Building State capacity to protect citizens

The Financial Express

For the citizen to be confident, the state has to first believe that it can enforce the rule of law

In Mumbai (and this may be true in many other cities in India), many traffic signals start blinking the yellow lights after around 10 pm. These traffic signals are not tucked away in the low density residential areas; they are a common sight on key arterial roads and dense junctions. The blinking yellow lights are supposed to signal to the traffic that they are on their own—the drivers and the pedestrians need to look out for their own selves: the state or the law will have been considered to have done its bit by warning them to slow down.

The scenes at many such junctions left to fend for themselves suggest that the state abandoning its responsibility creates a low equilibrium for all its citizens. The traffic slows down, gridlocks emerge which take patience or fights to sort out, loud honking and road rage add a dash of rough music to the brew and pedestrians wonder when they should cross the roads (well, gridlocks do help sometimes!). This is, it is safe to imagine, not the intended outcome from anyone’s perspective.

The state is clearly signalling two things: (1) it does not have the resources to police the junctions at night and (2) since the signals will not be policed, the state does not expect its citizens to follow the rules and hence the state leaves each citizen is on their own. The questions to ask then are whether the state should spend more on increasing its budget on policing or should it create an environment where the citizen find it worth their while to follow the rules of the red and green lights even when the state is not watching.

When questions are couched like we have done above, the warm and fuzzy feeling of the answer of the second question seems to point towards that being the right answer. It is also a matter of common experience that simply throwing more money at problems rarely provides the best solution. So, how does the state go about building its capacity to deliver better equilibrium for its citizens?

Turning on the red and green lights every night just after reading this article would possibly be useless. The implicit assumption of the state that citizens don’t really expect it to come after them if they flout rules would become an explicit fact. The citizens will be further coached into believing that the rule of law does not exist. This is where the ‘frog and boiling water’ scenario creeps in.

The way to build state capacity for policing at night is to demonstrate it during the daytime. The repercussions of breaking the rules should be fast, unflinching and, as far as the system can be made fool-proof, devoid of corruption. Technology, the other catch-all of all solutions after money, should indeed be an important component of ushering in the changes. Creating confidence in state capacity comes from the state’s own belief that it can indeed enforce the rule of law. This has a salubrious effect on the citizenry which needs to start believing again in the state.

Let us turn to another example where the yellow, blinking lights persist: the title to land and property. The state does indeed charge a hefty price for registering property documents. Depending on who you are (gender is an important component) and where you are, the charges can range from 4% to 8% of the transaction value. Indeed, after the GST is implemented, state property taxes will become the largest component of revenues for the states. Taxes and levies under this head brought the states more than R1 trillion in FY15.

For all the money it charges, the state currently stops at merely recording the transaction without giving the buyer the comfort that the seller is genuine. This has, over time, reduced the confidence of the citizenry in the state’s ability to protect it if there is a dispute. It is no surprise then that the citizenry also tries to reduce its outflow for this ‘service’ that the state provides. Cases of registering the property at rates much lower than market rates are pretty common.

Central governments have, for almost a decade now, worked towards making the Land Titling Bill a reality. Land being a state subject, Rajasthan has recently taken the lead in moving partially towards the Torrens system which gives the buyer the comfort that the seller indeed had the rights to the property s/he is selling and the state will stand guarantee to that right. Rajasthan is implementing this law for urban properties and with a waiting period of two years (in case no claims come up).

If over time, across the country, buyers can believe the sellers and not second-guess them and their motives (as they do at every blinking, yellow signal for fellow drivers and pedestrians), the overall economic equilibrium will settle at a significantly higher plane.

Tilotia is the author of The Making of India—Gamechanging Transitions and is an associate director with Kotak Institutional Equities. Views are personal. 

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