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Decentralization Scenario in the Indian Sub-Continent

(India, Bangladesh And Pakistan)

and Implications for International Development Actors1

Author: Nayana RenuKumar, Masters in Public Administration (2014-16) student at the

Harvard Kennedy School, Cambridge, USA

Table of Contents

Introduction .................................................................................................................................. 1


Context of the Study.................................................................................................................... 1


Decentralisation in the Indian Sub-Continent: Past and Present ......................................... 3


Differing Paces of Decentralization in the Indian Sub-Continent ....................................... 8


Implications for International Development Actors ............................................................ 10


Bibliography ................................................................................................................................ 13

List of Figures
Figure 1: Overview of India's decentralization ................................................................................ 4
Figure 2: Overview of Pakistan's decentralization .......................................................................... 5
Figure 3: Overview of Bangladesh's decentralization ..................................................................... 7

List of Tables
Table 1: Overview of economic, social and political indicators of Indian sub-continent ......... 2
Table 2: Summary of comparative analysis of decentralization across India, Bangladesh and
Pakistan......................................................................................................................................... 8

According to the World Bank, over seventy-five governments have introduced some form of
decentralization since the 1980s (Ahmad, Devarajan, Khemani, & Shah, 2005). It has been
argued that decentralization of power and resources to democratically elected local
governments enhances access for citizens, increases accountability of officials and expands
citizen participation in decision-making (Norris, 2008). Recognizing the role of decentralization
to democratize, reduce corruption and enhance the delivery of public services, international
agencies such as the World Bank, OECD and UNDP have extended lending and non-lending
support to its client countries to promote decentralization. During 1990-2006, World Bank
disbursed $31.6 billion (8 percent of total Bank commitment during that period) on
decentralization across 89 client countries (World Bank, 2008).
Today, local tiers of governments handle a substantial share of responsibilities in both
developing and developed countries although there are huge differences in the nature and
extent of decentralization process and outcomes across countries (Schneider, 2003). The
experience of decentralization in South Asia is a case in point. While India, the largest country
in this region has drastically decentralized since 1993, Bangladesh remains one of the most
fiscally centralized countries in the world (World Bank, n.d). Decentralization efforts in Sri
Lanka, Pakistan and Nepal are in different stages of crises given the specter of authoritarian
regimes looming large over their heads amidst post-conflict reconstruction and volatile security
In this context, this report reviews the decentralization scenario in the three largest nations of
the Indian sub-continent, India, Pakistan and Bangladesh and seeks to identify the key factors
that affect the implementation of democratic decentralization. The report argues that the
current funding programs of the two major international donor agencies, World Bank and
UNDP, fail to fully address these limitations and offers suggestions that the international
donors could adopt to promote democratic decentralization in the Indian sub-continent. The
key suggestions include focus on addressing systemic deficiencies, focusing on democratic
decentralization and pooling of skills and resources of the two agencies.
The Indian sub-continent consists of India, Pakistan, Bangladesh, Nepal, Bhutan, Maldives and
Sri Lanka. The following tables gives a snapshot of the economic, social and political set up of
key countries of the region:

Table 1: Overview of economic, social and political indicators of Indian sub-continent


Type of

Type of

(WDI 2013)


GDP per







2013 (out
of 187

Sri Lanka







index 2013

house (2013)


Partly free
Partly free


Partly free
Partly free

(out of 177

From the above table, it can be observed that the Indian sub-continent is home to close to 22%
of world population and more than its fair share of authoritarianism, corruption, human
development problems, resource constraints and poverty. The scenario is not surprising given
the backdrop of civil wars, military coups and regional conflicts. India is the only country in the
region with an uninterrupted and free democratic set up since the last 57 years of independent
However, the promise of democracy and peace is brighter than ever with the end of civil wars
in Nepal and Sri Lanka, the first ever-peaceful transition of democracy in Pakistan, the return to
normalcy in Maldives, the transition to guided democracy in Bhutan and the possibility of coup
just eliminated from the fate of Bangladesh. In the last ten years since these changes have
precipitated, the international donor agencies, mainly the World Bank and UNDP have played
important role in attempting to consolidate democracy and by supporting programs to help
strengthen the reach of democracy to the grassroots levels. Huge funds have been disbursed for
various local governance support and sectoral service delivery improvement programs.
However, a decade later, there is very little evidence that these interventions have brought
about democratic decentralization. Corruption, human development and freedom broadly
remain where they have been in most of these nations or have worsened.
Why is the international funding for grassroots democracy failing to create an impact? What
could be done to improve the situation?
These questions are explored by taking the case of decentralization in the three largest nations
of the Indian sub-continent. Together they have more than 90% of the regions population and
its landmass. The study focuses only on these three nations in the hope that the lessons drawn
from this exercise will be useful for other countries in the region too.


