Editorial Notes

[Editorial Notes] Use Blockchain Technology to improve governance

The point of convergence is the unanimous acceptance that technology and e-governance promote greater transparency.
By IASToppers
October 10, 2020

Content:

  • Introduction
  • What is Blockchain Technology?
  • How can India utilize Blockchain Technology?
  • Government Efforts
  • Challenges
  • Suggestions
  • Conclusion

Use Blockchain Technology to improve governance

For IASToppers’ Editorial Simplified Archive, click here

Introduction:

In India, present administrative affairs grapple with leakages in public delivery of welfare and development goals on account one critical problem- manual processes that can be very easily manipulated. These are often so complex and laborious that even a well-intentioned public servant is chary of implementing beneficial decisions. Technology can cut through much of these daunting processes.

What is Blockchain Technology?

  • Blockchain technology is a structure that stores transactional records (known as the block) of the public in several databases (known as the chain) in a network connected through peer-to-peer nodes. This storage is referred to as a digital ledger.
  • The three key principles of blockchain technology are transparency, decentralisation and accountability.

How can India utilize Blockchain Technology?

  • In the next decade, the business of Indian government is going to experience massive disruptions. This comes on the back of technological enhancements that reduce the need for intermediaries and ensure that the sanctity of process remains unimpeachable.
  • NITI Aayog identified use-cases where the technology can potentially improve governance ranging from tracing of drugs in the pharmaceutical supply chain to verification of education certificates.
  • One of the most productive areas of intervention for blockchain technology would be in land records.
  • A vast developing country like India, with its diverse land tenure systems, is bound to have major problems in this area.  The system is riddled with inefficiencies that reduce trust in the government.
  • Currently the United Nations Development Programme is involved in Proof of Concept pilots across India. Through this technology;
    • create an immutable history of transactional records that helps in checking authenticity;
    • create a tamper-proof system to avoid forgery;
    • create a distributed ledger so that all stakeholders see the same information and set up a secure encrypted environment, where updates are available in near real time.
  • The NITI Aayog notes that, in order to ensure that transactions are not fraudulent, the physical presence of witnesses is mandated at the time of sales deed registry.
  • Deployment of blockchain would potentially eliminate the need of these processes while maintaining the sanctity of the transaction.
  • Blockchain helps create a tamper-proof audit trail that allows for tracking decision-making and ensures that such decisions are in accordance with anti-corruption principles.
  • It addresses concerns around cyber security that come with any effort towards digitisation. Currently there are interesting pilots being conducted across the world, where deployment of blockchain is being tested for public procurement.
  • From the perspective of Internal Controls and Governance (Vigilance), blockchain is strongly recommended to employ a five-part test while assessing such deviations from process:
    1. Whether the issue being pursued has corruption connotations;
    2. The general reputation of the employee involved;
    3. Whether better options were available and ignored without valid reasoning;
    4. Whether the situation inhibited the selection of any other option but the one finally chosen;
    5. Whether the larger interest of the organisation was safeguarded.
  • However, a significant factor in blockchain’s success will be the ability to develop/reform laws and building robust data protection and maintenance regimes.
  • The general environment now is in favour of a regime which ensures that companies not only do profitable business but do so in an ethical manner.

Government Efforts:

  • The enactment of the Public Procurement Bill, Lokpal Act incorporating, inter alia, the disclosure of assets by public servants and reforms in higher judicial appointments to name a few.
  • The government launched the Government e-Marketplace (GeM) in 2016 for goods and services required by central and state governments, and public sector undertakings. 
  • The price reduction of approximately 56% of goods and services coupled with demand aggregation has led to savings of ₹40,000 crores annually.
  • The government made a significant change to the Prevention of Corruption Act in 2018. In the earlier regime, even honest public officials were harassed if a decision provided pecuniary advantage to a person without any public interest.
  • The element of intention has been added under the definition of criminal misconduct. Similarly, broadening the definition of “unfair advantage” and the introduction of corporate criminal liability will go a long way in apprehending or deterring those indulging in bribery.
  • United Nations Convention against Corruption ratified by India in 2011 as well as the anti-corruption principles of the Organization for Economic Cooperation & Development (OECD) cover a wide swathe of vulnerable areas and aspects of business operations including anti-bribery, public procurement and conflict of interest.

Challenges:

  • The problem of corruption in the social and political spheres has often come in for strident criticism.
  • It can be argued that corruption in public life, directly or indirectly, adversely affects the achievement of United Nation (UN)’s sustainable development goals (SDGs).
  • Governments are expectedly risk-averse in dealing with both public policies and public money while enterprises thrive on risk-taking. This often hobbles the entrepreneurial spirit in the public sector. 
  • The public procurement economy in India constitutes about 20% of the Gross Domestic Product (GDP), it is imperative to build on this initiative with a view to onboard as many goods and services as possible.

Suggestions:

  • In the recent discourse on procurement methods, transparency of policy, procedure and practices is increasingly being seen as an imperative when utilising public money.
  • However, transparency is not an end in itself. The whole process must be open to public scrutiny.
  • It is important to institutionalise a system where compliance and established processes can be routinely checked and quantified.
  • A metrics-based system for oversight in governmental processes will bring about transparency, build trust with citizens and spur further digital innovation to make any administration more robust.
  • It is only through robust yet streamlined procedures that a bureaucrat can achieve the intended outcome and avoid unintended consequences.
  • India must focus on the well-intentioned public servant who finds the processes leading to greater transparency and ensuring value for taxpayers’ money cumbersome.

Conclusion:

Blockchain is likely to have a significant impact in creating an integrity-first governance ecosystem. India needs to review existing legal frameworks to address issues around, inter alia, data security, corrupt practices and corporate governance with a view to address anti-corruption objectives.

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