The question of institutional autonomy of very significant national public organisations is a subject that keeps raising its head again and again in this country. Since these institutions and their decisions deeply impact public life and the national governance fabric, repeated questions are raised about their impartial decision-making. Of recent, opposition parties have questioned the functioning of the Election Commission of India (ECI) and the Central Bureau of Investigation (CBI). The latest to attract attention is the Reserve Bank of India (RBI). In all cases, the Government of India has been charged with interference and with attempts to erode the functional autonomy of these institutions. This is not something of recent origin and every government in the past has been censured by every opposition of impropriety in regard to institutional autonomy.
In August 2013, the CBI had protested before the Supreme Court that it “has to approach the Ministry for various approvals ... which remain pending at the bureaucratic level ... impacting the efficient functioning of the CBI”. The CBI demanded that the rank of its Director be raised to the level of a Secretary. This was seconded by a PIL that attacked the Government of India, alleging that it was unwilling to relinquish control over the agency. It argued that the CBI was unnecessarily subjected to dual control of both the Minister and the Secretary that only impaired its functioning. The Union Government in its own affidavit rejected all key suggestions of the CBI. It harped on the judicial principle of separating investigation from execution. The affidavit stated that as a secretary-level officer, the CBI’s Director would be able to appoint public prosecutors for cases, which isn’t desirable. For the very same reason, it also rejected the proposal that the CBI appoint special counsels without the approval of the Ministry of Law and Justice.
The Department of Personnel and Training (DoPT) took the unambiguous stand that granting secretary status would “militate against democratic constitutional principles”. It was appropriate that investigative agencies function under the “administrative supervision of the executive”. The then Minister DoPT reiterated the position at a conference, asserting that “there can only be one executive” and the then Prime Minister agreed that it would be improper “for a police agency to sit in judgement” of “policy formulation”. The current round of controversies surrounding the CBI may be viewed as an extension to the earlier days of the ‘caged parrot’.
The latest organisation that has been the focus of public attention is the Reserve Bank of India. This is on account of its ongoing differences with the Government of India. A number of issues, including the RBI’s lending restrictions and more liquidity for the NBFCs (non-banking financial companies) and the Government’s views in regard to them raised eyebrows. A very senior RBI functionary publicly warned that disastrous consequences would result if the RBI’s autonomy was diluted. “A government’s horizon of decision-making is rendered short”, he said, “like the duration of a T20 match (to use a cricketing analogy), by several considerations … There are always upcoming elections of some sort — national, state, mid-term, etc. In contrast, a central bank plays a Test match, trying to win each session, but importantly also survive it so as to have a chance to win the next session, and so on.” He prophesied that “Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life s.”
The Government in turn reminded the RBI how it “looked the other way” while banks doled out loans “indiscriminately to keep the economy going artificially”. In the eyes of the Government, the central bank could not wash its hands off the responsibility for the mountain of bad loans during 2008-14. However, it added that “the autonomy of the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this”. Ministry of Finance’s press note further stated that “Both the Government and central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy. For the purpose, extensive consultations on several issues take place between the Government and the RBI from time to time”. “Government of India has never made public the subject matter of those consultations. Only the final decisions taken are communicated. The Government, through these consultations, places its assessment on issues and suggests possible solutions. The Government will continue to do so,” the Finance Ministry stated.
The debate also raised the matter of accountability. In this regard, statements such as “accountability of the elected government is supreme” were made. While institutional autonomy had to be respected, it was added that “All institutions will have to work together to achieve that goal. That’s the relationship between various departments and institutions … All the institutions should integrate the objective of the overall governance.”
It can be seen from the brief presentation of events and reactions cited above that institutions are always dissatisfied with their levels of autonomy and continuously contrive to seek larger elbowroom than what they have at present.
On the other hand, Governments are always chary of unbridled institutional autonomy. That could render Governments completely ineffectual vis-à-vis such institutions. They would, therefore, like them to be reasonably amenable, if not wholly government-compliant. In effect, this boils down to the fight for power.
There is a lot to be said for institutional autonomy for organisations like the CBI and the RBI. Investigations and monetary policy must be run impartially, without the influence of interested parties.
It is absolutely essential, for instance, to acknowledge that central bank autonomy fosters price and financial sector stability that are conducive to sustainable economic growth. It is equally vital to acknowledge that the CBI’s functional autonomy is a sine qua non for quality investigation and the prevention of big crime. However, what is of utmost significance to citizens is the quality of governance provided to the people of this country, by public institutions. That does not get resolved by merely looking at institutional autonomy. In the theory and practice of good governance, autonomy must be counter-balanced by transparency and accountability. There can be no blind trust of the powerful because of the innate corrupting influence of power. Hence, greater the autonomy of an institution, greater the need of inserting robust instruments of transparency and accountability. This is no longer difficult as the march of technology has allowed willing organisations achieve very high degrees of transparency. This in turn would aid a process by which institutions and their functionaries could be held to account in relation to functions they are charged to perform.
Unfortunately, there appears very little discussion on how transparent these institutions are and how accountable they have been. While there are huge sensitivities involved in the jobs that these organisations do, and while some part of their bedroom decision-making may not be displayed in all its nakedness, surely there is a lot that needs to be shared. In either case, their score on transparency appears low and on accountability lower. It would be worthwhile to examine for instance, how transparent the Central Bank is and the kind of information it provides to the general public and the markets – on its strategy, assessments and policy decisions as well as its procedures. And how open, clear and timely the given information is. A similar dispensation holds good for the CBI. And just as nations are compared, for instance, on ease of doing business, it would be apposite to do a similar analysis vis-à-vis central banks and investigation counterparts of other democratic countries.
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Dr. Ramanath Jha is Distinguished Fellow at Observer Research Foundation, Mumbai. He works on urbanisation — urban sustainability, urban governance and urban planning. Dr. Jha belongs ...
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