party Committee
and the Municipal and local governments organise, lead and integrate the identi-
fication of social policy issues—such as the ‘The Seven Tough Issues’—they rarely
depart from the agenda set by the public or impose their own priorities. Secondly, at
the stage of planning and assessment, government operating departments and
professional advisers play the main role. Here the focus is on technical matters, and
on legal and financial implications—which require high levels of professional

expertise. Experts are likely to have a good appreciation of past performance and
are thus well placed to anticipate the likely outcome of any new policies and their
impact on related fields. Despite the importance of experts, however, the govern-
ment’s overriding objective is to meet the needs and expectations of the public.
Thirdly, at the phase of public policy making, the party and government play the
leading role, while the public is encouraged to participate. Under this system,
policies involving complex legal issues are decided by NPC. Issues, especially
relatively straightforward ones, are decided in close consultation with the public.
Issues substantially affected by technical factors, regulations and budgets are mainly
decided by special institutions. Finally, at the phase of policy evaluation, public
comments are once more the chief point of reference. Policy evaluation is mainly
concerned with the effect of policy on targeted groups and others affected.
Professional evaluations have a role to play, but the comments of those directly
affected by the policies are treated as more important. They are seen as likely to
provide the most accurate reflection of how well a policy is working and hence
serve as a primary reference to decide whether it should be continued, adjusted or
terminated. In the process of solving quality of life issues, as an organiser and
formulator of public policies, the Hangzhou municipal government certainly makes
full use of the advantages that come from accurate information, adequate resources,
effective coordination, appropriate regulations and clearly defined duties. For the
purposes of the establishment and expansion of a working system of democracy, it
is even more important to stress that it works closely with the public, seeks public
opinion and implements democratic policies that guide and constrain its behaviour.
From the point of view of society, institutionalised and stable public involve-
ment also created a favourable environment in which to handle social issues. Since
these are the issues which are of greatest concern to the public, they are especially
eager to make their views known and hence the government is able to get a better
understanding of where problems are emerging and of how urgent they are. It is
sometimes said that, since the workload of government is so heavy and some
officials more interested in short-term personal achievement and promotion, it is
only too likely that social and quality of life issues will be neglected or receive only
superficial attention; in other words not much effort will be made to find real
solutions. Here public involvement can provide a necessary corrective. It serves to
highlight the importance and urgency of these issues and puts pressures on officials
to make them realise that they have a moral obligation to attend to them. Over the
years, the public participation has played a major role in finding solutions to ‘The
Seven Tough Problems’ and, as a result, public complaints about local government
have fallen dramatically.
For instance, comparing 2002 (when ‘The Seven Tough Problems’ were first
identified) with 2009, complaints about government performance fell in most areas
except housing and traffic (see Table 4). These figures reflect the considerable
efforts made by local government. For example, to solve the living and employment
problems of poor families, the municipal government changed its pension scheme
(the ‘Provisions of Hangzhou Municipal on Basic Pension Insurance’), to extend
Table 4 Comparison of the number of complaints on ‘7 tough issues’ in 2002 and 2009
Items 2002 2009 Change rate
No. of Percentage No. of Percentage of the
complaints (%) complaints (%) percentage of
complaints
(%)
All issues 6921 100.00 11,085 100.00
“7 tough 2341 33.82 3225 29.09 −11.59
problems”
Sanitation 433 6.26 138 1.24 −80.19
Public 668 9.65 379 3.42 −64.56
administration
Medical 309 4.46 237 2.14 −52.02
treatment
Education 257 3.71 259 2.34 −36.93
Living and 101 1.46 110 1.00 −31.51
employment
of the needy
Traffic and 405 5.85 1170 10.55 +80.34
Parking
Housing 168 2.42 932 8.41 +247.52
Sources Based on the original complaints of the year 2002 and 2009 provided by Office of
Hangzhou Performance Evaluation Commission
social insurance cover to low-income and needy families. To deal with unem-
ployment, it also implemented ‘positive employment policies’ to ensure that there
are no households completely without wage-earners. Thus, before the financial
crisis of 2008, the urban rate of unemployment was reduced to 3.23%, the lowest
for ten years. The local government has also made great strides towards solving the
sanitation problem and creating a clean image of Hangzhou. Thanks to the efforts of
thousands of sanitation workers, the city has taken on a brand new look. Both
employment and sanitation issues have now been under control, and the complaints
about them have fallen to about 1%, with overall public satisfaction in these areas
notably high (see Tables 4 and 5).
To improve educational opportunities, the government abolished tuition fees in
rural primary and secondary schools and took many other steps to maintain stan-
dards. Thus, by 2009, the enrolment rate in key provincial middle schools was
70.6% (of these six districts reached 86.1%); and the proportion of students
achieving ‘excellent’ grades reached 55% (in six districts 80%). Thus, complaints
about education fell to 2.3% in 2009. There have also been improvements in public
administration with complaints accounting for only 3.42%. To tackle health issues,
Hangzhou provided medical assistance for the needy, modifying ‘The Provisions of
Hangzhou Municipality on Basic Pension Insurance”. The New Cooperative
Medical System now covers 98.21% of the population. It has also adopted a policy
of bulk-buying for drugs, opening the market to competitive tendering—thus
122
Table 5 Vote distribution of the least satisfied item of the ‘7 + X Problems’ among different group of voters in 2008 (%)
Choices Daily life Medical Education Housing Traffic Sanitation Public Food Environment
and treatment and administration safety protection
employment parking
of the needy
Citizen 13.409 15.361 2.141 13.059 22.346 2.011 6.034 21.795 3.843
representatives
Party representatives 6.236 12.702 1.386 9.007 38.568 2.309 6.467 16.859 6.467
Party representatives 12.923 8.923 1.231 5.846 34.769 0.923 2.769 22.769 9.846
CPPCC members 2.957 7.796 1.613 9.946 40.860 2.688 4.839 20.430 8.871
Scholars 7.853 8.901 1.047 7.330 38.220 2.094 4.712 24.084 5.759
Leaders of the district 6.375 9.960 1.195 10.359 43.426 2.390 4.781 15.139 6.375
Migrant workers 10.261 13.246 8.116 39.925 12.966 1.959 5.597 6.437 1.493
Enterprise 6.324 11.858 3.953 19.895 31.621 2.372 7.246 13.570 3.162
representatives
Community leaders 17.012 12.009 2.359 10.936 27.877 1.716 7.934 15.868 4.289
Town and street 8.617 17.034 1.403 13.627 39.078 1.403 5.010 8.216 5.611
Country/district 8.163 14.129 2.512 11.617 39.874 1.570 4.082 12.245 5.808
ministries
Provincial 7.207 14.414 3.604 18.018 38.739 1.802 3.604 10.811 1.802
government-affiliated
institutions
Sources Provided by Office of Hangzhou Performance Evaluation Commission
X. Yu and S. Cui
Table 6 Evaluation on the general effects of government in Hangzhou in solving the ‘7 + X

tough issues’
Choices Satisfied Quite Basically Not very Not Overall
(%) satisfied satisfied satisfied satisfied satisfaction
(%) (%) (%) (%) (%)
2006 10.60 36.56 42.72 8.99 1.12 89.88
2007 13.46 35.19 42.53 7.68 1.15 91.18
2008 20.90 40.61 34.25 3.87 0.36 95.77
2009 20.66 40.02 34.31 4.61 0.40 94.99
Sources Based on the information provided by Office of Hangzhou Performance Evaluation
Commission
reducing costs. Complaints about medical issues now account for 2.14% of the total
(see Tables 4 and 5).
Thus, on balance, Hangzhou’s efforts towards the solution of social issues,
mainly in terms of progress on ‘The Seven Tough Problems’, has gained public
approval and recognition. Overall public satisfaction with the performance of local
government remained consistently above 90% between 2006 and 2009 (see
Table 6). Moreover, in a nationwide survey conducted by Oriental Outlook Weekly,
Hangzhou has been voted as the happiest city in China for 7 years—which certainly
vindicates the government’s policies and its determination to maintain high levels
of public involvement.12
5 Some Issues in the Operation of the Democratic System
Since the introduction of the system of democracy in Hangzhou, it has achieved

significant progress, especially in finding solution to basic social issues. However,
serious challenges remain and there is certainly room for improvement. The major
challenges are now in the areas of housing and living costs, both of which are
important elements in daily life.13 More and more people are urging the government
to treat these issues with seriousness and urgency. Worsening traffic congestion and
the poor service provided by some state-owned monopolies actually received most
complaints in 2009. The gap between the quality of life of established residents and
that of migrant workers remains unacceptably high. Further, the transparency of
public finance and public involvement in this sector remains problematic and does
not meet crucial social needs, even though public finance is key to the solution of
these issues.
12
Cf. China City Image Evaluation
13
According to the survey taken by the Office of Hangzhou Performance Measurement
Commission, among the 12 choices shown in the questionnaire, living cost ranked as number one
concern for the public.
Of course, these problems arise largely due to China’s rapid economic devel-
opment and urbanisation and need to be dealt with at the national level as well as at
the local level. In fact, Hangzhou has made considerable efforts, including some
innovative measures; these include policies of ‘low-rent housing, economic-rental
housing, economically affordable housing, capped-price housing and refurbished
housing’. In 2007, the per capita housing space in the urban areas of Hangzhou was
20.7, 5.8 m2 larger than that of 2000, ranking it fourth nationwide. By 2007, the
proportion of houses owned by their occupiers had reached 88.5, 27.5% higher than
in 2000. In addressing traffic and parking problems, Hangzhou has pressed ahead
with the development of public transport, including subways, buses, taxis, water
buses, water taxis, and free bicycles. It also implemented some well-received
measures such as allowing night-time public access to the car parks of government
buildings. As a result of these measures, road capacity has been increased and more
parking spaces are available.
However, despite all the efforts of the municipal government, the public feel that
many problems remain. The issues concerning housing and traffic seem especially
intractable and clearly need both micro- and macro-solutions and short- and
long-term measures. For example, compared with 2002, car numbers have risen by
100,000 a year and more and more migrant workers have moved to Hangzhou.
Some of the solutions, such as the construction of the subway system and of large
estates of low-rent houses, will take a long time to complete. There are also con-
straints at the macro-systemic level because China is a unitary state, a country with
a one-party system. In theory, the authority of the local government is derived from
the central government and the local party committee works under the supervision
of the central committee. It is inevitable the democratic system operated by the
Hangzhou municipal government will be influenced by the state structure and
political system, which on occasion, may restrict its freedom of action.
The slow improvement of the quality of life of migrant workers may also be
attributed to systemic constraints. In Hangzhou, there are nearly 2 million migrant
workers, most of them peasants from the countryside. Many farmers seek better
wages and move to towns in such of a job and a house. However, under the Chinese
household registration system, they are not entitled to the same pay or the same
rights to housing, education and social insurance as the established residents and
their living standards and quality of life are generally much lower. Thus, in China,
the challenge of how to improve lives of migrant workers is closely related to
general issues of social equality and justice. The way to promote and safeguard
these things thus should be through the operation and extension of the democratic
system.
Equality and justice are values that all human societies should aspire to and
much thought needs to be given as to the best institutional arrangements through
which to achieve them. Roscoe Pound once said that in economic and political
terms, social justice should be defined as a system that complies with the social
ideals and meets the desires and wishes of the people.14 John Rawls argues that
justice is about the basic structure of the society or, to be more precise, it is a social
institution by which basic rights and duties are distributed, and the way of distri-
bution is through cooperation.15 It follows, therefore, that justice can be seen as an
ideal way to achieve social harmony through the regulation, distribution and
coordination of interests, rights and obligations. From the perspective of modern
politics, social justice and equality rest upon five principles: fair distribution of
fundamental rights; fair distribution of basic goods and development opportunities;
fair distribution according to contributions; the creation of conditions for the
development of disadvantaged groups; and the same rules to apply to everyone.
These definitions of justice and equality in modern politics provide the basic norms
and rules that we need to follow when approaching issues concerning the quality of
life. In China, these principles are reflected in the fundamental rules of the
Constitution and related documents. Thus, in order to enhance governance through
democracy, we need to strengthen the constitutional system to ensure that the
regulations of constitutional law and related documents are implemented thor-
oughly. A task of this magnitude and importance requires the joint efforts of both
local and central governments.
In reality, the appropriate use of public finance is the crucial factor in the
solution of quality of life issues. Here, the Hangzhou system has not gone far
enough to enhance transparency and public involvement to meet the needs of
society. In order to solve this problem, we need to improve the People’s Congress
system, the basic democratic system of China, not least because one of the basic
duties of the Congress is to approve and audit the budget. The local People’s
Congress has considerable influence and power over local financial budget planning
and can propose reforms in local financial management. However, since China is a
unitary state, the central government has a dominant role in state governance. Thus,
while the local government and People’s Congress can initiate some reforms in
local financial management, there are doubts as to how far this should be taken. If
local reform goes too far or becomes uncontrollable, might it not shake the whole
system by causing public discontent, and increasing distrust of the government? It
is clear therefore that some degree of coordination and cooperation between local
and central governments is required if reform measures to become more effective as
a result of greater financial transparency and public involvement. Moreover, if the
central government does not introduce substantial reforms, it will be difficult for
local governments to improve procedures in their own areas and, in turn, the
solution of fundamental social problems will be harder to achieve.
The democratic system in Hangzhou adjusts and coordinates different interests
largely through the operation of its administrative departments. It is important to
stress that this is very different to the way that legislative bodies approach the same
tasks. The administrative approach has considerable merit; the departments contain
14
Pound (1984, p. 73)
15
Rawls (1988, p. 1)
experienced and highly qualified officers; they have excellent access to the latest
information and the cost of decision-making is comparatively low. But the process
of integrating public opinion and administrative functions can encounter problems,
especially when officials are able to influence the process too much so that their
perhaps narrow-minded or self-serving views carry too much weight and true public
opinion is not reflected. It is probably here that a legislative solution is needed. In
other words, the process will have to be decided upon at the People’s Congress,
where it should be easier to transcend parochial interests and to maintain impar-
tiality. However, in the Chinese context, if the legislative body is to deal directly
with fundamental social issues and to extend the process of coordinating the work
of the state (whether at the national or local level) with the wishes of the people, the
People’s Congress system needs to be reformed first. These are major dilemmas and
challenges that face the operation of the system of democracy in Hangzhou.
6 Conclusion
In conclusion, the working system of democracy is a combination of a democratic

system with a system of government and administration. This kind of democratic
working system differs from a democratic electoral system and from a
democratic legislative system. At the same time, it is also different to what we
normally call a democratic administration. The working system of democracy has
the following characteristics. First, it focuses on social issues and those affecting the
quality of life where the interests of ordinary people are most directly concerned. In
approaching these issues it is willing to open the whole policy making process to
the public—that is, from choosing issue areas, through planning and policy making
to policy evaluation. Thus, public policy making gains greater depth and support
from its citizens. Secondly, both the starting point and the end results of the system
are about finding and solving actual problems. This problem-solving oriented
approach is conducted through public participation. Since these problems are issues
of great concern to most members of the public, there is a strong public desire to be
involved in the governance process. Thirdly, the working system of democracy also
provides a platform for the public evaluation of government officials. Thus, through
the inner link between public participation and government performance assess-
ment, the system not only rewards or constrains government officials but also brings
the entire government sector under democratic scrutiny. As a result, it has a positive
impact on the quality of government services. Finally, the system combines ele-
ments both from direct and indirect democracies, ensuring that citizens can par-
ticipate its public affairs, but at the same time, achieving social stability and an
effective governance structure. However, the practice of Hangzhou also shows
some limitations to this form of democracy. To ensure that the system reflects
public interests more effectively, some important reform measures are required,
especially public sector financial reform. Yet, in the Chinese context, such reforms,
if they rest solely on bottom-up and local level initiative will not go far enough.
A combination of local and central government measures is necessary. In other

words, local democratic working systems need to be backed by nationwide
democratic reform. One possible answer could be a combination of the democratic
electoral system, the representative system, local autonomy and the democratic
working system to form an integrated whole. While it has had some limitations, the
democratic working system practised in Hangzhou still offers an example that could
be valuable in the search for democratic reform in China. It certainly points to the
crucial point that the introduction of a democratic dimension has a positive effect on
governance performance.
References
Cf. China City Image Evaluation. Oriental Outlook Weekly. http://city.lwdf.cn/.

Cohen, Carl. 1988. Democracy, 12. Beijing: The Commercial Press.
Diamond, Larry. 2008a. The Spirit of Democracy the Struggle to Build Free Societies Throughout
the World. New York: Henry Holt & Co.
Diamond, Larry 2008b. The Democratic Rollback: The Resurgence of the Predatory State. Foreign
Affairs (March/April 2008).
Hamilton, Alexander, John Jay, and James Madison. 1980. Federalist Papers, Chinese Edition.
ShangWu Press, 133.
Hangzhou Daily. June 11, 2003, 7; Hangzhou Daily. May 27, 2009, B7–B10.
Lipset, Seymour Martin. 1997. Political Men: The Social Basis for Politics, Chinese Edition.
Shanghai People’s Press, 55–66.
Pound, Roscoe. 1984. Social Control Through Law, 73. Beijing: The Commercial Press.
Rawls, John. 1988. A Theory of Justice, 1. Beijing: Science Press.
Schumpeter, Joseph A. 1979. Capitalism, Socialism and Democracy, Chinese Edition. Shangwu
Press, 312–354.
Rethinking Environmental Regulation
in India
Geetanjoy Sahu
1 Background
Over the last three decades, the Ministry of Environment and Forests (MoEF) of
Government of India has enacted a number of environmental laws and also has
restructured the environmental regulation process to ensure successful enforcement
of environmental law in an effective manner. Across the country, government
agencies wield the vast power to regulate industry, mines and other polluters to
ensure the effective implementation of environmental laws and regulations. The
process of environmental regulation which started effectively in the early 1970s has
subsequently become comprehensive and stronger, in part, by the spate of fresh
legislation passed after the Bhopal gas leak disaster of December 1984.1 They cover
hitherto unregulated fields, such as noise, vehicular emissions, hazardous waste,
hazardous microorganisms, the transportation of toxic chemicals, coastal develop-
ment and environmental impact assessment. Equally significant, in the environ-
mental regulation process, is the creation of a number of regulatory structures to
implement these laws effectively. The enactment of the Water (Prevention and
Control of Pollution) Act, 1974, is provided for the institutionalisation of pollution
control machinery by establishing Boards for prevention and control of pollution of
water. These Boards were entitled to initiate proceedings against infringement of the
environmental law, without waiting for the affected people to launch legal action.
The Water Cess Act, 1977, supplemented the Water Act by requiring specified
industries to pay cess on their water consumption. With the passing of the Air
(Prevention and Control of Pollution) Act, 1981, the need was felt for an integrated
1
For more details, see Upadhyay and Upadhyay (2002).
G. Sahu (&)
Centre for Science, Technology & Society, Tata Institute of Social Sciences (TISS),
Deonar, Mumbai 400088, India
e-mail: geetanjoy@tiss.edu

https://doi.org/10.1007/978-981-10-5963-6_8
130 G. Sahu
approach to pollution control. The Water Pollution Control Boards were authorised
to deal with air pollution as well and became the Central Pollution Control Board
(CPCB) and the State Pollution Control Boards (SPCBs),Curmally (2002).
However, a plethora of such enactments and Constitutional provisions has not
resulted in preventing environmental degradation in the country. The last three
decades have witnessed a rapid degradation of the environment. The reasons
underlying this state of affairs appear varied and complex; however, one major
factor seems to be the ineffective implementation of the laws concerned. Many legal
and social science scholars widely agree that there is governance deficit in the field
of environmental protection and improvement. This has prompted environmental-
ists and the people, as well as non-governmental organisations, to approach the
Courts, particularly the higher judiciary, for seeking suitable remedies.
Interestingly, the judiciary has also responded in a proactive manner to deal with
these different environmental problems (Divan and Rosencranz 2001).
Although the Indian Supreme Court in resolving environmental disputes has
contributed immensely to the evolution of environmental jurisprudence principles
and also its directions have been implemented in respect of a number of cases, there
remain a fair number of cases as yet where either judicial directions have not been
implemented or have been partially implemented. In this way, the environmental
compliance and effective enforcement of the environmental law have become an
increasingly challenging task in India.2 In such a situation, in 2010, the Ministry of
Environment and Forests (MoEF) proposed to restructure the environmental reg-
ulation and monitoring process in India through setting up a National
Environmental Assessment and Monitoring Authority (NEAMA). The proposal of
MoEF has invited both positive and negative reactions. It is argued by the MoEF
that the problems of environmental compliance and monitoring through a multi-
disciplinary authority will be useful and improve the state of environmental com-
pliance and monitoring in an effective way in India.3 However, several questions
have been raised about the need for NEAMA when the existing authorities and
regulation institutions have failed to produce effective results and act as a deterrent
against polluters in India. In recognition of the existing problems around envi-
ronmental regulations and the implementation challenges faced by environmental
regulation authorities, this report has done an in-depth analysis of environmental
regulatory authorities in India to explore whether we need multiple authorities to
ensure effective implementation of environmental laws or do we need to reorient
and redesign the existing institutions.
The study was carried out from March 2012 to June 2013 in two phases. In the
first phase, we focused on understanding the key concerns revolving around
environmental compliance in India through a detailed review of existing
2
For more details, see Sahu (2010).
3
Working Paper on National Environmental Assessment and Monitoring Authority for public
consultation, Ministry of Environment and Forests (MoEF), Government of India, New Delhi,
2010.
Rethinking Environmental Regulation in India 131
environmental regulation policies, environmental compliance and enforcement

structures, government appointed committee reports on strengthening environ-
mental regulation process in India, annual report of MoEF, CPCB, SPCBs and
thereby identified the factors determining non-compliance of environmental laws in
India. Analysing the data and interview with various state functionaries and
stakeholders was done in the second phase of the study. Information from all the
SPCBs was collected through filing Right to Information applications, and also
personal and telephonic interviews were conducted with staff members of the
SPCBs between March 2012 and June 2013.
2 Environmental Regulation in an Era of Deregulation
Regulation has been a very controversial terminology. Viscusi et al. (2000) defines
regulation as, “a state imposed limitation on the discretion that may be exercised by
individuals or organisation, which is supported by the threat of sanction”. There are
two kinds of regulation, namely economic regulation and social regulation.
Economic regulation is defined as a type of government regulation that sets prices
or conditions on the entry of firms into an industry. On the other hand, the social
regulations are more to do with the externalities related to the market. Social
regulation focuses more on correction of this externality. According to Viscusi et al.
(2000), the following are some of the instruments of regulation:
1. Control of price
2. Control of quantity
3. Control of exit and entry
4. Control over other variables
Control of price and quantities involves government control over price in the
market and quantity of the product to be made available in the market. The control
over exit and entry follows the concept of permitting. The other variables used in
regulation are setting up minimum standards or amount of money to be invested, for
example, those related to safety in the aircraft industry.
Environmental regulation involves permitting and setting up minimum standards
which are enforced on firms. Permitting would involve the provision of permits to
industrial firms to pollute. This permit would entail the firm to follow the minimum
requirements, a breach would entail a penalty. This approach can be classified under
command and control approaches. Recently, various regulators have started
implementing alternate approaches like environmental taxes, a trading scheme,
negotiated or voluntary agreements, environmental management system (Harman
2004). Many have a different view on whether industrial units should be regulated
or not. Opponents of regulation fiercely contest on how regulating industrial units
would cripple the productivity of industrial units. On the other hand, the proponents
132 G. Sahu
of regulation have raised serious concerns against deregulation. There is an

increasing trend where many sectors are being deregulated. Post-1990s have
defined by many as the era of deregulation. However, there are many sectors where
regulation has either increased or remained constant (Peltzman et al. 1989), and
environment is one area in which there has been demand for more regulation both at
the local level and international level. There has been another trend where many
incentive-based approaches have been introduced to complement the command and
control approaches.
There exists a general belief among economists that deregulation results in
efficiency (Winston 1993). Other considerations like overall effectiveness ease of
implementation, equity, information requirements, monitoring and enforcement
capability, political feasibility and clarity to the general public are seldom con-
sidered by economists while discussing regulation (Hahn and Stavins 1992).
Economic Historian Richard Vietnor has favoured the idea that both regulation and
deregulation are due to people’s perception of interaction between economy and
government. He characterises the wave of regulation in the 1930s to the failure of
the laissez-faire economy due to the great depression. In comparison, he believes
that the reverse did happen in 1970s due to stagflation (high inflation and unem-
ployment) which reduced the faith of the public in governments’ ability to influence
the economy (Viscusi et al. 2000).
Layzer argues that in environmental policy of the USA, this has been possible
due to two reasons (Layzer 2002). First, there have been instances of change where
conservatives have been successful in installing staff who share their belief. Second,
as pointed out earlier, the conservatives have been successful in creating a picture of
regulation as inefficient. However, there still exists a strong resistance in the
environmental sector among the public against deregulation. Simultaneously, there
have been instances in the environmental sector where incentive-based economic
regulation which follows the principle of market has been introduced. This will
make regulation more acceptable to the conservatives in comparison to deregula-
tion. This trend is now catching across countries with global environmental
agreements also pushing for cap and trade programs.
There is a strong belief that externalities in the market can be corrected only by
regulation in sectors like environment, health and safety. This has not pushed for a
wave of deregulation in social regulation along the lines of economic deregulation
(Ringquist 1993). Also, there are many researches that have put forth the point that
the reduction in pollution is mainly due to the change in economic activity.
However, there have been studies which have pointed out that a strong regulatory
effort had the significant effect of reducing air pollution emissions in the USA
(Ringquist 1993). On the field, there are still calls for deregulation in the envi-
ronmental sector yet there have been no major instances of that happening. As in
many parts of the World, India has witnessed a number of independent regulatory
authorities in an era of deregulation over the last two decades.
3 Independent Regulatory Authority
With increased privatisation, liberalisation in 1980s there has been an increased

trend of a regulatory capitalism. Regulatory capitalism reflects delegation of reg-
ulatory responsibilities to the independent authorities which are partly free from
government control (Gilardi 2005). However, this independent regulatory agency
has increased in the arena of economic regulation in comparison to the social
regulation. In a paper, Gilardi has looked at three frameworks to understand the
increased presence of IRA. His paper shows that all the explanation discussed by
Levi-Faur (2005)—bottom-up, top-down and horizontal to have played a role in the
diffusion of IRAs. According to Faur, a bottom approach meant that most gov-
ernments faced with similar problems and found that IRA was the solution to these
new problems. The top-down approach propagates the idea that the introductions of
IRA have been primarily due to the exogenous factors. In the case of western
European countries, it has been the European Union (EU) that has actively pushed
for change in national policies (Levi-Faur 2005). On the “net impact” of
Europeanisation: The EU’s telecoms and electricity regimes between the global and
the national 2004. The last explanation put forth by Faur is horizontal emulation
which looks at interdependencies between countries which have resulted in diffu-
sion process. Mark Thatcher lists four reasons for delegation of powers to inde-
pendent regulatory authority. He emphasises that in 1980s and 1990s, governments
were increasingly facing problems with regulation. First, elected officials used IRA
as a cover to shift the blame while implementing unpopular policies. Second, as
regulation became more technical in nature, it became interestingly more important
to introduce the technical requirements of regulation by means of IRA. Third, with
a new set-up, there was a new way for the governments to project a credible
assurance. According to Thatcher, all privatisation has been complemented with
IRA thus creating renewed confidence of an investor in the system (Thatcher 2002).
Fourth, as pointed out earlier, the international organisation put forth for new IRAs
which had to be implemented under pressure from the international organisations.
4 Instruments Related with Environmental Regulation
Regulators have been using varied instruments to obtain favourable outcomes for
the larger good of the society and public. With the environmental movements at its
peak in 1970s, direct regulation was extensively used to combat the problems of
pollution and other environmental concerns. However, from 1990s, there has been a
new wave of market-based instruments which have been used by the regulatory
agencies. It is claimed by the proponents of market-based instruments that it gives
the flexibility to a firm with respect to the pollution abatement technology or
process which can be used. At present a mix of direct and other market-based
134 G. Sahu
incentives are used by different regulatory agencies to achieve their goals. In this
section, we look at the three most important and widely used instrument of per-
mitting; fiscal measure; and trading scheme.
4.1 Permitting
A permit allows a firm a right to conduct an activity provided a set of rules and
regulation are followed. John Harman, the head of Environmental Agency, United
Kingdom, had emphasised that rising cost of direct regulation is a major concern in
near future as there is a huge increase in application for permits which pushes the
regulatory cost up (Harman 2004). Usually, the compliance part of the regulation is
carried out by the operators and results are then submitted to the regulatory
agencies. Permitting ensures that the industry operates in a way which brings the
benefits to the people and the environment. They clearly set out the minimum
requirements. The biggest advantage of the permits is that they are a most certain
way of dealing with the high risks. Permits in short force the operators to follow the
actions which are in the greater interest of the society. A permit-based regime also
allows for very effective implementation when risks are to be combated quickly. As
pointed out earlier, permit-based regimes have been criticised for the high cost to
manage the regulatory instrument for both regulator and the regulated. They are
also criticised for the amount of rigidity they offer making them unfavourable for
conditions which change quickly (Harman 2004). They are very effective for point
source pollution sources in comparison to the mobile pollution sources. It is also
very well suited for localised problems of water or air pollution for example.
4.2 Fiscal Instruments
Fiscal instruments like environmental tax have found favour in recent times as a
means to combat environmental degradation. Taxes are compared to be easy to
implement. According to Harman (2004), this fiscal measure should complement
the direct regulation and should not be seen as a means to obtain objective with its
independent merit. He adds in that case the tax should be seen as a tool to set up
extra benchmarks to outperform the earlier set standards. In some countries,
environmental taxes have also been developed by the state as revenue neutral for
the government where the revenues generated would be used to incentivise better
performers or renewable technology. It has to be understood that these taxes do not
assure a favourable outcome. There is also a need for additional resources to make
sure the taxes are paid without evasion. This instrument can be used when a
deviation in price signals has an impact on the market which will force the firms to
incorporate environment-friendly strategies (Hahn and Stavins 1992).
4.3 Market-Based Instruments
Trading schemes are one of the most widely used market-based instruments.
A trading scheme involves a binding target and a unit of trade. Trading schemes
also distribute initial allotments to participants of the scheme. There is a penalty in
place for participants who do not comply with the rules. A trading scheme also has
a specific time limit for achieving the goals. From time to time, the participants
have an allowance to cover the emissions for that period. Participants are allowed to
sell or buy the allowance based on their requirement. This is considered a
cost-effective option. As there is a fixed cap, it is guaranteed that the emissions do
not exceed the required emissions. Many times trading schemes are actively sought
by the corporates as it gives them the option to choose from many options for
pollution abatement. But there is a risk of scheme faltering if the allowance is not
allocated properly. There is also increasing risk that small and medium business
will find it difficult to due to lack of information and resources (Harman 2004).
5 Command and Control Versus Incentive-Based

