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Catch-22 of the Indian state
Abinash Chaudhary
08 October 2012

"The State is not reality which stands behind the mask of political practice. It itself is the mask which prevents our seeing political practice as it is" -Philip Abrams

Last week, a constitutional bench headed by former chief justice of India SH Kapadia gave its opinion on two important issues. In a ruling on the Presidential Reference in the 2G Spectrum auction, the court said profit maximisation cannot be the only basis for allocating natural resources. The division bench ruled that the allocation of natural resources is a policy decision which should be backed by social and welfare measures. Further, the ruling said it cannot prescribe or proscribe method of allocation of natural resources but can undertake judicial scrutiny on a case to case basis.

In the Karnataka government review petition on Prime Minister-led Cauvery River Authority (CRA) decision, the sc has firmly directed the state government to adhere to the orders of the Prime Minister, who heads CRA.

These decisions bring to light one question. Just who holds the prerogative for making policies in a democracy? Who among the Executive, Judiciary and Legislature has the ultimate power to make the law of the land and take a policy decision?

State in a developing world has the unique responsibility of promoting economic growth while ensuring equality for its subjects. Indian state is no exception to this rule. It was in to promote economic growth and ensure equality to all that within 65 years of independence, the Indian state has transcended from being a reluctant pro-capitalist state with a Nehru-Mahalanobis socialist model to a pro-capitalist state with a neo liberal ideology of post- Washington consensus.

The 1991 reforms and the Indian state's decision to open its market to foreign investment also brought along possibilities of drastic development and redistribution in the country. So much that though we have registered a very high economic growth rate in the past two decades, there has also been a significant widening in the gap between the rich and the poor. The eternal debate of India vs. Bharat has fast become mainstream and the notion of development for rurban poor is no longer the same as it is for the urban rich. So the balance of power is heavily skewed in favour of rich and middle class.

This goes against the notion of public policy making being the sole domain of the elected government and Parliament in a welfare state. Elected governments are expected to have unselfish benevolence, for which ordinary citizens delegate them decision making authority through the electoral process. Once the 'will of the people' is established through elections, the elected government are expected to move quickly the desired social goods for people at large while keeping themselves accountable to their electorate.

The Supreme Court opinion came at a time when the Manmohan Singh government is taking some tough policy decisions following much loss of face over the so-called policy paralysis and growing corruption in its three year rule. The Comptroller and Auditor General (CAG) has been seen as the biggest tormentor for the government for loss theories 2G spectrum allocation, Coal block allocation etc. But given the broader contours of a welfare states and idea of 'check and balance', we can easily make out that the CAG's decision to prescribe and proscribe government policy in recent past is ultra vires. The CAG has clearly followed a maximalist position. Profiteering, it argues, cannot be the sole motive for a welfare state while taking policy decisions. True. But also true is the fact that today mobile telephony penetration is highest and cheapest in India and it has eventually benefited both rich and poor alike. Even in the coal allocation policy, it needs to be substantiated case by case. All the companies allocated coal blocks cannot be painted with one brush as a big chunk of them are state owned companies (PSUs), top Indian private companies and then a small bunch of new entrant.

There is no doubt that the CAG has done a great service to the nation over the years and will continue to do so. But in the past we've also seen instances like the Bofors deal where the CAG leveled charges against the government and post retirement, the chief of CAG joined the main opposition party.

This time too it looks like the CAG has exceeded its limit. We need to tread cautiously. Let the CAG report be scrutinised by the Parliamentary Accounts Committee (PAC) and the final report be submitted to Parliament. Till then we should not jump the gun. In an apparent reference to the CAG report on loss in coal blocks allocation, Justice Kapadia had pointed out: "The basic fact is that loss is a matter of fact, whereas profit or gain is a matter of opinion." In the absence of economic literacy, coupled with legal literacy, "government institutions will suffer... in terms of democracy, and the economy will be in peril."

To conclude, I am reminded of Friedrich Engels remark, "The state presents itself to us as the first ideological power over the man."

(The writer is an Associate Fellow at Observer Research Foundation, New Delhi)