UP Govt Is Seeking Consultants to Help Become a $1-Trillion Economy. Does That Make Sense?

While there are certainly provisions for governments to employ consultants, in statecraft, some work is 'mission critical' which cannot be wholly entrusted to private players who are not, at least periodically, answerable to the electorate.

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The government of Uttar Pradesh recently published an advertisement in prominent newspapers in which it said it was looking to “engage a consultant to boost the size of the economy of Uttar Pradesh to $1 trillion in five years (2022-2027)”.

As per the request for proposal (RFP) document, available on the website of the state Planning Department, a consultant has been defined as “any Training & Research Institutes or Universities or Consulting Firms or Government Departments or Subject Matter Specialists or entity or person or association of persons that may provide or provides the Services to the Employer under the contract. (sic)”

Thus, a function which so far has been the preserve of the government officials and economists working in planning and other departments is likely to be outsourced to external agencies.

The Uttar Pradesh government had made a similar attempt in June 2020. As per newspaper reports, eight firms had submitted bids, including Deloitte, Boston Consulting Group, IIM-Lucknow and Grant Thornton. However, the process did not appear to end in success. 

Is the Uttar Pradesh government’s attempt to outsource economic planning an expression of ‘no-confidence’ in its bureaucracy, planners, economists, ministers and chief minister, or is it a (modest) administrative-bureaucratic breakdown?

While this is a subject for deeper scrutiny, it no doubt marks a paradigm shift in our economic and social thinking.

Also read: As Uttar Pradesh Heads to Polls, How Does the Yogi Govt’s Economic Performance Hold Up?

To engage consultants?

It is not that governments cannot engage consultants. The website of the Uttar Pradesh government’s Planning Department mentions, “The Department of Planning … is primarily responsible for making a development plan for the state, to initiate and undertake necessary exercises for this purpose and oversee and take an over-all view of the implementation of the plan, without diluting in any manner the role of different departments of the state government in the formulation and implementation of their respective plans.” 

Further, the ‘Manual for Procurement of Consultancy & Other Services, 2017′, issued by the Union government, finance ministry and the Department of Expenditure, provides for hiring consultants or external professionals “for a specific job, which is well-defined in terms of content and time frame for its completion. Engagement of consultants may be resorted to in situations requiring high-quality services for which the procuring entity does not have requisite expertise” (para1.10.1).

While these guidelines have been framed by and are applicable to departments of Union government, state governments can be expected to honour this framework, especially when the governments at the Union and state levels are ruled by the same political party; the so-called ‘double engine’. 

Further, ‘Economic and social planning’ is listed in Clause 20 of List III (the Concurrent List) under the Seventh Schedule to the Constitution of India. This implies that a state government can seek the help of the Union government and/or the NITI Aayog – the new avatar of the erstwhile Planning Commission – for any technical inputs or expertise while framing its plan, should there be a need. 

Also read: Outsourcing Governance to the Citizen

Economic planning and strategic choices

The underlying assumption in any business strategy, including that of a state, is that one cannot excel at everything and that resources are always finite. So, one must make strategic choices.

Key among these choices is a critical decision: which elements of work must be done by the government itself and which ones should be outsourced? To make a sound decision of this sort, the government must begin by identifying the work of its machinery that is ‘mission critical’; and in the realm of statecraft, mission critical work cannot be entrusted to outsiders.

The Reserve Bank of India (RBI), for instance, cannot completely outsource the framing of monetary policy to an outside agency, such as a consultancy firm or a think tank, however efficient and reputed the agency may be. 

Besides, entrusting the planning process to outsiders comes with its attendant risks. Consultants chosen to undertake such an exercise may mainly consist of personnel who may lack an understanding of local conditions and people’s aspirations in general. Given our proclivity to select reputed firms that have a global standing, such a gap between ground realities and technical prescription may, indeed, fail to achieve the promised objective.

Any plan, whether prepared in-house or devised by an external agency, will also require field-level machinery for its successful implementation. Presuming that the state machinery implements the plan, are we divorcing the planning personnel from those implementing said plan? In that case, both might have less skin in the game, thus thwarting the ultimate objective of outsourcing economic planning. The outsourcing arrangement would also shift the responsibility for integrated planning to players who are not answerable (periodically) to electorate.

Today it is economic planning; tomorrow it could be internal security and law and order. As the list of areas grows, the days when political leaders will just marshal money power; misuse or abuse social platforms and electronic media; resort to pre-election economic munificence as a quid pro quo for getting elected; and, post-victory, leave governance to outsourced agencies, are not far away. This will add a new meaning to a ‘government of the people, by the people and for the people’.’  

A leader – in this case, Uttar Pradesh chief minister Yogi Adityanath, with 20 years of legislative and administrative experience – is expected to have mastered statecraft and the means to achieve economic progress by channelling resources at his command instead of shifting the responsibility to consultants, who are mostly global consultancy firms having unproven credentials in planning for a state or a country as a whole.

Most importantly, aiming to achieve the goal of becoming a one trillion dollar economy in five years – that is, growing the economy to four times of the current Gross State Domestic Product (GSDP) – may not, by itself, be social good. Concerns have been expressed recently that the concentration of economic powers in the hands of a few and blatant crony capitalism may fail to achieve an equitable and just society. After all, isn’t an improvement in the general standard of living of the people the ultimate aim of any planning process?

Ganga N. Rath is a former central banker. Views expressed are personal.