History: In India, at the time of Constitution formation, the idea of local government was
relegated to Directive Principles of State Policy (Part-IV).
73rd and 74th Constitutional
It noted, The State shall take steps to organize village
Panchayats and endow them with such powers and
Part IX and IX A added to the Indian
authority as may be necessary to enable them to function
Constitution with provisions for
Panchayats (rural local bodies) and
as units of local self- government. During 1950-75,
Municipalities (urban local bodies)
several committees were set up to examine the
Panchayats and Municipalities to be
revitalization of local self-government institutions. The
constituted at every level in each state
with direct elections to these bodies
efforts to amend the Constitution to strengthen local
government institutions succeeded in 1992 with the 73rd Reservation for scheduled castes and
tribes and women
and 74th constitutional amendments. The constitutional
and XIIth schedules added to the
amendments and the accompanying schedules clearly XI
Constitution listing 29 and 18
demarcated functions to be devolved to local
functions to be devolved to
governments by the States. It became mandatory for
States to enact conformity acts.
Present: In India, decentralization has strengthened during 1993-2013. According to the
Devolution Index 2012-13, thirteen States of India has performed above the national average
in decentralization with superior performance in dimensions such as legislative framework,
functions, functionaries, finances, capacity building and accountability. Six more states
performed on the medium level with eleven States performing below the national average. The
general perception has been that while the mandatory provisions of the Constitution regarding elections
and reservations are adhered to in all States, the devolution of powers and resources to Panchayats from the
States has been highly uneven across States (IIPA, 2013). Yet, overall performance is positive.
Regular elections for panchayats have been conducted in all states. All states have constituted
the State Finance Commission. They have also made India the most representative democracy
in the world. By 2006, about 2.9 million representatives were elected to the three levels of
panchayats; about 42.30 percent were women, 13.70 percent belonged to scheduled castes and
14.6 percent were scheduled tribes (Government of India 2006).


Figure 1: Overview of India's decentralization

History: In Pakistan, decentralization has a long and chequered history. In 1962, President
Ayub Khan introduced the Basic Democracy concept to promote democracies at the village
level. However, the effort was widely seen as an effort to circumvent the provincial
governments and promote clientelism to legitimize military rule. It has been observed that
local governments (functioning under the military regimes of Ayub and Zia (19581969 and 19771988
respectively), were not empowered and had extremely limited fiscal and administrative mandates (Mohmand
& Cheema, 2007). The subsequent war with India and break away of Bangladesh led to a new
democratically elected government. Prime Minister Zulfikar Ali Bhutto abolished the Basic
Democracy initiative and promulgated two local government ordinances in 1973.
In the 1973 Constitution, Articles 32 and 140-A deals with local government. Article 32
requires the State to encourage local government
Devolution Plan by Legal
Framework Order, 2002
institutions composed of elected representatives of the
(expired in 2009)
areas and ensure special representation of weaker sections. Balochistan Local Government
Article 140-A (included in 2002) requires each province to
Ordinance, 2001 (XVIII of 2001)
enact laws to establish a local government system and North-West Frontier Province,
Local Government Ordinance,
devolve responsibility and authority to them (CLGF,
2001 (XIV of 2001)
Punjab Local Government
Ordinance, 2001 (XIII of 2001)
Sindh Local Government
Ordinance, 2001 (XXVII of 2001)

