Introduction

The primary concern of this chapter is whether panchayats can be leveraged for effective provision of services and achieves the desired development outcomes in terms of literacy, health and income. Basic services, in particular for education and health, were identified by the World Development Report (World Bank, 2000) as a key strategy for poverty reduction. A main message of that report is that improvements in services for the poor require enhanced accountability: of service providers to the citizens, of service providers to politicians and of politicians to citizens. Among other possible options these accountability improvements can be achieved by devolution of services to local governments. Choice among service providers also enhances accountability, as do payment or copayment requirements for services.

Chapter 3 raised several administrative and financial issues that form the core of service provision among panchayats in Indian villages, whereas chapter 7 has dealt extensively with qualitative evidence around provision of water and schooling in 4 villages across Maharashtra and Orissa. This chapter serves as the quantitative counterpart to the FGDs in chapter 7.

In India drinking water is the most decentralized service, with panchayats in charge of investments and maintenance. They are allowed to charge user fees, but not all of the panchayats do so. In education and health the panchayat government and the gram sabha have considerable oversight responsibility, which they may exercise with the help of statutory bodies such as VECs or pani (water) panchayats. They can also contribute financially to these services. In education and health, but not in drinking water, citizens can choose from public and private services.

The authors show that during the period of analysis involvement of citizens in the gram sabha has improved in terms of quantity and quality. This is likely to have reduced information asymmetries and therefore enabled citizens to make more informed choices about public services, as well as about their own choice of service providers and time allocation. It is also shown that, if local government panchayats are given adequate powers to manage services, then the quality of service provision, on average, improves substantially. In particular, it is shown that the involvement of panchayats in financing and management increases the availability of education, health and water, and their quality.

Introduction

The process to allow empowerment in the political sphere, reservations to increase women's political power by reserving a share of seats for women who contest in any election has become popular globally. In fact, nearly 100 countries worldwide are reported to practice gender quotas to overcome gender bias and long-standing inequalities. Still, electoral quotas remain controversial. This is due to the suspicion that the effects of political reservations may at best be temporary, or could affect only a narrow clientele. While supporters of political reservations argue that empowering members of historically disadvantaged groups can result in more inclusive processes of policymaking drawing in those previously excluded. To the extent that such measures improve access to public goods (e.g. education or roads) by those who were earlier excluded or marginalized, political reservations can be viewed as Pareto optimal strategy ensuring better development and use of a society's human potential. Critics note that such measures run a danger of bringing to office individuals who lack necessary qualifications and may then be easily manipulated by traditional elites. In addition to adverse effects, reservations, when they are in force, may also adversely affect behaviour by competitively elected leaders who, because they are prevented from standing for re-election, will have their time horizon truncated and, thus, be tempted to adopt myopic patterns of behaviour that do not maximize long-term social welfare.

This chapter explores the effects of political reservations for women in the Indian panchayats. Chapter 3 has shown that the constitution provides reserving a share of seats by rotation in the panchayats. The qualitative evidence from chapter 5 suggests that in panchayats headed by women there is a greater likelihood that both women and men participate actively in the process of governance. The Mani Shankar Aiyar Committee Report (2013) asserts that political reservations have enabled the participation by nearly a million women in panchayats as functionaries and there is not much evidence of capture of power by elite groups either. Other evidence also points to improved service provision and better functioning gram sabhas. In this chapter, empirical evidence of the development impact of political reservation for women on a range of government processes, outputs and development outcomes have been provided.

From Chapter 4, it was possible to infer some of the lacunae in the literature. One of these is the fact that much of the literature is unable to place either the household or a member of the household within a policy space. Consequently, the analysis of household or member level reactions to policy changes or the impact of such reactions on policy is quite sparse. A feature of the analysis presented in this book is the use of a unique panel data of household members, households, villages and panchayats that allows for identification of the relevant policy connections and impact among these units of analysis. For example, this allows us to evaluate the consequences of political participation and decisions of the panchayat on household-level choices and development outcomes in terms of literacy, health, consumption and income.