Approach
Command and control approaches have dominated the regulation scene pre-1990
phase. However, incentive-based approaches are being now simultaneously
implemented. There is no doubt that command and control approaches had played a
significant role in improving the environmental condition. However, there is an
increased optimism with the incentive-based approaches that they would be
cost-effective in comparison with the command and control approaches. In many
discussions, it is assumed that there is no transaction cost involved with trading
scheme (Hahn and Stavins 1992). There are many studies which present results of
the low cost of implementation of trading scheme as means to support
incentive-based approach; however, they do not include the transaction cost. This
gives an imperfect reflection of the trading scheme. It is also widely agreed that
incentive-based approaches are not ideal for all the environmental problems. For
example, command and control approaches could be preferred for problems which
have threshold level. It is clear that one single approach is not ideal for all problems
but what is more important is that how these schemes are implemented on the
ground. There is also a charge against command and control approaches that they
stifle innovation as they prescribe a particular technology. On the other hand, the
market-based approaches are appreciated for the level of flexibility they provide
when it comes to choosing a technology. With increasing use of market-based
approaches, the role of the regulatory agency will also change to facilitate
market-based instruments. However, it is assumed that the regulatory agency is
sophisticated to facilitate the incentive-based approach (Hahn and Stavins 1992).
With direct regulation, the onus lays on the regulator to penalise the firms which do
136 G. Sahu
not follow the minimum required standards. With the fiscal and market-based
approaches, the design part becomes equally important along with the implemen-
tation part.
6 Genesis of Environmental Regulation in India
One of the most notable characteristics of the change in governance of the past two
decades in India has been the restructuring of the state, most notably the delegation
of authority from legislature and executive to technocrats and regulatory agencies.
In recent years, there has been a considerable degree of delegation from govern-
ments to quasi-autonomous agencies. A close look at the emerging regulatory
reforms in India in several sectors such as telecommunications, insurance, finance,
banking, electricity, housing, environment and water reveal the widespread diffu-
sion of these reforms in recent decades. The era of privatisation since the late 1980s
in India is also the era of regulation. This seems paradoxical since privatisation and
the number of policies that were associated with it were supposed to lead to
deregulation and the promotion of freer markets. Yet, with the advance of pri-
vatisation, it became clear that freer markets often imply more rules, regulatory
agencies and regulators (Vogel 1996).
India’s environmental governance impression is largely due to the exogenous
events. They have been heavily influenced by the judiciary, international envi-
ronmental events and multilateral international agreements. The Stockholm
Conference on the Human Environment in 1972 led to the creation of a National
Committee on Environmental Planning and Coordination (NCEPC). This was
followed by Department of Environment (DOE) on 01 November 1980 as the
earlier commission was felt inadequate. Simultaneously, the first environmental
regulator was established in India through Water Act 1974. This act was also
created as fallout from the Stockholm conference of 1972. The Central government
had no role to play with regard to environment. However, with the 42nd amend-
ment, all that changed when “forests” and “protection of wild animals and birds”
were brought to concurrent list. Similarly, “protection and improvement of envi-
ronment and safeguarding of forests and wildlife” was incorporated in the directive
principles of State policy. The Central government has invoked the article 252 of
the constitution which gives authority to the central government by resolutions of
state legislatures to enact various laws under environment. After the Bhopal disaster
in 1984, the MoEF was created in 1985 and EPA in 1986 due to increased envi-
ronmental activism (Strategic Plan 2012–13 to 2016–17, MoEF). The Ministry of
Environment and Forests (MoEF), the apex policy-making body in the field of
environment, acts through the CPCBs and the SPCBs. The CPCB, a statutory
organisation, was formed in 1974 under the Water Act (Prasad 2006).
The main functions entrusted with the SPCBs include: to plan a comprehensive
programme for prevention, control and abatement of water and air pollution in the
State; to advise the State Government on matters concerning prevention, control or
abatement of water and air pollution; to lay down, modify or annul effluent stan-
dards for sewage and trade effluents and for the quality of receiving waters (not
being water in an interstate stream) and to classify waters of the State; to develop
economical and reliable methods for treatment of sewage and trade effluents, for
their utilisation in agriculture and for their disposal on land; to advise the State
Government with respect to the location of any industry the carrying on of which is
likely to cause water and air pollution.
An analysis of the above-mentioned functions suggests that the SPCBs have
largely followed “CAC” approaches in India to control and prevent pollution.
Under the “CAC” approaches, the SPCBs are required to consistently monitor the
activity of the industries operating in their respective states. No industry can be set
up without the prior permission of the SPCBs.4 The industries obtain permission
from the SPCBs which allows them to operate based on certain terms and condi-
tions. While following the “CAC” approaches, the SPCBs employ three instru-
ments, namely consent to establish producing units, consent to operate, and
standards for air and water pollution. Under the Water Act, consent is necessary for
an industry to “discharge effluent into a stream”. Under the Air Act, consent is
necessary to “establish or operate an industrial plant in an air pollution control
area”. The “command” therefore is the stipulation of certain upper limits of
parameters, while the “control” is the power to withdraw the power supply, water
supply and the imposition of the penalty (fines, imprisonment). Thus, the role of the
Boards is mostly that of an enforcer, and the primary functional tool employed by
them for controlling industrial pollution is an inspection of polluting units.
The PCBs in India predominantly have been using command and control
approaches of permitting. However, they have now started using certain
incentive-based instruments. For example, a number of SPCBs offer a rebate on the
water cess. Operators are entitled to a rebate if they comply with the rules, which
include connections to wastewater plant and water consumption within a prescribed
limit. Certain PCBs have started provision of bank guarantees as a measure of
compliance. Subsidies for pollution abatement technologies have been introduced
by state and central government. One such example is the provision of subsidy for
construction and installation of Common Effluent Treatment Plants (CETP).
Gujarat PCB has started providing incentives to operators who employ environ-
mental management systems (OECD 2006). However, these measures at the state
level have not resulted in producing effective results. In recent past, MoEF has
hinted at its intention of forming a national-level regulatory authority to take care of
needs of enforcements of environmental regulations. In this regard, the MoEF
circulated two discussion papers on the establishment of the National Environment
Assessment and Monitoring Authority (NEAMA) and National Environment
Protection Authority (NEPA). According to the ministerial discussion paper, the
4
Section 33A of the Water Act and Section 31A of the Air Act states that if the industry fails to
obtain consent or if violates consent conditions then the industrial unit is liable for punishment
under both Acts.
138 G. Sahu
NEAMA “shall be a professional autonomous body with domain experts, techno-

logical finesse and field outreach, which will discharge the following functions
related to EIA and CZM under the Environment (Protection) Act, 1986”. The main
contention of the ministry is that the MoEF is burdened with the process of EIA
(Environmental Impact Assessment) and CZM (Coastal Zone Management).
According to the proposal, Thematic Action Committees (TAC) will be formed on
the discipline-based knowledge. Further, the TAC will review the EIA and rec-
ommend for grant or rejection of projects. Changes would be made to the EPA to
open a source of revenue for the NEAMA, which will allow them to charge pro-
cessing fees. According to MoEF, the creation of NEAMA will lead to an inter-
national best practice, and project appraisal will be done by specialised bodies
without interference from the government (GoI: 2009 and 2010). The draft also
talks about creation about databases by three agencies: CPCB; FSI (Forest Survey
of India); National Centre for Sustainable Coastal Management (NCSCM) which
can be used by NEAMA for the purpose of giving clearance. Disaggregation of
responsibilities between MoEF and NEAMA will result in necessary checks and
balance according to the discussion paper.5
A few years before, the MoEF also came out with another set of discussion paper
focussed on three-tier environmental governance structure with following roles:
1. MoEF—legislation and policy making
2. NEPA—regulation, monitoring and enforcement
3. NGT (National Green Tribunal)—adjudication
The paper also stressed that the SPCBs will continue to function in their present
capacities. Some function of the CPCB might be subsumed by the NEPA. The key
principles of this authority will include making NEPA a statutory body under
parliamentary process, giving it autonomous power under the MoEF with sub-
stantial budget and with own powers, making it professionally equipped with
expertise from across the fields, allowing it to discharge power from EPA 1986 and
apply principle of “polluter pays principle” and “precautionary principle”. NEPA
would be mandated to assume the role of national stewardship of enforcement and
compliance. NEPA will also have regional bodies with decentralised functions. The
functions which will be discharged by NEPA are as follows: environmental impact
assessment; enforcement and compliance; environmental planning and sustainable
studies; environment health and ecosystem protection; sustainable production and
waste management; chemical safety and biosafety.6
However, several questions have been raised about the need for NEAMA when
the existing authorities and regulation institutions have failed to produce effective
results and act as a deterrent against polluters in India. In recognition of the existing
5
For more details, see Discussion Paper on the Establishment of National Environment
Assessment and Monitoring Authority 2010, Ministry of Environment and Forests, Government of
India, New Delhi.
6
For more details, see proposal for the Establishment of National Environment Protection
Authority 2009, Ministry of Environment and Forests, Government of India, New Delhi.
problems around environmental regulations and the implementation challenges

faced by environmental regulation authorities, this report has done an in-depth
analysis of environmental regulatory authorities in India to explore whether we
need multiple authorities to ensure effective implementation of environmental laws
or do we need to reorient and redesign the existing institutions.
7 Composition of State Pollution Control Board

and Tenure of Members of SPCBs
The provision of the Water (Prevention and Control of Pollution) Act, 1974 states
that a SPCB shall consist of the following members,7 namely (a) a chairman, being
a person having special knowledge or practical experience in respect of matters
relating to environmental protection or a person having knowledge and experience
in administering institutions dealing with the matters aforesaid, to be nominated by
the State Government. Provided that the chairman may be either whole-time or
part-time as the State Government may think fit; (b) such number of officials, not
exceeding five, to be nominated by the State Government to represent that
Government; (c) such number of persons, not exceeding five to be nominated by the
State Government from among the members of the local authorities functioning
within the State; (d) such number of non-officials, not exceeding three to be
nominated by the State Government to represent the interest of agriculture, fishery
or industry or trade or any other interest which, in the opinion of the State
Government, ought to be represented; (e) two persons to represent the companies or
corporations owned, controlled or managed by the State Government, to be nom-
inated by that Government; (f) a full-time member secretary, possessing qualifi-
cations, knowledge and experience of scientific, engineering or management
aspects of pollution control, to be appointed by the State Government.
An analysis of data collected from SPCBs, however, gives a contrasting picture.
It has been observed that time and again across state governments have not been
able to choose a qualified, impartial and politically neutral person of high standing
to this crucial regulatory post. The recent appointments of chairpersons of various
SPCBs like Karnataka (Vaman Acharaya a senior BJP leader8), Himachal Pradesh
(Kuldip Singh Pathania, a Congress party leader and former MLA9), Uttar Pradesh
(Waseem Ahmed Khan appointed on the recommendation of SP leader
7
For more details, see Water (Prevention and Control of Pollution) Act, 1974. Available at this
website http://www.moef.nic.in/legis/water/wat1c2.html. Accessed on 30 March 2013.
8
See Vaman Acharya is Pollution Control Board Chief, 21 September 2012, The New Indian
Express.
9
See Kuldeep Singh Pathania appointed as Chairman of Pollution Control Board. Available at
http://himsatta.com/fullstory.php?&newsid=2429. Accessed on 20 March 2013.
140 G. Sahu
Syed Ahmed Bukhari10), Arunachal Pradesh (Ramol Barang a sitting NCP party
MLA11), Manipur PCB (Shri E. Dwijamani Singh, a sitting MLA12),
Maharashtra PCB (J.S. Sahani a former bureaucrat) are in blatant violation of the
apex court guidelines. The apex court has recommended that the appointees should
be qualified in the field of environment or should have special knowledge of the
subject. It is unfortunate that in a democratic set-up, key enterprises and boards are
headed by bureaucrats for over a decade. In this connection, it is very important for
State Governments to understand that filling a key regulatory post with the primary
intention to reward an ex-official through his or her appointment upon retirement, to
a position for which he or she may not possess the essential overall qualifications,
does not do justice to the people of their own states and also staff working in the
SPCBs. The primary lacuna with this kind of appointment was that it did not evoke
any trust in the people that decisions taken by an ex-official of the State or a former
political leader, appointed to this regulatory post through what appeared to be a
totally non-transparent unilateral decision. Many senior environmental scientists
and other officers of various SPCBs have expressed their concern for appointing
bureaucrats and political leader as Chairpersons who they feel not able to create a
favourable atmosphere and an effective work culture in the functioning of the
board.13 It has also been argued by various environmental groups that if the gov-
ernment is unable to find a competent person, then it should advertise the post, as
has been done recently by states like Odisha. However, State Governments have
been defending their decision to appoint bureaucrats to the post of Chairperson as
they believe that the vast experience of IAS officers in handling responsibilities
would be easy. Another major challenge has been appointing people without having
any knowledge in this field. For example, the appointment of Smt. C.C. Sangdarpa
with the maximum qualification of Class X as Chairperson of SPCB of Sikkim was
clear violation of Water Pollution and Prevention Act, 1974.
It is also observed that most of the State Pollution Control Boards in India don't
have the minimum required number of 17 people in the State Pollution Control
Board Governing Board as per the Water (Prevention and Control of Pollution) Act,
1974. Also, though it is mandatory for the SPCBs to meet at least once in every
three months, our findings suggest that many SPCBs have not followed the pro-
visions consistently.14 In this connection, it is important to mention that the
10
See SP appoints Bukhari candidate as pollution board chief. Available at http://www.
indianexpress.com/news/sp-appoints-bukhari-candidate-as-pollution-board-chief/953757/.
Accessed on 20 March 2013.
11
See Arunachal Pradesh State Pollution Control Board Website. Available at http://apspcb.org.in/
contactus.htm. Accessed on 20 March 2013.
12
See Manipur State Pollution Control Board Website. Available at www.pcbmanipur.org.
Accessed on 20 March 2013.
13
This observation is based on my personal interaction with environmental scientist of various
SPCBs from March 2012 to March 2013.
14
The provision of the Water (Prevention and Control of Pollution) Act, 1974 states that a SPCB
shall meet at least once in every three months and shall observe such rules of procedure in regard
Table 1 Board members and number of board meetings in the year 2011–2012
Number of Board
Meetings between 1st Number of Governing
April 2011 to 31st March Board Members by
Name of PCBs 2012 31st March 2013
Andhra Pradesh 4 17
Arunachal Pradesh 1 15
Assam 4 18
Bihar 2 17
Chhattisgarh 2 8
Goa 2 17
Gujarat 4 11
Haryana 5 16
Himachal Pradesh 2 8
Jharkhand 2 17
Jammu and Kashmir NA NA
Karnataka 3 17
Kerala 4 17
Madhaya Pradesh NA 17
Maharashtra 3 9
Manipur NA 15
Meghalaya 2 17
Mizoram 2 17
Nagaland 2 12
Odisha 2 17
Punjab 4 17
Rajasthan NA 17
Sikkim 2 16
Tripura 2 18
Tamilnadu 4 12
Uttar Pradesh 1 13
Uttarakhand 1 11
West Bengal 3 17
Source Information collected through RTI and from State Pollution Control Board Websites
between March 2012–March 2013
NA Not available of information in the website. Also, information was not given to our RTI
application
governing board members are supposed to discuss various pertinent issues related
to the functioning of industries, action plan for the PCB, compliance and moni-
toring issues, devising innovative methods to improve enforcement of laws but it is
also found that most of the governing board members generally do not attend the
meetings of PCB, and many times board meetings have been a ritual rather than
making any substantive impact on the functioning of the board.15 Table 1 shows the
number of board members and meetings organised by each PCB in the year 2011–
2012.
(Footnote 14 continued)
to the transaction of business at its meetings as may be prescribed: Provided that if, in the opinion
of the chairman, any business of an urgent nature is to be transacted, he may convene a meeting of
the board at such time as he thinks fit for the aforesaid purpose.
15
This information is based on my discussion with SPCB members between March 2012 and
March 2013.
142 G. Sahu
8 Tenure of Chairpersons
The provision of the Water (Prevention and Control of Pollution) Act, 1974 states
that (1) a member of a Board, other than, a member secretary, shall hold office for a
term of three years from the date of his/her nomination, provided that a member
shall, notwithstanding the expiration of his/her term, continue to hold office until his
successor enters upon his office. An analysis of tenure of members in general and
chairperson, in particular, suggests that there are hardly one or two PCBs which
have followed the provisions of the Water (Prevention and Control of Pollution)
Act, 1974 in letter and spirit. Many state governments have had appointed and
transferred chairpersons at their will, and no systematic attempts have been made to
institutionalise the process of appointment and ensuring the continuity of chair-
person for minimum three years to bring efficiency to the regulatory authorities. For
example, knowing that Mr J.S. Sahani has retired and also appointing him for a
period of only one year by the Government of Maharashtra is a clear violation of
Section 4 of Water Prevention and Control of Pollution Act 1974 which says that a
full-time chairman with special knowledge or practical experience in matters
relating to environmental protection or a person having knowledge and experience
in administering institutions related to environmental protection can only be
nominated for the post and the minimum tenure for Chairperson should be three
years.16 Similarly, the appointment of Mr Waseem Ahmed Khan as Chairman of
Uttar Pradesh PCB for less than six months and his recent transfer to Civil Defence
Council (CDC) give clear indication that there is no political will to ensure effective
enforcement of environmental law at the implementation level. Media reports
suggest that the appointment and transfer of Mr Waseem Ahmed Khan as Chairman
of Uttar Pradesh PCB was purely political.17 A close look at the tenure of
Chairperson of SPCB indicates that the appointment of Chairperson is more
symbolic than creating an impact in the effective functioning of regulatory
authorities. Table 2 shows except in Arunachal Pradesh, Chhattisgarh, Goa,
Nagaland and Tripura, the average tenure of Chairperson in all other SPCB of India
has been less than three years.
9 Shortage of Staff
In an era of industrialisation and globalisation even though States have witnessed an

increasing number of industries and other development activities causing serious
environmental problems, many states in India have not increased the staff strength
16
See Ex-Babu heads Maharashtra PCB again, 2 November 2012, The Times of India.
17
Waseem’s sacking points at imminent row in SP, The Times of India, 28 February 2013.
Available at http://articles.timesofindia.indiatimes.com/2013-02-28/lucknow/37351727_1_uppcb-
akhilesh-yadav-sangam. Accessed on 18 April 2013.
Table 2 Presentation of number of chairpersons in each state pollution control
Number of Technical Background of

Year of Chairpersons till Average Tenure of Current Chairperson by 31st
Name of PCBs Establishment 2013 Chairperson in yrs March 2013
Andhra Pradesh 1976 27 1.37 NO
Arunachal Pradesh 1993 4 5.00 NO
Assam 1975 22 1.73 YES
Bihar 1974 15 2.60 YES
Chhattisgarh 2001 3 4.00 YES
Goa 1988 8 3.13 YES
Gujarat 1974 25 1.56 YES
Haryana 1974 31 1.26 NO
Himachal Pradesh 1974 NA NA NO
Jharkhand 2001 13 0.92 NO
Jammu and Kashmir 1986 NA NA NA
Karnataka 1974 17 2.29 YES
Kerala 1974 19 2.05 YES
Madhaya Pradesh 1974 18 2.17 YES
Maharashtra 1970 28 1.54 NO
Manipur 1989 NA NA NA
Meghalaya 1983 18 1.67 NO
Mizoram 2003 4 2.50 YES
Nagaland 1991 6 3.67 YES
Odisha 1983 12 2.50 NA
Punjab 1975 21 1.81 YES
Rajasthan 1975 26 1.46 NA
Sikkim 2008 2 2.50 YES
Tripura 1988 6 4.17 NO
Tamilnadu 1982 NA NA NA
Uttar Pradesh 1982 NA NA NO
Uttarakhand 2002 8 1.38 NA
West Bengal 1974 18 2.17 YES
application
of the PCB, the key institution mandated to regulate and monitor industrial activ-
ities. For example, the Kerala SPCB still operates with the staff strength it had been
allocated in 1995, though new areas like municipal solid waste management,
biomedical waste and high-rise buildings have been brought under its ambit
(Ramavarman 2012). The PCB has a sanctioned strength of around 320, and this
was allocated as per the norms in 1995. Out of these, 150 are remaining vacant.
A committee appointed by the Supreme Court had recommended sanctioning of 20
additional posts to the Kerala PCB around six years ago, but nothing has been done
so far. The board had received 14,000 applications for starting various forms of
enterprises and waste treatment facilities last year, from various parts of the state.
Out of them, 11,000 were disposed of, and they include 8000 “consents to operate”
and 3000 consents to establish. In addition, the board receives 1400 complaints and
has to prepare around 150 reports for institutions and committees like the
Lokayukta and Assembly panel on environment. Staff shortage is likely to affect the
board’s activities this year, particularly as the three-year environmental sanction
given to most of the industries will expire on June 30, and they need to be renewed,
according to member secretary of the board P. Molikutty. Usually, these sanctions
are being granted for a period of three years. “The board issues consents to firms to
operate, with some conditions. Monitoring the implementation of these conditions
becomes a major casualty of shortage of staff,” the chairman said. A significant
portion of the staff in the PCB is on deputation from other departments or is taken
144 G. Sahu
Table 3 Presentation of number of staff in each state pollution control board

Total Administrative
Total Staff by 31st March Staff by 31st March Total Technical Staff
Name of PCBs 2013 2013 by 31st March 2013
Andhra Pradesh 294 166 128
Arunachal Pradesh 32 11 21
Assam 175 121 54
Bihar 72 72 0
Chhattisgarh 70 36 34
Goa 134 44 83
Gujarat 468 429 39
Haryana 186 179 7
Himachal Pradesh 152 142 10
Jharkhand 94 92 2
Jammu and Kashmir NA NA NA
Karnataka 279 156 123
Kerala 162 125 37
Madhaya Pradesh 547 NA NA
Maharashtra 717 349 360
Manipur 72 53 19
Meghalaya 66 61 5
Mizoram 34 5 29
Nagaland 24 17 7
Odisha 237 226 11
Punjab 443 306 137
Rajasthan 283 175 108
Sikkim 16 11 5
Tripura 18 17 1
Tamilnadu 697 382 313
Uttar Pradesh 702 NO NO
Uttarakhand 94 58 32
West Bengal 321 215 106
application
on a temporary basis, and this affects the continuity of the board’s functioning
(Table 3).
The shortage of staff is one of the serious problems of a number of SPCBs. It has
been observed that SPCBs like Bihar, Chhattisgarh and Odisha have not recruited
even one person in the last five years. It is important to mention here that while the
number of industries has increased in these states and also a number of enactment of
laws to implement and monitor, there has not been any attempt to recruit more staff
to deal with various environmental problems due to increasing industrialisation and
urbanisation at the state level. There is no doubt that the task of pollution control has
now widened to include municipal waste, domestic waste, solid waste, e-waste,
plastic, battery and bio-medical waste, hospital waste, slaughterhouse solid and
liquid waste with the municipal areas in addition to the industrial pollution control.
However, this increase in responsibility has not been complemented with an increase
in manpower. In spite of dire need of manpower, there is huge backlog while filling
the vacancy. No doubt, many SPCBs have recruited environmental engineers and
scientists in recent past; but in many cases, these appointments are contractual and
also the salary paid to these newly recruited contractual staff is so low that most of
them either leave very soon or work under tremendous pressure.18 A recent report by
the Centre for Science and Environment report (2009) recommended that
18
This information is based on our personal discussion with a number of SPCB staff.
Table 4 Total vacant positions and number of staff recruited in the last five years from 2007 to
2012
Number of Staff
Recruited in the last 5 Recruited for Recruited with
yrs from 1st April 2007 administrative technical Total Vacant postitions
Name of PCBs to 31st March 2012 Purpose background by 31st March 2013
Andhra Pradesh 58 0 58 218
Arunachal Pradesh 23 13 10 0
Assam 3 0 3 0
Bihar 0 0 0 114
Chhattisgarh 0 0 0 55
Goa 110 39 71 14
Gujarat 39 0 39 239
Haryana 3 0 3 54
Himachal Pradesh 34 NA NA NA
Jharkhand NA 0 0 182
Jammu and Kashmir NA NA NA NA
Karnataka 8 8 0 432
Kerala 45 6 39 152
Madhaya Pradesh 13 13 0 NA
Maharashtra 173 44 129 144
Manipur NA NA NA NA
Meghalaya 23 15 8 55
Mizoram 9 NA 9 1
Nagaland 4 0 4 0
Odisha 0 0 0 6
Punjab 97 24 64 102
Rajasthan 110 26 84 79
Sikkim 5 0 5 0
Tripura 5 NA NA 7
Tamilnadu NA NA NA NA
Uttar Pradesh 152 0 152 NA
Uttarakhand 27 0 27 41
West Bengal 15 2 13 NA
application
environmental scientists and engineers of the board should get a permanent position
and also the pay package should be made more attractive so that the functioning of
pollution control boards will be effective. Being a low-paying organisation, talented
professionals are leaving it and joining other private organisations where they are
being paid handsomely. Table 4 shows a number of vacant positions in each state
and number of staff recruited in the last five years in each PCB.
Another major challenge of not having adequate staff in the SPCBs puts pressure
on existing staff to discharge their duties in an effective manner. The provision of
the WATER (PREVENTION AND CONTROL OF POLLUTION) ACT, 1974
states that any person empowered by a SPCB in this behalf shall have a right at any
time to enter, with such assistance as he considers necessary, any place for the
purpose of examining any plant, record, register, document or any other material
object or for conducting a search of any place in which he has reason to believe that
an offence under this Act or the rules made there under has been or is being or is
about to be committed and for seizing any such plant, record, register, document or
other material object, if he has reason to believe that it may furnish evidence of the
commission of an offence punishable under this Act or the rules made there under.
However, it is observed that in a number of SPCBs, senior environmental scientists
instead of engaging in a regular inspection and research and laboratory work are
146 G. Sahu
Table 5 Guideline for inspection

CPCB guideline for regular inspection of different categories of industries
Red category Orange category Green category
Large Once in every 3 months Large Once a year Large Once in 2 years
Medium Once in every 3 months Medium Once a year Medium Once in 2 years
Small Once a year Small Once in 3 years Small Once in 5 years
Source Central Pollution Control Board Website. Accessed on 30 March 2012
given the task of responding to RTI applications. Most of the times, environmental
scientists and technical staff have to do administrative tasks as there are no adequate
staff. This has hampered their other major responsibilities like regular inspection
and research work. For example, in Odisha state, there are 18130 industries but only
226 scientists and technical persons for inspection. Similarly, in Tripura, there are
17 technical people to inspect 3143 industries. In West Bengal, the situation is
similar where 215 technical staff have to inspect 39,226 industries. Table 4 gives a
number of staff vis-a-vis industries in different states and also shows classification
of industries based on their levels of pollution as red, orange and green under
different states. Similarly, the number of inspections carried out by the SPCBs is
also given. A common ratio coefficient of the number of inspections to the number
of industries is calculated. This coefficient gives the measurement of coverage
possible by the PCBs. Optimal level of coverage is considered to be represented by
a coefficient of one which signifies at least one inspection per industry per year.
However, the CPCB guidelines are of minimum frequency which is given below
based on the category of pollution and size of the industry is given. A higher
coefficient shows a higher coverage of inspections by the PCBs. On the other hand,
a lower coefficient reflects lower coverage of inspection by the PCBs. PCBs of the
Himachal Pradesh and Karnataka have very good levels of coverage with coeffi-
cients of 1.364 and 0.963, respectively. Similarly, Assam, Bihar and Goa have
above-average coverage with a coefficient between 0.4 and 0.5, respectively. In
comparison, the other PCBs have an average coverage.
The findings with reference to inspection of industries of different categories are
not in accordance with the guideline issued by the CPCB (Table 5).
10 Ineffective Information Documentation
The provision of the WATER (PREVENTION AND CONTROL OF POLLUTION)

ACT, 1974 states that every State Board shall, during each financial year, prepare, in
such form as may be prescribed, an annual report giving full account of its activities
under this Act during the previous financial year and copies thereof shall be for-
warded to the State Government within four months from the last date of the
previous financial year and that Government shall bring every such report to be laid
before the State legislature within a period of nine months from the last date of the
previous financial year. However, the submission of annual report gets delayed each
year as most of the times the annual report of SPCB needs to be certified by the
competent auditing authority. Also, except SPCB of Maharashtra, no other SPCB
has a statistical officer to compile the data from each department of PCB to prepare
the annual report. In some cases, the head office of SPCB never gets data from
regional office as per the prescribed time schedule to prepare the annual report. No
doubt, annual reports of the PCBs are available in case of the majority of SPCBs.
However, these reports are not prepared consistently and available to the public in
the SPCBs websites. For example, the PCBs of Bihar and Sikkim do not have the
annual report after 2008. This tendency reduces the information available in the
public domain. These annual reports consist of information about: the action the
PCBs have taken; legal status of the cases; information about the defaulting
industries; sources of funding; revenues of PCBs; status of CETPs, etc. These annual
documents are published primarily in English language. This hinders the use of the
report by users of vernacular language.
11 Ineffective CETPs and RPCBs
There are PCBs like TNPCB which actively have pushed the industries to install
Common Effluent Treatment Plants (CETPs). MoEF has started actively pushing
the respective SPCB to actively subsidise the construction of CETP. Under a joint
program, the central government provides about 50% of the construction cost of the
project cost. The rest is to be shared by both the state government and the proponent
of the project. However, there are many states that have not yet taken any initiative
to construct CETPs like Assam, Bihar, Chhattisgarh and Goa.
The laboratories have been set up by all the PCBs who have reported their data.
However, it is not clear whether these laboratories are enough to meet the demands
of enforcement of PCBs. Regional PCB allows for decentralised enforcement which
supports the SPCBs. They have a better chance of monitoring as they are close to
the source of pollution. This decentralisation process has to be complemented with
better resources to enable surprise inspections. A big state like Bihar just has two
regional pollution control boards. Conversely, there are many RPCBs in states like
Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh; however, it is not clear
whether they possess the resources for enforcement. For example, the
Ratnagiri RPCB in Maharashtra is staffed by just an officer and three officials. Also,
it is found that none of the SPCBs has been reported the submission of environ-
mental statements by the industries. This is a trend which is risky as it is the duty of
the industries to submit the reports to the SPCBs. This information gives the PCBS
certain information of a level of policy enforcement by the firms or an individual.
148 G. Sahu
12 Status of Litigation Against Polluters
The provision of the WATER (PREVENTION AND CONTROL OF POLLUTION)

ACT, 1974 states that if it is apprehended by a SPCB that the water in any stream or
well is likely to be polluted by reason of the disposal or likely disposal of any matter
in such stream or well or in any sewer, or on any land, or otherwise, the Board may
make an application to a court, not inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class, for restraining the person who is likely to cause
such pollution from so causing.19 SPCBs have the powers to give directions under
Section 33A of the Water Act of 1974.20 More importantly, after amendments to the
Act in 1988, the SPCBs were given more teeth—they can now close errant factories
or cut off their water or electricity by an administrative order. Prior to 1988,
enforcement was through criminal prosecution initiated by State Boards and by
seeking injunctions to restrain polluters. The amendment to the Air Act in 1988 has
enabled the SPCBs to directly close the defaulting industries. There is an increasing
trend where the SPCBs have used this section to their advantage instead of
approaching courts which take a long time and resources. PCBs of Maharashtra,
Gujarat, Rajasthan, West Bengal, Jharkhand, Goa and Andhra Pradesh have
increasingly used this trend. For example, the PCBs have favoured giving time to the
defaulting industries time to install abatement infrastructure and this is followed by
closure in case of non-compliance with order. Similarly, bank guarantee schemes act
as a deterrent to an operator as the bank guarantee is forfeited in case of a
non-compliance. This has been a successful way of enforcing the environmental
norms as legal option left with the PCBs was often costly and slow. Most of the
SPCBs did not have standing legal officers. Though states like Karnataka have a
group of standing lawyers to represent the SPCB, it is very difficult to use the service
of standing legal officers for a long period as they are changed as and when a new
government comes into power. Many SPCBs find it difficult to get good lawyers to
represent their board as these lawyers charge huge fees. Also, litigations in the courts
took a very long time. The research report prepared by the Centre for Science,
Technology and Society of Tata Institute of Social Sciences in 2013 reveals that a
19
Section 33 of the Water Act and Section 22A of the Air Act state that the SPCBs have the power
to move court for restraining apprehended pollution as a preventive measure.
20
For minor violations of the Acts, such as failure to provide information, obstructing personnel of
the board from discharging their duties, and so forth, the penalty prescribed is imprisonment up to
three months or fine of Rs. 10,000 or both. More severe punishments are provided under both Acts
for continued violation after the first conviction (Section 41 to 45A of the Water Act and
Section 37 to 39 of the Air Act). The Water Act prohibits the discharge of pollutants into water
bodies beyond established standards (Section 24) and requires that generators of all new and
existing sources of discharge into water bodies get the prior consent of the PCBs (Section 25 and
26 respectively). It also lays down penalties, such as fines and imprisonment, for not complying
with these (and other) regulations of the Act.
number of PCBs do not have a legal officer nor have filed any cases in the court of
law in the last five years. The research report also shows a sorry picture of regulation
in certain PCBs. SPCBs have been given a wide range of powers under Water Act of
1974.21 However, these penalties can be enforced only by pushing criminal charges
in the court of law.
The provision of the WATER (PREVENTION AND CONTROL OF
POLLUTION) ACT, 1974 also states that if any person convicted of an offence
under this Act commits a like offence afterwards it shall be lawful for the court
before which the second or subsequent conviction takes place to cause the offen-
der’s name and place of residence, the offence and the penalty imposed to be
published at the offender’s expense in such newspapers or in such other manner as
the court may direct and the expenses of such publication shall be deemed to be part
of the cost attending the conviction and shall be recoverable in the same manner as
a fine. However, there are no such initiatives taken by the SPCBs to regulate the
behaviour of polluting industries by using this clause of the WATER
(PREVENTION AND CONTROL OF POLLUTION) ACT, 1974.
13 Capacity Building of SPCB Staff
SPCB staff are generally given orientation and training on different aspects of
pollution control measures and also have been updated from time to time about the
innovative methods to be adopted by the PCB staff to ensure compliance of
environment law by the industrial units. Generally, it is the SPCB which has to take
initiative to send its staff to various training programmes organised by the CPCB,
New Delhi or MoEF and in some cases by research organisations and institutes
related to environment. States like Karnataka, however, had its own training centre
a few years back to orient its staff on environmental issues by the senior envi-
ronmental scientists and officers of the board. Over the years, it has been found
from staff who attended the training programme that most of the training pro-
grammes are conducted or oriented by people who are not aware of the ground
realities and emphasis more on theoretical and policy aspects.22 Also, it is not
possible for interested staff to attend the training programme as the SPCB Member
Secretary or in some cases SPCB Chairperson nominates staff to attend the training
programme.
21
For more details, see Sahu (2013), Environmental Regulatory Authorities in India: An
Assessment of SPCBs, Centre for Science, Technology and Society of Tata Institute of Social
Sciences, Mumbai.
22
This information is based on my discussion with staff of Odisha, Karnataka, Gujarat and
Maharashtra SPCB.
150 G. Sahu
14 Financial Constraints
The major sources of revenue generation and funding for SPCBs include collection
of water cess, grant-in-aid from Central and State Governments, World Bank and
other financial agencies funding for training and infrastructures, consent fees from
industries, penalty on industries for violating law, sample testing fee, NOC fees,
public hearing charges, RTI fees, interest on deposits, environmental audit fees, and
bank guarantee forfeitment. Over the years, there is no doubt that the revenue
generation of many SPCBs has gone up due to increasing number of industries and
innovative methods like bank guarantee has been introduced by the SPCBs. At the
State level, however, environment is still low in the priority of the Governments.
This is reflected in the negligible share of plan budget being allocated for envi-
ronmental management. The 12th Five Year Plan Strategic Report of MoEF has
pointed out that many SPCBs receive almost no financial support from the State
Governments and are totally dependent on cess they collect from industrial units.
With reference to cess revenue, there is also a serious problem as the current
practice of getting 80% of cess money from CPCB collected by the SPCBs gets
delayed every year. The strategic plan report further claims that though environ-
mental concerns are being given greater importance at the national level, com-
mensurate investment is hardly evident. The total annual plan of the MoEF is
currently of the order of Rs. 2000 crores, which is about 0.25% of GoI’s plan
budget. The expenditure on environment in India is a very small fraction of the
GDP, much below most developed and emerging economies. Currently, the per-
centage of GDP spent on environment in India is 0.012, whereas it is 1.0 in Japan,
0.4 in the USA and 0.3 in Netherlands.23
The results, to summarise, raise doubts about the efficacy of SPCBs in its current
form. Nevertheless, we hardly find any significant evidence that supports for
restructuring the current form of environmental regulation process by creating a new
set of authority such as National Environmental Protection Authority or National
Environment Assessment and Monitoring Authority as proposed by the Ministry of
Environment and Forests. Lack of human, technical, financial resources and
increasing political interference and the inability of SPCB staff to adapt to the
emerging environmental problems are the most persistent problems of SPCBs. These
findings do not show that SPCBs are not the effective institution for environmental
governance, but they do suggest how the lack of resources and increasing political
interference create hurdle in implementing environmental standards and norms
effectively at the grassroots level. According to MoEF Strategic Plan 2012–13 to
2016–17, the ministry admits that it has been successful in creating an institutional
structure for environmental governance. This includes the creation of laws and rules
for the protection of environment. The ministry credits itself for bringing the debate
on environment and sustainable debate to the mainstream. Similarly, the
23
For more details, see Strategic Plan, 12th Five Year Plan (2012–13 to 2016–17), Ministry of
Environment and Forests, Government of India, New Delhi.
establishment of pollution abatement infrastructure is considered a great achieve-