In 2001, President Parvez Musharaff promulgated the

dramatic and far-reaching Devolution Plan. Through a
central ruling, the 200-year-old colonial system of bureaucratic control over districts by the first two tiers of

government was swiftly replaced by an elected third tier that connected 110 district governments, through 334
tehsil (rural) and 62 town (urban) governments, to 6,125 union governments in the four provinces of Pakistan
(Gellner & Hachhethu, 2008). Local Governments were placed in the sixth schedule of the
constitution through the 17th amendment for a period of six years.
Present: In Pakistan, the momentum given by the 17th amendment gradually subsided with
the expiry of the constitutional protection for local government in 2009. Provinces have been
experimenting with different forms of previous local government ordinances or experimenting
with their own models.
However, Pakistan had another landmark decentralization initiative with the 18th amendment
of the Constitution whereby attempts were made to
Pakistans 18th amendment
strengthen the federal structure by transferring federal Not only revived but also reoriented
the level resources and responsibilities to provincial
democratic and federalist governments. 17 federal ministries targeted for devolution
fundamentals of Pakistan
have been transferred to the provinces. However, the
committee implementation of what would have been one of the
under the Prime Minister
watershed initiatives in Pakistans history has been stalled
formulated to look at
by the lack of capacity and will in the provincial
implementation issues
strengthen governments to assume the delegated responsibilities
democratic devolution at (Kugelman, 2012). So far only Balochistan has conducted
federal, provincial and local elections to the local government despite the Supreme
levels (UNDP 2013)
Court judgment mandating all provinces to hold elections
to the local governments (UNDP, 2013).


Figure 2: Overview of Pakistan's decentralization

History: Till its secession from Pakistan in 1972, Bangladesh followed the Basic
Democracy system. In 1972, immediately following liberation, the Presidential Order No.
7, dissolved all existing local government committees. New Committees were established
only at Union level and District level. The Presidential Order No. 22 of the same year
specified the composition, functions and election procedures of local governments.
The 1973 Constitution has Articles 9, 11 (Principles of State Policy) and 59 (Chapter III:
Local Government) of making provisions for establishing local government as an
inseparable organ of administering state affairs to safeguard democratic values and to
secure economic and social justice. However, the Constitution does not clearly define the
powers and functions of the local government.
The first election for the Union Parishad (lowest tier/village level) was held in December
1973 while elections to the Thana Development Committee (upazila/sub-district) and the
Zila (District) Councils were suspended. The Local Government Ordinance of 1976 by the
Military Government introduced a three-tier system with the Thana level re-established.
The elections to the Union Parishads were held in 1977 while the other levels were under
the control of bureaucracy (Mohabbat Khan, n.d).
In 1982, General Ershad constituted an Administrative Reorganization Committee and
replaced the Thana Development Committee with
legislations on
Upazila Parishad with wide ranging powers. When Bangladeshs
local governance:
Bangladesh introduced parliamentary democracy in
Hill District Local
1991, the inter-mediate level was repealed following
Government Parishad Act
the recommendations of Local Government

Zila Parishad Act 2000

Reorganization Commission of 1991 due to the link
between General Ershad and Upazila Parishad Local Government
chairmen (Sarker, 2003). The Sheikh Hazina Ordinance 2008
Government of 1996-2001 set up a Commission to Local Government (Union
Parishad) Ordinance 2008
set up a democratic local government system. It
Local Government (Upazila
recommended a four-tiered local government
Parishad) Ordinance 2008
system starting at district level. The government was Local Government (City
Corporation) Ordinance 2008
successful in conducting elections to the lowest tier
during this period (Mohabbat Khan, n.d). The Source: Country profile, CLGF
Government has approved direct funding of Union

Parishads in 2004, which is a major step to devolve fiscal power to local governments. In
2008, the Sheikh Hazina government passed a series of legislative reforms for
Present: Today there are 4,504 Union Parishads at the lowest-tier of local government in
rural areas and 308 Pourashavas (Municipalities) and 7 City Corporations in urban areas.
All are directly elected, but have limited independent powers or resources to run their
affairs. In addition, there are 484 Upazila Parishads, which have become representative
bodies after the 2008 reforms. (World Bank, 2011).
It can be opined that the Union Parishad is the only local government body that has been
operating for decades with regular elections and has any institutional continuity in the local
government landscape. The failure of development strategies pursued by the State over the
years amidst recurring military coups and weak democratic governments have led to a
international development actors who has placing greater trust on NGOs and the private
sector in the development process (Sarker, 2003).
Whatever functional space has been left for local government has been taken over by
bureaucracy in the name of development administration. Almost every aspect of local
government operations is controlled by the central government and its field offices either through direct
intervention or a plethora of rules and regulations. The central government has the authority to suspend a
local government unit. All these practices have jeopardized attempts to build an effective and devolved local
government system in Bangladesh (ibid).