The basis of the data used for the analysis presented in this book is the Additional Rural incomes Surveys (ARIS) of 1968–69. Three annual rounds of these surveys were conducted ending in 1970–71. The ARIS survey was repeated in 1982, 1999 and 2006. However, starting with 1982 this was renamed as Rural Economic and Demography Survey. The details of the sample selection and some of the summary features of the data are outlined in this chapter.

Sample

ARIS was designed to obtain data on income, investment, saving and consumer expenditure in rural India, from a panel of households first selected in 1968–69. A sample of 5115 households across 17 states was selected according to a multistage stratified probability sampling. The basic unit of the sample was the household. Since it was not feasible to sample the households as the first stage, a list of all villages in a given district or a community development block (CD block) was prepared. These villages were divided into three strata. Villages, covered by the Intensive Agricultural Development Programme (IADP),1 were classified as Stratum 163 villages were selected across 15 states (except Haryana and Himachal Pradesh) for the study. All villages in the community blocks where the Intensive Agricultural Area Programme (IAAP) had been implemented were grouped to form Stratum 2.

Introduction

The preceding quotes by both members of the academic community and the political party suggest that identity defined by Jati (caste) ought to define political processes and help achieve desirable development outcomes for those groups defined by such identities. From Chapter 10, it can be noted that enabling panchayats will create avenues for households to access services. Villages have social networks formed along caste identities that may fracture the ability to arrive at a consensus. Under such circumstances, will decentralization lead to identity-based voting? In fact, from chapter 3 it is learnt that the likelihood that the possibility of such behaviour by households was the reason for many of the founding members of the constitution to oppose decentralization being provided for within its ambit.

With respect to identity-based voting, Munshi and Rosenzweig (2010) have shown that it could result in group members being able to hold elected officials to account and, therefore, allow than to elect more able representatives. This section also analyses bribes, and with respect to both behaviours it goes further by analysing how identitybased voting and payments of bribes improves the access of households to public services and their consumption in the face of imperfections of the governance system.

Introduction

Why should a study of decentralization and its attendant outcomes be taken up? Decentralization and devolution of powers to local governments has been adopted as a development strategy in many countries worldwide. However, it is not merely the sheer number of countries using decentralization as a development strategy that makes it an important reform for comprehensive analysis, rather the systemic change that is expected to be brought about in governance – making it more participatory, transparent and accountable to citizens, which makes it a reform measure worthy of detailed examination. Decentralization is viewed both as a strategy and as a system for bringing about economic development.

Decentralization, as is generally understood, implies devolution of powers to local bodies that are legally separated from the Central government. These local bodies are headed by representatives who are elected by a formally constituted electoral process. These elected representatives are, in turn, vested with powers whose jurisdiction is limited to the geographic boundary of the local body and have been vested with legally guaranteed provisions to make decisions and make use of various financial resources.

The principle of subsidiarity is central to the discussion on decentralization. This is evident in a quote from Tocqueville (1945):

Reid Buckley (2008) goes a step further and asks:

In chapter 5, it was found from the REDS data – that there have been improvements in service provision, access and quality. Such improvements have been modest in most cases. For example, average teacher absenteeism has reduced but is still quite high. The time spent by members of the households in fetching water has declined and a significant number of households in villages now have access to drinking water. However, this evidence is not a conclusive proof that the panchayats were the causal factor in engendering these changes. This chapter begins to explore whether panchayats can help in improved quality of service provision. Qualitative methods are used to examine whether panchayats can succeed in effective management of services specifically, can PRIs be used to provide services such as water and manage education? To what extent and under what conditions will these institutions succeed?

The 73rd constitutional amendment has strengthened the legal and formal structure to the PRIs. It was expected that by adequately empowering panchayats through devolution and promoting rural selfgovernance provision of services will become more efficient. Have panchayats been able to achieve this objective? To provide a few initial insights into the mechanics of service provision, Focus Group Discussions (FGDs), in which various stakeholders are brought together to evaluate and discuss the role of panchayats in service provision and management, were undertaken in two villages each of Maharashtra and Orissa. Maharashtra is industrially and economically more advanced compared to Orissa. It also is one of the states which initiated decentralized governance much before the constitutional amendment in 1992. Problems of water scarcity are common to both states, while the literacy rates in Maharashtra are higher. Both states have introduced legislations that provide improved management of water resources. pani panchayats have come into existence in these two states. The pani panchayat is a voluntary group of villagers engaged in the collective management (harvesting and equitable distribution) of water for drinking and/or irrigation. Meena Manch is an institution specific to Maharashtra to promote the education of girl children. Sarva Siksha Abhiyan has greatly energized the role of the panchayats in Maharashtra in matters related to management of schools while this is not the case in Orissa.

