Ready. Ban. Regulate!
By a GCPP (Advanced Public Policy) Student
Indian State's 3 step process to handle anything- from crypto, to agricultural derivatives. Can we break this cycle?
The Context
Internet Ban
On May 21, 2024, the internet was shut down in Saran, Bihar as post-poll violence broke out between two contesting parties.
Since 2012, Indian bureaucracy has resorted to 813 internet shutdowns in India, with Jammu and Kashmir accounting for more than half. Otherwise, peaceful states like Rajasthan too have suffered over 100 internet shutdowns. Shutdowns have emerged as the first response whenever the State fears an upcoming stress on the law and order apparatus. Yet, it is quickly emerging as the first instrument of recourse, even when there is no apparent stress. Recent experiences in Jodhpur reveal that the internet was shut down to ensure government examinations are conducted cleanly, without leaks1. Dedicated trackers2 paint an unflattering picture of the default state response.
Book Ban
Post-independence India has banned about 33 books from circulation. They range from Nine Hours to Rama, a fictionalized account of Godse’s activities before the assassination of M.K.Gandhi, wrapped neatly in a ‘race-against-time’ trope, to benign books by geologists writing about Nepal3
Apart from Union government interventions, the local state governments have also banned about 11 such books, ranging from Da Vinci Code to Jinnah: India, Partition, Independence.
Banning of books has been undertaken in response to or in anticipation of “hurt communal feelings”, “law and order” or “factual errors”. Sometimes, as in the case of Toni Hagen’s book (Nepal), it may be because the Prime Minister considered it as foreign interference (see 3.)
Cryptocurrency Ban
Indian State adopted banning cryptocurrencies as the first course of action4, incrementally softening its stance towards regulating it, post feedback and pressure.
While no omnibus regulation on cryptocurrency is applicable even now, acts like the Prevention of Money Laundering Act (PMLA) have been updated and expanded to ban virtual digital asset (“cryptocurrencies”) transfers which bypass scrutiny56
We see an outright blanket ban as the preferred intervention at all stages.
Ban on Derivatives of Agricultural Commodities
Agricultural futures were first banned from trading in 1966, in post-independent India. Beginning in 2003, futures trading in a large number of agricultural commodities was reintroduced in India. However, the bans kept rolling in.
Rubber, Potato, and Sugar were banned from trading on exchanges from May 2008 to November 2008. Sugar was again, banned from May 2009 to October 2010. Wheat, from March 2007 to May 2009, Guar from March 2012 to May 2013. Rice has never been traded on commodity exchanges. Fernandez7 analyzes the periods of bans with the price behavior of the underlying.
Important to note that the bans coincided with periods of rising prices or volatility. Fernandez concludes that while the bans stabilized prices for some commodities in the short term, the longer-run outcomes were adverse.
Ban on criticisms as ‘unparliamentary’ in the Lower House of India
Indian legislative houses routinely classify the usage of certain words as ‘unparliamentary’. Use of such words is met with prompt censure and expunction of the words from official records.
Westminister-styled parliaments worldwide rely on norms, rules, and procedures to guide their affairs. Their Speakers deem certain phrases ‘unparliamentary’ that are deemed to be distasteful, particularly related to the honor of a member.
Indian Parliament is no different. However, it has the longest set of words deemed to be unparliamentary, some of which have nothing to do with the honor of a member. Words like ‘lollypop’, ‘bloodshed’, ‘mislead’, and ‘fudge’ among others, find themselves in the book of unparliamentary language, and out of the records.
The overzealous expansion of unparliamentary words in the Indian context reflects the shrinking space for free criticism even by representatives who hold ‘privileges’. The ban on such criticisms reflects the dispensation’s distaste of anything that rankles them, however apt the criticism may be.
Problem Identification/Agenda Setting
In the Indian context, the Executive experiences little compunction to tread on civil liberties to make their day-to-day job easier. Ruling dispensations are not above the abusing of discretionary powers to muzzle criticisms, trample upon civil liberties, and ply heavy-handed disruptions to ease its task.
The problem thus is “the absence of a rule-driven administration that places civil liberties at the center stage”.
Unchecked Discretionary Powers: An Analysis
We understand the following set of ideas well -
Discretionary powers breed deviant behavior. Undocumented discretionary powers breed uncontrolled deviant behavior.
Public choice theory posits, that the Executive, as a group, are selfish, utility maximizers.
