Decentralizing administration


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The World Bank provides the most commonly available definition of administrative decentralization on the web: ‘Administrative decentralization seeks to redistribute authority, responsibility and financial resources for providing public services among different levels of government. It is the transfer of responsibility for the planning, financing and management of certain public functions from the central government and its agencies to field units of government agencies, subordinate units or levels of government, semi-autonomous public authorities or corporations, or area-wide, regional or functional authorities.’1

In effect, this definition distinguishes between different types of decentralization. In ascending order, towards what is considered a greater degree of decentralization, the World Bank distinguishes between three types of administrative decentralization: (i) Deconcentration – which merely shifts responsibilities from central government officials in the capital city to those working in regions, provinces or districts; (ii) Delegation – which is more extensive and involves transfer of responsibility for decision-making and administration of public functions to semi-autonomous organizations not wholly controlled by the central government, but ultimately accountable to it; and (iii) Devolution – which involves transfer of functions and concomitant responsibilities for services to municipalities that elect their own mayors and councils, raise their own revenues, and have independent authority to make investment decisions. It is this type of administrative decentralization that underlies most political decentralization.2

As defined above, administrative decentralization would appear to be quite extensive in scope – comprising the entire gamut of funds, functions and functionaries. However, not only is administrative decentralization considered distinct from political decentralization but also fiscal decentralization. ‘Political decentralization aims to give citizens or their elected representatives more power in public decision-making.’3


A devolved form of administrative decentralization with elected sub-national/local government would qualify to be considered the highest level of political decentralization. Fiscal decentralization is considered in a narrow sense to relate only to the extent to which there is control over sources of funds required for the performance of functions in a decentralized scenario. If this definition is adopted, the sphere of administrative decentralization would leave out funds and include only functions and functionaries. However, expenditure assignment which relates to allocation of functions, is considered a component of fiscal federalism.4

If this wider scope of what should be included in ‘fiscal’ is accepted then administrative decentralization would include only the sphere of functionaries or human resources related to the discharge of the functions of government. However, in practice, it is difficult to make such sharp distinctions when discussing issues related to administrative decentralization. After all, functions, funds and functionaries are closely intertwined matters. Given that this issue of Seminar has numerous contributions focusing on fiscal federalism, this essay will attempt a greater focus on the human resource aspect of decentralization in relation to both the centre-state and state-local body situation.

This essay argues the following propositions in relation to administrative decentralization in India.

1. Despite the existence of a politically decentralized formal structure (which has been strengthened over time), administrative decentralization has failed to make headway in India.

2. Various attempts to enhance administrative decentralization to local government level following the 73rd and 74th Amendments to the Constitution have had little impact.

3. Centralization in relation to functionaries has always been an accepted practice in India and has possibly become even more entrenched over time.

4. Attempts at securing a greater degree of administrative decentralization face resistance from all relevant stakeholders (and not just the politician and civil servant in higher tiers of government).


Political decentralization has not been matched by administrative decentralization in India. This is not a new assertion and has been noted by commentators in different contexts (possibly more with reference to state: local government than in the centre-state context). The first of a three part study on rural decentralization in India carried out by the World Bank, ‘Overview of Rural Decentralization in India’, points out that ‘India is among the best performers on political decentralization, but ranks in the middle on fiscal decentralization, and close to last on the administrative dimension.’5 The Constitution as first adopted gave unfettered power to states to legislate on the entire subject of local government. The nature and extent of political, fiscal and administrative decentralization that should exist within a state was left to each state to decide at its level. The 73rd and 74th Amendments to the Constitution changed this situation. Regular elections, appointment of state Finance Commissions and legislation to empower local governments is now mandatory. However, the extent of empowerment that a state chooses to confer on local governments is effectively, still in the states’ domain and therein lies the rub.


On administrative decentralization, the states’ have seldom sought to go beyond the state of affairs that existed before these seminal amendments. A brief prepared by the Accountability Initiative at CPR documents the limited extent of administrative decentralization in rural India based on a survey conducted by the National Council of Applied Economic Research.6 Even though it is based on self-reported action by states (and therefore, not verified with regard to the extent to which the orders are actually implemented), it presents a dismal picture, specially with respect to functions and functionaries.