ment. Conversely, the ministry goes overboard on the fact that they have success-
fully implemented several initiatives in India (Strategic Plan 2012–13 to 2016–17,
MoEF). Given the environmental condition in India, it can be concluded that the
claims of the ministry have several fundamental flaws. For example, the NRCP
(National River Conservation Plan) failed because of “the jurisdictional opacity
around implementation and a failure to provide a clear source of revenues to fund
clean-up activities” (OECD 2006). The ministry has many times claimed that laws in
India governing environment have been robust. On the contrary, the laws and rules
have not allowed the environmental regulator to conduct his job in an effective
manner as pointed in the above instance. This should be considered a serious con-
cern by the ministry. For example, our findings show there are no clear rules on the
recruitment of staff for the regulator in Water Act. Further as pointed out earlier, the
regulator does not have the power to collect fines from the defaulter as per existing
clause in the law. The MoEF has pointed that the respective state governments in the
India still accords environment a low priority (Strategic Plan 2012–13 to 2016–17,
MoEF). This has to be factored in when we talk about excessive decentralisation.
A system with a mix of both centralised mechanism and decentralised mechanism
should be thought of when coming up with new strategies.
15 New Agencies Are Not the Only Option
There is no doubt that a single authority with its regional centres can bring a great
difference to environmental governance. However, it is also important to understand
that this change in environmental governance process has to be complemented with
reforms in other related arenas. However, the discussion paper puts the onus of
environmental governance on the creation of a new independent regulatory
authority without proposing any significant changes in laws and rules which govern
environment in India. It has to be understood that the success of any program
depends on the internal design of the structure. Unfortunately, the discussion paper
does not dwell into larger intricacies involved with the environmental structure.
There are chances that the new changes going to be infused will also equally fail.
For example, the EPA does not allow for the PCB to collect fines from defaulting
operators. In that case, as many other researchers have pointed out that the benefit
from a new agency will only make a superficial impact (Lele et al. 2010).
Though NEPA or NEAMA are proposed as an IRA, a closer look at the proposal
shows that this organisation will be still dependent on the MoEF as major
appointments to the agency will be made by the ministry.
Instead of looking at bringing new institution, there are also chances of
increasing the efficacy of the environmental governance by channelising resources
to the agencies like PCBs. If PCBs have failed, it has to be understood that PCBs as
pointed out earlier in the paper never had the capacity to enforce the directive.
Similar can be the fate of the NEPA and NEAMA if certain changes are not
152 G. Sahu
incorporated in the system. Moreover, centralisation of decision-making has not

brought desired results. For example, a centralised implementation of conservation
of forest measures in the 1970s and 1980s did not bring desired results. On the
other, a continuous environmental degradation brought a change in government’s
behaviour. The government then introduced decentralised decision-making with a
scheme like Joint Forest Mechanism.24 When coming out with a new framework for
environmental governance, it is equally important to keep in mind that along with
centralisation of resource management other options need to be explored and given
adequate attention. More importantly, there is a need for providing better resources
to the environmental regulator as has been the case in the USA or western Europe
(Ringquist 1993).
There is no doubt that command and control approaches and the incentive
approach at a later stage have been useful in environmental regulation. The Indian
case has also shown the fact that Indian regulators have also started using these
incentive-based mechanisms. However, there have been constraints which have
held them back from succeeding in environmental regulation due to several factors
mentioned above. There is no doubt that a central regulatory agency gives
enhancement to environmental regulation. However, it has to be understood that the
central regulatory agencies in isolation cannot achieve anything significant as
proposed by the MoEF. These efforts have to be complemented with capacity
building of SPCBs in respective states. This is to avoid the process of being
hijacked by the central agencies, and thus, there is a need for some space for
effective decentralised decision-making.
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Technology as a Driver for Governance
by the People for the People
Ruth Kattumuri
1 Introduction
The rapid developments, growth and access to technology in the last ten years
provide myriad avenues for the governed to participate and engage directly in a
multidimensional process of governance. Technology has been a key driver in the
last two decades for an exponential increase in access to as well as exchange of
knowledge and information locally, nationally and globally. Increases in global
access to technology and media, as well as the interplay between the two, offer tools
for expression and participation by millions (and billions) of people around the
world to congregate and contribute to the evolving geopolitical landscape of state,
society and their interactions with local and global governance. Media has had a
strong influence on who gets elected and stays in power in the developed world for
some decades. The influence of media in the developing world has grown in the last
two decades. However, governance and influence through media are controlled and
managed by a few and are subject to their priorities, biased and foibles. Recent
developments in technology for communication have reportedly enabled most of
the world’s population access to mobile phones. World Bank’s data shows 98
mobile cellular subscriptions per 100 people in the world in 2015, which has
increased rapidly from 50 per 100 people in 2007 (World Bank 2017). This data for
India shows 78 mobile cellular subscriptions per 100 people in 2015. Mobile phone
usage has enabled widespread engagement by people with their governance. The
governed have discovered the ability to engage directly with governance through
the use of technology, such as social media. The last decade, in particular, has
surprised and enamoured the global community with some governed attempting to
R. Kattumuri (&)
e-mail: r.kattumuri@lse.ac.uk

https://doi.org/10.1007/978-981-10-5963-6_9
156 R. Kattumuri
change their regimes through the use of social media. This paper examines an
increasing role being played by citizens attempting to influence governance for the
people, through the use of technology around the world.
1.1 Transitions in Leadership and Governance Modus

Operandi
The “romanticized and heroic views of leadership” in relation to what leaders do,
what they accomplish, and the entrenched belief that leaders have the capability to
control and influence the lives of the people they govern have been undergoing
change over a period of time (Meindl et al. 1985; Wildavsky 1985). The concept of
leadership is no longer perceived as absolute and is constantly changing with the
changes in social and political scenarios. As argued by Meindl et al. (1985), the
notion of leadership is getting over its conventional image of leaders being perceived
as self-evident agents who occupy high-level positions, who are influential in
determining goals and in achieving them, who influence the masses irrespective of
the accomplishment of the set goals and who possess certain physical or psycho-
logical traits, explaining their rise to the position of power. Leadership can no longer
be seen in isolation from the social system, as it operates in “permanently entrenched
part of the socially constructed reality” (Meindl et al. 1985). A leader is increasingly
seen to be a representative, dynamic and a proactive individual with central elements
of standing up for development and inclusion and not merely being someone whose
thoughts and actions are overshadowed by political overtones. The changing face of
leadership around the world is seen to be a medium to improve the state of gover-
nance by making it participative and representative thereby leading to effective and
efficient administration with greater cooperation and minimum corruption.
The changing social and political scenario is increasingly democratizing the concept
of leadership to a new form of “consultative leadership in which the group members
lead as well as follow”. Consultative leadership represents leadership with people’s
participation towards the achievement of goals for mutual benefit; functioning within a
set of institutionalised procedures and with due political involvement towards an
improved state of governance (Gillespie and Mann 2004; Cheema and Maguire 2002).
The changing dynamics of leadership and growing involvement of people in the
process of governance can be attributed to an enhanced access to technology, which
enables the governed to engage directly and instantly. This is expected to lead to a
greater sense of accountability on the part of leaders to render outcomes for the
benefit of the public at large. Effective leadership is increasingly seen to play a
significant role in institutionalising citizen’s involvement through social media in
order to improve the responsibility of political decision-makers towards the citizens.
This chapter examines the role of technology as a key driver in the evolving
dynamics of state, society and the governance process. It analyses the engagement
by people for governance for the people through the use of technology. We first
Technology as a Driver for Governance by the People … 157
review the global debate on perspectives and changes in governance modus oper-
andi and the influence of technology. The second section examines the theoretical
concepts and empirical aspects of how technology is enabling growing involvement
by citizens in the system of governance. We focus mainly upon how technology in
the context of social democracy and development driven by people is escalating and
contributing significantly towards formulating opinions and enhancing public par-
ticipation for greater representation by people for people in the system of gover-
nance. The case studies in this section provide empirical evidence of the changing
dynamics between technology and governance. We posit that greater participation
by people through technology available at their disposal by itself receives local and
global attention and leads to the involvement of mainstream media as well and gets
represented to relevant governance mechanisms, which comprises a major contri-
bution towards enabling improvements in governance for people. The final section
comprises a discussion on future prospects and challenges for governance for the
people, through growth in technologies that are enabling digital democracy. We
recognise that social media is not exempt of challenges of misuse and misrepre-
sentation. However, we posit that the benefits of technology outweigh the chal-
lenges for enabling people’s participation to represent not only individuals’
concerns but in that process raise the concerns for the larger majority, including
those who might not be able to represent themselves.
2 Role of Technology
2.1 Technology for Social and Representative Democracy
Governance had predominantly been an instrument of the dominant class

influencing policies and decisions, thereby reducing its inclusiveness and repre-
sentativeness in society (Miliband 1983). Bardhan (1996) refers to social democ-
racy as primarily a form of meaningful political competition, effective
accountability mechanisms and some basic human rights. Participatory democracy
can be described as a phenomenon where people have full freedom to express
themselves and exercise their rights in a democratic system towards greater
involvement in a system of good and effective governance. Technology enables a
socially centred approach for the emergence of a new means of governance.
Technology and social media can play a vital role in improving the state of gov-
ernance, transparency and its overall impact and effectiveness towards active par-
ticipatory and improved governance. Technology by means of social media has
been very significant in terms of its outreach and is playing an influential role in
formulating opinions and enhancing public participation. It is growing as a mass
communication tool to both mobilise the participation of people as well as enable
greater expression and engagement of people in the process of social democrati-
sation. Technology has thus been changing the face of state–society relations
158 R. Kattumuri
making governance dynamically linked with the governed towards a representative

and inclusive democratic system of governance (Hoffmann 2011). In the light of
widespread use of social media by citizens, it, therefore, is becoming important to
strengthen the link between technology and social participation towards an inclu-
sive and representative democracy. Good governance most importantly requires
active participation of people in the political process and freedom of expression in
the system of governance. Technology is able to play a central role in bringing
state, civil society and markets together to participate in the process of social
democratisation (Fig. 1).
With emerging technologies and increased participation of people, the interface
between civil society, state and market is constantly changing and evolving due to the
rise in awareness and inter-connectedness among people globally in the quest for greater
accountability, transparency and improved governance for the people (Voltmer 2010).
Internet governance is a multi-stakeholder process with the involvement of state,
civil society and the private sector and is increasingly giving rise to transnational
democracy (Chenou 2011). The Internet is, therefore, emerging as a new tool to
speedily reach out to people at large, make them informed citizens and increase
participation in the democratic system. About 50% of people in the world are using
the Internet with 1 billion users in the developed world and 2.5 billion users in the
developing world (International Telecommunication Union 2016). The concept of
Internet Activism, an emerging phenomenon to mobilise public against injustice and
to improve the state of governance, is increasingly becoming a common phenomenon
Fig. 1 Process of social democratisation

by the people. It is increasingly leading to a rise of social democracy, and technology

is facilitating people-powered revolutions in the quest of inclusive and representative
democratic system. Social media is giving people a platform to coordinate and
effectively present their views in large-scale forums, which never could have been
possible earlier (Safranek 2012; Unwin 2012). However, participatory governance
can often be illusive owing to the time lag between people’s participation movements
and what is decided and when or whether any improvements in governance are
accomplished (The Economist 2013a; Loader and Mercia 2011).
2.2 Technology for Community Driven Development

in Governance
Social media and technology enable greater participation, cooperation and con-
sensus in community driven development (CDD) for the benefit of people.
Community governance or community driven development is increasingly playing
a significant role in decision-making and transparency (Wong and Scott 2005).
“CDD is increasingly seen as a nexus between bottom-up and top-down approaches
for improved governance and service provision.” The World Bank uses the term
“community driven development” to describe projects that increase a community’s
control over the development process thereby tackling the problem of inequality
(Dasgupta and Beard 2007). Community driven development with social media as a
catalyst is enhancing participatory governance and an increasing awareness among
citizens to be governed for their own benefit in order to secure their rights.
Technology and social media are increasingly seen to be playing a key role in
enhancing participation in various systems of governance in democratic and
non-democratic countries (UNDP 2012). Informed and aware people by means of
technology and social media can realise the benefits of democracy in a real sense by
influencing political decisions through citizen’s participation. In line with this,
UNDP propagates the idea of democracy education to capitalise the transforma-
tional potential of technology such as ICT in order to improve access to information
and empower people to have a say and influence in public decisions. Such an
approach would bring about a change in the system of governance by means of
improved coordination, representative democracy, enhanced efficiency, and
increased responsiveness and accountability of the government through the
involvement of citizens. Civil society organizations and social entrepreneurs are
capitalising on the growth of technology towards creating local solutions to local
developmental challenges with community involvement. All these factors together
are creating a step forward towards propagating democracy education thereby
leading to participatory governance.
As suggested by Chenou (2011), while technology and Internet governance offer
great potential and possibilities for citizen’s participation, it can still be an elitist
phenomenon primarily meant for transnational elites with limited access and
160 R. Kattumuri
knowledge among the wider public. In the following section, we attempt to

understand empirically the potential of Internet technology as a form of governance
towards participative and inclusive social democracy.
The following section examines qualitative evidence provided by case studies of
digital democracy made possible through access to technology empowering people
to develop social networks with like-minded for voicing their immediate concerns
and has become inherently embedded into the system of governance in recent years.
2.3 Governance by the People
The concept of leadership is changing dynamically owing to an increase in

awareness, technology available for engagement and expression by citizens glob-
ally to be governed with a focus on their interests being central. It is evident that
none more than citizens themselves can know better about the needs to improve
their situation. Social media has been providing large networks spanning global
reach at the touch of a button and is enabling new models of participative
democracy, more so among young people (Loader et al. 2014). Thus, social media
and Internet are providing people with platforms to express their opinions and
dissent contributing towards governance, even if it might be a while before changes
actually happen. The following section presents evidence of ways in which people
across the world have engaged directly to influence changes in governance.
2.4 Digital Democracy in Evidence
Technology and social media are able to provide networks and platforms for
sharing experiences, knowledge and inspiration for application tailored for partic-
ipation by the general populace for improving governance in their own
circumstances.
The Arab Spring, which started in Tunisia in 2010, which progressed to a series
of peaceful demonstrations across the Middle East and North Africa was a major
evidence of a technology-led phenomenon by people striving to overcome their
dissatisfaction with an autocratic government and the concentration of wealth being
in the hands of a few. Absolute monarchy, youth unemployment, violation of
human rights, corruption, poverty, leading to dissatisfied educated youth, when able
to access technology, participated in representing their concerns peacefully and
effectively. It was also seen that Democratic Republic of Turkey, with a secular
system of governance and constitution, emerged as a model for the protestors in the
neighbouring states, and the interactive media and social networks played a sig-
nificant role in influencing protests and movements. With the outset of the Arab
Spring, the domestic socio-political issues of the Arab countries for democratiza-
tion, political reform, elimination of authoritarianism, establishment of a market
economy and middle class, and human rights issues have been represented as
priority issues (Salamey 2015; The Economist 2013b; Barzegar 2012).
Through increased access to technology, these events were watched widely by
the global community. Social media played a crucial role in Arab Spring for the
engagement of the governed to influence their governance. People exercised their
democratic rights by creating extensive social networks and organised political
action. Social media messages across North Africa and the Middle East created
awareness and raised expectations, generating sympathy and support globally for
the people involved.
Thus, social media became significant in people’s struggle against self-serving
and authoritarian regimes. It was reported that during the week before Egyptian
president Hosni Mubarak’s resignation, for example, tweets about political change
in Egypt and videos featuring protest and political commentary went viral, with the
top 23 receiving nearly five and a half million views. The amount of content
produced online by opposition groups, in Facebook and political blogs, increased
exponentially (Taylor 2011). Technology by ways of social media and Internet
made this representation by people a very global and transnational phenomenon
with people participating from different regions and countries thereby having a
great influence globally.
The Arab Spring revolution seemingly inspired other movements around the
world. The Occupy Wall Street began in September 2011 when protesters began
camping in lower Manhattan to protest corporate greed and a resulting loss of
financial opportunity for the wider population, and the loss of democratic repre-
sentation by elected officials (Skinner 2011). The Occupy movement was mobilised
extensively through social media and went on to spread across the United States
and around the world. Another example is that of the Umbrella Movement in Hong
Kong. Lee and colleagues (2015) conducted a study of just over 1000 participants
in this movement and posit that social media has become an insurgent public sphere
(IPS). Their study suggested that acquiring political news through social media was
related positively in support of the Umbrella Movement and adversely with satis-
faction and trust of established political authorities, including the Hong Kong
Special Administrative Region government, the police, and the Chinese central
government.
In China, about 1.35 billion mobile phone subscriptions were registered with
602 million smart phone users (Statista 2017). Chinese citizens are becoming
increasingly globalised. Lei (2011) suggests that technology is enabling its citizen
to engage more critically in cyberspace and has made it possible for China’s media
system to undertake a new, albeit restricted and contingent role as a communication
institution of society.
The incident in December 2012 when a 23-year-old student was attacked on the
bus in New Delhi and raped several times by a group of men and died attracted the
162 R. Kattumuri
attention of the global community. The growing middle class could unite through
social media to make their voices heard demanding action against perpetrators of
sexual violence. A report by the Justice Verma Committee cited “the failure of
governance to provide a safe and dignified environment for the women of India,
who are constantly exposed to sexual violence” (Justice Verma Committee report
2013). Four men were convicted and have been sentenced to death by the Indian
Supreme Court in May 2017 (BBC 2017a).
While the above examples have been early events of counter engagement by
people, there has been growing involvement by people in governance around the
world, through social media, in the last three years. Burson-Marsteller’s
Twiplomacy Study 2017 reports that social media has become the very first thought
of a majority of world political leaders and governments across the world with a
digital divide between those who are active and the small number who are not.
According to this report, world leaders have 856 Twitter accounts with 357 million
followers and 606 Facebook accounts with 283.2 million followers. Instagram,
Google+, Linkedin, Youtube, Periscope and Snapchat are other modes of being
connected. Pope Francis ranked topmost on Twitter with 33.7 million followers, the
second and third positions are closely contested by Donald Trump and Modi with
over 30 million followers. India’s Foreign Minister Sushma Swaraj with 8 million
Twitter followers was the most followed among women leaders.
A growing digital democracy in India is regularly expressing opinions, gener-
ating information and large amount of data, which are impossible to ignore and can
contribute towards improving governance. In India, an estimated 220 million own a
smart phone and an additional 698 million own a mobile phone (Deloitte and CII
2016). PM Modi has over 40 million followers on Facebook and @narendramodi is
followed by 30.3 million and @PMOIndia is followed by 18.2 million on Twitter
(Indian Express 2017). WhatsApp has reached 200 million monthly users in India
and 14 billion New Year 2017 messages were reportedly exchanged (Singh 2017).
Indians from all demographics, sectors and regions are constantly engaging in
governance through social media within the country as well as globally. A recent
WhatsApp message circulating among government officials and private citizens is
an open letter addressed to the Prime Minister and reads like this:
“Dear Modiji, this is what the citizens feel about our governments – central and state. On
behalf of professionals and businessmen, I am sending you some facts, please try to
understand. We are not doing Tax ‘chori’.. this is tax saving (a bit of evading too). This is
to ensure security of our family, kids and their future for any adversity. We bought
generators/inverter in our houses, because government failed to provide constant elec-
tricity; we installed submersible pumps, because government failed to provide water; we
send our kids to private schools, because government failed to provide good education in
public schools; we headed for private hospitals to avail proper care and treatment because
government failed to provide good public hospitals; we bought cars because government
failed to provide good transportation; … what does the taxpayer get at retirement when he
needs most to survive? Nothing, no social security. But instead all this hard earned income
resource is used by government to distribute freebies in the name of welfare schemes

among masses to buy ‘free votes’ to those who don’t pay any taxes. Above all what does
government do with our money? Open courts-which do not give judgement. Open police
station which works for politicians only and not to protect citizens. Open hospitals, which
do not treat us well. Build roads wherein 40-100% of money spent goes in vain due to
corruption. Endless list… We all know that the major tax revenues collected from us are
consumed by government officials and politicians (billions of dollars are lying in foreign
banks). A manufacturer works at a margin of between 2-10%, whereas government needs
30% of his income to cover its expenditure. How fair it is all? That’s the reason no one
wants to pay taxes. We save taxes for our necessities, family, for our old age, … this is the
sign of failure of government in discharging its own functions fairly and efficiently.
Government alone is responsible for this. But on the other hand… we challenge that if
government announces that Rs. 1000 crore is required for Indian army or floods or
earthquake victims.. the same amount will be deposited within couple of days by these ‘tax
savers’ only. We will come forward with open hearts…” (Message from a public, private
and third sector international group of professional Indians on 31st May 2017).
This is an example of a WhatsApp message, which is not only humorous and

provides entertainment to the public but also represents serious concerns that are
relevant for a majority of Indians. Even while admitting the failure of paying taxes,
it raises important issues of governance for the people, which no doubt has reached
the attention of the Prime Minister, who is active in cyberspace and has a strong
pulse for people’s sentiments. These types of engagement also demonstrate that the
government can gauge people’s opinions at no cost to public funds.
The role of social media has been recognised to be relevant in the close vote for
Brexit on 23rd June 2016 in the UK and the election of the 45th President of the
United States on 9th November 2016. Social media also played a significant part in
the election of the French President in 2017. During elections 2017 in Britain, the
BBC developed partnership with the social network for the first time to stream
election debate live on Twitter as well as broadcast on television through a
“real-time curated timeline” of tweets with commentaries from BBC experts and
BBC Reality Check to Twitter users (BBC 2017b). This was also to enable
engagement with audiences who might be less likely to watch live TV. The rapid
growth in engagement of the public through social media is, therefore, evolving
perception from scepticism to acceptance that digital democracy is here to stay.
Altogether, there is growing acceptance of social media becoming an inherent
component of public engagement towards accountability and improving gover-
nance. Citizen journalism has become embedded with established media resources
regularly involving and using reports by the public. Further, evidence suggests that
new media empowers activism and coordination for bringing people together, and
the involvement of established and multiple media sources enhance their visibility
and impact. While the impact and engagement of people’s through digital tech-
nologies might not be measurable tangibly, and citizens’ representations might
seem not to have secured everything that was intended; however, it has been
established that peoples participation through technology certainly contributes
significantly for expressing their concerns and priorities towards improving
accountability and efficiency in governance.
164 R. Kattumuri
3 Future Prospects and Challenges of Technology

for Governance
People’s engagement with governance through technology is continuously on a rise

leading to a global relationship between the Internet and democracy. There is
growing evidence and acceptance that social media at the local and national level is
revolutionising the state of governance and impacting nations, society and devel-
opment. The accessibility of social media through mobile phones has been growing
and limited connectivity is no longer an issue as more people are able to access and
share information, ideas and possibilities for change and reform. Social media and
technology are playing a significant role in increasing accountability towards
improved and participative governance thereby acting as a catalyst for democratic
change and can subsequently lead toward an inclusive system of governance.
However, the extent to which Internet empowers the general public and enhances
their role in governance in the long term is still being determined.
A growing body of literature has been examining ways in which Internet might
contribute to democratic politics in a variety of national contexts (Vaccari 2008).
Some authors have argued that while protestors have effectively used social media
in their struggles, it is difficult to demonstrate rigorously that these new media
directly caused any of the outcomes with which they have been associated (Farell
2012). Farell (2012) also suggested that the ease with which Internet can give effect
to a collective action might make it difficult to establish long-term and stable
political goals with a different pattern of governance.
A study across 28 countries by Nisbet and colleagues (2012) suggests that
increased Internet adoption enables greater democracy and may foster political
change by socialising citizens into the political beliefs required for democratic
citizenship, and in turn promote successful and sustainable democracies. They also
conclude that countries that are highly authoritarian, or not free, are likely to limit
the democratic potential of the Internet regardless of the degree of Internet pene-
tration or level of demand.
Social media also has the potential to give rise to large-scale protests and rev-
olutions by bringing people together very promptly and effectively. An example is
that of the 2011 rioting by young people in several boroughs in London and other
cities in England. It started with incidents related to distrust of people of the police,
and research also suggested that it was associated with growing inequality (Phillips
2015). While these riots caused a lot of destruction and distress, they also high-
lighted relevant issues where some groups experiencing exclusion engaged in
disruptive actions through technology providing opportunity and access to net-
works for collective action, which received attention from the wider community to
understand the causes and seek to improve policies. Bennett and Segerberg (2011)
posit that changes related to globalisation have resulted in growing separation of
individuals from traditional bases of social solidarity and bring individuals’ own
narratives to the fore in the mobilisation process; they suggest that a more per-
sonalised collective action process maintains high levels of engagement, agenda
focus and network strength. This evidences that people are attempting to find
solutions for individual problems due to perceived governance failures through the
ability provided by technology for networking with collective engagement and
representation. Raftree (2011) reported that the use of new technology to deliver
data down from governments to people or up from people to governments for
improving governance or accountability had not been established. Loader and
Mercea (2011) proceed further and suggest that digital democracy as a virtual
public sphere has been replaced by technological optimism for democratic renewal
through open and collaborative networking opportunities of social media. Through
evidence-based research, Loader and Mercea (2011) posit the potential of social
media to facilitate more participative democracy while recognising its disruptive
value for challenging traditional interests and modes of communicative power.
The paradox remains that anonymity of social media could also be used as a
medium to create unrest and lead to a negative impact exploiting the freedom of
expression in a democracy and contrasts with commitment and leadership which are
considered to be most important to bring about change. As social media is
decentralised and democratic, it poses challenges for regulation and governance by
a central authority. This was considered by the Leveson enquiry, a judicial public
enquiry into the culture and ethics of the British press in line with the News
International phone hacking scandal (Leveson Enquiry 2012). The Leveson report
together with proposing stricter controls on press also suggests the need for rules to
combat “mob rule” on social media to avoid adverse impacts on the state of gov-
ernance. Lord Leveson’s report advocated new Internet laws to keep a check on
“mob rule” and avoid misuse of media and to maintain privacy and freedom of
expression in the Internet age. According to him, social media can appear to be a
very appealing option towards changing the role of governance in the short run but
can have permanent implications in the long run.
Social media also poses challenges of accountability and disruption. Gallacher
and colleagues (2017) report that large amounts of misinformation about politics
and public policy are distributed through computational propaganda over social
media platforms, which can impact public opinion significantly during important
policy debates, elections and political crises. Their study collected Twitter data on
bot (web robot) activity and junk news related to the 2017 UK General Election for
a week in May 2017 and found that social media users in the UK shared four links
to professional news and information, for every one link to junk news. Their
findings showed that UK users shared better quality information than that which
many US users shared, but worse quality news and information than German and
French users shared. The most recent debate for digital democracy concerns
legitimacy and the role of the public in Internet governance. West (2017) examined
the architecture of public inclusion at the Global Multistakeholder Meeting on the
Future of Internet Governance in the context of public legitimacy (NETmundial)
and links the debate to notions of the public sphere in shaping a discursive space
central to public debate and the Internet. She champions multistakeholderism as a
particular form of public discourse.
166 R. Kattumuri
Through Internet of everything, social media is evolving a new phase of bor-

derless and agile forms of public engagement unencumbered by the agonies of
bureaucracies. Social media enables people with common interests and objectives
to connect easily to networks without the need for going through formal organi-
sations (The Economist 2013a). Simultaneously, the digital interactions between
people, organisations, and artefacts are generating large volumes of data faster than
the ability anywhere in the world to process fully. Technology has transformed in
the last five years in the way people think, work and operate, which offers
opportunities unimagined before while also posing numerous challenges for gov-
ernance and regulation.
While the model of leadership has evolved from absolute to consultative con-
sensus, technology provides the opportunity of closer, direct and faster engagement
between governance and governed. Thus, online engagement provides crowd-
sourcing of ideas for governance, and institutional change and legislation are being
widely adopted by local and international public institutions for improving trans-
parency and accountability. Global Internet policy-making has become normal for
harnessing the potential of crowdsourcing. At the same time, efforts are being made
to legitimise social media and Internet governance. Radu et al. (2015) underscore
the need for leveraging sufficient community interest for substantial input, defining
procedures for the collection and screening of inputs and committing to institu-
tionalising rules for incorporating feedback.
Technology as an instrument for social democracy and development driven by
people’s engagement and interlinking directly with mainstream media has grown
exponentially in the last three years. Access to technology enables greater partici-
pation by people, offers a voice to be heard and represents the concerns of indi-
viduals and communities, including those who may not be able to represent
themselves, and is becoming a crucial influence on policy-making locally and
globally. At the same time, the role of social media to be disruptive has also been
recognised. So that, it is generating debates between multiple stakeholders and
sectors, to come together for developing mechanisms for regulation and reforms.
Altogether, the rapid growth and greater value of participation by people and their
inclusion in representing their concerns have been acknowledged and have become
inherently embedded into a system of governance for the people. While the extent
of digital participation varies between countries, the expressions by people are
highly visible and cannot be easily ignored and are imperceptibly seeping into
regimes everywhere, so that they will eventually evolve to become more inclusive,
even if it may not be immediately evident and might sometimes have to traverse
across generations.
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Electronic Technology and the Changing
Dynamism of Governance
M.N. Roy
1 Introduction
Governance has been defined in many ways to capture the diverse and complex
issues associated with the same. Understanding of governance has also changed
over time from being purely concerned with the administrative system in govern-
ment to a mechanism involving many players outside the government. Also,
emerging features of governance reflect and respond to the fact that governing is an
increasingly hybrid, multijurisdictional and plural phenomenon (Bevir 2011). The
governance process now combines the administrative system with various societal
organizations, market, media and even individual citizen having capacity to influ-
ence decisions and implementation of the same by the government, and new
practices are being adopted to accommodate the changes. Decision taken by any
government, in these days of globalization, is not merely influenced by those
players within its geographic area but several players operating internationally,
which include both market forces and various international institutions. However,
the State and the government continue to be the most important players which also
set the rule of the game of how others will remain engaged with the governance
processes. Political system and how it evolved, history of relationship between the
government and the citizen, socio-economic status as well as various cultural
factors broadly shape the expectation of the citizen from the government and the
State–citizen relationship. All those operate on many layers of multiple organiza-
tions making the governance process very complex and diverse. Modern nation
states are run by democratically elected government and legally defined processes
of who will exercise what authority and in what manner. Relationship between the
government and the governed in such system is iterative in which the citizens form
their government and give them authority to function and remain engaged with the
M.N. Roy (&)

