The caste of institutions

Business Standard, January 03, 2015

By T C A Srinivasa-Raghavan:

There is a hierarchy of institutions set by their provenance: constitutional, statutory and administrative

Governments are lucky. They receive a lot of free advice about how they should govern. But they are also unlucky in that much of this advice is impractical. The Narendra Modi government is no exception to this. It has already received more than its share.

Of late, a lot has been written and spoken to impress upon it the importance of “institutions” because many of the ancien regime are convinced that it is out to destroy them. Political scientists have been leading the annoyingly persistent chatter. Economists have not been far behind.

Indeed for some of these people, institutions – only the ones they like, naturally – have become the equivalent of Einstein’s elusive unified general theory, the one thing whose presence or absence explains everything in the Universe.

Hence, goes their argument, when “modern” institutions work well, a country succeeds. When they don’t, it fails. Well, hurrah, folks, well done, for telling us that a car will run if there is petrol in the tank and not if the tank is empty. We would never have guessed.

The most important strand of this jabber has been the notion of “independence”. That, too, like the original idea has become an article of faith. But who can quarrel with that? The problem, though, is there is no agreement on its meaning. So the debate is a free-for-all, which allows the government to ignore it.

Nor has anyone in India – that I know of, at least – delved into the design and evolution of institutions at the same time. They have tended to talk of either the one or the other but not the dynamics between the two.

This one-at-a-time approach has led “experts” to reach the wrong conclusions. It has been like trying to gauge the distance of something with one eye closed – very hard, and with a high probability of getting it wrong.

The caste ranking

Regarding the independence issue, Pradeep Singh Mehta, the expansive and highly successful head of the omnipresent advocacy group Consumer Unity & Trust Society (CUTS), once asked me to write something on it. They later published some of it as a discussion paper (

While boning up on the topic, I realised that in India institutions created by the Constitution generally delivered better results than the ones created by Parliament and executive orders. I also realised that India’s institutions can be split into three categories – constitutional, statutory and, shall we say, whimsical, like the Planning Commission, now called NITI Aayog.

The first lot, the constitutional ones – Parliament, judiciary, election commission, comptroller and auditor general, finance commission, to name a few – have generally performed well because the Constitution has guaranteed their independence. Moreover, their working has improved hugely over the last two decades as they have beaten back attempts by the (Congress) governments to subordinate them.

The second lot, the ones set up by Acts of Parliament – the Reserve Bank, the Central Vigilance Commission, the Securities and Exchange Board of India (Sebi) and so on – have also worked, but less well. One reason is that they report to the government and the scope for behind-the-scenes executive interference has been quite large.

The third lot, the ones set up by the ministries, aren’t really “institutions” at all but important for the role they are expected to play. They have worked least well, or even badly, because they have been reduced to being the Gunga Dins of the parent ministry. Fortunately, these have been restricted to regulatory bodies whose decisions are subject to review.

What matters to the country is the dynamic between them. Any discussion that lumps them all into one bag is quite pointless.

The hai-tauba brigade

Once you grasp this, much of the angst over how our institutions have been “eroding” becomes like Brahminical handwringing of the “dharm bhrasht ho raha hai” variety. But there is another way of looking at it.

Change is inherent in any dynamics. To moan about it is silly. To ask for it to stop is to behave like a khap panchayat. One may well ask what constitutes good change and what bad. The short answer is we don’t know. This is because no one can tell in the short run whether a change is good or bad. Thus, did Nehru do the right thing in amending the Hindu marriage and succession Acts in the mid-1950s? And so on.

That is why it is important to remember that instant judgements that are made rely more on prejudice than on any objective assessment because the evidence has not yet come into being to make a judgement.

Finally, it is also important, especially for the hai-tauba brigade, to distinguish between political and administrative interference in the working of “institutions”. The two lead to very different consequences.

Someone in his or her 30s, unburdened by the foolish debates of the past, needs to study all this objectively. Even a half definitive study will help restore the proper perspective.

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