At the centre-state level, the constitutional framework providing for elected legislatures at state level has only been strengthened over time. The Centre’s ability to take over the functions of the state governments has been circumscribed by judicial pronouncement7 and the ability to indefinitely continue such a state of affairs has been curtailed by constitutional amendment.8 However, the shift of subjects from the state list to the concurrent list has seldom given rise to controversy and the constitutionally mandated system of a centrally recruited higher civil service allocated to the states has been a feature of governance that has invited virtually no comment in the country. The centralizing trends in fund flows saw an early dilution of the Finance Commission’s role by the establishment of the Planning Commission and the subsequent introduction and growth of centrally sponsored schemes. The recent abolition of the Planning Commission and the increase in untied flows based on the recommendations of the 14th Finance Commission notwithstanding, there is little meaningful protest over the amount of central control over the manner in which funds flow to states.


Attempts to enhance administrative decentralization to local government level (following the 73rd and 74th Amendments), have had little impact. Central ministries have often been of the view that the major constraints facing local governments in improving the delivery of basic services is the lack of adequate finance, weak institutional framework and lack of capacity. Accordingly most programmes designed at the central level have sought to address these gaps. On the rural side, the Backward Region Grant Fund and various capacity building programmes like the recently launched Rashtriya Gram Swaraj Abhiyan have focused on these needs.9 On the urban side too major schemes continue to have a similar focus.10

However, for most proponents of decentralization, an increased level of administrative decentralization is the key to improved service delivery. In this perspective, primarily, it is the resistance to greater devolution to local government from entrenched state level interests that has to be overcome. Consequently for them the goal is to find ways to goad state governments to carry out greater devolution of funds, functions and functionaries.


The most significant attempt at enhancing the level of administrative decentralization by empowering local bodies has been undertaken by recent Finance Commissions. This process began with the 10th Commission which gave its recommendations immediately after the passage of the 73rd and 74th Amendments. Every commission since then has recommended increasing amounts of grants in aid for local bodies. This is being done despite the absence of detailed data on functional devolution and resource raising potential of the local bodies in different states. All the commissions so far have been votaries of increased decentralization as the route to improved service delivery based on the application of the principle of subsidiarity to enhance accountability. Each has considered various ways to incentivize states to create more empowered local bodies.

The 10th Commission imposed two conditions for release of grants. The grants should not be used to meet establishment costs and matching funds must be arranged by the local bodies for the projects which these grants would fund. The actual release was less than the amount recommended by 33.54% in the case of rural local bodies and 16.61% in the case of urban local bodies presumably because the matching requirement could not be met in many cases.

The 11th Commission introduced a 30% weight for revenue effort and an index of decentralization (leaving 70% need based) in devolving the grants to the states. It also directed that these funds should not meet establishment costs and should only be used for operation and maintenance of basic services after according priority to maintenance of accounts and creation of data bases. Again, the offtake was less than the recommended amounts by 17.48% and 12.41% for rural and urban local bodies respectively. This was despite relaxed monitoring of the conditions set for the release of funds.

The 12th Commission kept revenue effort as an incentive criterion at 20 per cent. It specified that the grant could only be spent on water and sanitation in rural areas and public-private partnership for solid waste management in urban areas and in each case 50% cost recovery in the form of user charges should be insisted upon. The offtake was again less than optimal despite the fact that there was little monitoring of the extent to which the conditions for release were being met (it was left to self certification by the states).11


The 13th Commission provided for an unconditional basic grant as well as a significant conditional performance grant that sought to hasten the process of decentralization. Again the effort yielded negligible positive results. The 14th Finance Commission reduced the performance component and simplified conditions for availing the grants. Even these less onerous conditions are sought to be diluted in order to enable release of the allocations. Apart from the attempt by Finance Commissions to incentivize states by placing conditions on release of grants, the central government has also made a significant attempt in this direction with regard to urban local bodies. The Jawaharlal Nehru Urban Renewal Mission imposed mandatory conditions on states to devolve functions and confer autonomy in resource raising on urban local bodies to enable access to the funding available under the scheme. The conditions achieved little more than a ticking of the appropriate check boxes.12

Apart from conditions attached to the release of recommended grants, various Finance Commissions have devoted considerable attention to advising on action that can empower local bodies and improve service delivery. Similarly, the Second Administrative Reforms Commission has accorded a lot of space to exhort increased decentralization to local bodies and the steps that can be taken in this regard. At one stage, the efforts of the then Minister for Panchayati Raj, Mani Shankar Aiyar, saw many states engage in a process of activity mapping to devolve functions to rural local bodies. However, in practice, despite pious pronouncements and occasional bouts of ‘activity’, there has been very little real change in most states compared to the situation that existed before the passing of the 73rd and 74th Amendments.


