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More than hoarders of black money, the Prime Minister, Mr. Narendra Modi’s announcement on November 8 to demonetize high value currency to strike at the root of illicit wealth appears to have stunned his political opponents. Coming within weeks of the surgical strike against Pakistan, through which he signaled his ability to take decisive action, the blow that he struck against hoarders of black money a fortnight ago has put him way ahead of the competition.

It is true that the roll out of the scheme has been rather clumsy and different organs of the government are struggling to cope with the challenges posed by demonetization, resulting in long queues outside banks and hardship for people wanting to exchange old currency for new. Yet, the large mass of people all over the country have given the idea a big thumbs up, because barring a few diehard critics of Mr. Modi, nobody is doubting his intentions. This is indeed extraordinary, because it is difficult to recall the last time an Indian prime minister commanded the trust of the people across the length and breadth of India and that too when people from every strata of society have been hit by the sudden absence of liquidity in the system.

Meanwhile, the opposition has begun to whip up tensions over the non-availability of new currency leading to long queues outside banks. Thus far, the people have refused to fall for the bait, but the government machinery needs to do much more if it is to prevent trouble on the streets. However, going by how the demonetization plan has worked out in the first two weeks, one thing is obvious: The country now has a prime minister who is given to out-of-the-box thinking and who is determined to end the status quo mentality of the Nehruvian establishment that he has inherited. But, he does not have the kind of machinery which he needs to carry out his policies. Although he has given the bureaucracy many a pep talk, it is mired in the inertia and the sluggishness of the past seventy years and is finding it difficult to cope with him. The massive problems encountered in the roll-out of the demonetization scheme is a pointer to the fact that the prime minister and the administrative machinery through which he operates are not running at the same pace. Mr. Modi has publicly declared his intention to take several more tough measures to achieve the goal of cleaning the body politic, which means we must be ready for many more big ticket programmes. But, does the Prime Minister have the administrative apparatus to carry out his plans?

Going by the experience of the past fortnight, it seems some innovative strategies will be necessary to upgrade the management skills of government. One way of dealing with this is to ensure lateral entry of management experts, who are currently outside the government system. Given India’s complexities and the pace at which Mr. Modi wants to bring about change, a good mix of the best minds in government and the private sector may be necessary to manage specific schemes. In order to do this, the prime minister will have to break the shackles of tradition and entice the best minds within and outside the government to come in and help him achieve his goals. Within government, he could look at officials in the various services with strong technology and management backgrounds and get them to work alongside those who come in from outside the system. From the private sector, Mr. Modi could look at individuals who have specialized in the rural market or those who have found innovative ways to capture the market at the bottom of the pyramid. In this, the prime minister can look at the way the U.S President picks his team. Many of those who get the top jobs in the administration come from the private sector, fit into the system, and get on to doing something else after their tenures in government are over. Rather than seeing the chosen one as an intruder or an outsider, the American bureaucracy welcomes the new entrant and goes about its business in the most normal way.

Since Mr. Modi is given to questioning the efficacy of existing practices, he could look at the possibility of opening the doors of government to management specialists hired specifically to manage national programmes. This can happen if he can end the stuffiness of the Indian bureaucracy, which has the reputation of resisting “outsiders” and killing their creativity.

In India, the bureaucracy has come to accept political bosses as the inevitable consequence of the democratic system that is in place. Unless a minister is seen as a person who knows his onions, the bureaucracy treats him with disdain, but every bureaucrat is trained to work with his minister. However, there is much resistance to the idea of lateral entry into the bureaucracy. Political bosses are okay in the sense that they are a necessary evil, but the entry of “foreign bodies” into the administrative set-up must be resisted and challenged. Those who do not have a ‘batch”, a “service” and a “year” to refer to, have no business being in government!

This will have to change. The new India that Mr. Modi wishes to build will need a new administrative machinery. Given the Indian reality – a good percentage of the people still below the poverty line and still not literate; an aspirational middle class that wants a quick transition to the better life; and well-meaning governments both at the centre and in many states which want well-crafted government schemes to reach the right beneficiaries without huge transmission losses, the new structure will have to be a proper blend of bureaucrats who have grappled with problems at the grass roots and management specialists from outside government, who are not weighed down by bureaucratic baggage. In other words, it will have to be a combination of the old and the new, the traditional and the radical.

In order to achieve this, the prime minister will have to shake up the system and trigger a paradigm change in the way government works. This will be the next big surgical strike that he will have to undertake, in order to have the machinery that can execute his plans. Let us keep our fingers crossed!

Dr A Surya Prakash
Distinguished Fellow, VIF
25 November 2016

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