Figure 3: Overview of Bangladesh's decentralization


From the above discussion, it can be seen that the three biggest countries of the Indian sub-continent are at different stages in
the pace of decentralization. The following table summarizes the current challenges in decentralization in the three countries:
Table 2: Summary of comparative analysis of decentralization across India, Bangladesh and Pakistan







Achieved a clear transition from local

government as a desirable institution (by virtue of
inclusion in directive principle of state policy) to
an integral democratic institution (by virtue of
inclusion as a constitutional provision)
Clear allocation of functions to local governments
by schedules XI and XII
Provisions for direct elections and representation
of weaker sections and a host of enabling
provisions by parts IX and IXA

The success of 18th amendment which

transfers substantial powers to
provinces and the history of 17th
amendment offers hope for inclusion of
local government as a Constitutional

Local Government an integral part of the

Constitution (Articles 59&60)
Broad assignment of functions: Administration,
public order, preparation and implementation of
development plans


While most political decentralization measures are

decentralization measures are discretionary
offering great latitude for States. Responsible for
variation among States in decentralization

Failed to achieve the transition from

local government as a principle of policy
to an integral constitutional provision.
With the expiry of Legal Framework
Order after six years, the constitutional
basis for local government remains only
in principles

Powers and functions of local government to be

decided by the Parliament
Functions specified in the Constitution are too
Limited clarity on elections to these bodies


All States have legislated decentralization Acts in

conformity with the Constitutional provisions

The devolution of powers under the

18th amendment offers hope that
provinces may feel more amenable to
devolving powers to local governments
as they have limited capacity to handle
all responsibilities

A series of ordinances had set the ground for

decentralization and representative government in
conformity with the constitution


The powers devolved to local governments vary

substantially across the Acts of different States.
This means that local governments in some States
have a more enabling legal environment that

After the expiry of Legal framework

Order, there is no clear legal framework
governing local government. Each
province is adopting their own legal

The parliament has also legislated laws which

restrict the powers and functions of local
government leaders and give sweeping powers to
bureaucrats leading to political-administrative




Implementation Strengths



The 18th amendment makes no mention
of local government

Strong Institutional support including dedicated

ministries at national and State level, State
Election Commission, State Finance Commission
Strong international development aid support in
capacity building, monitoring, performance
Active participation from citizens
Strong accountability mechanisms including
regular elections and rights based legislations
Varying performance across States due to weak
fiscal and administrative powers in many areas
Danger of elite capture in poor, illiterate, feudal
Capacity challenges

Local government tiers as part of 2001

devolution plan have been retained to
certain extent

Due to delay in holding local

government election, local governments
are still governed by bureaucrats
Dedicated institutional set up at national
level has been abolished after 18th
amendment and responsibility delegated
to provincial level where no clear
structure exists today



Institutional set up: Dedicated Local

Government Division
Strong support of civil society in implementation
Active bureaucratic support in development
Strong international development aid support
Elections to lowest tier held in 2009
Limited autonomy in fiscal and administrative
Lack of functional clarity: Mismatch among
functions, functionaries and finances
Weak fiscal base: Miniscule share allotted to
Unpredictable intergovernmental fiscal
transfers and low capacity to raise own revenues
Low levels of capacity
Weak systems of accountability

Countercyclical pattern of local democracy: Tendency to introduce/strengthen local
government during military regimes erodes the trust between democratic institutions and local
governments in better times. Provincial governments view local governments with
Strong federal system with established and
collaborators in strengthening and legitimizing non-democratic regimes and would make efforts
powerful State governments which are today
to emasculate it
able to view local governments as collaborators
and not existential threats
Absence of strong federal systems: The lack of strong provincial governments in Pakistan
and presence of a unitary, centralized government in Bangladesh means the absence of strong
intermediaries between the national and local governments which can effectively guide and
monitor the local governments