Uddalak, Flat 5, Plot KB 2, Sector III Salt Lake, Parganas 700106, West Bengal, India
e-mail: manab640@gmail.com

https://doi.org/10.1007/978-981-10-5963-6_10
170 M.N. Roy
government in watching its performance and the government attempts to deliver

various services for maximizing satisfaction of needs of the citizen. However, the
State power is dispersed in spatially and functionally distinct networks involving all
kinds of stakeholders who need to interact continuously (Bevir and Rhodes 2011).
The governance processes comprise of policy issues and related decision-making
and delivery of goods and services with optimal utilization of resources for max-
imum normative well-being of the citizen. Dynamics of these processes and taking
the same forward has been driven mostly by political, social and economic forces.
Electronic technology is playing a growingly important role in the dynamics of
governance through various applications, broadly referred to as e-Governance. It
has the potential of redefining the processes of governance for both engagement of
the citizen in policy making and in improving delivery of goods and services
resulting in a paradigm shift in how government functions. However, technology is
always a tool, and it is the political leadership and the economic forces which
determine the extent to which technology can drive governance. Capability of a
state in using technology applications like e-Governance varies widely across
countries. This paper examines some of those features of e-Governance and
highlights various aspects of those in the Indian context.
2 Governance Challenge in India
India is facing increasing challenges of governance. The country continues to have

high incidence of hunger, measured by the Global Hunger Index, which did not
improve much in spite of having high economic growth with doubling of per capita
gross national income between 1995–97 and 2008–10. The Human Development
Index of the country is quite low with a rank of 134 out of 179 countries in 2011,
which showed little improvement in the last two decades (its rank was 123 out of
160 countries in the year 1991) in spite of high economic growth. Large section of
the population of the country is immersed in poverty. The Planning Commission
of India estimated (GOI 2012a, b, c) that as on 2009–10 as much as 29.8% of the
population of the country, which works out to be around 355 million, were living in
poverty. The number is more than the entire population of the USA, the third most
populated country of the world. At the same time, there are a substantial number of
upwardly mobile people who have a rising demand for receiving better public
services. The State machinery is, thus, under increasing pressure to perform in
providing goods and services for upliftment of the poor as well as delivery of
services for the citizen in general. Thus, even being a successful democracy with
every citizen having equal right in forming their government at various levels, the
process of governance is not good enough to convert the wealth within the country
into well-being for the masses. Continuation of high degree of deprivation and low
human development is the outcome of poor governance leading to failure of
effective and efficient delivery of public services. After the 73rd and the 74th
Amendment of the Constitution, the democratic space in the country has expanded
Electronic Technology and the Changing Dynamism of Governance 171
substantially with over three million elected representatives. Proper functioning of

those local governments could result in improvement of delivery of services at the
local level. However, poor devolution of functions and low capacities of those
bodies have hardly improved delivery of services at the grassroots level. Weak
institutional framework of the local governments is rather likely to make the elected
functionaries to be tempted to provide patronage to their interest groups than trying
for general improvement on the quantity and quality of the services available from
public institutions (World Bank 2006). The country also faces high incidence of
corruption (TI India 2008), which has worsened over the years (The Economist
2012), and rank of India based on Corruption Perception Index worked out by the
Transparency International has dropped from 87 in 2010 to 95 in 2011 (www.cpi.
transparency.org). India has been allocating more resources for improving
well-being of the citizen and has launched several programmes of national
importance in addressing the problem of the poorer sections and in providing
guarantee for certain rights like right to education, right to receiving wage
employment and right to information which require huge capacity to deliver.
However, capability of the public sector has not kept pace with the increasing
allocation of fund and demand of services by the citizen (ibid). Also, while access
has improved for various services, there is substantial gap in satisfaction level of the
citizen in receiving services from the public facilities (Paul et al. 2004) which needs
to be bridged. Delivery of public services is faced with many problems related to
inefficiency, delay, rent-seeking and harassment of the clients receiving services.
Poor accountability, low capacity of the delivery institutions, weak oversight
function and ineffective enforcement mechanism make a big difference between
what the government promises to deliver and what is actually received by the
citizen. The situation is much worse for those at the lower end of the
socio-economic ladder, who have less voice and ability to cope with the existing
system. One positive thing is that the civil society organizations are having growing
voices and capability in watching, networking, demanding and influencing the
government to perform and to be accountable. Improving delivery of public goods
and services will require improving governance within governance and capacity to
deliver as well as strengthening and networking of the civil society and other
players outside the government such as the private sector, all of which are greatly
facilitated by e-Governance. e-Governance is not merely putting an “e” before the
existing way of handling things but merely increasing the use of computer in
government without changing the basic characteristics of existing governance
processes which lead to poor performance and stagnancy. e-Governance is not a
panacea but a mere enabler in organizing government processes within itself as well
as in providing better access to other stakeholders for receiving services from
government and being engaged with governance by using information and com-
munication technology (ICT). The political, social and economic considerations as
well as administrative leadership will ultimately decide to what extent
e-Governance will be adopted and for which functional and societal segment.
172 M.N. Roy
3 ICT for Strengthening Governance
Governance involves consultation among various stakeholders, deciding on public

policy and goals and allocating resources to reach those goals most efficiently.
Those activities require capturing, processing and exchanging various information
by different tiers of government at multiple locations and taking decision based on
information as well as documentation and easy retrieval of all those for subsequent
scrutiny. Conventional system of capturing, recording and retrieving information as
well as exchange of information is slow, inefficient and not reliable. Also, sharing
information quickly to large number of people located across a wide area is not
possible. Electronic recording, processing and exchange of data have opened up an
enormous scope of maintaining huge data, retrieving the same in no time and
sharing any amount of information simultaneously to unlimited number of people
located anywhere and on a real-time basis. Thus, electronic mode of data acqui-
sition, processing and keeping records of decision taken and its impact can not only
improve exchange within the government but can also bring many stakeholders
together, who may be remotely located. In addition to text data voice, picture or
video file may also be easily shared within exclusive group or in the public domain
to precipitate any discussion related to governance or in sensitizing all concerned
about any opportunity or governance failure for every stakeholder to respond
appropriately. Technology may be used for improving delivery of services as well
as in bringing out government failures, happening anywhere including remote
places and concerning people with little voice, in the public domain. This unfolds a
new dimension of how one takes cognizance of and responds to any public issue
and how any action by the government or any stakeholders is internalized by others.
Apart from variety of mode of data dissemination and exchange, the high speed,
almost unlimited volume of data that may be retrieved and exchanged in no time
and audit trail which is left behind to know who did what, where and when, has
made a radical change in governance process and its possible improvement.
Electronic documentation and processing substantially reduce possibility of
manipulations which is easy in conventional mode of data management and is a
cause of both harassment and corruption. Thus, application of ICT can improve
metagovernance by strengthening and better regulating its own function, and at the
same time, it opens up various types of networking in making governance more
transparent, accountable, participatory and responsive. Information asymmetry can
be reduced easily by publishing information in the Web which may be accessed
freely without human intervention, and any number of clients can be served
simultaneously. Electronic technology also allows direct communication between
the client and the service provider which helps to shorten the accountability chain
by cutting all the intermediate tiers within government including middlemen outside
government who often mediate between the service providers and the service
recipient resulting in corruption, delay and increased cost of services. Electronic
technology not only eliminates such middlemen, but direct receipt of service
requests maintaining sequence and publishing progress of processing of requests in
the public domain without human interventions leads to improvement of confidence

of the citizen and service delivery and easy measurement of service parameters in
ensuring better objectivity and efficiency. Depending on how electronic technology
is being used, there are several phases of e-Governance starting from mere dis-
semination of information to processing service requests electronically and deliv-
ering the same online. Delivery of online services does not require human
interventions except in defining the processes in the programming stage, which
requires rationalization of activities with clear objectivity. The same may start with
selective service(s) and ultimately may become an integrated and fully networked
system of governance for all services for the benefit of the citizen.
4 e-Governance Initiatives in India
India ranks 125 in the E-Government Development Index (EGDI), as per survey of
2012 (UN 2012) indicating poor progress made in this respect. e-Governance
applications depend substantially on the ICT infrastructure, which is still quite poor
in the country. As per report of the International Telecommunication Union, the
ICT Development Index of the country, which measures access, use and literacy
and ICT price basket, has been ranked at 122 in 2011 out of 155 countries included
in the report (ITU 2012). This is in spite of the fact that the country started quite
early in using ICT in governance and made substantial advances in telecommuni-
cation, and it has one of the largest pool of software professionals of the world. The
first major step towards e-Governance in India was the establishment of the
National Informatics Centre (NIC) in the year 1977. This was followed by
launching the satellite-based national network, known as the NICNET, which
connected all the district head quarters by the year 1990 (GOI 2009). In the year
1999, the Union Ministry of Information Technology was created, and by the year
2000, a 12-point minimum agenda for e-Governance was identified by the
Government of India for being followed by all the departments. Those were mostly
related to extending facilities for computer and connectivity in all offices, providing
training to employees, enhancing office automation in the existing mode of func-
tioning. For the benefit of citizen, the departments were to create own Website and
publish all Acts, Rules and Notifications of interest to public, allow downloading of
various forms and use Web-based grievance redress system and each department
was asked to develop package of services for the citizen. The Second
Administrative Reforms Commission in its 11th report submitted on December
2008 has noted that a plethora of pilot projects have been taken up in the country
with varying rates of success and majority of them have not been upscaled or
widely replicated (ibid). However, there was little focus on improvement of gov-
ernance and service delivery in a holistic manner. The commission also pointed out
the futility of e-Governance projects with ICT as the key element without gover-
nance reform, which is most critical in changing the quality of public services. Mere
expenditure on computer hardware or software or taking up ICT projects without
174 M.N. Roy
improving the process of governance provided hardly any benefit to the citizen in
the initial years. Such type of promotion of e-Governance for the sake of it may
result in patronage for jobs and contracts rather than improvement of governance
(World Bank 2006). India being a vast country with large number of elected
governments from centre to the local level, there are many initiatives on
e-Governance with varying degree of success in terms of improving governance
and its replicability. Also, there has been little convergence in such isolated efforts
keeping in mind that all government structures located in different tiers are serving
the same citizen. Government of India also failed to play a strong facilitating role by
adopting common e-Governance measures across the entire country though the
same was attempted by launching NeGP to “make all government services acces-
sible to common man in his locality through common service delivery outlets and
ensure efficiency, transparency and reliability of such services at affordable costs to
realize the basic needs of the common man” (www.negp.gov.in). NeGP has
developed 27 Mission Mode Projects (MMP) at the central, state and local gov-
ernment levels to transform high priority citizen services from their current manual
delivery to e-delivery. There are 9 central, 11 state and 7 integrated MMPs. Many
more projects have since been taken up by various state governments or even local
governments in isolated manners. Many of those have not been successful in
attaining desired goals. However, there are several initiatives, which have achieved
tremendous success and have set important examples for replication. A few illus-
trative cases of different types of e-Governance measures are mentioned below.
4.1 Better and Faster Management of Data

and Data-sharing
e-Governance augments capacity of capturing and processing data relieving much

of the drudgeries. That reduces manpower costs, and resources saved may be
utilized for addressing many qualitative issues of service delivery. Important data/
records are kept digitized and can be retrieved and shared easily with the citizen.
Most of the e-Governance applications in India are merely making information
related to functioning of the government available through the Website. However,
generally those data which are harmless to share are published and that does not
always reveal, without having a clear protocol of doing so, how the department is
functioning in meeting public demand. In many cases, the latest data are not
available since what is published is not linked to electronic processing of activities
in the department and much of the processes of governance remain hidden. In any
case, except sharing information, no service is delivered through such applications.
Such information is not often well organized keeping the need of the citizen in
view. Much needed integration of available data is yet to be functional in the
country.
4.2 Programme Management
Another class of e-Governance application is management of programmes where all

related activities are captured and published for public viewing. This category of
information, particularly related to implementation of various national flagship
programmes, is quite useful, and current information up to the latest month is
generally available. One example is the Mahatma Gandhi National Rural
Employment Guarantee Schemes (MGNREGS), which provides guarantee of up to
one hundred days of work for any rural households registered under the pro-
gramme. Annual expenditure under the programme is of the order of
Rs. 40000 crore, and being the most important poverty alleviation programme, its
proper management is very crucial. Important area-specific information related to
implementation of NREGA is available in the Website (www.nrega.nic.in).
Different programmes have different Websites to be accessed separately. These
applications are resulting in substantial improvement of programme management at
the central, state and local levels. One major lacuna of such MIS in general is that
the data analysis is more to meet the need of central and state level implementer and
not to provide feedback to the decentralized units of governance for guiding local
action. Also, there is no integration of information for knowing benefits flowing to
one person or a household as well as to put the outcome of those programmes on
Geographic Information System so that all interventions made at a particular
geographic area are better appreciated. Payment related to the programmes is being
integrated with the MIS which makes it easier to track transfer of money to the
beneficiaries, which is now paid only through accounts with banks. GOI is in the
process of issuing 12-digit unique identity number, called Aadhar, for the entire
citizen. However, only around 210 million unique identity cards have been issued
till the middle of October 2012 (www.uidai.gov.in). GOI has launched cash transfer
scheme using Aadhar-linked bank accounts in twenty districts of six states with
effect from 1 January 2013, in spite of having several lacunae in the system (The
Hindu, January 2, 2013). Linking payment and all other benefits under government
programmes will have the potential for substantial improvement of delivery of
services in e-mode and controlling corruption though there are strong criticisms for
paying subsidy in cash and making poor people to buy goods and services from
open market due to severe imperfection in the rural market.
4.3 Process Re-engineering for Better Delivery of Services
One of the most important types of applications is those related to computerizing

the entire process by which information is captured and processed and outputs are
delivered. This activity involves process re-engineering after thorough scrutiny of
the existing processes, obtaining feedback of the users as well as the providers
during the design phase and developing user-friendly software for delivering online
176 M.N. Roy
services. Since the employees are not very keen to shift to a new system, it requires
change of mindset and capacity building of the employees as well as consulting
them right from the conception phase for suitability and acceptance of the system.
In fact, adoption of e-Governance leads to improvement in carrying out government
processes primarily due to such process re-engineering, and computerizing the
process is to follow the steps faithfully leaving audit trail and with much higher
speed. There are several examples of such applications both in regulatory admin-
istration and in delivery of developmental services. For example, the MCA 21, the
first fully rolled out MMP in India, has improved all registry-related services to
companies, which are now provided online by the Ministry of Corporate Affairs
resulting in substantial improvement in delivery of services. Three lakh companies
have been registered in the portal, 12 million documents have been filed through
the system, and the portal gets average hit of 4 million per day (GOI 2012b).
Similarly, the MMP related to income tax allows e-filing of returns and faster
processing of refund providing relief to large number of income tax payers of the
country. In fact, number of tax payers increased from around one million before
liberalization to more than three million after liberalization of the economy, and
there was compulsion to introduce electronic processing which saved manpower,
processing cost and payment of interest due to delay on refund, which was quite
high in manual processing. There has been little effort in integrating various MMPs
of even the central government and effort to reduce corruption and bringing the
large informal sector into the tax net (indiaegov.blogspot.in 2009). However, it is
the State governments which are responsible for most of the services required by
the ordinary persons, and initiatives for improving service delivery for common
people vary widely across states. Good examples of such services are the BHOOMI
project of the Government of Karnataka and the Health Management Information
System of the Government of Tamil Nadu (e-Health 2009), both of which are
advanced states. Benefit of such e-Governance projects is immense as will be seen
from the highlights of the BHOOMI programme provided below. Some of the
relatively backward states have also come forward with e-Governance solutions for
better management of programmes for the common people. For example, the
management of Public Delivery System (PDS) of Madhya Pradesh has helped to
improve functioning of PDS in the State. Some of the applications, such as Gram
Panchayat Management System of West Bengal, are to improve functioning and
delivery of services by the local government (Roy 2011). There are many examples
of successful e-Governance applications from several states, and many more have
been attempted but were not that successful.
The BHOOMI project of Karnataka, which has owned the UN public service
award, is one such successful project, which provides land record-related
information and services to around 7 million farming families with 35 mil-
lion beneficiaries residing at 27,000 villages of the State from 202 service
locations, which are interconnected with the central data centre (Chawla and
Bhatnagar 2004). The project has fully computerized all manual land records
through 20,000 man-month of data entry followed by validation of 20 million
records each having 47 types of information ranging from demographic
information, legal rights, tenancy, soil type, crop yield, mortgage details, etc.
Accessing such records from government offices normally involves lot of
delay, harassment and manipulation by the filed officials, the system remained
opaque, and records were not updated regularly. Now, entire land records of
Karnataka are available on the public domain with total transparency, and the
data are secured and tamper-free and may be accessed quickly and in a
citizen-friendly manner. Also, the project is financially self-sustaining with
Rs. 600 million already recovered as service charges against project expen-
diture of Rs. 180 million (ibid). The popularity and utility of the project may
be judged from the fact that 40 million copies of land records have been
already provided to the citizen and farmers can obtain a copy of their Record
of Rights, Tenancy and Crops (RTC) within 30 min as against 30 days that is
used to take earlier. Moreover, a printed copy at kiosk costs Rs. 15 only as
against heavy bribes that one had to pay earlier (GOI 2012a, b, c).
Implementation of the project has also resulted in 50% decline in land-based
litigation (The Hindu 2009).
4.4 Public Sector Commercial Services
There is pressure on improving commercial services by the public sector organi-

zations for which adoption of e-Governance is necessary from commercial reasons.
Those sectors face fewer bureaucratic barriers and have been more successful in
adopting e-Governance for improving performances. The most prominent in this
respect is the railway reservation system. Prior to computerization, reservation for
return journey has to depend on feedback through telegram from the destination
located far away, which took lot of time and was uncertain. Similarly, banking
transactions across the country were a time-consuming affair with high financial
implication. Indian banking services have since been revolutionized by using
electronic technology (Subbarao 2012). All those complex processes can be han-
dled easily and quickly using both computerized processing and electronic com-
munication, and net banking including mobile banking has brought lot of
conveniences to the customer. However, there are many more such services
delivered by all tiers of government which requires urgent improvement, and the
progress has not been that good so far.
178 M.N. Roy
4.5 Handling Spatial Data Through Geographic

Information System (GIS)
All government reports and analyses are mostly done by handling data in tabular
form, and spatial data are managed by preparing physical maps. However, all
developmental and service delivery data are pertaining to certain geographic
location, and that is difficult to internalize in conventional mode. Geographic
Information System (GIS) helps to visualize the data in Web maps and brings
necessary insight for judging spatial variation of various development parameters
and guiding in planning and decision-making. Such processing is very difficult to
manage without ICT support. GIS applications are just coming up sporadically and
are yet to gain ground. Advancement of technology in global positioning system
has opened a new avenue for finding exact geographic location for various appli-
cations in business and governance. This coupled with capture and transmission of
geo-stamped data makes monitoring of events related to implementation of various
programmes have tremendous use in improving programme implementation, which
is yet to be used much in the country.
5 Holistic Improvement of Governance with ICT
Isolated success described above does not lead to holistic improvement of gover-
nance having wide impact in day-to-day life of ordinary people. The hierarchical
structure of exercising government authority, culture within public administration
as well as skill of ordinary government employee provides strong obstacles in
changing the way all the wings of government functions by using ICT. More
adoption of e-Governance calls for development of network and delivery institu-
tions with less control and discretion, more horizontal relationship, transparency
and free flow of information, change in mindset of patron–client relation and
building up skill of existing employees, all of which are difficult to achieve fast in
the Indian context. However, the process has begun, and the same has to be driven
from the top with clear focus on changing the culture within government to be more
citizen-centric, shifting from public administration to public management mode of
functioning, enabling legal provision, development of ICT infrastructure for
delivery of online services and a clear road map for all tiers of government. Basic
legal enablement has been put in place by passing the Information Technology Act,
2000 by the Indian Parliament, which provides recognition to electronic document.
However, the progress in providing online services and using electronic medium for
improving transparency and better engagement with the citizen and other stake-
holders is quite slow.
The most critical hurdle is to overcome the mindset of controlling services
through traditional mode and ensuring transparency and rule-based functioning of
exercising authority. The problem is coupled with deep-rooted corruption and
rent-seeking in existing mode of delivery. Strong determination to confront those

and coming up with a time-bound programme for improving governance is missing.
Being a federal country and most of the services which are delivered to ordinary
citizen being in the jurisdiction of state government, there is no way to compel the
States to follow one common pattern, progress made by different states is quite
diverse, and even the successful models are not being replicated. For example,
important officials including policy makers from almost all the States have visited
Karnataka for getting acquainted with functioning of the BHOOMI project. All the
States have resources to replicate the project, and GOI also provides support in its
replication, but no other states have implemented a similar project, or even if some
of the States are in the process of doing so, the same is yet to be put into operation.
So, when there is an acknowledged urgency to improve the delivery of services and,
solutions are known as well as the resources to execute the same are affordable, the
question is—“why the same is not replicated? The States rather Act at their will
either out of their own conviction or on demand by the citizen or with enough
incentive from the union government. None of those factors is strong enough in the
country for faster adoption of successful e-Governance projects. What have been
achieved so far is more due to commitment of individual either a minister or a
senior bureaucrat, and there is little united effort and commitment for a shift towards
implementing a well-drawn plan for fast expansion of online services, which is a
general observation across the globe as mentioned in the UN report—“Prerequisites
for achieving this shift include long-term vision and leadership commitment, a
strategic framework, IT management programme aligned with the overall strategy
and technical integration of IT systems” (UN 2012).
One recent positive trend is that the States are coming up with legal provisions
for providing guarantee in maintaining quality of services listed in relevant Acts,
which can be done only with support of ICT, and once the Act is enforced, the
government has no option but to implement the same. Madhya Pradesh, which is
one of the States with lower ranking in socio-economic development (India Human
Development Report 2011), was the first state in passing the Madhya Pradesh
Public Services Guarantee Act 2010. Till July 2012, twelve more states have passed
similar legislation. All those Acts have built-in grievance redress mechanism. The
services covered under those Acts generally include receiving various certificates,
documents for landownerships and mutation of ownership, receiving water con-
nections, etc. Receiving such services in a guaranteed mode is resulting in sub-
stantial improvement of service delivery. For example, Karnataka government has
enforced the Karnataka Guarantee of Services to Citizen Act 2011 on 2 April 2012
by launching a scheme called “Sakala” under the Act. Services are provided from
the Website http://sakala.kar.nic.in, and the State government have come out with a
report after completion of the first quarter after launching the scheme. The report
published in the Website mentions that 50 lakh citizen have availed the 151 ser-
vices administered by 11 major departments. However, there is still strong urban
bias in uptake of the services offered. During the quarter under report, there were
31,379 applications for services delivered by the Department of Rural Development
and Panchayati Raj against 236,257 applications by the Urban Development
180 M.N. Roy
Department, reflecting strong urban bias in service off-take. The GOI has also
introduced a Bill in December 2011, known as the Electronic Delivery of Services
Bill “to provide for electronic delivery of public services by the Government to all
persons to ensure transparency, efficiency, accountability, accessibility and relia-
bility in delivery of such services and for matters connected therewith or incidental
there to” (www.deity.gov.in). The proposed Act will be applicable for central
government and all state governments and public authorities, who have to provide
all services electronically within five years of notifying the Act unless it is not
possible to deliver such service electronically, and all governments have to notify
what services will be delivered electronically within 180 days from date of com-
mencement of the proposed Act.
5.1 Improving ICT Infrastructure
India has poor ICT infrastructure with large variations across states, across social
class and between urban and rural areas. Only 9% of the population own computer
(20% in urban and 5% in rural), and 0.7% of the rural households have access to
Internet as compared to 8.3% in urban areas (Registrar General of India 2011). As
compared to that, Internet penetration in China, Brazil and USA are around 36, 38
and 83% (GOI 2012a). India is yet to provide universal access to more basic needs
like having electricity at home (only 54.3% households have such access as per
Census 2011), which is more important in deciding quality of life and is a prior
need for providing broadband Internet connectivity. However, many of the appli-
cations to households not having electricity are possible through mobile phone,
which is owned by 63.2% of the population as per 2011 census, and mobile phones
have good coverage even in remote rural areas. Therefore, the country should focus
more on mobile technology-based governance, also known as m-Governance, as a
possible strategy for reaching online services to the common people in remote
areas. One option adopted by the GOI is to provide service in rural areas through
kiosks, known as Common Service Centres (CSCs) under the National
e-Governance Plan. CSCs are to be established for a group of around six villages,
which requires opening of around 100,000 CSCs in the entire country. Those are
operated in partnership with private providers known as the Service Centre Agency
(SCA), who engage Village Level Entrepreneur (VLE) to run the CSC. As per
News Letter of the e-Governance Service India Limited (Nav Jeevan March–May
2012), total 88,995 CSCs have been made operational of which 72,133 CSCs have
Internet connectivity. Out of those, 43,588 CSCs are reporting. As on May 2012,
total transactions in the reporting CSCs have been 5.3 million, generating revenue
of Rs. 2268 million, of which the VLEs have got a share of Rs. 87 million (ibid).
The CSCs are providing 40 various services like electricity bill payment; issuance
of various certificates like birth and death; registration of various services like
fishing boats; and permit for fertilizers—to residents all from one location.
The CSCs provide a great potential for reaching online services to the masses and
bridging the digital divide.
Andaman and Nicobar Islands are a cluster of 572 islands inhabited by almost four-lakh
people…it is not easy to move from one location to another. The CSCs have come as a
boon for people here as almost all services are available to them through a one-stop-shop
ensuring efficiency, transparency and reliability. Life of people has already started to
change and soon we will see all government services being offered through CSCs”, said the
A&N Islands Commissioner and Secretary Bhupinder S. Bhalla, who is in-charge of the
project. (The HINDU, March 22, 2012).
5.2 Availability of Online Services
Availability of online government services to the citizen is highly inadequate

indicating lack of preparedness of government in providing online services, which
is still a major supply-side constraint (Dass and Bhattacharjee 2011). The problem
is more in respect of services which are demanded by the ordinary people. While
government policy supports development of more online services, lack of strong
political and administrative will and poor capacity to organize delivery of online
services are major barriers. Government agencies like the National Informatics
Centre have limited capacity, and they are overburdened. At the same time, out-
sourcing from the market for deploying as service delivery agency is yet to be
widely accepted, making progress of such third-party arrangement quite slow.
Government has the option of either to off load the selected services to private
providers for delivery of services online or to computerize functioning of its own
organization which has been slow and is faced by many barriers mentioned before.
Another problem is to develop the contents in local languages for making the same
more accessible to the common people.
6 Access to Online Services and the Digital Divide
Availability of online services is not enough to ensure off-take of those services.

Lack of physical access, affordability, level of education and capability restrict the
use of online facilities for receiving services as well as communicating with the
government electronically. Being a multilingual country, language is another bar-
rier. Till now most of the contents in the Internet is in English, and therefore,
number of people who can read and write English becomes another cause of the
digital divide. As on 2008, there were 368 million literate people in rural India of
whom only 63 million could speak English and the existing knowledge divide
contributes substantially towards digital divide (Singh accessed through Internet).
However, the core reason behind the divide is poverty, level of education, unem-
ployment and age (ibid). So, on the one hand, use of ICT and access to electronic
182 M.N. Roy
services may help the poorer and weaker sections to facilitate their socio-economic
development and provide them unmediated access to various public services, but
the ability to do so being low they will be relatively more deprived in not being able
to access many of the online services. The country, therefore, faces a big challenge
of how to bridge the digital divide so that the poorer sections of the society mostly
leaving in rural areas have not only access to Internet and other electronic facilities
but also have the capability of using the same. One approach is to build capacity
from school level so that the younger age group acquires such capacity and other
members of the family may access required information through them, provided
such infrastructure is available. However, the problem is quite difficult and com-
plex, and there is little scope to make substantial improvement within a brief period
which has serious social and economic consequence for the country. Those who
will remain deprived from whatever online services and ICT-based economic
opportunities are available in the country will be relatively disadvantage in the
coming days. However, those ICT applications which improve efficiency of func-
tioning of the government are beneficial to all, and government should focus
strongly on improving metagovernance and improving capacity to deliver public
goods and services more efficiently for general benefit of the ordinary people.
7 State–Society Relationship and Electronic Technology
Applications of e-Governance mentioned above are broadly related to practice of

governance and on how the State can use electronic technology in improving its
own governance and delivery of various services. It requires a strong state to deliver
services effectively, but only a strong society makes a state effective (Migdal 2001).
Proper state–society relations are crucial in developing a strong state. e-Governance
can play an important role in improving state–society relations by facilitating the
same from more command and control-oriented relationship to having policy
instruments friendly to the citizen and the market. The process involves free flow of
information, bringing in a culture of valuing citizen’s right and public opinion,
giving due honour to views contrary to that of the State and strongly enforcing
accountability of the public servant in a transparent manner. Role of electronic
technology in this process is a mere enabler by efficiently handling data and
communicating the same to all stakeholders. Political dynamism and administrative
leadership in steering such change are most crucial. In India, the process is not as
developed as that in the Western countries where consultations with the citizen,
who enjoy higher degree of freedom and responsibility as citizen, started well
before electronic technology developed so well in networking various stakeholders.
The developing countries like India where the process of citizen’s engagement in
governance is in a more nascent state can take the advantage of technology in better
networking and augmenting capacity of societal groups for influencing policy of the
State and watching governance processes.
8 Challenges and Way Forward
ICT applications at present have remained confined to the higher echelon of the
society living in urban areas. Services which are of commercial in nature and are
driven by economic forces have been benefitted by adoption of e-Governance more
than other social services concerning day-to-day life of the common people. The
country faces huge challenge in reaping benefits of e-Governance by driving its
economy and providing opportunities to all across the society because of several
supply- as well as demand-side problems discussed before. Technology is
expanding faster in comparison with the rate of adoption of the same by ordinary
people which will lead to growing digital divide in technology front in addition to
other social, economic and geographical aspects of the divide. The digital divide
should be bridged as fast as possible so that most of the public services can be
delivered online to the ordinary people. Lack of infrastructure at the household level
may not allow access to services at the household level, but bringing those to the
community level with CSC or similar kiosk-based system is doable within a given
time frame. A hybrid system of delivery with the last mile being provided by the
service providers of the CSCs could be a possible solution. Providing authenticity
to the private service providers, managing the CSC is a major hurdle in doing so
and appropriate mechanism should be developed for giving them due authority for
handling public services. Also, instead of multiplicity of portals for delivery of
different services, which require different log-in formalities, there should be more
integration of services which should be done horizontally to cover all departments
within one government and across different states and vertically to include from
central to local government. There is little effort for such holistic development in
providing all services online for both efficiency and better satisfaction of the citizen.
There are several challenges such as resistance to change, low capacity in project
planning and implementation, data security and interoperability in integration of all
e-Governance initiatives (GOI 2012b). Online services also require unique identity
of the service recipients, and now, each system has its own identification and
validation procedures, which is inconvenient for the citizen. The current national
project on providing unique identity has to be completed early for providing unique
identity to everyone in respect of all electronic services, which will make inte-
gration of services easier.
There are severe demand-side constraints in using online services. More avail-
ability of online services will encourage the citizen for acquiring capability in using
those services and demanding more such services. However, that will not be true for
resource poor population, and there has to be more public facilities for accessing
online services. Internet connectivity is to be provided to all the CSCs as well as to
all the local governments i.e. Gram Panchayats and Municipalities. Developing
capacity to help use online services is another major challenge, which is being
attempted by some of the SCAs of the CSC project and the government. Equipping
all the schools and public libraries in rural and urban areas with Internet facilities
will be very helpful in transforming the society with more capability in using ICT
184 M.N. Roy
for receiving services as well as in remaining engaged with the government.