We seek to utilize these ideas to propose a set of “attack vectors” to constrain and reform the bureaucracy. As we think about the appropriate behavior-modifying incentive for a bureaucrat, it is pertinent to ask - What does an average bureaucrat seek?
What does an average bureaucrat maximize?
Niskanen8 argued they are budget-maximizers. Agrawal and Dewan9 , Muralidharan10 posed that an Indian bureaucrat is a job security-maximizer. Merton11 supported it as “The bulk of bureaucratic offices involve the expectation of life-long tenure, in the absence of disturbing factors which may decrease the size of the organization”.
Weber12 posited bureaucrats are power-maximizers, and Crozier13 illuminated the source of such power - expertise. Agrawal and Dewan further offer Indian bureaucrat’s predilection towards status games and an ever-ongoing tussle to keep up a facade of extraordinary.
Niskanen speculates on the possible list of goals of a bureaucrat - “salary, perquisites of the office, public reputation, power, patronage, output of the bureau, ease of making changes, and ease in managing the bureau.”
Except for the last two, everything is correlated positively with the budget. The presence of unchecked discretionary powers ensures the last two.
Understanding the analytical framework for a budget-maximizing and “slack-maximizing” bureaucrat
Analytically, for a general bureaucrat, the amount of discretionary authority allowed by the Constitution is a “budget” that is allotted to him/her to achieve a certain output. We established that a bureaucrat will always prefer higher discretionary power than lesser, irrespective of the level of the discretionary power allotted. Further, to achieve the expected outputs, the same bureaucrat will also expend the minimum mental “cost”. As a result, given the choice to opt for two sets of policy interventions, the bureaucrat will opt for the easy way out, and that exercises maximum discretionary power.
Under the assumptions of a typical bureaucrat being slack-maximizing, a similar behavior is achieved. Given a budget of discretionary authority, the bureaucrat attempts to maximize ‘slack’, that is do the least job possible and get away with it. Ajay Shah14 considers this as a form of corruption, and emblematic of the Indian administrative state.
As per this framework, a ‘ban’ is both, an exercise of the complete ‘allocation’ of discretionary authority, as well as, expends the minimum ‘cost’ in achieving the drama of output. Signaling takes an important dimension in this context, as the supervisors of the same bureaucrats, and the politicians are non-technocrats and cannot offer effective supervision.
The assessment of the output is marred by the power wielded by experts (see Crozier), and political representatives have limited ability to delineate between two actions. The only instance where assessment is accurate is when a crisis rages outside. A raging metaphorical fire in the body politic thus is the only case when senior echelons of political leadership receive clear communication. As a result, bureaucrats resort to ‘bans’ not during a crisis, but to evade any crisis.
This is the core of the problem we face in India, and there are three “attack vectors” to solve this problem:
Lower the “budget”,
Heighten the “costs”,
Influence the “utility” measures
A Quiver of “Attack Vectors”
Lower the Budget
In this attack vector, it is not the monetary budget that has to be lowered, but rather the “allocation” of discretionary powers that our Constitution allows, that has to be changed. The discretionary authority vested with Executive flows from Article 73 which goes as -
1) Subject to the provisions of this Constitution, the executive power of the Union shall extend—
(a) to the matters with respect to which Parliament has power to make laws; and
(b) to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any treaty or agreement:
Provided that the executive power referred to in sub-clause (a) shall not, save as expressly provided in this Constitution or in any law made by Parliament, extend in any State to matters with respect to which the Legislature of the State has also power to make laws.
(2) Until otherwise provided by Parliament, a State and any officer or authority of a State may, notwithstanding anything in this article, continue to exercise in matters with respect to which Parliament has power to make laws for that State such executive power or functions as the State or officer or authority thereof could exercise immediately before the commencement of this Constitution.
These words cut a wide swathe and transform our country into an ‘Administrative State’. This entire article has to be completely amended and possibly jettisoned altogether.
A complete zeroing out of the discretionary power budget doesn’t imply the bureaucrats will stop engaging in issuing diktats. There is a high chance that the supervision of the bureaucracy turns more difficult, as the system resorts to offering sophisticated reasons to justify illiberal, civil liberty clamp-downs.
But this will also raise the ‘friction’ needed to issue such ad-hoc bans/prohibitions.
Raise the Costs
A still effective way is to force the bureaucracy to explain itself through extensive cost-benefit and economic analysis, whenever it seeks to engage in knee-jerk interventions. This demand to offer a credible rationale should further increase the costs levied on ‘bans’ in particular but for all knee-jerk interventions in general.
