The recently released Annual Survey of Education Report 2010 serves as an important reminder of India’s greatest challenge – converting increased financial outlays to improved development outcomes.  Since 2004, India’s education budget has more than doubled, increasing from Rs 152,947 crore in 2004-05 to Rs. 372,813 crore in 2009-10. For the same period, ASER has been tracking learning outcomes to find that learning levels have remained depressingly stagnant. Nearly half the children in standard 5 are still unable to read a standard 2 text. This outcome failure is not unique to education nearly every social sector suffers the same fate.

What explains the status quo? The crux of the problem is well known: service delivery is governed by an incentive structure that privileges inputs – infrastructure creation – over quality and performance on actual outcomes. This input emphasis has created a target driven, rule-book governed bureaucratic culture where quality problems are invariably reduced to input deficits addressed through guideline driven expenditures. Consequently, government infrastructure is simply not geared to deal with the more complex task of actually delivering services and ensuring a minimum qualiy: making sure infrastructure is maintained and operational; trained staff are motivated and present.  So deep is this problem that not only do regular investments fail to yield results, but well meaning reform efforts to improve quality also flounder.

Take the instance of the National Rural Health Mission (NRHM). To improve health services, the scheme introduced a system for providing discretionary funds to district societies. The objective is to incentivize local innovation and ensure that spending matches local needs. To facilitate expenditures the rule-book offers a ‘suggested’ list of activities on which money can be spent. A recent evaluation by the Planning Commission looked at the use of these funds in Bihar Rajasthan and Uttar Pradesh and tells a depressing story. The study found that funds when spent usually go towards fulfilling infrastructure needs at the health facilities. But more interestingly it also found that officials and society members expressed a clear preference for using funds for suggested items in the rules rather than exercising their discretion.

The Nirmal Gram Puruskar (NGP) is another example. Launched in 2003, the NGP is an incentive scheme that offers a reward of up to 50 Lakhs for Panchayats that have achieved total sanitation. The NGP is a sincere effort by the government to move away from the earlier target driven sanitation policy that emphasized building toilets – which were rarely used for its intended purpose – to one that focuses on changing people’s behavior toward toilet use through local government innovation, awareness raising and generating demand for better sanitary facilities in rural areas.  In its early years, NGP managed to achieve some success but the program did not invest in building capacity and motivating implementation officials.  As a result, the input approach has crept right back in. While there is no serious research, anecdotal evidence indicates that officers are driven by incentives to win awards rather than create sustained behavior change and an increasing number of Panchayats have not been able to maintain their total sanitation status.

So, how do we break the input trap to ensure improved outcomes from increased outlays? This is a difficult question to answer. If international experience is anything to go by, service delivery systems in most countries are locked in the input trap. But there is some good news. Going back to elementary education, this year’s ASER report highlights the case of Punjab, which has seen significant improvements in learning outcomes. This was a result of strong leadership that chose to break the input trap by focusing on learning goals and experimenting with changes in pedagogy. One simple innovation was to group children according to their ability levels. Punjab focused on fostering leadership amongst teachers thereby addressing the input problem.

Bihar too has experimented with, amongst other things, improving access to teaching materials. In 2008 the government launched a Rs. 30 crore campaign for schools to buy text books over a two month period. With political weight behind the program, a traditionally slow bureaucracy managed to get money flowing at lightning speed and books were bought within two months. Hyderabad city’s district administration is yet another example. The administration is trying to improve education by strengthening parent teacher interaction by mobilizing school management committees to make school development plans. Motivating frontline officials to work with the committees is critical to this effort.

These experiences show that it is possible to break the input trap. Punjab and Bihar show that change is most effective when state governments take ownership and are willing to innovate and experiment. Ironically, the current architecture of service delivery is dominated by schemes that are centrally funded, centrally designed and controlled which creates disincentives to achieve this. Moving away from such a system to one where states are incentivized to take leadership and produce innovation is critical. But above all, these experiments demonstrate the importance of investing in building local leadership at the district, block and community level. As the NRHM and NGP experience shows, the success of a program depends on local providers, their motivations and incentives. The guideline culture will only be broken when service providers are encouraged to take leadership, to ask questions and to act autonomously.

To ensure quality, increasing local autonomy needs to go hand in hand  with regular performance monitoring and reporting on outcomes. This is how accountability for outcomes is ensured. Credible and easily accessible performance indicators both generates public pressure for action on outcomes but also enables providers to see the results of their choices and thus encourage innovation. For years now the government of India has promised outcome monitoring from the outcomes budget in 2005 to the Presidential speech in 2009 when the UPA promised to set up an independent evaluation office and prepare annual reports on social sector performance. But these promises remain unfulfilled fulfilled.  Rather than investing in new input driven efforts, the UPA would do well the focus its energies on fulfilling these promises, only then will outlays translate into outcomes.

Yamini Aiyar is the Director of the Accountability Initiative. This article was published in the Indian Express on 31 January 2011. Click here to read the Express article.