However, reaching online services to the lowest section of the society who face the
maximum hurdle in receiving services will be the toughest job.
The other aspect is to promote online engagement of the citizen for more col-
laborative governance. The government should encourage use of electronic tech-
nology for consulting the citizen and making communication with them or
receiving feedback from them. Reaching many people instantaneously with
messages/videos, etc., helps networking of the civil society and also gives a tool for
the government in reaching people, and such use is growing. The civil society has
used such technology including use of social sites more to organize protest and not
so much in playing constructive role in developing the society and promoting
responsibility of the citizen. Many online communities having common interests are
coming up for advocacy and engagement with the governance process. The State
has the responsibility of ensuring consistent and persistent flow of information to
citizens, developing appropriate environment to encourage various societal forces
for strengthening the society in order to make the State more effective in promoting
interests of the citizen in the most inclusive manner. However, the barrier is also
huge because of structure of the government and the society.
Government structure in India is still very hierarchical, with strong element of
discretion, opaqueness and unnecessary bureaucratic control and yet little urge and
ability to monitor the services reaching the citizen. Lack of adequate decentral-
ization adds to persistence of such system. Mindset of the government func-
tionaries, both elected and who are members of permanent bureaucracy, is strongly
embedded in patron–client relationship with little conviction of delivering services
to the citizen as matter of right of every citizen and recognition of the responsibility
of the government to ensure the same. The ancient system of cast and division of
labour-based social hierarchy and entitlement based on family of birth is still
strongly operative against admitting equal right of every citizen, albeit making rules
in support of that, which denies the people with lower socio-economic status of
their rights. Those who reach the position of power for exercising state authority
acquire mindset of the privileged class to remain blind to the misery and suffering
of the people because of governance failure and keep on thinking themselves above
accountability with nonchalance. Such a social milieu makes it difficult to improve
governance either in conventional mode or with application of electronic technol-
ogy. The problem is further aggravated by the people many of whom, particularly
belonging to the lower socio-economic category, have little voice and empower-
ment in ensuring their rights and resign to their fate in receiving patronage from the
government. The type of polity practised is more oriented to remaining in power by
delivering only to the extent that the political opponents will be kept at bay, which
is not always rooted on improving well-being of all through good governance but
on various other processes including using power and authority for narrow gain
sacrificing the wider and long-term interest of the people. Improving governance in
such scenario requires strong political will and administrative leadership to meet the
challenges boldly, which is generally lacking. However, e-Governance provides a
tool for improving governance which could not have been possible through
conventional modes because of the problems mentioned before. It can bring more
objectivity and norm-based governance which will not only improve delivery of
public services but will help the citizen, irrespective of their social or economic
status to enjoy their rights and utilize their opportunities and thereby to transform
the society to be more homogeneous. The process has begun, but there is a long
way to go.
References
Bevir, M. (2011). Governance as Theory, Practice, and Dillema. In The Sage Handbook of
Governance, ed. Bevir Mark. Beverly Hills, CA: Sage Publications.
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Challenges and Emerging Practices for Rollout. Ahmedabad, February: IIM.
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12/11352/.
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Reforms and Public Grievances.
GOI. 2012b. Deptt of Administrative Reforms and Public Grievance 2012: Background Papers—
15th National Conference on e-Governance, Bhubaneswar.
GOI. 2012c. Press Note on Poverty Estimate 2009–10 by the Planning Commission of India.
indiaegov.blogspot.in 2009.
India Human Development Report 2011, Oxford.
International Telecommunication Union: Measuring the Information Society, 2012.
Joel, Migdal. 2001. State in Society: Studying How States and Societies Transform and Constitute
Each Other. New York.: Cambridge University Press.
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Weekly.
Registrar General of India. 2011. Census of India 2011. Ministry of Home Affairs, Government of
India.
Roy, M.N. 2011. Promoting e-Governance in Panchayats, Journal of Rural Development, Oct-Dec
2011, National Institute of Rural Development.
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IDRBT Banking Technology Awards Function on August 3, Hyderabad.
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www.uidai.gov.in.
Part IV
Governance and Inclusion:
Navigating the Roadblocks
Corporate Governance: At
the Crossroads?
Hema Bajaj
This is a special epoch: For the first time, the world faces unprecedented combi-
nation of multitude of challenges—economic recession, high fuel prices, environ-
mental degradation, increased divide between various economic strata in the society
and growing intolerance for the same, and feeling of lawlessness and resulting
impugning of both authoritative regimes and democracies in different parts of the
world. These special circumstances have brought into question all our established
systems—those related to fields as varied as role of state, our cultural traditions and
the financial structures prevailing in the globalized world. As a consequence of the
prevailing circumstances, role, efficacy, and intent of governments are being
redefined all across the world. Under pressure, various governments are being
forced to look at means of balanced and inclusive growth; there are talks and
actions of imposing higher taxes on the rich, and policies and schemes for the
underprivileged are being designed and implemented.
Amidst all these changes along with the government, the role of the corporate
sector, especially that of publicly listed large corporations and various financial
institutions, is also being debated, questioned, and analyzed. The financial crisis
whose epicenter lay in the USA, but which later seems to have spread in and
engulfed most of the world, is seen as representative of avariciousness of the
business class and is considered to stem from the breakdown of ‘Corporate
Governance System.’ Perceived collapse of corporate governance has again shifted
focus upon the role of corporations, reasons for their existence and whether earning
and making profits is and should be their prime reason for existence. These
questions are not new, but actions of the corporate organizations, people and
governments as a response to these questions and as resolutions of the challenges
they highlight are.
H. Bajaj (&)
School of Business Management, Narsee Monjee Institute of Management Studies (NMIMS),
Mumbai 400056, Maharashtra, India
e-mail: hema.bajaj@gmail.com

https://doi.org/10.1007/978-981-10-5963-6_11
190 H. Bajaj
In this paper, the rationale for the existence of firm is revisited, to understand the
scope of corporate governance and focus upon how corporations, especially in
India, are trying to expand their objectives from pure financial to social and align
the roles of their various stakeholders, especially shareholders and larger society.
The section that follows discusses how and why shareholders gained more
prominence as compared to other groups that are associated with corporations. The
paper then goes on and analyzes the case for corporate social responsibility and
expanded scope of corporate governance to integrate the needs of other interest
groups, especially the society. Through examples, from corporate sector in India,
the paper evaluates the relationship that Indian corporates have established with
society and how contours of this relationship are shifting from being a unidirec-
tional philanthropy to metamorphosizing into a two-way linkage that creates mutual
value for both. Cases from both the so-called business and social enterprises, where
making profits and creating social values, respectively, are cited as primary
objectives of existence, are discussed.
1 Corporate Governance: The Shareholder Versus Other

Stakeholders Debate
The literature on theory of firm and transaction cost economies explicitly annotates
that a firm is preferred over market transactions because the cost of writing a
separate contract for each exchange transaction in a market is very high (Coase
1937). Added complications of taxation, marketing costs, and non-availability of
information further reinforce the advantage of concentrating operations in a single
entity over individual market transactions.
As firms are owned by individuals who employ their individual property (rights),
there has historically been a case for ‘enhancing the wealth of owners and helping
them realize their interests’ as an important objective of existence of the firm. As
firms gain scale and get transformed from privately owned firms to publicly held
corporations, there is a splitting up of ownership and control which leads to prin-
cipal–agent problems. According to principal–agent theory, the interests of the
shareholders and the interests of the managers’ may not be the same and may
conflict as managers possess more information related to strategic or operational
functioning of the organization and have the ability to disguise their actions from
the owners/shareholders. Consequently, there is a possibility of managers running
the firm in their own interests rather than maximizing the returns and interest of the
owners or shareholders.
In response to the perceived risk of managers’ running corporations in their own
interest, multiple mechanisms were suggested and employed by the owners and
shareholders to regulate and modulate the actions of the agents or managers. These
mechanisms included tying incentives of executives to firm profitability, appointing
a board of directors, market capitalization, and market for corporate control or
mergers and acquisitions.
Corporate Governance: At the Crossroads? 191
Around the middle of the 1970s, as principal–agent theory seasoned, shareholders

became the focal point and enhancing their wealth became the primary objective of a
business organization. This phenomenon was facilitated by emergence of
Anglo-Saxon model of corporations that emphasized the primacy of shareholders as
the most eminent group and which in turn got a boost due to a decade-long boom in
the stock market and rise of the institutional investors in USA and Britain (Lazonick
and Sullivan 2000). Growing influence, yielded by institutional investors such as
investment banks, mutual funds, and financial institutions, further highlighted the
importance of shareholder group and reinforced ‘creating shareholder wealth’ as the
core goal for existence of a corporation. Observations and research by noted aca-
demicians like Friedman (1970) also echoed the rise in rhetoric of shareholder value
creation, sometimes even at the expense of other stakeholders. Stating that assuming
responsibility of other stakeholders is not the reason for existence of a firm or cor-
poration, Friedman (1970) argued that a corporation is a free-enterprise, private-
property system and a business manager or a corporate executive by virtue of being an
employee of the owners of the business has direct accountability only to her/his
employers. The manager’s responsibility is to conduct the business in accordance
with the owner’s desires and benefit, which generally translates into making as much
money as possible. Any initiative taken by the corporate executive toward meeting
social goals, which may either lead to spending of the corporation’s money or result in
reduced profits, will conflict with and work against her/his primary duty of enhancing
the wealth of the shareholders. On a similar note, Jensen and Meckling (1976)
emphasized that instead of pursuing multiple objectives, corporations should focus
on a single-valued objective function of shareholder value creation and enhancement.
Rise in ‘shareholder capitalism,’ was accompanied by an increased need for
strengthening and providing structure and legal sanctions to various mechanisms
used by principals or shareholders to monitor or control their agents or managers. In
response, various governments and public institutions around the world set up
committees to define the scope of and for strengthening the apparatus of corporate
governance. Among the first, and most quoted Cadbury Committee (1992) formed
in UK, defined Corporate Governance as ‘the system by which companies are
directed and controlled. The boards of directors are responsible for the governance
of their companies. The shareholder’s role in governance is to appoint the directors
and the auditors to satisfy themselves that an appropriate governance structure is in
place. The responsibilities of the board include setting the company’s strategic aim,
providing the leadership to put them into effect, supervising the management of the
business, and reporting to shareholders on their stewardship. The board’s actions
are subject to laws, regulations, and the shareholders in general meeting. On similar
lines, report of the Kumar Mangalam Birla Committee on Corporate Governance in
India (1999) recognized that the fundamental objective of corporate governance is
the ‘enhancement of shareholder value, keeping in view the interests of other
stakeholder.’ Organization for Economic Co-operation and Development (2004)
defines corporate governance broadly and takes into consideration other stake-
holders: ‘Procedures and processes according to which an organization is directed
and controlled. The corporate governance structure specifies the distribution of
192 H. Bajaj
rights and responsibilities among the different participants in the organization—

such as the board, managers, shareholders and other stakeholders—and lays down
the rules and procedures for decision-making.’ The main objective of corporate
governance, hence, got translated into protection of ‘shareholder’s rights.
While researchers like Jensen and Meckling (1976) and Friedman (1970) were
busy emphasizing on ‘shareholder value creation’ as the most important objective
of management, there were other researchers who lamented the lack of attention to
other stakeholders whose interests are tied with those of the firm. To answer the
question that ‘Who these stakeholders are?’ Freeman and Reed (1983, p. 91)
proposed two definitions of stakeholder: one in a wide or general and another in a
narrow or specific sense and scope. Stakeholders recognized in ‘a wide sense
include any identifiable group or individual who can affect the achievement of an
organization’s objectives or who is affected by the achievement of an organization’s
objectives. Examples are public interest groups, protest groups, government
agencies, trade associations, competitors, unions, and employees, customer seg-
ments, shareowners, and others are stakeholders.’ Those stakeholders defined in a
narrow sense comprise of any distinguishable group or individual on which the
organization is dependent for its continued existence and include employees,
buyers, suppliers, key government/regulatory agencies, shareholders, and financial
institutions.
As the scope of the paper needs to be streamlined and defined, and because there
are constraints of resources, it narrows down and from the next section onward
focuses only one stakeholder group and that is the society.
2 Corporate Social Responsibility (CSR)
The argument that firms or corporations are responsible only to their owners is
being challenged on the premise that there are other stakeholders also with legiti-
mate interests in procedural and substantive aspects of corporate activity
(Donaldson and Preston 1995). The interests of these stakeholders are of intrinsic
value and deserve attention for their own sake and not only because they can
contribute to the interests of the shareholders. This idea forms the essence of
stakeholder theory; stakeholder management requires, as its key attribute, simul-
taneous attention to the legitimate interests of all its stakeholders. Considering its
scope, this paper looks at an organization’s relationship with only one of its
prominent stakeholders, i.e., the society. As a firm or corporation exists and
operates within the boundaries of a civilization or society, it has certain obligations
or responsibilities toward it and which is broadly defined as ‘corporate social
responsibility.’
Carroll (1991) has demonstrated that there exists a pyramid with four levels of
corporate responsibility. First and foremost, corporate responsibility is economic in
nature and requires a corporation to be profit-oriented and market-driven. Second is
the legal responsibility which requires an entity to abide by the laws and regulations
as price for society’s license to operate. At the third level is ethical responsibility
which translates into honoring society’s norms, beliefs, and values over and above
the legal requirements. The fourth and the last level is that of philanthropic
responsibilities which involve keenly engaging in actions, projects, or programs to
promote human welfare or enhance goodwill. Among the cited examples of phi-
lanthropy are contributions of financial resources or employees time. Philanthropy
is considered to be discretionary or voluntary on the part of businesses even though
there is always the government or societal expectation that corporations will pro-
vide it.
Proponents of CSR, according to Porter and Kramer (2006), give four justifi-
cations to advocate it: moral obligation, sustainability, license to operate, and
reputation. Moral obligation means that companies have a duty to be good citizens
and do what is ‘morally correct.’ Sustainability refers to securing long-term per-
formance by avoiding short-term behavior that is socially or environmentally
detrimental. The license-to-operate approach, emanates from the fact that every
corporation needs permission from the government and other
regulators/stakeholders to do business. Reputation claim links CSR initiatives to
improving the company’s image, thereby strengthening its brand and maybe
leading to increase in share price.
CSR is increasingly being recognized as that component of ‘corporate gover-
nance’ whereby businesses fulfill their obligations toward one of their major
stakeholders, i.e., the larger community. However, while the larger world is
defining CSR or expanding the scope of ‘corporate governance,’ it is not a new
phenomenon in India. Businesses houses like Tatas and Birlas are well known for
their work in areas such as health and education since inception. To understand the
nature CSR activities undertaken by corporate houses in India, in the following
paragraphs I discuss various initiatives taken by the Tata group.
2.1 The Tata Group
Tata group right from its formation in 1868 believed in the tenet that in a free
society, the community is not just another stakeholder in a corporation’s business
but is the very reason for its existence. For the welfare of its employees, the group is
known to have introduced many a labor reforms before they became national
legislations (Lala 2004). A few of them are mentioned in Table 1.
The groups’ philosophy behind CSR is well captured in the following statement
of J.J. Irani. Talking about the Western companies that are uncertain of spending
their shareholders money and were considering suspending CSR, he said, ‘Which is
fine for them, but not for a country like India. The governments of the western
world have a strong social security net so corporates can concentrate on making
profits and paying taxes regularly but in this regard India still lags behind. We are
far away from reaching that phase of economic development where government is
solely responsible for the basic needs of the public. We don’t have a social security,
194 H. Bajaj
Table 1 Labor welfare measures initiated by the tata group

Labor-related initiatives/reforms Introduced by Enforced Labor act
Tata group by law
(in year) (in year)
Eight-hour working day 1912 1948 Factories act
Free medical aid 1915 1948 Employees state
insurance act
Establishment of welfare departments 1917 1948 Factories act
Schooling facilities for children 1917
Formation of works committee 1919 1947 Industrial
disputes act
Leave with pay 1920 1948 Factories act
Worker’s provident fund scheme 1920 1952 Employees state
insurance act
Workmen’s accident compensation scheme 1920 1924 Workmen’s
compensation
act
Technical institute for training of apprentices, 1921 1961 Apprentices act
craftsmen, and engineering graduates
Maternity benefits 1928 1946 Bihar maternity
benefit act
Profit-sharing 1934 1965 Bonus act
Retiring gratuity 1937 1972 Payment of
gratuity act
Source Adapted from Lala (2004, p. 284)
adequate health and education services. So till then corporate houses should fill the
gaps.’1
Tata group for years has carried most of their CSR activities through their three
main trusts, namely the JN Tata Endowment, Sir Ratan Tata Trust, and Sir Dorabji
Tata Trust. JN Tata Endowment was established in 1892 by Jamsetji Tata, founder
of the Tata group, to inspire young Indians to take up higher education at some of
the leading universities in the world. It was the first Tata benefaction in the field of
education and for the past 120 years has helped many realize their dreams of getting
the best possible education through its loan scholarship initiative. Annually, the
endowment selects around 120 scholars for higher studies abroad in all disciplines
and subjects. Sir Ratan Tata Trust is a philanthropic institution established in 1919
in accordance with the will of Sir Ratan Tata, the younger son of group founder
Jamsetji Tata. The Navajbai Ratan Tata Trust, formed in 1974, works together with
SRTT to bestow grants. These trusts seek to be a catalyst in development through
giving grants to institutions in various areas. They focus their grants toward
organizations that they can partner to undertake innovative and sustained initiatives
1
http://www.tata.in/company/Media/inside.aspx?artid=ZYTmDvfrGd4. Accessed on September 9,
2014.
with the potential to make a visible difference. They also provide grants for
endowments, have a separate program for small grants, and give grants to indi-
viduals for education and medical relief. Sir Dorabji Tata Trust established in 1932
by Sir Dorabji Tata, the elder son of group founder Jamsetji Tata, offers monetary
assistance to students and economically disadvantaged patients, makes financial
contributions to institutions, and provides financial support to more than 600
non-governmental organizations (NGOs) in the country.2
In sync with the work that the Tata trusts were already doing, in the 1990s, the
group felt the need to adopt a more unified and systematic approach to CSR. As a
result, a new unit called the Tata Council for Community Initiatives (TCCI) was
formed in 1996 to bring together best practices practiced by the Tata group in the
sphere of corporate sustainability. Its founding objective was to start a range of
sustainable development initiatives such as community outreach, environmental
management, biodiversity restoration, climate change initiatives, and employee
volunteering. Its mission was: ‘We will work together to be, and to be seen as, a
group which strives to serve our communities and the society at large.’ TCCI also
collaborated with the United Nations Development Programme (India), to craft the
Tata Index for Sustainable Human Development, aimed at directing, measuring,
and enhancing the community work that Tata enterprises undertake. The index
provides guidelines for Tata companies looking to fulfill their social responsibili-
ties. TCCI’s participatory network includes chief executive officers of major Tata
companies, thus ensuring participation and commitment at the senior-most level.
Tata Group’s contribution to the larger society is an exemplary case of philan-
thropy, sustainability and replicability of which has been a concern for many. All
organizations may not be as large and resourceful as Tatas and may also want to
adopt a model of responsibility that best suits their industry, needs, and circum-
stances. Rather than being plain philanthropic, many organizations in India—both
domestic and multinational—have tried to find avenues of ‘shared value’ whereby
value is created through business activities of the organization for both themselves
and their target community. In the next section, I explore the meaning of shared
value and understand it with the help of ‘value-creating’ initiatives taken by cor-
porations like Indian Tobacco Company (ITC) and Hindustan Unilever Limited
(HUL).
3 Shared Value
According to Porter and Kramer (2006) for CSR activities to be sustainable and
effective, they should be woven into the inherent business and functioning of a
corporation and be anchored to the tenets of shared value. For finding ‘shared
2
http://www.tata.in/ourcommitment/articlesinside/SRTT-and-NRTT. Accessed on January 9,
2013.
196 H. Bajaj
value,’ both business and society should start with finding points of intersection or
areas of interdependence. The exercise of finding these intersecting points unfolds
two kinds of linkages: inside-out linkages and outside-in linkages. Inside-out
linkages mean that all activities in a company’s value chain touch on the com-
munity in which the firm operates, creating positive or negative consequences such
as employment and pollution, respectively. Outside-in linkages refer to the influ-
ence of social conditions on corporations. These will include among other, avail-
ability of skilled workforce, transportation infrastructure, availability of and access
to supporting and ancillary industries, and size and type of local demand.
Organizations do not have the bandwidth to undertake all social issues that may or
may not impact them, but the process of unearthing these linkages helps them in
identifying ‘value chain social impacts’ or those social issues that arise as a result of
their activities. Corporations are expected to ethically address these issues; hence,
this is likely to fall in the third level of the corporate responsibility pyramid, is not
discretionary, and may not create strategic value. Moving toward the last and
discretionary level of corporate responsibility pyramid, corporations are laying
increased emphasis on strategic CSR that unlocks shared value for the community
and corporates by investing in such social issues that strengthen a company’s
competitiveness. This leads to genesis of a symbiotic relationship between business
and community, and the success of each becomes mutually reinforcing. It has been
seen that more closely tied an issue is to the core business, higher is the company’s
ability to use its resources to serve the society. Project Shakti of Hindustan Unilever
Limited (HUL) and e-Choupal of ITC are noteworthy examples of strategic CSR,
and main initiatives taken under them are discussed below.
3.1 E-Choupal
ITC had set up its International Business Division (IBD) to promote export of
agricultural commodities such as soybean meal, rice food grains, wheat and wheat
products, lentils, marine products, and coffee. Despite there being huge demand for
its products, IBD could not grow at a desired pace because it was part of an agrarian
supply chain that was regulated by the government regulation of Agriculture
Produce Marketing Committee Act (APMC). Under APMC, companies could buy
agricultural produce only through ‘mandis’ and registered commission agents. Once
the produce was ready, the farmer would take it to the mandis where the crop was
auctioned through the commission agents. Since the commission agents wanted to
aggregate small lots and sell it further in bulk, they ensured that there was no price
and quality transparency. As the farmers had already brought their produce to the
mandis, they were under pressure to sell irrespective of the price offered. The agents
procured the produce at a low price and sold it to companies like ITC at a high
price. To overcome the inefficiencies of the system, ITC launched Internet kiosks in
villages, managed by farmers—called sanchalaks—themselves (Chitnis et al. 2007;
World Bank 2003). These kiosks enabled the agricultural community access ready
information in their local language on the weather and market prices, disseminated
knowledge on scientific farm practices and risk management, facilitated the sale of
farm inputs. The farmer could directly liaise with the sanchalak, obtain a rate for
his/her grain, go directly to the ITC hub called Choupal Sagar to deliver the grain,
and get paid. Along with the farmers, ITC also benefitted as it had direct access to
product of desired quality and did not have to pay saved on the agents’ margins.
3.2 Project Shakti
Rural India was identified as a major source of growth by Hindustan Unilever

Limited (HUL) as expansion had started tapering in urban markets. Retailers in
villages that were relatively easy to access due to proximity to cities were already
being sent stocks in a van once in a fortnight by the stockists in the neighboring
areas. To reach out to villages that were hitherto inaccessible, HUL launched
Project Shakti in 2001(Neath and Sharma 2008; Bannerjee 2010). The business
objective of this program was to increase HUL’s reach in unexplored markets and
promote its brand through local influencers. Its social objective was to provide
employment to rural women. HUL tied up with local self-help groups (SHGs), and
one member of every SHG was selected as a Shakti entrepreneur. This Shakti
entrepreneur borrowed money from her SHG and used it to buy HUL products and
sold it to both retailers in their village and direct consumers. To enable the Shakti
entrepreneur to earn a decent living, products were sold to them at discounted price
compared to general trade. A rural sales promoter was hired to train these women
and also enable them to devise and grow a viable business model. Taking the
initiative to the next level of CSR, program Shakti Vani, a social communication
program, was launched. Local women were appointed and trained on subjects
related to health and hygiene. These women would contact schools, SHG, Shakti
Entrepreneurs, village get-togethers to spread awareness related to health and
hygiene. Additionally in 2010, they started ‘i-Shakti’ an IT-enabled community
portal to give people staying in rural areas access to information through a web of
village ‘kiosks’ containing Internet-linked computers run by Shakti entrepreneurs.
People from the village could register as users and subsequently access free content,
developed in vernacular language, or e-mail questions on subjects of interest,
including HUL products, education, health and hygiene, education, finance, agri-
culture, and employment. Along with creating employment opportunities for the
rural women, value was also derived by the company as it made inroads into hereby
unexplored rural market that though low in value promised high volume returns.
Both the above-discussed initiatives had expansion of customer base and dis-
tribution channel as the prime objective. The social objective that followed was to
empower the community through providing employment, better access to markets
and information related to prices, products, etc. Over the last couple of decades, we
have seen emergence of enterprises that have dual objectives, achieving both a
social mission and business objectives. These organizations referred to as social
198 H. Bajaj
enterprises have added, set, and achieved ambitious social targets deploying a
viable business model. The next section tries to understand what social enterprises
are and how they integrate and align their business and social objectives.
4 Social Enterprises
The debate regarding what social enterprises are, centers around their two key
elements: their earned income strategy and their emphasis on social impact. A few
authors highlight their financial self-dependence which is directly tied to the social
mission (like employing disabled people/healthcare/running schools), while others
lament this emphasis on profit making as ‘it draws attention away from the ultimate
goal of social impact.’ Earned income, they claim, ‘is only a means to a social end,
and it is not always the best means.’ This difference in emphasis gets reflected in the
definition of social enterprises. According to Dees (1994, p. 1), ‘Social enterprises
are private organizations dedicated to solving social problems, serving the disad-
vantaged and providing socially important goods that were not, in their judgment
adequately provided by public agencies or private markets. These organizations
have pursued goals that could not be measured simply by profit generation, market
penetration and voter support.’ Haugh and Tracey 2004 (as cited in Mair and Marti
2006, p. 4), on the other hand define social enterprises as ‘Businesses that trade for a
social purpose. They combine innovation, entrepreneurship, and social purpose and
seek to be financially sustainable by generating revenue from trading. Their social
mission prioritizes social benefit above financial profit, and if and when surplus is
made, this is used to further the social aims of the beneficiary group or community,
and not distributed to those with a controlling interest in the enterprise.’
4.1 Social Enterprises, Non-profit Organizations,

and Business Enterprises
Social enterprises are different from traditional non-profits mainly in terms of their
funding mechanism, and sustenance and viability through earned incomes. Reis and
Clohesy (1999) believe that when traditional resources continuously reduce and
competition for them becomes severe, it is important for non-profit organizations to
employ business-type effectual operations and marketing techniques to improve
efficiency in products and services in order to serve community better. Dees (1998)
provides three explanations for increase in efforts by non-profit leaders to find
commercial opportunities. First, greater recognition of competition and the profit
motive in promoting efficiency and innovation in the corporate sector has increased
the rhetoric for higher market discipline in the social sector too (corroborated by
Foster and Bradach 2005). Second is the belief that institutional charity can dent
beneficiaries’ self-esteem and create a sense of dependence (to combat which

voluntary organizations charge some part of the cost of services from the benefi-
ciaries). Third, as grants and donations are limited to defined purposes or projects,
to gain more independence in choice of causes, self-funding is being sought.
Fourth, sources of funds available to non-profits are shifting to favor more mer-
cantile approaches and companies are thinking more strategically about philan-
thropy; donor companies are no longer deciding where their grant will go solely on
the cost-benefits of the programs they will fund but also on the value they will draw
from the relationship with a particular non-profit. Fifth, for-profit companies are
increasingly entering industries such as healthcare and education so far considered
in the domain of the third sector. As these for-profits start entering these segments
and some non-profits also start trying out commercial operations, other non-profits
feel coerced to follow them and turn to market-linked sources of revenue.
According to Dees (2001), social enterprises can be defined and operate over a
spectrum: on the one hand are philanthropic organizations and on the other end
purely commercial entities. Dees (2001) differentiates between these various types
of social enterprises using seven dimensions: motives, goals, methods, beneficia-
ries, capital, workforce, and suppliers (Table 2).
A few other characteristics also distinguish social enterprises from other orga-
nizations. One of the key distinguishing features of a social enterprise according to
Gunn and Durkin (2010) is the level of stakeholder and service user involvement:
Service user’s involvement in design, delivery, and management of social enter-
prises is considered to be significant, and emphasis is on community empowerment
and involvement in order to find solutions for societal problems. Anheier (2005)
points toward existence of multiple bottom lines in the case of social enterprises as
Table 2 Social enterprise spectrum

Type of Purely Hybrid Purely
organization philanthropic commercial
General motives, methods, and goals
Motives Appeal to Mixed motives Appeal to
goodwill self-interest
Goals Social value Social and economic value creation Economic
creation value creation
Methods Mission-driven Balance of mission and market Market-driven
Key stakeholders
Beneficiaries Pay nothing Subsidized rates and/or mix of full players Pay full
and those who pay nothing market rates
Capital Donation and Below market capital and/or mix of full Market rate
grants players and those who pay nothing capital
Workforce Volunteers Below market wages and/or mix of Market rate
volunteers or fully paid staff compensation
Suppliers Make in-kind Special discount and/or mix of in-kind and Charge market
donations full price prices
Source Adapted from Dees (2001, p. 15)
200 H. Bajaj
interests of all stakeholders including staff, volunteers, politicians, police, funders

need to be taken into account. As our objective is to look at various ways in which
organizations align the interests of all stakeholders, this paper evaluates social
enterprises that have been able to wed their social and business objectives. Hence,
from the wide spectrum as suggested by Dees (2001), here the focus is narrowed
down upon those social enterprises whose source of finance is not funding, but
capital raised from investors. Further, these enterprises are not philanthropic in
nature but produce goods or services which are sold commercially. Social enter-
prises that are have been considered here are also not clones of business organi-
zations as the primary objective is to create a social impact, and though the
secondary goal is economic value creation, the profits can be redeployed for growth
opportunities within the firm or even redistributed to the investors.
The following paragraphs analyze how two organizations, Vaatsalya and
Narayana Hrudayalaya, within the healthcare segment, have been able to create
value by synchronizing their business goals with the urge to bring change in the
lives of community and people devoid of most basic health facilities.
4.2 Vaatsalya
Vaatsalya was founded by Dr. Ashwin Naik and Dr. Veerendra Hiremath in 2004 to
meet the primary healthcare needs of people living in rural and semi-urban areas.
Amidst the grand achievements of growth in GDP of approximately 5%, housing a
large and sophisticated software industry and being home to an attractive and
burgeoning 28.5 million middle-class households lies the fact that India has a total
population of only 840,130 doctors.3 This translates to a ratio of 1 doctor for every
2000 people in the country. The public–private contribution ratio to healthcare
spending is approximately 20:80%. A large proportion of Indian households (65%)4
seeks health care from private doctors/institutions, while close to 33% of house-
holds use the government-owned or government-aided institutions. 46% of urban
households and 36% of rural households prefer to go to a private doctor or private
clinic for health care. 70% of our population resides in rural India, while 80% of the
hospitals employing a large proportion of India’s registered medical doctors are
located in cities.
Identifying a huge gap in the healthcare delivery and sensing the relatively
unexplored business opportunity Dr. Ashwin Naik and Dr. Veerendra Hiremath set
up Vaatsalya as a private limited company in November 2004. In February 2005,
the first of the Vaatsalya hospitals was opened in Hubli (Esposito et al. 2012).
Recognizing that availability of super-specialist doctors required for operating a
3
http://www.mciindia.org/pdf/Annual%20Report.pdf. Downloaded on January 9, 2013.
4
http://www.measuredhs.com/pubs/pdf/FRIND3/FRIND3-Vol1AndVol2.pdf. Downloaded on
January 9, 2013.
tertiary care hospital was quite low when compared to doctors needed for primary
and secondary medical care, they decided to focus on providing primary health care
services.
Initial capital of USD 150,000 to open the Hubli unit was raised from angel
investors. Subsequently, an additional USD 150,000 were raised from Aavishkaar
India Micro Venture Capital Fund for two additional outlets in Gadag and Karwar.
Again in April 2008, Vaatsalya received a second round of funding of US
$1.5 million, from Aavishkaar and Seedfund which was used to open few more
hospitals within a few months. In 2009, Luxemburg-based Oasis Fund invested
another US$4.2 million. As a substantial part of Vaatsalya’s equity came from
institutional investors who expected fast returns on their investments, right from the
beginning its founders focused on making it commercially viable and profitable.
The mission of Vaatsayla however was always to address the unmet healthcare
needs of mostly poor populace, a fact reflected in its operational model. Vaatsalya
hospitals offer services in six major medical areas: obstetrics and gynecology,
pediatrics, general medicine, general surgery, nephrology, diabetology. They
charge Rs. 100–300 per bed per night, while consultancy fees range from Rs. 25 to
100. Each hospital, on an average, has close to 50–70 beds and follows a basic
no-frills approach. For instance, the general ward is much bigger as compared to
other hospitals—in a 50-bed hospital, 20 beds will be in the general ward and
remaining spread across private rooms. Even special rooms are not
air-conditioned.5 The spectrum of services offered and price points at which they
are made available enables it to meet a substantial part of health-related needs of the
local populace. Vaatsalya also leases its hospitals. It also gets the advantage of
lower rentals as it is located in semi-urban areas. Vaatsalya saves on wages too
because non-clinical or support staff is hired locally. However, in its attempt to
provide best possible medical services, doctors’ salaries are not compromised with.
The starting salary is Rs. 30,000 per month, which is higher than the average Rs.
20,000–25,000 per month in cities. The doctors hired are in their middle thirties and
would generally be employed as junior doctors in city hospitals, but at Vaatsalaya,
they are employed at a senior level, i.e., specialists. These costs, recruitment policy,
and emphasis on creating value allow each hospital, with an average of close to
50,000 patients per year, to break-even within a few months.
4.3 Narayana Hrudayalaya
The vision of Narayana Hrudayalaya is: ‘Affordable Quality Healthcare for the
Masses Worldwide’ and its mission, ‘A dream to making quality healthcare
accessible to the masses worldwide.’ The noble vision and mission were also
5
http://business.outlookindia.com/printarticle.aspx?240800. Accessed on January 11, 2013.
202 H. Bajaj
grounded in the founder’s wisdom that ‘Charity is not sustainable. There has to be a
business model.’6
Narayana Hrudayalaya was founded in 2001 by Dr. Devi Shetty as a 280 bed
and 5 operation theaters cardiac hospital (Esposito et al. 2012; Prahalad 2006). The
initial funds for the hospital came from his father-in-law. Later, expansion took
place with funds coming from internal accruals, selling of stake, and private equity
investment. Today, there are thirteen Narayana Hrudayalaya across various cities in
India (and one in Cayman Island). The Bangalore facility has grown to accom-
modate around five thousand beds.
To provide affordable health care, Narayana Hrudayalaya use a hybrid model of
attracting affluent patients by virtue of the world-class services it offers and using
the surplus funds generated from them to treat others who cannot afford the entire
fee. To add to it, they offer the Karuna Hrudaya package for patients with modest
means at Rs. 65,000 per surgery.7 For poorer patients, funds are arranged through
the Narayana Hrudayalaya Trust’s general corpus, by requesting external donations
or through ‘Yashaswini,’ a micro-insurance scheme. Yashasvini was conceived by
Dr. Shetty and launched in 2003 by the Government of Karnataka to address major
health concerns of rural people who typically had no health insurance. Emphasis is
also on containing costs. In India, cardiac surgeons are paid per surgery and
people-related costs constitute a significant proportion of a hospital’s total expen-
ses. In Narayana Hrudayalaya, surgeons are paid fixed salaries which are not less
than what equally experienced doctors make in other hospitals, but they are
expected to perform more surgeries, bringing down the cost per procedure. Other
ways employed for containing costs include keeping the design of the facility
functional, reduced unutilized areas, and usage of assembled and mass-produced
structures. Also, instead of expensive, custom-made furniture, they use low-cost
seating and marble in the hospitals is substituted with simple tiles. These initiatives
reduce the cost per bed to Rs. 12–18 lakhs, as compared to Rs. 60–80 lakh/bed at
other corporate hospitals.8
Profit-and-loss account is monitored daily. This allows the management to gauge
how much concession they can afford to give to the patients the following day
without compromising profitability. Narayana Hrudayalaya has been profitable
from inception. JP Morgan and Pine Bridge Investments (formerly known as AIG
Investments) and Kiran Mazumdar-Shaw are other noted investors along with Dr.
Shetty and his family.9
Persuasion of social objectives by Tata Group, ITC, HUL, Vaatsalya, and
Narayana Hrudayalaya shows that organizations in India have pursued goals that
6
http://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/frugal-innovation-devi-
shettys-narayana-hrudayalaya-to-conduct-heart-surgeries-at-worlds-cheapest-rates/articleshow/
17762516.cms. Accessed on January 11, 2013.
7
http://articles.economictimes.indiatimes.com/2012-12-26/news/36008056_1_narayana-hrudayalaya-
heart-surgeries-devi-prasad-shetty.
8
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4493.
9
http://www.businessworld.in/en/storypage/-/bw/pulse-on-the-future/387828.0/page/0.
are not restricted to financial but even those that enhance welfare of other stake-
holders. Viability and sustainability of these two conflicting and yet intertwined
purposes over long-term are discussed in the next section.
5 Corporate Governance: Moving Beyond

the Shareholders
Acceptance of shareholders as the most important stakeholders started with

maturing of the principal–agent theory and recognition of the fact that by virtue of
being owners of the company their interests need to be over and above that of their
stakeholders. This also led to what Martin (2010) calls as the ‘profit-first focus.’ As
making profits became the main objective and shareholders emerged as the prin-
cipal–stakeholders, needs of the other stakeholders, until and unless they were
linked to the primary objective of shareholder wealth maximization, became sec-
ondary. Many organizational practices including compensation of top executives
were designed keeping the end goal of shareholder value maximization in mind.
Tenets of ‘shared value’ and ‘reputational argument’ of CSR also focus on align-
ment of social good with ‘financial objective,’ upholding the task of wealth
enhancement. Ideally, a situation where all the stakeholders are benefitting is also
the ideal one; it is principally, and for the sake of argument, also preposterous to
believe that the goals of all stakeholders are mutually exclusive and realization of
goals of one will be detrimental to the welfare of another. In reality, however,
achievement of twin objectives of ‘making profits’ and ‘bringing social transfor-
mation in the lives of the underprivileged’ has been challenging. There are multiple
sources of these aforementioned challenges. For one, as Karnani (2007, p. 91–92)
points out, making commercial services and products available to the group that
actually needs it the most and is called bottom of the pyramid segment (BOP) is
highly unlikely to be profitable. Costs of serving the markets at the bottom of the
pyramid are often high as the target group is often geographically widespread and
culturally heterogeneous. This wide dispersion of the target population increases
distribution and marketing costs and makes it difficult to derive any economies of
scale. Weak infrastructure (transportation, communication, media, and legal) and
small size of each transaction further increase the cost of doing business leading to
disenchantment among representatives of a corporate. Varman et al. (2012) found
evidence for this conflict in their study of two e-Choupals which revealed that small
farmers were outside the scope of ITC’s wheat procurement initiatives as the
company did not accept wheat that was less than a trolley or tractor. They further
highlight that the problem that small farmers face is not so much related to pro-
curement channels and information about prices, but rests more in the domain of
production in which access to land, credit, water, fertilizers, and seeds becomes
pose greater difficulty, areas unaddressed by ITC. In the eyes of the farmers cited,
e-Choupal is more of an exercise through which ITC procures grain at relatively
204 H. Bajaj
lower price than it would through middlemen. These revelations do not mean that
other than the parent company no one else has benefitted from the e-Choupal
initiative: Large farmers are known to gain as they get better prices for their produce
without having to deal with the state machinery that is considered to be corrupt and
inefficient. By virtue of being profitable, any shared value model principally looks
viable and sustainable, but its ability to reach out to the neediest remains
questionable.
Benefits derived even by a group, though not the most marginal, by initiatives of
organizations like ITC and HUL support the belief that firms have played a role in
contributing to the welfare of the society. By virtue of being profit-driven, business
organizations have created shared value, which along with enhancing wealth for the
shareholders also contribute toward social benefits. The social enterprises using
various operational models and multiple sources of funding have tried to both create
shared value and also reach out to the most deprived section of the society.
Narayana Hrudayalaya has achieved this through its trust and by using the surplus
generated through treating the affluent to compensate for those who cannot pay the
entire fee. However to reach out to the most deprived segment of society, philan-
thropic and altruistic, issue-centric support of corporates like Tata Group will be
continuously required.
In a country like India, the question is not which form of societal contribution
works the best; we need all models ranging from philanthropy for the most deprived
to creation of shared value where all the stakeholders derive the benefit. Support
from all possible sources including business and social organizations is required on
all fronts for India to boast of inclusive growth and find that coveted place among
the emerging/developed nations.
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The Problem of Democracy in Two
Brazilian Governance Experiences
Pedro Novais and Carlos Vainer
1 Introduction
This paper puts into question the relation between the state and civil society in
Brazil from the standpoint of the notion of governance. Initially, it describes the
context in which the idea of governance arrived at the debate concerning the state in
Brazil in the 1990s. The country had completed a long process of democratization
after the military dictatorship. Reflecting on the historical experience allows putting
into perspective themes such as popular participation, social control, and political
decentralization, which set the foundations for the democratic state in Brazil, as
established in the 1988 Constitution. Next, two cases are presented, the Participative
Budget in Porto Alegre and the Porto Maravilha Project in Rio de Janeiro.
The Participative Budget of the city of Porto Alegre is an emblematic case of
popular involvement in decision-making regarding public investments. It gained a
widespread reputation as an innovative form of political participation that suggested
that the “radicalization of democracy” could become reality. Prior to the use of the
notion of governance in government rhetoric, civil society participation, and direct
democracy were considered the dominant alternative to the elections-based liberal
model, often resembling the authoritarianism of the military regime. Popular par-
The authors wish to acknowledge the support of Chloé Brault MacKinnon, who translated the
text from Portuguese as well as Laís Jabace Maia and Giselle Tanaka for the background
research and for reviewing the text, in addition to presenting important suggestions for its
completion. Dr Neil Thomlinson of Ryerson University was very generous in offering several
suggestions for the text, in view of his knowledge of Brazilian government and politics and his
understanding of the challenge of presenting it to the English-speaking public.
P. Novais (&) C. Vainer