Introduction

The policy of inclusive growth adopted by India as part of the Eleventh Five Year Plan puts a lot of emphasis on reducing poverty and vulnerability and significantly increased government expenditures on programmes, many of which involve implementation via panchayats or in association with them. More specifically the central government has put in place two flagship programmes that both transfer income and reduce the vulnerability of households to shocks, namely MGNREGA and the Food Security Act. Under MGNREGA the panchayats select works and implement them, as well as participating in the targeting of the employment benefits. This has put control over large amounts of resources under the control of the panchayats. In the Food Security Act they participate in the targeting of beneficiaries and also have some oversight responsibilities.

Could panchayats play an even bigger role in reducing vulnerability to shocks via the use of own revenues or untied grants? Would unequal access to services, improper usage of programmes, programme capture, bribes, and inefficiencies in programme delivery, be reduced if they did so? These are the questions pursued in this chapter.

First the impact of ex ante vulnerability on ex post poverty dynamics is examined. Then the components of vulnerability are identified so that policy can be more focused. Finally, the impact of coping strategies on vulnerability and destitution and on economic welfare of households is assessed. More specifically the chapter focuses on five questions.

Does gender of the elected representatives matter, which we assess by measuring the impact of political reservations on reducing vulnerability?

• • What will be the impact of regime changes on resource reallocation and on household consumption? Are all types of regime changes (based on jati or gender) likely to have similar impacts on household vulnerability?

• • Do households fall into a poverty trap, i.e., experience chronic poverty, due to inefficiencies associated with governance?

• • Has local governance contributed to households undertaking less risky coping strategies in response to adverse shocks?

• • During periods of distress, are local governments able to provide insurance through their interventions?

• • After experiencing adverse shocks, is the insurance that the panchayats provide sufficient to eliminate the need for households to cut their food consumption to less than two meals, or to avoid selling of productive assets, and thereby reduce both vulnerability and poverty?

Introduction

In the previous chapter dealt with the impact of political reservations for women in panchayats. This impact is significant and more importantly, appears to be growing over time. There is another way to empower women. It has been shown that women who own assets are significantly empowered within their families and this leads to positive outcomes for both themselves and their family. Of particular interest is to see whether such empowerment gets reinforced by political empowerment.

But, the above quotes reflects wide-ranging prejudices against women owning property, educating the girl children and even panchayats being complicit in reinforcing such behavioural patterns. The relationship between social customs and practices germane to women's ownership of land and being cultivators, and panchayats is often not clear. In India there are often parallel amorphous institutions, panchayats, that regulate the social behaviour – mostly of women. This often includes restrictions on asset ownership, inheritance, education, etc by women.

In addition to political empowerment via reservations discussed in the previous chapter, women can also be empowered by providing them property rights or access to land. It has been shown that such measures significantly affect the life choices made by women (Deininger et al., 2013b). While political reservations lead to avenues for mobilization by women for either economic or political reasons, empowering women by providing access to property alters intra-household dynamics.

The last decade or so has been a rather tame time for analyses of democratic decentralization. Many new case studies have appeared, some of which – not least those that have focused on Africa – have been quite important, and some comparisons across continents have been valuable. But few major contributions to our understanding have emerged.

This book changes that. It is crucially important in several ways. It uses new methods to extract insights from a rich database – so that it offers us sophistication and rigour. It is a study of democratic decentralization, ‘warts and all’ – addressing key issues like corruption with admirable objectivity, and analysing things as they are and not as we might wish them to be. It does not seek to ‘sell’ or to condemn decentralization – it embraces ambiguity. It reminds us that local democracy is not a tidy process, so that we are bound to encounter great complexity. The highly credible, realistic analysis which emerges poses a formidable challenge to the pessimism in much of the literature about the impact of democratic decentralization on poverty.