Centralization in relation to functionaries has become even more entrenched over time. One of the main features showing the unitary bias in India’s Constitution is the provision for a centrally recruited higher civil service that is allocated to the states. This inheritance from the colonial past has never been seriously questioned post-Independence. Debates around civil service reforms have generally focused on subjects like recruitment bias and ensuring greater representation to the historically marginalized sections of society, lateral entry to enhance professionalism, diluting the bias favouring generalists to promote greater efficiency through specialization, more stable tenures and the considerable immunity from disciplinary action available in conduct rules.

The role of the centre and the states in managing these ‘All-India Services’ have seldom been an area of discussion.13 In fact, the idea of expanding their ambit (beyond the generalist administrative service and the more specialized police and forest services) to include the judiciary has usually been viewed in a positive light. The central level interacting directly with state level civil servants bypassing the state level political executive has seldom raised eyebrows across regime changes.


Rajiv Gandhi as prime minister, called meetings with district collectors without including the state government in this interaction. In the Narendra Modi era this direct interface with the centre has extended downwards below the district level and upwards to the highest level of the state civil services. Immediately after completing their formal induction training, IAS officers are now posted in central ministries for a few months even before reporting to their respective states. In an unprecedented step that takes centralization to a new level, the prime minister now also holds regular meetings with the chief secretaries of states to review programmes and projects in the states.

This acceptance of an hierarchical order in which the centre controls recruitment and disciplinary action in relation to the higher echelons of the civil service in the states is a culture that extends downwards to local government. It is taken for granted that the state will exercise control over all key functionaries in local government. Most reform discussions for this level only extend to seeking separate local government cadres (even while conceding that these will still be controlled by the state government).


No relevant stakeholder really wants more decentralization in India. The 14th Finance Commission made a radical departure from past practice in dramatically increasing the divisible pool of untied transfers to states. This meant that even after accounting for the fact that the Planning Commission related block grants would no longer be necessary, conditional transfers to states (through centrally sponsored schemes) would have to be reduced, if fiscal deficits were to be kept in check. The immediate response was predictable – announcements of reducing the number of schemes and reduced central allocations while seeking a larger matching share from the states. Over time the number of centrally sponsored schemes has been pruned but clearly this has been a paper exercise. There are now omnibus schemes with many of the earlier ones becoming sub-schemes. Central allocations for conditional transfers have had to inch up even as the matching requirement from the states has been lowered for many schemes.

While conditional transfers appear to now have a slightly reduced proportion in overall transfers to the states, this clearly does not suit the Centre. The Terms of Reference given to the 15th Finance Commission actually enjoin the commission to reconsider the size of the divisible pool arrived at by the previous commission keeping in view the Centres’ needs to fund its priority schemes. It is easy to see that political economy compulsions and civil service interests at the Centre would conflate to protect and expand the domain of conditional transfers. However, it seems somewhat anomalous that there was no real demand for doing away with these central sector and centrally sponsored schemes even from the states. The primary focus has been on securing a more favourable matching requirement than initially announced in the Budget of 2015.


The normative underpinnings of India’s federal set-up unquestionably accepts a principal and agent relationship between the Centre and the states in a large number of subjects in the state and concurrent lists. In effect, neither the level which is to devolve nor the level that would ostensibly be the beneficiary of a greater degree of administrative decentralization, has an interest in this course of action. The Centre wishes to continue its patronage based role of principal with as wide an ambit as possible and the states are content to be agents in this game where at least some part of the blame for poor delivery can be laid at the door of the Centre.

The deck is stacked against administrative decentralization to an even greater degree in the state to local body case. The reluctance of state level politicians and civil servants to devolve funds, functions and functionaries stems from an understandable desire to protect their own fiefdoms. What is less often realized is that in most cases, there is no great desire to become functionally responsible for delivery of services at the local body level.