Instituto de Pesquisa e Planejamento Urbano e Regional—IPPUR,
Universidade Federal do Rio de Janeiro—UFRJ, Rio de Janeiro, Brazil
e-mail: pedrodenovais@gmail.com

https://doi.org/10.1007/978-981-10-5963-6_12
208 P. Novais and C. Vainer
ticipation would guarantee permeability of the state to societal demands, and

therefore, would ensure the legitimacy of public administration.
The Porto Maravilha Project, in the city of Rio de Janeiro, is a case where the
Urban Development Corporation for the Port Area of the city (CDURP) functions
as a mediator of public interest. This company, one of the outcomes of the largest
public-private partnership (PPP) in Brazil, holds a public concession to develop and
manage a strategic area of the city. The project is justified by its economic
importance. The strategy of engaging the city into circuits of globalized capital
places into the hands of entrepreneurs the responsibility for the development of the
area. In political terms it means that the benefit of all is to be achieved under the
control of a few.
The two experiences are concrete expressions of the concept of public gover-
nance at the local level in Brazil. They are characterized by the displacement of
decision-making processes from municipal bureaucracy (for some because it is
inefficient, for others because it is biased toward powerful interests), and by the
creation of a counterpart decision-making structure, constituted either as a group of
citizens exercising their rights, or as a network of relevant stakeholders aiming at
their own ends (which are said to coincide with society’s interests).
The cases of Porto Alegre and Rio de Janeiro represent opposing sides of the
political debate over democracy, therefore serving as references to reflect on the
meaning and possibilities that the notion of governance may actually have in Brazil.
Such consideration is the purpose of the final part of this paper.
2 The Notion of Governance in Brazil
The term “governance” associated with public affairs does not have a definite
signification in contemporary Portuguese. Originally derived from French, it is
known in Portugal since the XV century with a derogatory connotation (Cunha
2010; Figueiredo 1913; PRIBERAM 2011). In Brazil, the word was not used until
it appeared in the late 1980s, mostly as a result of new guidelines for public
management imposed by multilateral agencies like the World Bank (1992). This
time translated from English, governance was renewed in meaning.
An important dictionary of Portuguese,1 published in Portugal, explains the
sense of the word in relation to its use by the European Union: a “form of governing
based on a balance between the state, the civil society and the market, at the local
level, national and international” (Porto 2013; translated from Portuguese).
According to this description, governance involves an ideal, that is, the absence of
conflict, achieved by a balance of powers (political, social and economic). It implies
a normative orientation as well: to impose limits on the participation of civil
1
Grande Dicionário da Língua Portuguesa da Porto Editora.
The Problem of Democracy in Two Brazilian Governance Experiences 209
society, to ensure legitimacy to the state apparatus, and to institutionalize the

involvement of economic forces in political decisions.
Considering the dominant ideas on the subject in Brazil, it can be stated that
from the point of view of practice, governance is primarily related to the organi-
zation of decision-making processes. Its spatial reference is the network, an
arrangement that involves decentralized, and, to some extent, diffused mechanisms
by which a policy is formulated or a development is planned.
The definition of who gets to participate is also a central issue because such
arrangements depend on the collaboration between its agents. Thus, governance
relies on the ability to identify proper participants. One way to handle this is to
focus on stakeholders coming from the business community; another way is to give
prominence to agents who originate in the local community.
The term governance, having become part of the vocabulary of different—even
antagonistic—political and ideological positions, is not a label for models of
organization of local government decision-making processes. It asserts the measure
for the relation between state and civil society advocated by each position.
3 Political Openness and Democratic Ideals
To reflect on the relation between state and civil society in Brazil in the context of
neoliberal globalization, it is necessary to examine the end of the military dicta-
torship, when issues of participation and social control over public affairs
increasingly attracted the interest of society. Political attitudes of that time serve as
a reference to understand how these same themes are to be delineated today.
The military regime crisis began in the 1970s, with a growing questioning of its
capacity to deal with the economic recession. The loss of purchasing power of the
middle class, the rejection by the business community of economic policies deemed
to be recessive, and the reduction of real wages reinforced the loss of the regime’s
political support. Authoritarianism and centralization of decision-making power at
the federal level came to be regarded as a reason for the increase in inequality, while
participation was treated as a way to direct the actions of the state in the interest of
the society, and therefore to promote social justice.
‘Abertura Política’ (Political Openness), as Brazilian democratization was called,
was an intricate political process. Though launched by the military in 1974 as a
top-down initiative, popular pressure, partly tolerated because of the regime’s
progressive relaxation, added a bottom-up orientation to it. As a result, while the
authoritarian regime was still strong, important social transformations occurred,
significantly affecting political culture, particularly in the build-up of a consensus
around the idea of democracy and its formulation in terms of participatory
democracy.
Consensus about democratization does not necessarily imply consensus around
models of democracy. In fact, in Brazilian society at the time, diverse opinions
concerning the future of democracy in the country coexisted. There were also
different perspectives on who were the subjects, or the agents, of democracy.

Cardoso (1989) arranges these views in terms of three competing schools. The first,
a functionalist school: associated to liberal democratic thought, it emphasized free
individual initiative and the need for the state to retreat and to assume the role of the
guardian of social order. The second, a Statist perspective, subscribed to a liberal
conservative view: it advocated the state as the guardian of public will, therefore
demanding an elite capable of controlling it, and a system of representation to speak
(and speak only) about the “Nation’s aspirations.”
The last school adopted a grassroots perspective. It departed from a perception of
intrinsic structural biases in capitalist development that were responsible for the
maintenance of class differentiation: it emphasized the idea that democratization
would be achieved through communal solidarity, with organized and autonomous
groups, independent from the state, pursuing their own wants and needs. This view
stressed that collectives, and not the individual nor the state, were the subjects of
democracy (Cardoso 1989).
These differing understandings of democracy, its mechanisms and subjects were
interwoven into programs and strategies of new collective organizations, that is,
political parties, labour unions and popular associations formed during the demo-
cratic transition. Nonetheless, the convergence of diverse and even conflicting ideas
into a common goal deserves to be highlighted. As one examines the social context
of the “Abertura Política,” it becomes clear that this reconciliation of perspectives
was accomplished through the image of civil society as the antithesis of the state.
According to Telles, “faced with the state as the common source of oppression,
society appeared as a political alternative” (1994).
4 Organized Civil Society and Direct Democracy
Despite the diverse standpoints that coexisted in the period of democratic transition,
the first half of the 1980s was marked by the predominance of a more radical
approach to democracy, that is, participative democracy. At the time, there was both
an emphasis on collective decision-making, with a strengthening of
“collective-popular subjects,” (Cardoso 1989, p. 323) and a widespread challenge
of authority, observed in the vocabulary: the replacement of the personal pronoun
‘I’, usually employed by a leader, by ‘we’, which refers to the collective, or by ‘a
gente,’ expression that indicates an “indeterminate subject—expanded with the
concrete sense of ‘those present’” (Cardoso 1989, p. 323).
The promotion of popular participation as part of the democratization process
cannot be explained without making reference to the overall influence of the
grassroots level and to the work of mediating agents that helped translate perceived
economic difficulties into ideas of social change by integrating critical viewpoints
of the social process (Mainwaring 1987). In the Brazilian case, two important
agents were the Catholic Church and the political left, particularly the Workers’
Party (Mainwaring 1987)—in Portuguese, the “Partido dos Trabalhadores,” or PT.
The Catholic Church promoted the idea of solidarity communities, organized as
cell groups (Krischke 1991). Ecclesial Base Communities (CEBs) were first and
foremost religious groups where people met to worship, but also for the discussion
of collective problems. Concrete changes in several communities were attributed to
the development of new forms of social action, including repertoires for self-help
and for bargaining with the state. It is usually explained that the emphasis on
democratic decisions within CEBs contributed to the strengthening of communities’
ties. Then, since each member would participate in other collectivities, there was a
natural dissemination of the participative practices experienced within CEBs into
society (Krischke 1991).
The Brazilian political left also played a significant role in the formation of
collective organizations. It initially stood out for focusing on revolutionary struggle;
however, sectors of the left shifted the arena of disputes to institutional politics,
emphasizing collective organizations. Leftist groups contributed to popular move-
ments by disseminating a vision of the broader political and economic context in
which questions with local relevancy could be considered. This helped in the
translation of groups’ aspirations into articulated political ideas. Another contri-
bution had a strategic dimension: with the association of different movements,
fragmented efforts gradually formed amalgamations of social movements
(Mainwaring 1985, 1987).
In the dictatorship years, CEBs were one of the few spaces that allowed for
political gathering. They attracted activists from the different political orientations.
With the emergence of new collective organizations during the dictatorship relax-
ation, and particularly, after the formation in 1980 of the leftist Workers’ Party (PT),
this situation began to change. Not only had a political space been made available,
but there was also a migration of many of CEBs’ leaders to the PT. Nonetheless,
through these activists, the grassroots experience influenced the party, which
adopted, as one of its main agendas, participative democracy and the primacy of
popular will over vanguard visions (Banck and Doimo 1989; Mainwaring 1985).
In the following years, the Workers’ Party would remain deeply committed to
the idea of popular participation and would continue to elaborate its practical
definition. Popular participation became, then, one of the main aspects of the
municipal ballot campaigns carried on by the PT in the 1980s (Alvarez 1993). It
was a way of ensuring accountability and political legitimacy as much as a response
to popular pressure: despite concerns about state interference, grassroots move-
ments came to support the institutionalization of spaces for participation as a way of
giving authoritative expression to their demands (Cardoso 1989). These movements
gradually found room for expression in institutional environments (Gohn 1990).2
2
The Federal Constitution of 1988 institutionalized the idea of social control over public affairs,
treating as a precept participation at the local level through organized groups or representative
associations. In these terms, the basic unit in participation is not the single citizen, but a collective
of individuals. Political decentralization and strengthening of municipal governments were
Participation, as formulated in this context, was simultaneously a means to attain

social change and a realization of democratic principles. Community groups
organized themselves in search of autonomous solutions to their problems, and as a
form of exerting political pressure upon public authorities so that local priorities
would be addressed. These groups had democracy as a method for reaching deci-
sions in collective matters. Furthermore, participation was seen as the fulfilment of
democratic principles, and the realization of the ideal of self-government. The local
democratic experience was of particular importance in the political context of the
end of the dictatorship as it defined a new standard for decision-making that con-
trasted the prevailing authoritarian and detached model.
4.1 Popular Participation at the Local Level
Although experiences of popular participation in municipal governments have

occurred since the late 1970s, usually in smaller cities, it was in the 1980s that they
proliferated in municipalities administered by the political left. Given its political
base and its origin in popular organizations, the Workers’ Party presented inno-
vative solutions to municipal governments while centralizing public policies were
being dismantled at the federal level. Proposals were based on the idea of direct
democracy and aimed at promoting an “inversion of priorities,” meaning the
precedence of the people’s demands over all other matters.
Souza (1999) identifies three experiences in the 1980s that indicate the different
“Workers’ Party’s modes to govern.” Each experience was affected by conflicting
relationships between those interested in the formulation of public policies, those
concerned in the consolidation of the political authority of the re-democratized
state, and those determined to contribute to the organization of a society with
autonomy and decision-making power.
In Diadema (a municipality of the Metropolitan Region of São Paulo, the largest
city in the country), municipal popular councils were important fora for political
decisions and the formulation of public policies. However, these councils were
marked by divergences: while certain political groups advocated the creation of
spaces where mobilized collectives could actually control public affairs, others
aimed at councils limited to an advisory (as opposed to deliberative) role, and
referred to policies formulated elsewhere, on the basis of a systemic view of
municipal issues. According to this perspective, the councils would serve as
strategic spaces for the consolidation of governmental agendas (Souza 1999).
In Fortaleza (the capital of the state of Ceará), the municipal government
favoured popular mobilization and organization, and supported the occupation of
additional marks of the Federal Constitution, counterpoints to the previous centralization of power
(Cardoso 1989).
unused urban areas. At the same time, the government sought to organize public
administration to implement sectoral policies for social services like health and
education. According to Souza, “On one hand the revolution and on the other, the
need to organize the administration in order to implement public policies” (1999;
translated from Portuguese). Internal divergences led to the expulsion of the mayor
from the party in 1987, in the midst of her term of office. The experience in Porto
Alegre (the capital of the state of Rio Grande do Sul), a better-known example, was
based on the idea defended by Tarso Genro of “another relationship between state
and society, which, in turn, would express itself in a new public sphere” (Souza
1999; translated from Portuguese).
4.2 Porto Alegre’s Participative Budget
In the city of Porto Alegre, before the creation of the Participative Budget, there had
already been an experience of political participation based on neighbourhood
organizations. The Union of Neighbourhood Associations of Porto Alegre
(UAMPA), founded in 1983, held its first congress in 1985, the year of the first
municipal elections. According to Menegat, in the congress “the urban social
movements outlined guidelines for the democratization of municipal administration
which included popular participation in the definition of the public budget”
(Menegat 1998; translated from Portuguese).
The UAMPA supported the elected candidate, Alceu Collares, though it did not
succeed in enforcing its participative proposals, nor did it succeed in promoting the
neighbourhood associations’ demands (Abers 1997). In 1989, Olívio Dutra, of the
Workers’ Party, became the mayor of Porto Alegre. Jointly with community
leaders, a commission was formed to plan investments for the next year. According
to Abers (1997), that commission was the antecedent of the Council for the
Participative Budget.
The Participative Budget was created as a space for direct democracy in which
people decide on the allocation of part of the public resources destined to be
invested in various budgetary areas. The participation of popularly elected delegates
takes place in two types of boards dealing with regional and sectoral demands.
Regional Forums are responsible for discussing the allocation of resources in the
city’s neighbourhoods. In the Thematic Plenaries, representatives from all of the
regions debate priorities for common themes (Abers 1997). Members of the two
boards constitute the Council for the Participative Budget.
In terms of its operation, The Regional Forums function as assemblies formed in
each of the sixteen regions, each of which encompasses several neighbourhoods. In
addition, there are assemblies formed in neighbourhoods and micro-regions. The
regional and the neighbourhoods assemblies appoint the delegates who participate
in the Regional Forum for the Participative Budget. Delegates meet in order to
conciliate the different neighbourhoods’ demands in relation to the sectoral prior-
ities for each region. Accordingly, a second assembly is formed in order to present
the priorities to the municipality and to elect delegates who will participate in the
Council for the Participative Budget.
The Thematic Plenaries were created in 1994 to guarantee the participation of
social groups that are not involved, or not interested, in local questions, and to
permit discussion about the different sectoral politics at the city scale (Abers 1997;
González 1997). There were five plenaries, organized by themes: (1) Transport and
Traffic; (2) Education, Culture and Leisure; (3) Health and Social Services;
(4) Economic Development and Taxation; (5) Organization of the city and Urban
Development. Each plenary elected delegates for the Council for the Participative
Budget.
Forums and Plenaries functioned during the whole year in order to monitor the
implementation of the Budget (Abers 1997). The Council for the Participative
Budget, with a one-year mandate, should decide on the distribution of the resources
of the municipal departments between regions and thematic groups. The council
proposed priorities in order to categorize the different types of expenditures that
were presented to the correspondent municipal departments.
Even though it is presented as an instrument for direct participation, the
Participative Budget is a mixed form of democratic space that combines direct
involvement in plenaries (where an agenda of priorities is conceived) with the
election of delegates who will follow later stages of the decision-making process
and monitor results. Delegates act as representatives in the Council, defining the
criteria for the hierarchy of priorities, subsequently discussed with the municipal
government (González 1997).
Abers (1997), who studied the Participative Budget from 1993 to 1996, iden-
tifies limits to the participation in the plenaries. Abers believes, however, that the
activity is important for the assertion of democracy because it contributes to
political learning. Individuals learn rules and practices of participation, which
contribute to the democratic decision-making not only in the immediate community
but also in other spaces.
The relation to the policy makers and other public servants results, in turn, in
mutual learning. When having their localized (particular) interests confronted with
the city wide (universal) perspective demanded by the public service, participants
learn to negotiate and gain critical knowledge concerning the capacity of the local
government to address demands. Pressured to explain technical impediments
attending certain demands, the government, in turn, sees itself obligated to better
justify and explain its arguments.
The analysis of the early years of the Participative Budget demonstrated that
meeting demands of better-organized groups stimulated the strengthening of
existing groups or the emergence of new community organizations and leaderships.
Moreover, participation instils an individual interest in political involvement: at the
time of the research, close to half the participants of the regional assemblies were
from communities that already had their own interests addressed (Abers 1997).
Abers’ analysis coincides with that of Pateman in which participation, as a form of
political interaction, can be said to have a socializing role: it teaches the individual
“to be a public as well as a private citizen” (Pateman 1970), and to make decisions
while cooperating with others, judging personal interests according to collective

concerns.
The capacity to organize and participate would depend on access to economic
and cultural resources, besides availability of time and political experience. Such
resources are proportionally limited to those who have more needs and, in this way,
the participative practice could contribute to aggravating their exclusion. In theory,
considering the competition for scarce resources, decisions tend to be monopolized
by better-organized groups, neglecting the demands of others (Abers 1997).
However, in practice, Abers (1997) notes that a division of interests tends to
minimize the unbalance of cultural and economic resources: groups of higher
income and schooling were less interested in the Regional Forums while propor-
tionally better represented in the Thematic Plenaries.
Two other factors contribute to balance the process, the first being a cooperative
attitude and a sense of solidarity between participants. Abers (1997) noted an
acknowledgement between the better-organized groups that neighbourhoods with
low participation tend to be the ones with higher needs, and should be included in
the process. Solidarity is explained either as strategic motivation, in order to deal
with even better-organized groups, or for ethical motives, in response to immediate
needs of certain localities.
The second factor is the municipality’s role in spreading among participants a
culture that values distributive justice. According to Abers, “the influence of city
officials in the participative process can promote cooperative behaviours and more
systematic forms to justly distribute resources” (1997; translated from Portuguese).
According to this perspective, the state has an important role in overcoming the
tendency, in democratic processes, to perpetuate asymmetries. Abers (1997)
observes that one indication of such a role in the early years was the proposal
coming from City Hall for the implementation of a system to elect delegates to the
Council for the Participative Budget that would guarantee the involvement of
minority groups.
According to Abers (1997), new public spaces do not substitute for traditional
spaces of representative democracy. They actually incite tensions. The experience of
direct participation in neighbourhoods and the relation established between com-
munity leaders and the decision-making fora destabilize practices of political
patronage, common in the mandates of the Municipal Council. Accordingly, this
diminishes the possibility of city councillors demanding expenditures in the name of
communities, which relativizes their political power. It is true that the budget still
depends on the approval of the Municipal Council; however, after it is approved in
spaces of significant popular representation, it is most unlikely that it will be rejected.
A critical view of this relation between social movements and Porto Alegre’s
local government is presented by González (1997), who completed a study in
approximately the same period, between 1994 and 1996, during the consolidation3
3
According to Cabannes (2004) participative budgeting was formalized in cities like Porto Alegre
and Santo André (both governed by the Workers’ Party). Cabannes believes that the first phase of
of the Participative Budget in Porto Alegre. For González, the process functions as
a sort of state regulation of the form of demand considered acceptable. In other
words, it is a way by which government interferes in civil society, at the same time
ensuring legitimacy for decisions made by City Hall, presented as if they had been
taken by the public (González 1997).
The Participative Budget, for González (1997), functions as a mediator and
refractor of a variety of political pressures. At the same time, the Executive would
be relinquishing its duty to act in the collective interest. This problem is amplified
in the function of the dominant individualistic culture to the detriment of a
democratic perspective, based on the collective interest: “The type of participation
is of a corporate nature or of an interest group, not a social movement, not aspiring
to social transformation, but to individualized selective benefits” (González 1997;
translated from Portuguese).
Moreover, González (1997) considers the Participative Budget as conflicting
with other legitimate forms of democracy: the City Council and the Sector
Councils. The City Council is founded in elections (where voting is mandatory) and
is organized in terms of political parties. In turn, the Participative Budget is based
on the involvement of volunteers, often motivated by, and associated with, interest
groups. According to González (1997), the distinct ways they were institutionalized
confer greater legitimacy upon the City Council, when compared to the
Participative Budget. Counselors also use this argument: they resent the reduction
of their representative function, and the popular pressure to approve the Budget.
With regard to Sector Councils,4 González (1997) observes that the municipal
government resolves the conflict of jurisdiction by giving prominence to the
Participative Budget since Sector Councils’ propositions are submitted to the
Thematic Plenaries. González understands that a “form of semi-institutionalized
participation (Participative Budget) is prioritized, to the detriment of a legal insti-
tutionalized form (Sector Councils)” (González 1997; translated from Portuguese).
4.3 Recent Criticisms and Popular Dissatisfaction

with the Participative Budget
As opposed to authors interested in changes in the political culture, Mororó (2009)

focuses on the objective results of the participative process, that is, the application
of municipal economic resources. In his opinion, the positive image that is usually
the experience (1989–1997) was experimental, restricted to a few cities. This phase was followed
by a massive spread of the Participative Budget (1997–2000). The current period corresponds to
the diversification of experiences and its expansion abroad (Cabannes 2004; UNDP 2004).
4
Sector Councils are institutional arrangements, consisting of representatives of the Municipality
and civil society, who meet periodically to define plans and to monitor different sectorial policies.
The Federal Constitution establishes the existence of Sector Councils.
conveyed concerning the Participative Budget in Porto Alegre does not correspond
to its results. One of the examples the author provides is the fact that the offer of
social housing, the key item in popular demand, was not incremented in the
nineties, the amount available having decreased at the end of the following decade.
In his analysis, Mororó (2009) observes that the inversion of priorities cannot be
explained as a consequence of the Participative Budget, nor as a result unique to
Porto Alegre since the reorientation of the municipal investments that took place in
the nineties was similar to those in countless other Brazilian cities. The improve-
ment in public services was also noted in places where participation is not
institutionalized.
Mororó (2009) actually disagrees with the notion that the decisions concerning
public investments in Porto Alegre occur in a participative way. According to him,
investments are mostly defined by the government, and not by those involved in the
process. The Participative Budget would be, therefore, a discourse strategy,
employed in order to build and legitimize a certain perspective on reality, as well as
a myth that caters to political and ideological interests. The main motivation for
embracing the Participative Budget—even by governments of different political
orientations—would be, thus, that it legitimizes, before the municipal legislative
branch, the investment proposals formulated by the executive branch.
Criticisms denote a disenchantment with the participative experience (Novais
1998). Baierle (2012) suggests a crisis in urban popular movements, related to the
decrease in space for political participation. The crisis is exacerbated by the fact that
political gain is not carried out in material and economic terms—the democratic
mechanisms have not contributed to income redistribution. The lack of ability to
contribute to an improvement in living conditions for the population discredits the
participative process and frustrates popular expectations.
Baierle (2012) believes that a sociopolitical situation in which exception prevails
has been consolidated. It presupposes the development of an apparatus geared
toward ensuring the consent of those in the lower strata of society in regards to the
control and the subordinate condition to which they are subjected. Thus, the cen-
trality conferred on the executive branch adds to the strengthening of the third
sector—the mission of which is to offer compensations to popular demands not met
by the government—and thus contributes to a reduction of the political influence of
neighbourhoods, as well as to facilitate the intensification of labor exploitation.
Local political groups were organized, according to Baierle (2012; translated
from Portuguese), in a model of dependence on municipal public authority. The
political collective (of a neighbourhood, for instance), began to be confounded with
the legal entity (the Community Association that represents the neighbourhood),
whose leadership gained autonomy vis-à-vis the collective to negotiate with other
Associations and public or private institutions. Baierle believes the Participative
Budget “upholds a community oligarchy that runs poverty management programs,”
this being a major hindrance for participative democracy (2013, p. 3; translated
from Portuguese).
The control by dominant classes is also achieved through the situation of legal
instability in which low-income populations are kept. In Baierle’s perspective, the
settlements of the low-income population do not constitute an expression of

resistance or defence before the established order, but a “formula of coexistence
between legal formality and social reproduction” (2012; translated from
Portuguese). The low-income real estate market operates as a formal market—it
emphasizes private property and stimulates the commodification of the land—
contributing, thus, to the reproduction of the marketing logic all over the city. The
belief in a project of improvement in living conditions that mirrors the practices of
the dominant classes ends up frustrating the emergence of alternative proposals that
could contribute to changes. To the contrary, it reinforces a politically precarious
and economically peripheral integration.
According to Baierle (2009, p. 7), in 2007, the cost of institutional advertising
was three times greater than what was spent in the implementation of Participative
Budget decisions. In the following year, only 1% of the total amount of investments
of the city was subjected to popular debate. Since 2000, although social housing is
the main demand in Porto Alegre, the decisions that are made in the Participative
Budget process are not implemented. The local deficit was heightened due to urban
mobility works related to the 2014 FIFA World Cup (soccer championship). The
projects were negotiated directly between the government and construction com-
panies, resulting in countless evictions.
Despite the evictions and the protests that followed, Baierle (2012) observes that
the number of those involved with the Participative Budget has remained stable
over the years, amounting to 15,000 people (1% of the city), a figure that has been
considered a positive indicator of this experience. Baierle refers to the relationship
between the denial of one’s rights and the active involvement in the Participative
Budget as “participative exclusion.” This expression denotes the way in which the
excluded individuals consent to, and participate in, their social exclusion. In the
author’s own words, it is a paradigm characterized by the “substitution of content
for recognition” (2012; translated from Portuguese).
From the possibility of democratic radicalization up to the disenchantment and
dissatisfaction with “participative exclusion” there is a history, which Baierle
(2009; translated from Portuguese) divides into phases: from the “Participative
Budget as a class struggle” to “welfarism” (“the functionalization of poverty”). An
important inflexion point in this trajectory was the defeat of the Partido dos
Trabalhadores administration in the Porto Alegre municipal elections of 2004. The
Participative Budget was maintained by the subsequent administration, but with
certain adjustments that resulted in the reduction of the amount of investment. The
changes also sought to ensure the participation of the business community, among
other things (Langelier 2011; translated from French).
The limitations of the Participative Budget cannot, however, be only attributed
to the institutional fragility of the process, subject to the changes imposed by each
government. According to Baierle, there is a lack of confrontation regarding the
capitalist state, which has proved to be resistant to change, leaving to the partici-
pative practice the role of an interaction mechanism between state and civil society
(Baierle 2009, p. 25; 2013). With this type of relationship, the problems of rep-
resentative democracy end up being replicated in local practice. Langelier (2011)
suggests the return of patronage.5 Furthermore, circumventing the democratic

entities, there is a direct relationship between the government and the business
community, the “direct democracy of capital” (Vainer 2012).
5 Public-Private Partnerships: Opportunity for Direct