International development actors such as World Bank and UNDP have ongoing projects in
India, Pakistan and Bangladesh with sizeable fund allocations for decentralization.
World Bank has supported the Local
Governance Support project (I&II) of
Bangladesh with a ten-year commitment of
$1193 million. The direct support to Indias
third tier by World Bank approximates to
around $1358 million (World Bank, 20052014). Pakistan is currently implementing the
Strengthening Participatory Federalism
and Decentralization Project in partnership
with UNDP at a project cost of $15 million Figure 4: International development aid for strengthening
(UNDP, 2013). World Bank has projects local government (direct funding)
worth more than $1000 millions in sector service delivery programs in Pakistans
However, a detailed analysis of the funding components brings in the following insights:
World Bank
Uniform design for different contexts: World Banks local governance support
project in Bangladesh has adopted a project design and implementation strategy very
similar to that of its local government projects in India regardless of the stark
differences in decentralization challenges faced by the two countries. In both
Bangladesh and India, World Bank projects focus on the lowest tiers of the
Government. Whereas this approach may be suitable in case of India, which has
mostly addressed the systemic, constitutional and legislative challenges and is working
on implementation challenges, this approach appears unsuitable for Bangladesh that
face huge systemic deficiencies and policy level limitations.
Narrow focus on fiscal transfers and assumption of Governments
responsibilities: The diagram below shows that 92 percent of project funding has
gone into fiscal transfers to the lowest level of the government, the Union Parishad
with the World Bank performing the role that the Government of Bangladesh should
ideally perform. This would mean that the national governments and local
governments would have limited ownership for the funds so transferred as also weak


institutional mechanisms or resources to sustain the transfers upon the completion of

the project by World Bank.
Figure 5: Components of
Local Governance support
Program II: World Bank

Source: Author (drawn upon LGS II project documents)

Limited resources: An analysis of UNDPs project documents on Strengthening
Participatory Federalism and Decentralization Project in Pakistan indicate that
UNDP has a better understanding and insight into the ground realities and challenges
faced by Pakistan in strengthening decentralization and federalism. While its focus is
on enabling the government to implement the 18th amendment and strengthen the
Provinces, it has very strategically weaved in strong commitments for decentralization
to lower levels as part of the funding program. UNDP has outlined realistic and
meaningful project goals in terms of addressing systemic and legislative challenges
involved in decentralization. However, the extremely limited funding support offered
by UNDP in this program may not help build enough political and administrative will
for bringing about the policy shifts it envisages.
There is a need for international development agencies to understand that decentralization
need not be seen as a universally benign value by countries that has suffered under it, such as
Pakistan and Bangladesh. As Hart (1972: 607) for instance, observed: commitment to
democracy must precede the commitment to decentralization, if the latter is to be
instrumental in promoting the former (Andrews & de Vries, 2007). To promote


decentralization without that prior commitment can lead to unforeseen and sometimes
antidemocratic results.
Most efforts of World Bank, UNDP and all related funding agencies has been to work at the
lowest levels of government and focus on improvement of service delivery and performance
management without really focusing on the core issues of federalism and democracy and
how it affects the implementation of federalism in both these countries. While it is useful to
export best practices from India where grassroots level approaches worked, this happened
where the state governments owing to the federal structure were strong enough to support
the decentralization process.
There is a need for strong political commitment for democracy before decentralization can
be thought of in earnest. Such political commitment should first reflect in constitutional
amendments that clearly specify areas allocated to the local government institutions and
clearly demarcate powers between the provincial and local governments.
Towards this, there is great potential for better impact if World Bank and UNDP can work
together in creating more joint initiatives as in case of joint UNDP-World Bank Project on
country-led Poverty and Social Impact Analysis (PSIA) or on State-building in Fragile and
Post-conflict situations. Great joint gains for the countries and international donors can
come from pooling funds and specific skills and knowledge to build more effective
democratic decentralization initiatives in the Indian sub-continent.



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