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8. LEGITIMACY IN STATE AND SOCIO-ECONOMIC TRANSFORMATION
Democracies of the world have evolved much since they came into being. India joined the club late though it is among the most vibrant democratic economies of the world today with its own set of strengths and weaknesses. Socio-economic transformation of the country could be considered as the most prime aspiration of India. The same resonance we find throughout the period of freedom struggle, in the debates of the Constituent Assembly and the Constitution of India also. Numerous efforts have been made by the governments in this direction though the performances have not been up to the desired levels. There have been several minor reasons responsible for it, but the major reason has been the lack of financial resources to push it. The revenue that governments get by way of taxes is not a form of income only, but it is a measure of the fiscal potential of the nation, too. India has not been able to tap its actual fiscal potential by now. While its potential of tax collection is estimated to be 53 per cent of the GDP, it collects only about 17
per cent. It means a vast fiscal potential remains untapped. Given the resource crunch faced by the country, it is high time that the country moved in the direction of enhancing the fiscal capacity of the economy.
In case of India, ‘income redistribution’ (the recent proposal being UBI coming from the Economic Survey 2016-17) is suggested to be the single most important way out to promote socio-economic transformation today, provided the Government can mobilise adequate amount of fund for the process of redistribution. One very weak link to tapping fiscal capacity of the economy has been the lower legitimacy in the State.9
Higher legitimacy in state strengthens democracies in general. In case of tapping the fiscal capacity of the economy legitimacy in state has been found to be among the most important variables. In this regard, the history of developed countries suggests two important things:
(i) The foremost duty of the State is to supply ‘essential services’ such as, physical security, healthcare, education, infrastructure, etc.
(ii) Redistributive role of the State comes later on.
The above-described sequencing is not accidental. Unless the middle class in society perceives that it derives some benefits from the government/state, it will be unwilling to support (i.e., finance) the government moves of income redistribution. In other words, we can say that a government needs to earn the legitimacy to redistribute income from the effectiveness of its public service deliveries.
If the Government tries to redistribute income without guaranteeing effective deliveries of the public services, the middle class starts ‘exiting the state’ (the famous idea of Albert Hirschman, 1978)—the middle class ultimately shies away from financing the schemes of income redistribution. One important sign of exit is fewer number of tax payers—abundantly evident in case of India. By reducing the pressure on the state, middle class exit will shrivel it, eroding its legitimacy further, leading to more exit in future. A state that is forced into inefficient redistribution, risks being trapped in a self-sustaining spiral of inefficient redistribution, reduced legitimacy,
reduced resources, poor human capital investments, weak capacity and so on. The income and consumption anomaly has been specially highlighted by the Union Budget 2017-18 where number of tax payers are miniscule to ratio of various income groups.
It is suggested that the Government of the country should carry out their functions with utmost commitments to promote legitimacy in the State. Some of the major steps the state can take are as given below:
• The essential public services promised to the common citizens must reach them in an effective, transparent and non-partial way on a permanent basis.
• The visible instances of crony capitalism must be checked under which many of the times public assets are handed over to a select group of corporate houses that too at very cheaper prices by the governments.
• The issue of governance should not remain on paper only but it should show up to the citizens that the governments are committed to promote good governance.
• The menace of corruption must be rooted out with the help of transparency, greater devolution of power and involving the larger group of the stakeholders.
• People’s participation should be enhanced by the governments in speedy way.
In the last few years, we have seen an increased emphasis by the Government on the above-suggested areas. Promoting the idea of ‘minimum government and maximum governance’ the government is not only promoting the governance factor but it is empowering the common masses, too. States have been included in the process of making the NITI Aayog the very ‘vehicle of governance’ (governance has been faltering more at the state level). The Government is using the different tools of information technology in every possible area to promote transparency, check corruption across the system
and bringing speed in governance. Similarly, focus has shifted towards non- punitive measures of enhancing tax compliance and giving a push towards less-cash economy. Auction of public assets has become a fully online process, aimed at checking the problem of crony capitalism. Besides, the Government is committed to strengthening ‘social trust’ and ‘co-operation’ among the citizens and between the government and the masses to promote the level of happiness in citizens’ lives. There is a declared shift in favour of modifying people’s behaviour to achieve the desired objectives of socio- economic transformation in the country, too. Experts believe that the recent policy actions will surely improve the level of legitimacy in the State in the coming times.