Democracy of Capital
During the 1990s in Brazil—at the moment of a major advance of neoliberalism

throughout the country—there was an increase in the number of Public-Private
Partnerships (PPPs). The terminology designates associations between private and
public institutions around objectives taken as common. The distinction of PPP from
other forms of relations between the public and private sectors relates to its cor-
porate character. As explained by Compans (2005), alternatives like outsourcing
and privatization imply the unilateral definition of the contractor as to the goals and
obligations of the contracted, while the participation in advisory councils does not
involve counterparts, either in providing the means or in dividing results.
While for the general public, PPPs are always justified by their ends (i.e., pro-
jects are advertised for promoting the public good and economic development), for
the private sector, it could be said that their legitimacy is based upon the means
used for their own realization. This means, in managerial terms, PPPs are treated as
ways to overcome the lack of resources for state investments and to circumvent
bureaucratic barriers in public management. In this sense, they represent, according
to Compans (1998), nearly a consensus between government authorities, regardless
of their level of government, location in the country, ideological orientation or
political party.
Public-Private Partnerships are welcomed among public managers for a number
of reasons. First, because of the possibility they create for the completion of projects
that would not be achievable due to the difficulties imposed on the public sector for
the execution of construction works. Second for the provision, maintenance, and
management of infrastructure and urban services with the quality that the certain
development plans require. Third, because they offer the speed necessary to seize
opportunities, particularly to ensure that achievements occur within the duration of
a political mandate. As for corporations, they see in PPPs the opportunity to harness
public resources—political and financial—to private projects, assuring govern-
mental commitment and protection.
The possibility that PPPs bring to overcome administrative inertia or slowness of
the public sector—caused by imposed controls, although improperly interpreted as
an expression of an intrinsic inefficiency—is complemented by the chance they
5
In 2008, according to Langelier (2011), the percentage of government supporters that were
pleased with the meeting of their demands was five times higher compared to the supporters of
parties of the left.
offer to channel toward specific projects, resources that are, in principle, diffuse.
These partnerships result in the building of relationships that connect much more
than the public and the private, if considered as two abstract entities. They also
stimulate the association of political groups, frequently promoting the alignment of
different spheres of government; they encourage the unification of large corporate
groups interested in a monopoly on public services or works; and finally, they
provide the opportunity to relate the interests of concrete political groups to those of
concrete business groups.
The participation of the private sector in the provision of urban services has a
long history in Brazil. In Rio de Janeiro—which was once the capital of the country
—there are railway, transport, electric energy, gas, and basic sanitation companies
currently owned by large corporations, whose foundation by English and Canadian
companies dates back to the early twentieth century (Compans 1998). Later
examples are related to the economic crisis of the 1970s. The reduction of resources
for state investments—arising from the public debt crisis that hit the industrialized
countries of Latin America—marked the beginning of two decades of economic
recession. This period contributed to a shift in the role of the state.
The International Monetary Fund (IMF), the Inter-American Development Bank
(IDB) and the World Bank (WB)—which were prominent during the period of
economic recession in the 70s and 80s—contributed to the spreading of ideas and
encouraging of practices in which public financing and management of infras-
tructure and services would be the responsibility of the private sector. In many
situations, as a condition for signing agreements and releasing new loans, the IMF
and the WB imposed the adoption of processes that reinforced the privatization of
public companies and the introduction of practices leading to new modes of relation
between state and private capital. Barcelona (Spain) constituted an important ref-
erence of this model of management at the municipal level. Compans (1998)
observes that, in the preparation for the Olympic Games of 1992, the public
administration of that city created twenty-three municipal companies and institu-
tions, in addition to two private and thirty-four mixed economy companies
(Compans 1998). Rio de Janeiro mirrored Barcelona’s example for many public
initiatives of an administrative nature, some related to the internal organization of
City Hall, some aimed at services offered by the municipality, and some involving
urban planning and intervention.
5.1 The Renovation of the Port Area in Rio de Janeiro
The project for the renovation of Rio de Janeiro’s Port Area had the objective of
developing this historical area, long-considered to be physically degraded and
economically depressed. Physical degradation, related to the obsolescence of local
facilities, was mainly the result of changes in the organization of port activities at an
international scale. As a consequence, there was a reduction of economic activity,
which led to the abandonment of properties and the degradation of the surrounding
areas. The residential occupation of the hills, by predominantly low-income pop-

ulations, in tenements and shanties (in the area lies the city’s first favela, whose
occupation began in the late nineteenth century), would further reinforce the idea of
deterioration.
Nonetheless, the project area, which corresponds to about half of the city centre,
has a privileged location, especially considering the city’s connection with the
outside, that is, with the metropolitan region and with other cities in the country and
abroad. In addition to the port, which still receives transatlantic tourist ships,
industrial and commercial cargo, the project area is adjacent to the main avenues of
the city centre, and connected to the access roads to the city. Likewise, in the area,
or contiguous to it, are the intercity and the interstate bus stations, as well as the two
railway stations of the city.
The urban renovation project has, as its main strategy, the change of the use of
the old port and its surroundings. It is seen as a way to change local economic
dynamics—from industrial and commercial to real estate activity—in addition to
boosting land prices, which is probably the most attractive aspect for investors.
Besides City Hall (PCRJ), three institutions have joined forces to conduct this
renovation project: (1) the Docks Company (CDRJ), equivalent to the Port
Authority of Rio de Janeiro, a mixed-capital company whose major shareholder the
Federal Government; (2) the Commercial Association of Rio de Janeiro (ACRJ);
and (3) the Federation of Industries of Rio de Janeiro (FIRJAN). The last two
(ACRJ and FIRJAN) are business associations, representing distinct economic
sectors, respectively, commerce and industry (Compans 1998).
In 1983, the ACRJ advanced a proposal for urban renovation in order to
transform the Port Area into a space—replete with hotels, restaurants, telecom-
munication ports, offices, convention centers and expositions—that would show the
city’s role as the commercial center of the country, thus becoming a destination for
foreign business looking for a place to invest (Compans 1998). The CDRJ resisted
the proposal because, at the time, it was unwilling “to share decisions with [private]
entrepreneurs on the operation of Rio’s port” (Compans 1998; translated from
Portuguese).
The CDRJ was subjected to criticism from the business community regarding
the management model under which port administration authorities operated. It was
argued that the bureaucracy of public administration inhibited investments in
infrastructure, contributing to inefficiency and high costs of freight transportation in
the country. Only ten years later, in 1993, the decentralization and the adminis-
trative and financial autonomy of Port Authorities began to be effectively imple-
mented in the country. This process was oriented to allow concessions of the port
management to private initiatives, in order to achieve the benefits associated with
them: investments and flexibility (Rocha-Vidigal and Morato 2009).
The municipal bureaucracy represented an additional obstacle to the claims of
ACRJ. Municipal officers, expressing the view of some sectors of society, recog-
nized the historical value of the Port Area, and sought measures to prevent its
adulteration. Controlling legislation on the use (activities permitted) and occupation
(measured in terms of density and building height) of urban land, the Municipality
of the City of Rio de Janeiro (PCRJ) limited the claims for urban transformation in
the area in the 1980s. In 1987, the Area for the Environmental Preservation of the
Port Area was created. This was the legislation that stimulated housing projects in
the region as a means to protect buildings of historical and cultural interest
(Compans 1998; Diniz 2013).
The pressure on the PCRJ to deal with the economic decline of the area brought,
in 1991, the creation of a Working Group with the participation of ACRJ and
CDRJ. The group proposed new zoning—the Area of Special Urban Interest
(AEIU)—changing the construction indexes of the region in order to stimulate the
renovation and restructuring of the place. This measure, breaking the previously
dominant preservationist approach at City Hall, was intended to allow the com-
pletion of large real estate projects (Compans 1998).
The Working Group was the result of an agreement signed between the
Municipality of Rio de Janeiro and the Docks’ Company, whose objective was to
“associate social agents involved in the process of revitalization of the port in an
entity that will administer the development program for the area” (Working Group,
according to Compans 1998; translated from Portuguese). According to this
agreement, City Hall would be responsible for preparing the urban project and for
carrying on legal and administrative steps for its implementation. The CDRJ would
set the economic guidelines for the new development. Compans (1998) presents
two reasons for why the proposal did not advance. First, there were internal
divergences in the group regarding the urban design proposal, and second, because
electoral disputes at the end of 1994 hindered agreements between these institu-
tions, as they represented distinct levels of government that were dominated, at the
time, by different political parties.
The CDRJ, the owner of approximately 500,000 square meters of real estate in
the area, proposed an Urban Revitalization Program, developed as a part of the port
area and in its warehouses. To carry out this program, landowners, entrepreneurs,
real estate developers and community members invited by the CDRJ would form an
organizing consortium. The real estate holdings would compose one Real Estate
Fund, coordinated by a company responsible for the planning, management, and
investment in the area (Compans 1998).
The urban design proposed by City Hall—which did not own property in the
area—had as a reference the possibility of creation of mixed-capital companies, that
were to be stimulated by an amendment to the Municipal Charter that would extend
the deadline for public service concessions, thus attracting private interests by
allowing a longer time for the return of invested capital (Compans 1998, 2005). The
municipal administration also submitted to the City Council a proposal for the
creation of the Municipal Company for Urban Development, a mixed-capital
company focused on the implementation of a Program for Urban Development for
the city.
The bill was brought forward due to the change of interest of the PCRJ while, at
the same time, the business groups involved created the Agency for Urban
Development in Rio de Janeiro, a private body for urban planning. The Agency was
a non-profit organization, launched at City Hall and installed in a municipal office
building until the end of the mandate of Mayor Luiz Paulo Conde, in December
2000. The relationship between the Municipality of Rio de Janeiro and the private
sector was further manifested in the elaboration of the Strategic Plan for Rio de
Janeiro, completed with consultation by Catalans hired by ACRJ and FIRJAN.6
The 1990s marked a change in the orientation of municipal urban policy, an
expression of the articulation between local government and groups from the
business community. The cooperation between the public and the private sectors
would be one of the ways to overcome difficulties associated with legal and
operational obstacles. Such obstacles include the limited duration of the conces-
sions for the exploration of public services, the rigidity of the urban zoning for the
area, the absence of conditions for urban monitoring and law enforcement, and the
insufficiency of public resources (Compans 2005). Projects proposed at the time
were not actually implemented; however, the way was open to effect changes in the
area: the legal barriers had fallen for large real estate operations.
5.2 The Porto Maravilha Project
The Porto Maravilha Project started to become a reality when the city of Rio de
Janeiro won the bid to host the 2016 Olympic Games. Shortly after the
announcement of the result of the selection process, on the grounds of meeting the
agreements made in the bid application, the municipal government succeeded in
approving, through an emergency procedure which exempted some regimental
formalities, three municipal laws that created:
(1) The Area of Special Urban Concern (AEIU) in the Port Area, which modified
the Master Plan, augmenting construction rates and changing permitted uses of
the area.
(2) The Consorted Urban Operation (OUC), accompanied by the Certificates of
Additional Building Potential (CEPACs). The establishment of an OUC
involves a modification in the urbanistic parameters and building regulations of
the area. The new urban regulation sets a basic coefficient for land occupation,
which developers are allowed to raise up to a maximum, also defined in the
regulation, by acquiring “building potential” (a permit to increase the height
and/or the total built area). CEPACs are meant as a mechanism for private
financing of operations.
(3) The Urban Development Company for the Urban Region of the Port of Rio de
Janeiro (CDURP), responsible for the financial transactions required for the
works and services in the project area. Although organized under a private legal
6
According to Ferreira’s analysis (2000), upon completion of the plan, there was no representative
of social organizations on its Directing Board, composed mostly of representatives of private
companies and other interests related to large projects for the city (the renovation of the port area
was among the projects considered priorities in the City Strategic Plan).
regime, CDURP works with public funding and takes advantage of financial
transactions relating to the Urban Operation and to the CEPACs.
The bill that created the Urban Operation, although recorded as authored by City
Hall, was shown by Oliveira (2012) to reproduce almost entirely the planning
proposal formulated in the “Report of Urban Operation of Porto Maravilha,” by a
consortium of large contractors that later won a public tender to run and manage the
works and services related to the Operation. Several mechanisms have been
implemented in order to attract private investment. Among them are tax breaks for
the companies that won the public bidding for the project, forming the PPPs, as well
as for other companies that may settle or act within the area, particularly those in the
construction sector.
The implementation of the project, however, is being supported by public funds.
The first phase of the Porto Maravilha project was funded with 139 million dollars
(US) from the Department of Public Works and executed by the Saúde-Gamboa
consortium (formed by the contractors OAS, EIT, and Odebrecht). This phase
included water, sewage and drainage works in the avenues Barão de Teffé and
Venezuela, the urbanization of Morro da Conceição, the restoration of the Jardins
Suspensos (Hanging Gardens) and of the piers Cais do Valongo and Cais da
Imperatriz, besides expansion of the capacity of telecommunication networks and
streetlights (Diniz 2014).
The second phase, budgeted at 7.6 million dollars (US), also conducted through
a Public Private Partnership, takes advantage of private funds arising from the sale
of CEPACs. However, with the launch of this phase, in September 2011, the Caixa
Econômica Federal (CEF), a public bank, acquired all of the CEPACs issued by the
municipality, an operation of 1.9 billion dollars (US; 3.5 billion reais), carried out
with financial resources from FGTS, a major retirement and unemployment public
fund. CEF took responsibility for the subsequent sale of CEPACs; however, sales
continue to be economically disappointing. In October 2012, CEF offered 100,000
titles, but only 26,000 were traded, according to the official data of Porto Maravilha.
By December 2013 only 7.1 percent of CEPACs were used (Diniz 2014).
The PPP model created for the port area of Rio de Janeiro was innovative in
Brazil. The combination, in the same agreement, of construction projects, mainte-
nance of the area for the duration of the contract, and privatization of public
services, was unheard of in the country. The contractual innovation was also
accompanied by institutional rearrangements. It is worth noting that the process of
design and approval of the urban operation in the port area involved the dismantling
of the administrative structure of the Instituto Pereira Passos (IPP), the research and
planning agency for the municipality, and the replacement of part of its workforce
with former employees of the consulting firm McKinsey (Oliveira 2012).
As background for these innovations and transformations are the preparations for
sporting mega-events in Rio de Janeiro. Based on Oliveira (2012), it can be stated
that for its implementation, a mega-event fosters the creation of decision-making
arenas that allow the repositioning of social actors in social space and the redis-
tribution of their possibility to exercise power. In other words, these events
contribute to redesigning the physical and socioeconomic spaces (they rearrange the
opportunities for different social groups to access urban infrastructure and services),
as well as the conditions for governance.
The organization of sports mega-events (2007 Pan American Games, 2014
World Cup, and 2016 Olympic Games), have provided opportunities for new
institutional arrangements. Having to justify the fulfilment of commitments made at
the time of the bid, numerous legal and institutional modifications were conducted
by different levels of government (Oliveira 2012). The Differential Contracting
Scheme, created to expedite the works for the 2014 World Cup and 2016 Olympics,
relaxed the criteria for the conduct of public procurement in the country. At the
same time, federal law authorized an increase in the indebtedness of municipalities
when dealing with loans for infrastructure of sports mega-events. Finally, new
special management structures were created at all levels of government, with no
space for the participation of civil society (Oliveira 2012).
The participation of the private sector in the definition of the project was beyond
the conception of the plan for the renovation of the port area. The outlines of
institutional and financial arrangements approved by Municipal Law relied on
individuals with prominent roles in the business community. According to Oliveira
(2012), the legal and institutional changes met different interests, indicating the web
of relations this project raises. Those at the federal level would be geared to meet
global scale interests, such as the World Cup and Olympics organizers and their
sponsors. Changes in local legislation are targeted for the benefit of business sectors
that operate in specific areas of the city such as the hotel and real estate sectors.
Created public agencies sought to channel decision flows in order to provide
greater speed and control—needed to complete the works within the planned
timeframe, before the beginning of the events—and simultaneously circumvent
bureaucratic barriers and established beliefs (often indifferent to, and eventually
disapproving of, the interests of private investors). At the municipal level, the
Department of Economic Development, whose mission was to attract private
investment, was the place at the municipal level where projects were conceived or
made possible (Oliveira 2012). During its existence, the Department of Economic
Development was directed by an executive (coming from the consulting firm
McKinsey) who accumulated other functions at City Hall: President of the
Municipal Council for Economic Development (COMUDE) and President of
Instituto Pereira Passos (IPP). According to Oliveira (2012), this executive was the
one who effectively coordinated the economic modelling and coordination of
stakeholders in the revitalization of the Port Area.
6 Conclusion
The notion of governance is evoked in Brazil to indicate management processes

fine-tuned with the dominant representations over contemporary society. In the
academic milieu, the use of this term suggests dissatisfaction with reified means of
explaining the state (descriptive dimension). In the public space, governance

denotes expectations concerning an adequate form of the relationship between the
state and the civil society (normative dimension). In this case, the notion suggests
removing from the bureaucratic apparatus the exclusivity of the decision-making
process on public matters.
The word governance is usually employed in reference to a network of stake-
holders that share decision-making power. In this usage, this term tends to obliterate
the social statuses of the decision-makers in relation to society. Nevertheless, the
relevant matters in societies with high levels of inequality are related to the actors
that formulate a certain policy, plan or project. In other words: Who decides? In
order to identify the spectrum of answers that the notion of governance might
suggest, two experiences have been discussed. They indicate opposing paths for
democracy in Brazil.
The Participative Budget emerged as an institutionalized way of ensuring social
control over municipal public investments. The initiative arose from social move-
ments (Santos 2002, p. 69) and was conceived as a way to democratize the
decision-making process and avoid the reproduction mechanisms of the dominant
political and/or economic groups. In theory, the citizen is the decision-maker in
political associations, taking part in transparent processes. This experience was
presented as a possibility of radicalizing democracy. However, little remains of its
original character as, in practice, it has frustrated the expectations that it was
supposed to meet and is now viewed with scepticism.
The direct democracy of the Participative Budget of Porto Alegre aims at other
possibilities for the local society. It is not by accident that the slogan of the World
Social Forum, organized in the city, is “another world is possible.” In the part-
nerships between the public and private sectors, realism prevails; decisions consider
what is probable or likely to happen. They are suggested as alternatives to the lack
of capacity or efficiency on the part of the state (as opposed to the market) in
providing services and public construction projects.
The launching of the Porto Maravilha project, on the other hand, shows a certain
inaccuracy in regard to the nature of the places where public decisions are made: at
times in private spaces, often in conditions protected from popular pressure. As to
the decision-makers, considering the interests that the project accomplishes, one can
affirm they come from the business community.
In these experiences, distinct in their characteristics, but similar in their aspi-
ration to dismantle the state, one can find the limits of the notion of “governance”.
It is superficial, in the sense that it merely indicates a form: the network. It is biased,
suggesting a model to be followed. Finally, it fails to support penetrating political
analysis, for the focus on form implies a neglect on the one element that grants
change or stability to the relationship between state and civil society: the different
forms of capital possessed by those participating in the definition of social goals and
publicactions.
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Identity, Politics and Violence: Shiv Sena
in Retrospect
Abdul Shaban
1 Introduction
Sociocultural and racial diversities provide richness and the colour the humanity
can have. However, they also make available the schism and layers on which
politics can operate, divide people and sustain violence. The democracies remain
prone to negative exploitation of the diversities along which the identity politics can
be practiced and interest groups can be mobilized. The migration from one region to
another in search of livelihood opportunities may further add to this negative use of
the diversities (Katzenstein 1973). In order to consolidate the diverse groups and
their identities, the ‘unity in diversity’ has been advocated in India. However, the
diversity and identity of ethnic and linguistic groups have become rich source of
regional, communal and national politics and very productive to political parties to
secure their votes even at the cost of violence—looting and killings. The fault line
along religion, language, caste and region had started manifesting themselves in the
country in the national movement for freedom from the British rule. The British
also used the Indian social diversity and complexity for their advantage and to
sustain their rule. The religious division was to be first utilized by the British. The
mutiny of 1857 made them believe that the Muslim Mughal king was symbol
around which different communities mobilized themselves to oppose the colonial
rule. As a result, Muslims were the first target of the British. Muslims were not only
discriminated against in the government civil and military services, but their entry
to Delhi was restricted in the subsequent years. The ‘divide and rule’ policy of the
British gave rise to ‘two-nation’ theory and subsequent division of the country on
the basis of religion. Among others, the recurrent communal violence and polar-
ization of religious groups around certain political parties in the post-independence
period remain consequence of this. The deprived lower caste of India also started
A. Shaban (&)
School of Development Studies, Tata Institute of Social Sciences, Mumbai, India
e-mail: shaban@tiss.edu

https://doi.org/10.1007/978-981-10-5963-6_13
230 A. Shaban
demanding the separate electorate under leadership of Dr. B.R. Ambedkar which
was later abandoned by his pact (Poona Pact) with Mahatma Gandhi. However, the
deprivation and access to sociopolitical institutions still remains an issue to the
lower castes. In the 1990s, caste divide further accentuated due to provision of
reservation for lower castes in government services. The regional issues remain
alive in the country. They also have their root in partition and accession to Union of
India, or reorganization of states in 1956 on linguistic basis. The present chapter
attempt to study the ‘son of the soil’ movement and politics around it by Shiv Sena
in Mumbai. Although Bal Thackeray, the founder of the party, has passed away in
2012 (under whose leadership the party grew leaps and bounds only contracting in
later years) and the party now seems to be adopting more universalistic values and
less oriented to violence, it demonstrates the possibilities of extremes in political
innovations, threats and violence along religious, caste, regional and linguistic lines
not found in any other states of the country. This chapter highlights and underscores
the productivity which diversity of India could have for political party like Shiv
Sena to mobilize their votes and perpetuate violence against constructed ‘others’. It
first discuss the context in which Shiv Sena emerged and later examines its reaction
to democracy, ‘othering’ strategies, political innovations, violence and inherent
contradiction in its political ideologies.
2 Emergence of Shiv Sena
The formation of states in India on linguistic basis provided much needed base to
sub-national groups to unite and assert their identities in democratic peaceful ways
or otherwise. The movement for Maharashtra and Mumbai as its capital started by
socialists and some of those associated with Indian National Congress through
Samyukta Maharashtra Movement (SMM) resulted in consolidation of the identity
of those speaking Marathi. Whereas ‘Marathi’ as an identity unified some, at the
same time it also differentiated and divided them from others. This is what exactly
happened in Maharashtra. The identity of ‘Marathi’ cultivated by the SMM has
been much utilized by the extreme right-wing parties like Shiv Sena and recently by
Maharashtra Navnirman Sena (MNS) for ‘othering’ and violence. Once the
Maharashtra State on linguistic basis was achieved and Mumbai became its capital,
the SMM died out and important issue became that of employment and livelihoods.
Given the influx of educated and skilled workers from other parts of the country
(particularly from Tamil Nadu), the Marathis (Maharashtrians) especially found it
difficult to get middle- and upper-level jobs in industries and service sector in the
1950s and 1960s. Bal Thackeray, a cartoonists and right-wing journalist, sensed the
opportunity to use unity of native people against those from outside the state (Joshi
1970). Bal Thackeray wrote in Marmik:
As a class they (Maharashtrians) feel that in the State of Maharashtra, they, who are the sons
of the soil and as such must get full opportunities to develop their look of life, do not get them
even in small measure. They find their interests woefully neglected (Marmik 1967, p. 6).
Identity, Politics and Violence: Shiv Sena in Retrospect 231
Though Shiv Sena’s definition of Maharashtrian initially was reasonable wide,

the party interpreted it on its own term and as per the occasions. In Shiv Sena’s
conception, a Maharashtrian,
not only includes Marathi-speaking Maharashtrians, but extends to all those of all castes,
creeds and religion, who look upon Maharashtra as their home-land, who have been living
here for generations to-gether carrying on trade or business, contributing to the welfare and
prosperity of Maharashtra and above all co-mingling their weals and woes with those of the
sons of the soil (Marmik 1967, p. 8).
This movement in turn gave birth to a political party, Shiv Sena. The emergence
of Shiv Sena and its rise and fall have drastically impacted the social spaces, crime
and violence, relationship between people from other states and those ‘sons of the
soil’ or Marathis (also called Marathi manoos (marathis), or dhartiputra (sons of
soil)), the relationship between Muslims and Hindus, and also the relationship
between dalits (mostly those neo-Buddhists) and caste Hindus. The ‘sons of the
soil’ movement run by Shiv Sena has also impacted the relationship between dalits
and Muslims. Most importantly, the antagonistic relationship of Shiv Sena with
other groups has often translated into violence: killing, looting and creation of
‘mass fear’ and ‘enmity’.
The seed of violent-cultural-regionalism was sown by the SMM in the later half
of the 1950s, when it expressed its demand for Maharashtra State and Mumbai
(then Bombay) as its capital through violent ways—by strikes and emotional
political speeches full of regional sentiments. The left-wing labour trade unions in
the city had also united the workers and taught them how to express their demands
in violent ways. These two components combined together to form the base of the
success of Shiv Sena in keeping itself alive and kicking. The growth of Shiv Sena
can be divided into the four phases: Phase I (1966–75), Shiv Sena rose as anti-
communist and anti-South Indian movement and remained limited to Mumbai–
Thane urban belt; Phase II (1975–84), the period of first decline of the party when
its popularity shrank mainly due to influence of Datta Samant on mill workers and
its support to emergency (Dhawale 2000); Phase III (1984–99), the period of rapid
expansion due to failure of Datta Samant’s led mill workers strike and manufac-
turing of Muslims as new enemies leading to major riots in Bhivandi in 1984 and in
Mumbai in 1992–93. This period also coincided with rapid rise of Hindu
Nationalist sentiment at the national level due to rath yatra (travel on chariot)
undertaken by BJP and VHP, and their support by the RSS. The Shiv Sena learned
much politically and ideologically from the above right-wing organizations and
effectively utilized the same against Muslims in Maharashtra and elsewhere. It
formed coalition with BJP in Maharashtra, won Assembly Election (Vidhan Sabha
Election) and ruled the state in alliance with BJP during 1995–99. This phase also
marks its growth in other states such as Gujarat, Rajasthan, Delhi, Punjab, Haryana,
Uttar Pradesh, and Madhya Pradesh due to its adoption of Hindu Nationalist
agenda. This got combined with its ideology of violence and became attractive to
the youths who already were ideologically fed by right-wing cultural and political
organization. Fourth Phase (1999 onwards) has been the period of decline and split
232 A. Shaban
in the party due to family feud. The party has got defeated in Assembly Election
(Vidhan Sabha Election) in 1999, 2003 and 2008. The internal war between cou-
sins, Raj Thackeray (nephew of Bal Thackeray) and Udhav Thackeray (son of Bal
Thackeray) to control the party began as Bal Thackeray due to old age, was unable
to attend meetings and control the party effectively. In the feud between the cousins,
Bal Thackeray supported his son Udhav as Shiv Sena leader leading to relegation of
Raj Thackeray to the secondary position. Raj Thackeray felt dissatisfied with this
development and separated from Shiv Sena launching his own political party,
Maharashtra Nav-nirman Sena (MNS).
MNS adopts symbolic truce with dalits and Muslims by including green (colour
generally associated with Muslims) and blues (a symbol of dalits), and recruiting a
few of Muslims and dalits in the party and putting hoarding in the city with their
names. The MNS in order to establish itself has also adopted the Shiv Sena’s
nativist agenda. The MNS, along with sloganeering against north Indian, has also
attacked major film personality like Amitabh Baccham and Shahrukh Khan for their
expressing loyalties and associations with their native places, Uttar Pradesh and
Delhi, respectively. This period also has seen resignation of two other prominent
and politically virulent leaders of Shiv Sena, Narayan Rane and Sanjay Nirupam as
their ambitions despite all their innovations and loyalties to Bal Thackeray could
not be satisfied. Both of them have interestingly joined the Congress party, which is
strategically using them against Shiv Sena and the BJP. The last phase also reflects
the corporatization of few individuals in Shiv Sena. Some of them are presently
engaged in real estate business, most important being the buying of Kohinoor Mill
land for millions of rupees by a few from the party.
The formation of a unilingual state of Maharashtra, with Mumbai as its capital,
was achieved on May Day 1960 only after a long and bitter mass protest for five
years (1955–60) by the Samyukta Maharashtra Samiti, which mainly comprised of
the socialists, communists and other democrats (Dhawale 2000). Bal Thackeray
who was working as a cartoonist in the Free Press Journal, the English daily in
Mumbai, separated himself from the newspaper in 1960 and started publishing
‘Marmik’ (that which grapples with the essence), a Marathi weekly journal of
cartoons, political comment and humour (Lele 1995). In Marmik, he wrote scath-
ingly against communists, South Indians and plight of bhumiputras (the
Maharashtrians) in employment. Here, he first conceptualized outsider
(non-Maharashtrians) and insider (Maharashtrians) perspective, which as an
instrument was first used against South Indians, then Muslims and later against
those from North India. The launching of ‘Marmik’, which became a precursor to
the formation of the Shiv Sena, took place against the backdrop of a huge mass
movement, as mentioned earlier, for Samyukta Maharashtra, i.e. a united
Maharashtra inclusive of Mumbai, Konkan, Western Maharashtra, Vidarbha and
Marathwada regions but exclusive of Gujarat. On 20 October 1966, the day of
Dussehra, Shiv Sena organized its first rally (RSS also organizes rally on Dussehra
day at its headquarter in Nagpur) at Shivaji Park. The support was immense, and
since then every year on day of Dussehra, Shiv Sena’s rally is held at Shivaji Park.
The reasons for the formation of Shiv Sena were many ranging from
politico-cultural to economic. The party was formed to fight against the perceived
injustice in employment and other matters faced by the Marathis in Mumbai. For
instance, between April and September 1967, the Marmik, a Marathi cartoon
weekly edited by Bal Thackeray, carried lists of persons in executive positions in
some 40 leading Industrial Houses in Bombay and some Government Departments
(Joshi 1970).
North Indian seths (businessmen and industrialists) used to call Maharashtrian
workers by derogatory names like Ghatis (dwellers of hills) and Hamals (head
loaders). This no doubt had hurt the sentiments of those belonging to the state.
Further, as has been mentioned earlier, the middle-class Maharashtrians had tough
time in getting employment as South Indians were proving better skilled for
employment. In fact, that is why many claim that the Shiv Sena is an outgrowth of
middle-class job competition (Katzenstein 1973). The trade union movements in
Mumbai was largely controlled by the leftist from South India and this further
infuriated Bal Thackeray who used abusive languages in Marmik to describe the
leftist trade union leaders. The Gujarati seths could somehow escape from the
violence of Shiv Sena, but South Indian became the target. Shiv Sena started
coining derogatory words for South Indians and started building animosity against
them among Marathis in the city. It started branding South Indians with abusive
words like ‘Yandu Gundus’ and ‘Lungi Wallas’ and arousing Maharashtrians to
attack South Indians with slogans like ‘Uthao Lungi Bajao Pungi’ (Kumar 2012).
At this juncture, Shiv Sena started demanding 80% reservation in government jobs
and 80% houses for Maharashtrians in Housing Board colonies which further
widened its support in native population and intensified attacks on communist
leaders and trade unions controlled by South Indians.
3 Mobilization Strategy and Political Innovations
Shiv Sena has shown very resilient and innovative character to Indian politics. It
has always attempted to use the opportunities and symbols on its disposal to its
political advantage and to initiate violent events and processes for ‘othering’. It
creates myths and then involves people in imagining and searching the facts for
these myths. It massifies the myths and dispossesses them by religious belief or
mob-mentality (Lele 1995; Hueze 1995). This mass is then used for violence. It
survives on its innovations—terminology, symbols, new methods of violence and
threat to new groups. It remains perpetually busy in seeking ‘others’. If they come
themselves before it, it welcomes; otherwise, it constructs and makes them. The
same method is for some time was adopted by the MNS.
The symbol of Shivaji’s persona is his youth and physical and political prowess
in fighting with Moghal Empire have been used to motivate youths. The events of
seventeenth and eighteenth century A.D. are glorified and interpreted out of context
to strengthen the religious and cultural sentiments of Hindus, particularly
Maharashtrians. Now, it uses Shivaji as symbol of power, political strategist,
234 A. Shaban
masculinity and virility and attempts to bring ‘Chhatrapatiraj’ (the benevolent

dictatorship). Till the late 1990s, motor cycle rides of party youths which symbolize
horse riding of Shivaji further fascinate many for involvement in the party and
being part of such rides.
It often celebrates Shivaji Jayanti to mobile youths and takes advantage of Bal
Gangadhar Tilak initiated Ganapati worship, Janam-ashthami (birthday of Krishna)
and Dussehra (the symbolic day of murder of evil Ravana of Lanka by Rama). The
Ganapati worship is an example of ‘little tradition’ being used by Bal Gangadhar
Tilak in Maharashtra to mobilize people against the British rule in India. The small
one-day worship of believers was turned into an elaborate 14-day worship to
mobilize people. Now, Shiv Sena has almost taken over more than 70% of Ganesha
Pandals in the city and the occasion is now used to impart cultural nationalist
ideology rooted in “national-Hindu” ideology of V.D. Savarkar (Hueze 1995,
p. 215) and recruitment of unemployed poor youths in the circuit of this violent
ideology. Dussehra day had been usual occasion when Bal Thackeray himself
delivered speech in Shivaji Park of the city to his followers, and it was this day
when the first rally of Shiv Sena was organized in Shivaji Park in 1966. There has
also been vicious association of capitalist class with Shiv Sena and those with
right-wing ideology. They (capitalist class) actively participate and help the party
by providing generous donations and putting big hoarding on roads and streets.
English and vernacular newspapers and electronic media owned by big media
barons publish and highlight photographs and events associated with these festivals
in order to capture viewer-ship and market. This further strengthens trust and belief
of common man in the rituals and ideology those advocated by the culturo-religious
nationalists.
Further, under the leadership of Bal Thackeray, Shiv Sena has also been able to
the use the grievances and plight of common Maharashtrian in Mumbai to its
political advantage. The Shiv Sena has over the years struggled through violent
ways to create respect for Maharashtrians as they had often been called with
derogatory names by the people from other regions. Most of the Maharashtrian
workers were engaged in lower and menial jobs in the 1960s and 1970s. Given that
Shiv Sena attempted to provide a respect to common Maharashtrians and their
culture, it appealed to common man and number of its supporters surged. In fact,
Shiv Sena was initially not much inclined to Hindutva ideology as towards nati-
vism, but in 1970, this ambivalence was abandoned by Bal Thackeray, who
declared:
Our victory is a victory of Hindu-ness, the victory of true nationalism. What is shameful in
it? Jan Sangh, Hindumahasabba, R.S.S. and Swatantra were with us. I thank them. (Marmik
1970)
After Marmik, Bal Thackarey started Saamana (meaning ‘confrontation’), a