That pessimism is mainly rooted in studies from Africa which stress the problem of ‘elite capture’ – whereby prosperous groups seize control of elected local councils and prevent resources from reaching poor people. One counterargument, which has by no means prevailed against the pessimists, emphasizes on an overlooked set of gains that poor people make when they engage with elected local councils. By participating, they enhance their ‘political capacity’ – i.e., their political awareness, their confidence as political actors, their political skills and their political connections to allies. Their capacity tends to increase even when they experience disappointment. Those who make this case argue that a severe shortage of political capacity is an important dimension of their ‘poverty’, alongside a severe shortage of incomes and assets.

Some of the findings in this new book resonate powerfully with that counterargument. The authors do not focus explicitly on political capacity, but they provide telling evidence of its constructive potential.

They demonstrate that despite complications and disappointments, participation – engagement with local democratic processes – can help poor people access resources and welfare programmes, reduce the probability of being vulnerable and improve the quality of local governance.

As seen in chapter 3, it has been 20 years since the landmark 73rd amendment to the Constitution of India. This amendment formalizes the local bodies and has put in place a range of powers that ought to be vested in them. There are a number of outcomes that are expected out of the various provisions. Since the passing of the amendment, a significant literature has emerged; one that attempts to evaluate both the need for decentralization as well as the types of outcomes due to decentralization. This chapter reviews the evidence in the extant literature about the functioning of panchayats and the progress of decentralization in India. The authors first look at the general functioning of local governance, social welfare and economic growth. This is followed by sections on provision of services; gender, caste and tribe and programme capture; the mechanisms and impacts of local democracy; localized planning; panchayat revenue-raising; the payment of bribes, and finally on transparency and accountability.

Common findings highlighted in these studies are the wide variations across states and panchayats in the features of local governance systems and the impacts of decentralization; the need for open and competitive political systems to realize the benefits of decentralization; the growing involvement of poor and vulnerable groups in the system; the significant improvements in local governance and delivery of services associated with reservations of political positions for women and SC/ST; the usefulness of parallel bodies such as village education committees to improve services; the superior educational achievements associated with private education; the powerful forces that favour capture of benefits, combined with the power of democratic governance such as elections, gram sabha meetings and political involvement of poor and vulnerable segments of the population to counteract the tendencies for programme capture and finally the low levels of revenue raising relative to village incomes. While many studies point to the steady but slow improvements in local governance, as a whole the studies present a mixed picture of the characteristics of local governance and the gains it has brought about.

Local governance, social welfare and economic growth

The major contribution of this book is to significantly strengthen the evidence on the impacts of the PRI on local governance, services, and economic welfare. The loop is closed from citizen involvement in governance, to local government actions and outputs, and all the way to their development outcomes. Not only is the degree of empowerment of various groups studied, but also the mechanisms that lead to it, such as participation in elections, attendance in gram sabha meetings, or the payment of bribes; and their impacts on a variety of economic and social welfare indicators such as time saved fetching water, educational achievement in terms of literacy, health and income.

The overall findings of the report suggest a strong link between decentralization, empowerment and development. The evidence also suggests that democratization enhances the benefits from decentralization. However, decentralization, empowerment and local democracy are still very imperfectly implemented in India. Particularly striking is the lack of fiscal decentralization and poor administrative capacities in the panchayats associated with the lack of devolution of staff. It is therefore surprising that there are still so many positive impacts of decentralization.

The basis for our conclusions and recommendations are our own findings in this book. However, the recommendations also draw on the reports of the various commissions discussed in chapter three that studied decentralization and made useful and often converging recommendations on how to improve it.

The current status of decentralization in India

Decentralization of governance in India has been very poorly implemented on average, with wide variations among states (Alok, 2012). The main deficiency is the lack of devolution of functions, funds and functionaries (the three Fs). India is at the bottom of developing countries in this respect. Additional weaknesses come from the fragmentation of central and state programmes and funding streams, the retention of decision-making authority in sectors, the states and at the national levels, limited progress in bottoms-up planning, and poor accountability of sector officers and local government functionaries to their populations. The outcome of decentralization has therefore been judged as very poor (Chapter 2).