In a set-up where state government departments or parastatals have traditionally been responsible for the delivery of most basic services, the elected representatives in local bodies are mostly conduits for approaching the state level functionaries to meet the demands of the electorate. At best they are minor patrons with some funds under their control. The local bodies exhibit little capacity to undertake the delivery of most basic services. Most locally elected representatives only seek an expansion of discretionary funds under their control and shy away from assuming responsibility for actual delivery of services.

Consequently, the electorate would much rather continue to rely on the state departments or parastatals than trust the elected representatives who are generally elected to play the role of middlemen and an implementing machinery at local body level that does not inspire confidence. In effect, state governments in avoiding increased devolution to local government level, are not only reflecting a vested interest but are also responding to the feelings of their own electorate. There is, thus, a remarkable coalescing of views amongst all relevant stakeholders that holds back administrative decentralization in most Indian states.


If the arguments presented above make sense, then clearly there is little likelihood of administrative decentralization making progress in India with the strategies and instruments that have been used till today. It may be time to stop addressing the issue head on and try another tack. The rationale for seeking enhanced levels of administrative decentralization is that this will increase accountability and thereby improve the quality of service delivery. It may, therefore, be useful to target an improvement in the levels of service delivery and to do this through the instruments accepted by the prevailing culture of centre-state relations rather than directly targeting an increased devolution of untied funds, functions and functionaries.

Conditional transfers (central and centrally sponsored schemes seeking implementation by the states) could be redesigned to reward sustained improvement in performance on outcomes rather than funding inputs and processes. In doing so, of course, it has to be ensured that the right indicators are chosen and the performance is measured in a credible manner. Ensuring credible performance measurement requires that the relevant data bases meet criteria such as objectivity, reliability and consistency. There have been instances in the past where rewards have been secured by gaming the system.14 A recognition of the need to ensure that only credible performance will be rewarded is essential in a system in which gaming is an accepted practice. Central rewards of this kind may motivate fresh thinking at the state level to achieve targets of sustained improvement in various sectors. The realization that enhanced levels of devolution to local government can aid such efforts in basic services may even goad movement in the direction of greater levels of administrative decentralization from state to local government.


What are the prospects of this kind of approach being accepted? What kind of regime at the Centre might agree to at least rethink the design of CSSs? A regime headed by one of the two current major national parties is unlikely to abandon their inherently centralizing ethos and desire to continue the patronage game. At best it can lead to the currently fashionable talk about cooperative (competitive) federalism and the kind of indices that NITI Aayog is constructing to rank state achievement in various sectors. These indices not only suffer from the use of multiple indictors that include inputs and processes but often the data bases used fail to meet the criteria for credibility enunciated above. The chances of a grouping of regional parties seeing merit in a competitive system to reward achieving states, are possibly brighter.



1. This paragraph is abbreviated from, ‘Administrative Decentralization’, accessed on 30.03.2019.

2. Ibid.

3., ‘What is Decentralization?’ contributed by the World Bank, accessed on 30.03.2019.

4., ‘Introduction: Principles of Fiscal Federalism’, accessed on 03.04.2019.

5., ‘Decntralisation in India’, accessed on 30.03.2019.

6., ‘Administrative Decentralisation in India: The 3Fs’, Panchayat Briefs 1(2), bases its conclusions on NCAER 2008, ‘An Index of Devolution for Assessing Environment for Panchayati Raj Institutions in the States: Empirical Assessment 2008’.

7. S.R. Bommai vs Union of India.

8. Constitution (44th Amendment) Act, 1978.

9. Backward Region Grant Fund and the Rashtriya Gram Swaraj Abhiyan.

10. The flagship urban programme in this genre is currently the AMRUT scheme.

11. All data from the Report of the 13th Finance Commission, Chapter 10: Local Bodies (

12. Various evaluations of JNNURM have noted little sustainable change occasioned by the reform conditions in the programme.

13. Sujata Singh, ‘Reforms in Governance: Six Decades of Administrative Reforms’, theme paper for the 53rd members’ Annual Conference of the IIPA in 2009, in summarizing the major debates in civil service reforms since Independence, bears out this view ( accessed on 29.03.2019).

14. The Nirmal Gram Puraskar in rural sanitation is a classic case of this kind.