Marathi daily. The bold and virulent writing in the paper by its editors and sponsors
against its invented enemies keeps on appearing in the newspaper. In fact, the party
leaves no opportunity to publish such type of write-ups. This keeps the ideology of
the party whizzing around. This also has kept the mobilized flock of the party-men
together over the years and motivates the youth to join the party. Although many a
times civil society has attempted to drag the newspaper to the court and get it
gagged for publishing such news. However, the overt and covert supports by the
administrators of the city to the thinking propagated by the party have every time
rescued the newspaper from judicial strictures. In fact, ‘Bal Thackeray has com-
bined media techniques that portray him as an incarnation of Shivaji, as a deliverer
of unfulfilled promise with purely instrumental alliances and have targeted
Muslims, elite Marathas and Mahar dalits as the enemy’ (Lele 1995, p. 209). The
violence perpetuated by it has often left behind the trail of human sufferings.
To recruit, organize and mobilize youths and supporters, Shiv Sena has had a
well-established structure. At the lower level, it has ‘gata’ (small organization).
A number of ‘gata’ combine to form ‘shakhas’. It has borrowed the organizational
efficiency and structure much from the RSS. Youths spend a long hours at shakhas
or vyayamshalas (gymnasium) and get exposed to its ideology. The unemployed
and uneducated youth form foot soldiers or army of the activists. In addition to the
support of upper caste, white-collar workers and professionals, the Shiv Sena
needed an army of activists to give credence to its name (Lele 1995). It has believed
in a strategy that ‘at least a part of the cadres, have to be young, perpetually new
and assertive and involve themselves in political work that is continuously con-
sidered as “a struggle”’ (Hueze 1995, p. 215).
Shiv Sena (now its splinter MNS as well) has often been involved in using
emotional themes through any kind of tactics for building and maintaining the unity
of its followers. It propagates concept of cultural nationalism and to the aim of
achieving a ‘Hindu Rashtra’. ‘Hindutva has become a convenient ideology in
sustaining this posture in number of ways’ (Lele 1995, p. 204). Issues and occa-
sions have often been chosen and manipulated so as to retain the core supporters
and provide new vigour and enemy to the workers. It had engages in for creating
homogenous Hindu consciousness and construction of stereotypes and demoniza-
tion of ‘others’. It has also represented, as we see later, a new capital–state–
muscle-power nexus and is involved in fostering and being fostered by predatory
capitalism.
To attract potential candidates for recruitments, Shiv Sena has also been engaged
in many philanthropic works. It offers social services in slums, like ambulance
service. The recruitments of followers, in the past, had generally been through
demonstration of force of violence in riots. It also uses family and local associa-
tions, mitra-mandals (friendship organization), and network of clubs to recruit its
sympathizers and army. In fact, many say that the party comprises of those who
want to take political advantage of common man expressing their feeling of
powerlessness through violence (Hueze 1995). Association with Shiv Sena pro-
vides common man an informal power and gives a sense of ‘virility’. By blistering
speeches, Bal Thackeray through his charismatic leadership had been able to
mesmerize both educated and uneducated marathi youths (Katzenstein 1977). In
fact, Dipankar Gupta in 1980 wrote, ‘Bal Thackeray… is in many ways a typical
charismatic leader which allows him to exercise complete dictatorial authority over
the organization’ (p. 24), and use the mass power for his political ends. The petty
236 A. Shaban
goons, who otherwise would be afraid of the police, have found shelter in Shiv
Sena, and the party needs them in order to physically express its ideology. The
informal power or acceptance and omission of criminal acts what the petty mus-
clemen needed and that what Shiv Sena has been able to provide them. In Mumbai,
Shiv Sena ‘organizes presently some 40,000 hardcore activist and perhaps 2,00,000
sympathisers through 210 shakhas (urban branches), about 100 sub-shakhas (gata
shakhas) and several mass organizations, especially trade unions, the Women’s
Front (Mahila Aghadi) and Sthanya Lok Adhikar Samiti that tries to procure job for
educated unemployed’ (Hueze 1995, p. 214). Shiv Sena has also shown extreme
opportunism with regard to its victims. It engaged in violent clashed against the
Muslim League and the Dalit Panthers but also sought their support for mayoral
election in the 1980s. It initially called South Indians as enemies and then moved to
Savarkarian Ideology of Hindu Rashtra perpetuating violence against Muslims. It
has further widened its scope and attacked North Indian migrants along with
Muslims. North Indian Hindus in the city, in fact, had helped Shiv Sena in pre-
cipitating violence against Muslims in 1992–93. South Indian surrendered to Shiv
Sena in the 1970s and became friendly to it. In Dharavi, where most of the lower
income group South Indians and dalits reside, Shiv Sena held special recruitment
drive. These Dalits were later used as instruments for violence against Muslims in
1992–93 riots. A large recruitment of South Indians in the party was carried out in
Dharavi in the late 1970s and early 1980s. Thus, the enemy has changed for Shiv
Sena. The usual prey (South Indians) now feels secure. Shiv Sena chooses its
enemies as opportunities require.
4 Not Much Confidence in Democracy
As the ideology of Shiv Sena (now that of MNS as well) remains that of dictator,
which wants to homogenize people to one culture, one nation, one religion, one
region and one belief, obviously often finds it odd to appreciate Indian democracy
which propagates and assures diversity, respect for all, and to live and earn
livelihood anywhere in the country, irrespective of birth place, belief or culture.
Shiv Sena under the authoritarian grip of its supremo Bal Thackeray had never
disguised his contempt for democracy and adulation of dictatorship (Dhawale
2000). It supported emergency imposed by Indira Gandhi in the 1970s. But many
also believe that the support was mainly due to the fear that Shiv Sena office bearers
would be rounded off and put in prison like those from RSS and Janasangh by
dictates of Indira Gandhi. The emergency was perhaps the only occasion when the
ideology of Shiv Sena and those in RSS and BJP (BJP comprise mainly those from
Janasangh party) diverged so much.
Under the Emergency, the Sena relegated to the background its earlier attacks on Congress
and applauded Mrs. Gandhi’s ascending power. It is said that when Sanjay Gandhi passed
through the city, Thackeray showed his respect by touching his feet. During the pre-election
campaigns this March, Thackeray overruled those in the Sena ranks who supported the
Janata and declared the Shiv Sena’s open alliance with Mrs. Gandhi’s Congress
(Katzenstein 1977, p. 246–247).
Shiv Sena (now MNS as well) has also shown occasional praise to and glorified
Adolf Hitler, Nathuram Godse (who killed Mahatma Gandhi) and Sangh Parivar
(the RSS, VHP, Bajarang Dal, whose ideology remains of Hindu Rashtra and
cultural nationalism). Occasional criticism and mocking of parliament and its
elected representative have been regular appearance in its newspaper Saamana.
5 Violence Omnibus
The hallmark of Shiv Sena has been its ability to perpetuate violence. The ability
that it has bestowed to its cadre to engage in violence through its ideology is
noteworthy. Since its birth in 1966, it has always expressed its ideology in violent
ways. Of course, the state machineries have often looked other side and thus
supported it covertly. While returning from the first rally organized by Bal
Thackeray in 1966, Shiv Sainiks (supporter of Shiv Sena) targeted South Indian
establishments, looted and burned down restaurants. They also kicked and attacked
South Indians on their way to the rally and while returning from the same. The
Maharashtra—Karnataka boarder dispute provided another opportunity to Shiv
Sena to display its power in Mumbai in February 1969. The riots against
Kannadigas led to loss of 59 lives, 274 persons wounded, 151 police men injured
and property worth millions destroyed and looted. It was the first and the last time
that Bal Thackeray was arrested (Dhawale 2000; Hueze 1995; Lele 1995). Another
major event was 1984 in Bhiwandi where allegedly many from Shiv Sena were
invloved in riots against Muslims and destroying their properties. The anti-Muslim
riot in 1984 and 1992–93 is chilling reminder of the support base of the party and
its penetration in the police. Wherever its political leaders could not reach (like
those in Muslim ghettos of Byculla, Nagpada, J.J. Marg and Pydhoni) to kill
Muslims, the police did the job. On occasions, it has been engaged in violent protest
against the people from other states in the city. It has specifically targeted North
Indian (those from Bihar and Uttar Pradesh). Bengalis have been scoffed as ‘use-
less’, and ‘lowly’, and Muslims from West Bengal have often been innovatively
targeted as Bangladeshis. As mentioned earlier, Shiv Sena has not even spared the
film personalities like Amitabha Bacchan, Shahrukh Khan and Shabana Azmi from
its violence. The art and media are its favourite targets. It has also violently targeted
on occasions new year celebration and celebration of Valentine’s Day, as it regards
them of Western origin and pollutant for Hindu culture.
Shiv Sena has shown tremendous ability of political innovation and at the same
time translates the innovations into violence in order to eradicate ‘others’. One of
the main targets of Shiv Sena has been communists and leftists. The party used its
regional and religious agenda so effectively that communist movement which was
extremely strong in Mumbai disappeared within two decades (by 1985). Shiv Sena
238 A. Shaban
set up Bharatiya Kamgar Sena (BKS) on 9 August 1968. It needed to break other
unions in order to establish its supremacy in working class. Through violence and
muscle power, it succeeded in breaking the labour unions having communist
support. Some major examples of communist-led unions that were broken in this
manner were the AITUC unions of Larsen and Toubro, T. Maneklal and Parle
Bottling Plant in Mumbai, and the CITU unions of Devidayal Cables, Wyman
Gordon and Surendra Industries in Thane (Dhawale 2000). The congress-led
governments and the capitalist class (mill owner and media baron) actively sup-
ported Shiv Sena in its project. The climax was reached on 6 June 1970, when
armed members of the Shiv Sena murdered the sitting MLA of the Communist
Party of India (CPI), Krishna Desai. Krishna Desai was a popular militant mass
leader in the textile belt and had been elected as municipal corporator four times
before he was elected to the state assembly in 1967 (Dhawale 2000).
5.1 Targeting Minorities
Shiv Sena has constantly changed its enemies except that of Muslims. Many from
South India (South Indians were once targeted by Shiv Sena) have become a part of
Shiv Sena and are now its violent workers and foot soldiers. Many North Indian
Hindus have been actively siding with Shiv Sena over the years and more so when
South Indian were targeted. Against Muslims, both North and South Indian Hindus
and even those belonging to dalit community (as in Dharavi) were utilized in 1984
and 1992–93 riots. Shiv Sena has not willingly pitched these regional, religious and
caste groups against each other, but for saving themselves from the violence of Shiv
Sena and ideological convictions within have led these groups to behave in such a
manner. By associating with Shiv Sena, they feel more secured, as they have
experienced and seen failure of the state to provide them security. Further, religious
divides and conflicts lead these regional and caste groups to unite with Shiv Sena
(and other Hindutva ideologues such as RSS, VHP, BJP) to target Muslims. Shiv
Sena uses religious occasions and festivals for political ends. They serve as a
platform for continuously keeping in touch with masses and keep the masses ide-
ologically intoxicated. Major festivals such as Durga Puja, Ganesh Chaturthi,
Shivaji Jayanti and Navratri are used to spread the Hindutva (to turn the Hindus
against its imaginary religious enemies) and regional ideology (to divide them on
regional line to garner local votes) and recruit people in party fold.
A large section of Muslims in Mumbai lived and continue to live with precarious
livelihood and lack of appropriate shelter (Shaban 2010). Shiv Sena never ran the
analysis of employment situation of Muslims vis-à-vis Maharashtrian Hindus as it
did for South Indians. The attacks on Muslims were based on perceived sense of
their being Pakistan supporters, Bangladeshis and fear that they through their
population growth will take over the Hindu population.
Indeed, the Sena did not claim (nor would it have rung true) that Muslims were taking jobs
or educational places or housing away from Maharashtrians as the Sena had claimed about
South Indians in the 1960s. No exposes about Muslim economic encroachment, similar to
the 1960s lists of South Indian company employees, ran in the pages of Saamna, Shiv
Sena’s daily. Rather, there were at best vague allusions to the burden that must be borne by
the taxpayer who has to support ever the allegedly rising numbers of illegal (Bangladeshi)
immigrants and to the Muslim (Bangladeshi) hawkers who crowd the roads and to the
thousands who occupy scarce space, preying on urban services in an already overcrowded
city. Muslims were not portrayed as traders whose wily ways were suspect or as privileged
professionals who dominated the higher rungs of the city’s white-collar occupations. What
Muslims were- according to the Sena’s creed- were seditious. It was their presumed lack of
political identification with the Indian nation rather than their societal position that was the
subject of Shiv Sena’s diatribes. (Katzentein et al. 1997, p. 376)
In the 1980s and 1990s, India–Pakistan relations became major determinants of

Hindu–Muslim relations, particularly in urban areas in the country. By targeting
Muslims, the right-wing Hindu groups enjoyed vicarious feeling of punishing
Pakistan. For Muslims, it became difficult to watch live telecasts of cricket matches
between these two countries particularly in offices, hostels and other public places.
Appreciation of game and players for their ability, and if they belong to Pakistan
and the appreciators were Muslims, was construed to be anti-national. Those who
celebrated win of Pakistan were considered gaddar (disloyal) to the nation and
needed to be punished at appropriate time. Then, there were also those Muslims
who celebrated winning of Pakistan team. The appreciation or support of team
slowly translated into religious hatred. The vent often came out in the form of riots
against Muslims. Shiv Sena (even BJP, VHP and Bajarang Dal) understood the
potential which the cricket matches offered to them besides other issues like Ram
Mandir at Ayodhya and Shah Bano case. This ideology later also got combined
synergistically with the US ideology of pursuance of war against terrorism. As
such, Shiv Sena has systematically targeted Muslims and sometimes other
minorities as well in a cynical attempt to build its mass support. Involvement of
Shiv Sena in anti-Muslim riot in Bhiwandi (a suburb of Mumbai) in 1970 led to the
death of 43 people. The riot also spread to Mahad and Jalgaon (where 39 people
were killed). The property, mainly of Muslims, of millions of rupees was destroyed.
The early eighties in Maharashtra, as elsewhere in the country, saw the first stirrings of a
new drive launched by the forces of Hindu communalism, which was spearheaded by the
RSS-controlled Sangh Parivar. Capitalising on events like the Meenakshipuram conver-
sions, terrorism in Punjab and Kashmir, Christian missionary activities in the north-east and
so on, the VHP began to make direct appeals for Hindu consolidation to meet these
challenges. Ganga Jal yatras were taken out across the country and the Ram
Janmabhoomi-Babri Masjid dispute was deliberately raked up. The communal cauldron
was being stirred up by the saffron brigade (Dhawale 2000).
Shiv Sena took up the Hindu revivalist tendency in Maharashtra more promi-
nently. It started translating the ideas which Savarkar, Hedgewar, Golwalkar and
latter RSS propagate.
240 A. Shaban
Invigorated with communal ideology propagated by the BJP, VHP and RSS and
yatras (travel) for Ram Mandir, Shiv Sena unleashed its violence against Muslims
in Bhivandi Riots in 1984.
The provocation for the riots was a public speech by Bal Thackeray wherein he made
derogatory remarks against the Prophet, Paigambar Mohammed. These remarks were
printed in exaggerated form by some Urdu papers. As a reaction to this, in far-off Parbhani
in the Marathwada region, a Congress MLA, A.R. Khan organised a large protest in which
Thackeray’s photo was garlanded with shoes. This ignited the fuse which led the Shiv Sena
to unleash massive riots in which at least 258 people were killed, thousands injured and
property worth millions destroyed. The riots were replete with terrible instances of cruelty,
the most heinous being the Ansari Baug massacre at Bhiwandi (Dhawale 2000).
The venomous attacks on Muslims who have always been seen as traitors and
anti-Hindu by right-wing Hindu parties and their sympathizers provided the needed
platform to Shiv Sena for its resurrection in the mid-1980s. In 1986, Shiv Sena in
order to capture the loyalties of Hindus in villages started ‘Saffron Week’ all over
Maharashtra. Opening up of lock of Babri Mosque during the same time by Rajiv
Gandhi led regime and subsequent further polarization of Hindu and Muslim
masses helped Shiv Sena in propagation of its brand of Hindutva more
conveniently.
Another opportunity came to attack Muslims in 1992–93. On 6 December 1992,
Babri Mosque in Ayodhya was attacked and demolished. Muslims started
protesting against the government which could not prevent it and those who did it.
Violence started in Mumbai. An unprecedented attack started on Muslims, only to
be repeated in Gujarat riots in 2002. Great brutality and dehumanization were
displayed by Shiv Seniks. It led to the counter violence by Muslims (largely by
criminals and underworld) through serial bomb-blast. This was also first time in
Mumbai’s history that such a coordinated and managed bomb-blast took place, as
were riots. The violence has often helped the Shiv Sena in its political game plan,
for which, in fact, it uses the violence. In 1995, Shiv Sena in alliance with BJP
emerged as victorious party in state assembly. Thus, riots paid up. Later, Srikrishna
Commission Report on Mumbai Riots in 1992–93 thread bared the involvement of
Shiv Sena in killing of Muslims in the city (Punwani 2010).
Attacks against dalits, tribals and Muslims had occurred, independent of each
other, before and during the seventies, they continued in the eighties. A highly
publicized event in 1981 placed the fear of rising subaltern militancy in the larger
context. With the conversion to Islam of a thousand dalits in the South Indian
village of Meenakshipuram, the fear of loss of hegemony of savarna (upper- and
middle-ranking castes) elites came to be expressed as danger lurking of Hindus
being reduced to a minority in their own country. Discrete local acts of defiance by
dalits and Muslims could now be explained as a part of nationwide conspiracy
financed by foreign powers. The support received by the janajagaran movement of
the Vishva Hindu Parishad (VHP) and the popularity of the slogan ‘Say with pride,
I am a Hindu’ (gurve se kaho hum hindu hain) bear testimony to the fact that the
changing conditions of material life were providing an easy breeding ground for an
old ideology in a brand new manifestation (Lele 1995, p. 201). And this is what the
Shiv Sena has used effectively for its political end. Further, repeated propaganda for
dehumanization and demonization of Muslims has been carried out.
5.2 Targeting Dalits
Shiv Sena is a party with brahminical, kshatriya and kayashtha loyalties. It has got
supports from other Hindu castes because of their loyalties to Hinduism and lack of
independent thinking from system in which they are embedded. The Dalit Panther
was set up by Neo-Buddhist dalits in 1972, and it attacked the perpetuation of caste
system by attacking Hindu Gods and Goddesses. The first flash point came in
January 1974, when there was a violent clash between Shiv Sena and Dalit
Panthers. Shiv Sena unleashed riots and violence against dalits in BDD chawls
(where most of dalit workers reside) in Mumbai. Dalit Panther leader Bhagwat
Jadhav was brutally killed by Shiv Sena musclemen. Since then, the animosity
between Shiv Sena and radical dalits (Hindus and Neo-Buddhist) continues. In rural
Marathwada and Vidarbha, the attack on dalits continues. They are attacked for
their encroachment on fallow land or water bodies. The Mandal Commission
controversy in the late 1980s and early 1990s further brought to the fore the anti-
dalit character of Shiv Sena. Bal Thackeray opposed caste-based reservation. This
in turn assured him loyalties of upper caste Hindus not only in Maharashtra but all
over India. In 1988, the publication of Dr. Ambedkar unpublished work ‘Riddle in
Hinduism’ further provoked Shiv Sena which started abusing Dr. Ambedkar for
assault on Hindu Religion and breaking it up. The attack on Mahatma Jyotiba
Phule, another great champion of radical social justice, by RSS leaning journal
‘Sobat’ around the same time further crystallized the upper castes and widened its
wedge with lower castes (Dhawale 2000). The renaming of Marathwada University
after Dr. Ambedkar provided another opportunities to Shiv Sena and its right-wing
alliance parties to carry out violent suppression of dalits.
6 Capitalist Linkage, Extortion and Other Nexuses
Shiv Sena has overtly and covertly been in alliance with a number of petty and
hardened criminals. Lele says,
By the early eighties the most characteristic feature of Sena was its image as nothing more
than a network of gangs which thrived on extortion of protection money from hawkers,
businessmen, shopkeepers. It also became known for extortion from and actual involve-
ment in the various illegal deals in the larger construction, contraband and drug-trafficking
industries (1995, p. 199).
Shakhas of Shiv Sena paved the way of entry of criminals. As mentioned earlier,
shakhas recruit urban unemployed and underemployed youths. Many petty
242 A. Shaban
criminals and those ambitious to find political power join the shakhas. The
extra-legal authority of Bal Thackeray also provide legitimacy to violent acts of the
criminals and position/status within the urban power hierarchy. Through Shiv Sena
for the criminals ‘opportunities were opened for individual material gain through
collective action of rioting, looting and extortion’ (Lele 1995, p. 199). However,
1995 onwards (when it came to power), there has been gradual disillusionment of
middle-class white-collar workers from the party. Presently, ‘the most abiding core
of Shiv Sena activism is located most firmly in Bombay’s lumpenized youth’ (Lele
1995, p. 200).
Shiv Sena has also been blamed for having its active link with underworld and
crime mafia. Bal Thackarey himself declared, ‘if they (Muslims) have their Dawood
Ibrahim, then we have our Arun Gavli’ (Dhawale 2000). Gavli belongs to lower
castes and fell out from Shiv Sena due to his loyalty towards Chhagan Bhujbal, a
lower caste Shiv Sena leader who came out from Shiv Sena due to its opposition to
Mandal Commission recommendations and promotion of Manohar Joshi by Bal
Thackeray against Bhujbal. Later on underworld dons, Amar Naik and Ashwin
Nayak (two brothers) got patronized by Shiv Sena, and when Amar Naik was killed
by the police in an encounter, Samanaa denounced it as selective killing of Hindu
and Marathi mafia dons by the police and leaving out Muslim don Dawwod
Ibrahim. Shiv Sena also nominated the wives of these dons for MCGM election,
and one of them was also promoted for Assembly Election (Vidhan Sabha
Election). After the serial bomb-blast in Mumbai in 1993, Shiv Sena has tried to
patronize Chhota Rajan gang by declaring him as Hindu don. In fact, the 1980s and
early 1990s were peak periods of relationships between Shiv Sena and Organized
Criminal Gangs within the city. In this period, Shiv Sena accumulated power
through local neighbourhood and criminal networks. Several well-established
gangsters, major slumlords and dadas (goons) ran on Shiv Sena Tickets (Lele 1995;
Hansen 2001).
Since the beginning, Shiv Sena stood against the communists. It often sided with
capitalists to break the trade unions run by the organized labours. ‘It in fact
described some big capitalists as annadatas (food givers) of Maharashtrians, while
describing ‘all lungiwalas’ (South Indians) as criminals, gamblers, illicit liquor
distiller, pimps, goondas and Communists’ (Lele 1995, p. 190). In the late 1960s
and 1970s, attacks on South Indian establishments became a regular feature, and it
was then that the extortion racket under the name of ‘protection money’ began. In
1968, cinema theatres screening Hindi films brought out by South Indian producers
were attacked and the shows brought to a halt. ‘…attacks on property were easily
transformed into a protection money racket and were made a source for financing
many shakha activity’ (Lele 1995, p. 195).
Corruption charges have repeatedly been made against many leaders of Shiv
Sena by Gandhian activist and social reformer, Anna Hazare. The list of corruption
included names of Bal Thackarey, Pramod Mahajan, Manohar Joshi, Narayan Rane
(now in congress (I) party), Shashikant Sutar, Babanrao Gholap, Mahadev
Shivankar, Nitin Gadkari, Shobha Phadnavis (all Shiv Sena-BJP ministers in Shiv
Sena–BJP government during 1995–99), Kirit Somaiya, Raj Thackeray and many
others. In some cases, the High Courts and Inquiry Commissions passed strong
indictments, due to which Shiv Sena ministers Sutar and Gholap were forced to
resign from the Cabinet (Dhawale 2000). In fact, the muscle power of these leaders
is such that media has been afraid of seriously taking up the charges, and police due
to its own corruption, religious, caste and regional loyalties have looked other way.
‘The “Maharashtra Times” of January 13, 1994 published a shocking report, which
was never denied by Shiv Sena sources, that a fund of five crore rupees was being
collected by the Shiv Sena through large-scale extortions and other means, and that
this fund would be presented to Bal Thackeray on his 67th birthday, the following
week. Compulsion was made that every Shiv Sena MLAs in Maharashtra must give
rupees one lakh, every corporator Rs. 50,000 and every shakha pramukh Rs. 25,000
to this fund. The report said that even the previous year, a similar fund was col-
lected (Dhawale 2000). However, the ideology of Hindutva and its real-time
demonstration keep people loyal to Shiv Sena. The police and media both remain
under its influence.
7 Attack on Media, Art, Culture and Judiciary
Shiv Sena has always successfully bullied the media to its favour. Further, rec-
ognizing the danger of opposing Shiv Sena, and the market Shiv Sena presents,
media has also willingly sided with Shiv Sena and facilitated its political agenda.
The media and literary persons who attempted to deviate the line of submission
have been attacked. Shiv Sena’s first attack was on P.K. Atre, a Samyukta
Maharashtra Samiti leader and communist. Bal Thackeray hated communists as
they stood between his ideology and people. He started attacking Atre by
derogatory names. In ‘Marmik’, he used to refer Atre as ‘that pig from Worli’
(Dhawale 2000). The location of office of Maratha which Atre was publishing was
in Worli. In 1967, Atre was attacked in a meeting by Shiv Saniks but escaped. In
October 1991, three journalist (including two women) were assaulted for protesting
against Shiv Sena attack on Marathi eveninger for writing editorial against Shiv
Sena’s involvement in digging pitches prepared for India–Pakistan cricket match.
Later on, Shiv Sena’s ‘Dophar Ka Saamna’ (noontime Saamana) started attacking
women journalist by characterizing them as ‘prostitutes’ (Dhawale 2000). Shiv
Seniks attacked Nikhil Wagle, editor of ‘Mahanagar’ in 1993 when he was
addressing a seminar, and in 1994, they assaulted a dozen of journalist in
Aurangabad in February. Subsequently, ‘Lokmat’ (Marathi daily) office was van-
dalized by Shiv Sainiks.
Justice Srikrishna who headed the commission of enquiry on Mumbai 1992–93
riots was attacked by Samanaa as ‘biased, anti-Hindu and pro-Muslim’, Shiv Sena
also attacked Vijay Tendulkar, a playwright, for his plays ‘Sakharam Bunder’ and
‘Ghasiram Kotwal’, as the plays exposed the degenerated ways of the Peshwas,
Brahmin rulers of Maharashtra. Dilip Kumar, the famous film actor, was declared as
‘Pakistani’, when he defended Deepa Mehta’s film ‘Fire’ which depicted lesbian
244 A. Shaban
relationship and also accepted Nishan-e-Pakistan (an award for his achievements).
Even High Court decisions are not spared. Bal Thackarey attacked the judgment of
high court which ruled to unseat some BJP-Shiv Sena MLAs. In a speech in 1991,
he termed high courts and judges as ‘corrupt’ and ‘partial’ (Dhawale 2000). In
September 2008, Raj Thackeray imitating the style of his uncle Bal Thackeray,
challenged a Mumbai police officer, with the statement ‘He (the police officer)
should come out without his badge and uniform and he will know to who
Maharashtra and Mumbai belongs to’ (Indian Express 2008). The police officer had
protested and cautioned Raj Thackeray against the threatening email send by him to
every shop-owner in the city to put their signboard in Marathi. The statement the
police officer gave was that Mumbai belong to none but every Indian and so they
can put their signboards in the language they wish.
8 Contradictions Within
Shiv Sena is an amalgam of contradictions and opportunism. It uses the tools which
suits its most to further its ideology and political ends. Playing religious and
regional cards, it brought workers associated with the left to its own fold. It sided
with capitalist class against communists in the city and latter started attacking them
for not recruiting enough Marathis. It has tendency to shift from parochial and local
issues to Hindutva and all India nationalism as situation desires. It uses cultural
symbols of god and goddess to pull people from all-walk of life and also degrades
common man by calling them with regional and cultural derogatory names like
Biharies, Bhayyas and lungiwallas (South Indians). It is led by regionalism and
simultaneously nationalism, and it is guided by national Hinduism but becomes
parochial and attacks even Hindus on regional basis.
Shiv Sena is interesting phenomenon. It promotes agitations and riots in the
name of order. It engages in garnering political power but hates democracy and
politicians and gives adverse remarks on the Parliament. It hates communists and
socialists, but directly inherits their ways of protesting, organizing and vandalizing.
The communist worker unions have taught many tactics to Shiv Sena, and it used it
with utmost brutality. It promotes masculinity through vyayamshalas and speeches
of its leader by calling congressies as chhakka (eunuch) and offering them bangles,
but it also equally thrives on Mahila Aghadi, many of who assisted in perpetuating
violence on women of minorities and looting in 1992–93 riots. The women sup-
porters have not only been used to block the arrest of several of its leaders in the
past but during 1992–93 riots also ‘prevent fire engines from going to Muslim areas
engulfed in flames, and even loot stores and attack Muslim women’ (Banerjee
1996, p. 1214).
Shiv Sena perpetuates ‘dada culture’, ‘goondaraj’ (rule by criminals and mus-
clemen) but aspires for ‘Chhatrapatiraji’ (benevolent dictatorship) (Lele 1995;
Hueze 1995). It has converted the poor and vulnerable into marauding mass.
Shiv Sena leaders are among the most vociferous in condemning criminal activities,
hooliganism, smuggling and so on. Usually they say that it is not ‘their people’ who are
involved, but only Muslims or other ‘alien’ (in their view) people (Hueze 1995, p. 226).
Bal Thackeray condemned the violence by the Communist trade unions, but he
himself led the violent mobs against others. He wrote:
The Communists in India desired to bring to this country Communist rule by violent ways,
to organize country-wide strikes, to bring about destruction, to create disorder … and to
establish red dictatorship. (Marmik 1961).
It attempts to provide rup (shape) to the city. The rup for them is ‘beauty’ but
engaged in violence, riots and looting. It is called by Heuze as ‘a monster of
ambivalence’ (Hueze 1995, p. 230) and ‘a place where bad can become good’
(Heuze 1995, p. 226, emphasis in original).
9 Summing Up
Shiv Sena has been master of political innovations, derogatory terminologies and
violence. It has been sporadic but predictable hunter. It changes its targets and
attacks victims with its ferocious force. It is also a bundle of contradictions. At each
stage till now, it has overcome these contradictions through political and social
engineerings. Although it involves in act of violence, killing and crime, it has its
most loyal friends and sympathisers in police and administrations. It has inherited
the ideology of Hindutva and preaches cultural-regionalism/nationalism which
threatens the existence of minorities and people from other cultures. The fertile
grounds for Shiv Sena had been provided by the failing successive governments in
delivering development to the people. The marginalization of lower class over the
years has further added to its advantage. It has been said that
one of the major reasons for the success of the communal appeal, whether of the Shiv Sena
or the BJP, is … the fertile soil provided by the deepening economic crisis resulting from
the policies of successive Congress governments. Another important reason has been the
ruling class tendency of compromising with the communal forces, at both national and state
levels. In the case of the Shiv Sena,…this tendency has been exhibited with a vengeance
(Dhawale 2000).
Mumbai as a city of diversity has for a long time remained threatened with the
ideology of cultural homogeneity propagated by Shiv Sena.
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Shiv Sena. Asian Survey 36 (12): 1213–1225.
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Madhushree Sekher

ISBN 978-981-10-5962-9 ISBN 978-981-10-5963-6 (eBook)

© Springer Nature Singapore Pte Ltd. 2018

Printed on acid-free paper

This Springer imprint is published by Springer Nature

The governance discourse has been dominated by a language of apparent rationality

Part I Introduction: Setting the Scene

Part II From Government to Governance

Part III Rethinking and Restructuring Governance

Technology as a Driver for Governance by the People

Part IV Governance and Inclusion: Navigating the Roadblocks

Madhushree Sekher is a Professor at the Tata Institute of Social Sciences,

focusing on human capital development and equal opportunities; water resource

S. Parasuraman, Madhushree Sekher and Ruth Kattumuri

S. Parasuraman M. Sekher (&)

© Springer Nature Singapore Pte Ltd. 2018 3

as an outcome of human endeavour, and is not a ‘neutral phenomena’ or an ‘auto-

the scope of debate and divergence in the understanding of ‘governance’ to achieve

1 Debates and Discourse

Bevir (2010) in his earlier work ‘Democratic Governance’ provides a compelling

3 Organisation of the Book

This volume amalgamates grounded accounts of various state experiences in the

3.1 From Government to Governance

3.2 Rethinking and Restructuring Governance

3.3 Governance and Inclusion: Navigating the Roadblocks

Madhushree Sekher, S. Parasuraman and Ruth Kattumuri

M. Sekher (&) S. Parasuraman

© Springer Nature Singapore Pte Ltd. 2018 15

The tendency of scholarship to view government and governance as two ends of

2 Governance: A Brief Articulation of the Landscape

Fig. 2 Progression of discourse on governance and governed

Figure 2 provides a synoptic picture of the progression of discourse on gover-

the beginning of the idea of governance as an action of a layered governing body

3 Understanding Governance: A Conceptual Framework

Fig. 3 Conceptualizing the governance and governed link

While there has been an unprecedented increase of interest in governance in recent

© Springer Nature Singapore Pte Ltd. 2018 27

1.1 Governance: Idea and Practice

The term governance is polysemic, employed in a variety of ways to communicate

2 Why Governance in India?

Using a broadly new institutional framework allows us to both see the

governance’ agenda, using grassroots organizing to push for greater transparency

© Springer Nature Singapore Pte Ltd. 2018 43

2 1994–2004: The Nelson Mandela Government,

The ﬁrst democratic government in South Africa inherited a governance machinery

The negotiated transition and the constitutional order provided the

3 Three White Papers: The RDP; The 1995

As stated above, apart from the macro-constitutional framework, the post-apartheid

represented a vision for the fundamental transformation of South Africa. It sought

Information 1995). The third, longer-term objective was designed to improve

4 1999–2004: Transformation and Integrated

5 Integrated Governance and Planning

6 Intergovernmental Relations, Co-operative Governance,

7 Anti-corruption and the Promotion of Good Governance

8 2004–2008: Towards a Developmental State, South

Having learnt some important lessons from preceding governance experiences,

• Building infrastructure to grow the capacity of the economy;

9 2009: The Jacob Zuma-Led Administration

partnerships with society for equitable development; and strengthening democratic

10 The Elusive Quest for a Capable, Developmental State

of a “capable state”, which it regarded as a “precondition for development” (NPC

shadow. The government appeared to underestimate the managerial, technical and