Nevertheless, since the passage of the 73rd Amendment of the Constitution empowering the PRI in 1993, the existing literature documents steady progress in empowerment of citizens in general, as well as of marginalized groups such as Scheduled Castes and Scheduled tribes, (SC/ST) and women.

Context

With the signing of the Treaty of Rome, the competition law became an important chapter of the Treaty. This was a significant step since major European economies like Germany were largely cartelized. The Treaty of Rome was subsequently amended by the Treaty of Maastricht in 1993 and then by the Treaty of Amsterdam in 1997. The Amsterdam Treaty re-numbered the Treaty of Rome, which effectively meant that the provisions relating to competition were also re-numbered. Thus, Articles 81–89 embodied the entire European competition law (hereinafter called the EU competition law). The Treaty of Rome has been further amended and re-numbered by the Treaty of Lisbon, signed on December 13, 2007 in Lisbon.

Accordingly, the EU competition law, in its entirety, is embodied in Chapter I of Title VII of the Treaty of Lisbon. Furthermore, the Articles 81–89 have been re-numbered as Articles 101–109. As in this book we are concerned with cartels, our focus will be on the relevant provisions relating to cartels. The interpretation of the relevant provisions by EU institutions will be analysed in this chapter. This analysis will help us understand the theoretical response of the EU to cartels. The questions that are sought to be addressed in the process are: which approach, viz., the per se or the rule of reason, best accommodates the consumer interest (both intermediary and end consumer), and how is the objective of an agreement assessed for the purpose of categorizing it as a cartel conduct? As the role of EU institutions in both framing and implementing the anti-cartel law is of paramount importance, the chapter will begin with a review of the structural schema of these institutions. It is herein important to note that the Treaty of Lisbon has not brought about any structural changes within the EU institutions.

EU institutions: An overview

The EU comprises the European Parliament, the European Council, the Council of the European Union, the Commission, the Court of Justice of the EU, the European Central Bank and the Court of Auditors. However, it is the European Parliament, the Council of the European Union and the European Commission which produces the policies and the law that are applicable across the EU.

Appendix 2

Scope

This book is focused primarily on the interpretation and application of the anti-cartel provisions within the Competition Act, 2002. Although India had started on the path to industrialization and modernization soon after its independence from the British rule in 1947, to begin with and for quite some time it adopted and followed the so-called ‘mixed economic policy’ under which the state was the major player in industrialization and trade. Under this policy, very limited and restricted scope existed for the non-state actors to participate effectively and decisively in industrialization or international trade. In fact, the borders were not open for international investment or trade. Consequently, little or limited scope existed for free competition among private enterprises. Even then, precautions were taken in the Monopolies and Restrictive Trade Practices Act, 1969, against the misuse of freedom of trade by private actors. Nonetheless, the Monopolies and Restrictive Trade Practices Act was not geared to deal stringently with cartels. The reason was that the focus of the Act was to curb monopolies and dominant undertakings.

Accordingly, the anti-cartel provisions within the Monopolies and Restrictive Trade Practices Act were weak. Cartels were not prohibited per se; they were declared void only if they harmed public interest. Further, there was no mechanism for the detection of cartels. This was a major lacuna within the Monopolies and Restrictive Trade Practices Act, since cartels are usually secretive in nature. In the absence of any deterring substantive as well as procedural provisions, cartels thrived within the Indian economy. This is amply substantiated by the surveys conducted by CUTS (Consumer Unity and Trust Society). Moreover, writers have extensively analysed the provisions of the Monopolies and Restrictive Trade Practices Act and highlighted the weaknesses within the Act. Specifically, it is evident from their writings that the Monopolies and Restrictive Trade Practices Commission had failed to take any concrete steps against cartels. At the beginning of the last decade of the last millennium, specifically in 1991, India changed its path by introducing the so-called ‘new economic policy’.

The new economic policy, which replaced the mixed economy by a market economy, opened up and encouraged participation in industrialization and trade not only to domestic enterprises but also to foreign ones. India also opened its international borders for cross-border trade.