Watershed Development, Decentralisation and Institutional Change: Insights from the Mechanism Design Theory

Abstract

Watershed development (WSD) is one of the core strategies to arrest widespread resource degradation and reduce poverty in India’s semiarid regions. Although many WSD initiatives had positive short-term impacts, long-term returns to investment have been questioned. Overall, past approaches of WSD programmes have had slow, inequitable and short-lived impact. In recent times, many WSD programmes have taken a participatory approach, where state governments share costs and benefits with local communities. The shift towards a participatory approach largely stems from the failure of the top-down approach. There are several varied institutional configurations involved in implementing WSD programmes including non-governmental organisations, government departments and various partnership arrangements. The 73rd amendment of the Indian Constitution provided an impetus for decentralisation by strengthening local government bodies, collectively called Panchayat Raj Institutions (PRIs), at district, block and village levels. These self-governing bodies have been given an expanded role in implementing WSD initiatives within a nested and decentralised institutional environment. This chapter examines the institutional apparatus of WSD programmes in India. Using mechanism design theory, the chapter evaluates the new institutional structures proposed by the WSD Common Guidelines of 2008. The findings indicate that there is tension between traditional government bureaucracies and self-governing bodies. Informational asymmetries, inadequate devolution and capacity constraints preclude the WSD implementing agencies, achieving their full potential in delivering outcomes. Future institutional reforms should focus on lowering information gathering and processing costs and enhancing technical skills at the local level. Reforms to contractual agreements between the state government and the project implementing agencies are also needed in order to provide renegotiating opportunities and robust compliance mechanisms.