Representatives should demand that each delegated legislation be appended with extensive cost-benefit analysis, spending, and economic analysis, and turn it to the Legislature for their stamp of approval.
Further, two adjoining reforms have to be made - firstly, for Comptroller and Auditor General (CAG), and secondly, to the process by which a judicial review is done for such exercise of power.
CAG, in the Indian context, is limited to rudimentary auditing, and subsequent reporting of the Consolidated Fund of India, Contingency Funds, and Public Accounts of the Union, State, etc.
The role of CAG needs to expand outside the auditing and reporting roles. It has to have an assessment role, one that requires judgment based on economic knowledge. This new capability can be built if the agency leverages the existing cadre of the Indian Economic Services.
Secondly, the judicial review of discretionary powers has been limited to only the most egregious violations covering illegality, irrationality, or impropriety. Under the current winds of a recidivist judiciary, the bar for all these violations has been further raised. A set of precise judicial tests to assess these actions and the subsequent rationales that will be offered by the bureaucracy is much needed.
The hope is, that the executive with its powers over the dominion needs to have multiple, effective watchdogs checking it to ensure it doesn’t turn into a tyrant.
Influence the Measures
If reforming bureaucracy needs political representatives to take hard steps, CAG to build new capabilities, and the judiciary to reduce its own fickleness - all difficult propositions in themselves, this last “attack vector” is arguably the easiest.
We saw how internet shutdowns are tracked and reported on a month-to-month basis with a live dashboard demonstrating the extent of unchecked power. It is a good idea to ‘scale’ this practice up, and expand it across all forms of bureaucratic tyranny.
Tracking this metric requires no permission. It also is apparent from the executive action, thus accruing no ‘noise’ in the measure. I hope that trackers like these will be ready reckoners for the time when the Overton Window shifts. We need to shift the focal point of discussion from politics to policies and its absence. We need to think about processes and not personality. Finally, we need to mull over the bureaucratic excesses and their evolution. I believe, that when we start thinking as a nation about those ideas, these dashboards and tracking metrics will catalyze the first discussions.
Final Words
Bureaucracy will always seek to expand the scope of undocumented and discretionary powers to prevent scrutiny. Any rules to force the Executive to start documenting their decisions will be met by pushback or poor execution (haphazard notes, poor analysis, cause-effect diagnosis, faulty cost-benefit analysis, etc.).
Specifically in the Indian context, there is a massive capacity constraint. It is my hope, that increasing the cost borne to issue delegated legislations, which are often poor in design, will force the bureaucracy to increase its strength. Currently, there is a massive degree of gate-keeping that is ongoing to ensure that incumbents keep enjoying the benefits of exalted and extraordinary status.
My hope is when faced with the hard choice of ensuring outcomes, without which bureaucrats will risk underperformance, they will compromise giving up their status, and increase the number of jobs in their ranks.
“Rajasthan: Internet services to remain suspended in many districts today”, India TV News, Jan 07, 2024, (link)
“Remembering not to forget Toni Hagen”, Nepal Times, 6th April 2012 (link)
“Draft Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019”, PRS India (link)
Anand, N. “Blockchain & Cryptocurrency Laws and Regulations 2024”, Global Legal Insights (link)
Tambe, N., Jain, A. “Does India’s FIU Ban Affect Your Crypto Investment?”, Forbes India
Fernandez, C.P.S, “Futures Trading in Agricultural Commodities: Effects of the Ban on Selected Commodities in India”, Artha J Soc Sci, 12, 4 (2013), 61-87, ISSN 0975-329X, doi.org/10.12724/ajss.27.5
Niskanen W.A., “Bureaucracy and Representative Government”, , ylor & Francis Group, https://doi.org/10.4324/9781315081878 [link]
Agrawal, P.K, Dewan, P., “Psychology of Bureaucrats”, Manas Publications, ISBN: 978-8170494966 (link)
Muralidharan, K., “Accelerating India's Development: A State-Led Roadmap for Effective Governance”, Penguin Viking, ISBN: 978-0670095940 (link)
Merton, R.K, “Bureaucratic Structure and Personality”, Social Forces, Vol. 18, No. 4 (May, 1940), pp. 560-568 (link)
Weber, M., “The Theory of Social and Economic Organization”, 1947 (link)
Crozier, M., “The Bureaucratic Phenomenon”, Routledge; 1st edition (December 30, 2009), ISBN: 978-1412811583 (link)
Shah, A., Verma, A., “Public Choice Theory Explains SO MUCH”, Episode 33, Everything is Everything, Youtube.com (link)