Caged by the Public Sector

Over the past three years, the Indian economy has surged at an average rate of 9% per year, thereby bolstering India’s image as a formidable economic force on the global stage.  However, in order to sustain both economic growth and human development, the Economist, in its latest issue entitled, “What’s Holding India Back?”, contends that India must institute and enforce significant reforms in its bloated public sector.  Despite Prime Minister Manmohan Singh’s commitment to “administrative reform – at every level”, including the formation of a commission to look into the matter, even P. Chidambaram, India’s Finance Minister, admits that for the most part, the commission’s deliberations have been “academic.”  In an article entitled “India’s Civil Service: Battling the Babu Raj”, the Economist contends that this trend threatens to stifle economic growth:

 Some economists see India’s malfunctioning public sector as its biggest obstacle to growth. Lant Pritchett, of the Kennedy School of Government at Harvard, calls it “one of the world’s top ten biggest problems—of the order of AIDS and climate change”. 

There is a very human dimension to this issue, as bureaucratic inefficiency and corruption takes a bite into government schemes intended for the poor.  In fact, the impact of India’s recently proposed development spending schemes, termed “inclusive growth” by the government, are expected to be diluted by gross inefficiencies in the public sector.  In a separate article entitled, “What’s Holding India Back?” the Economist informs readers of the following:

 In his budget, Mr Chidambaram duly handed out extra money to a long list of worthy schemes, from school meals to rural road-building. But as he himself conceded, outlays and outcomes are not the same thing. Standing between the two is an administrative machine corroded by apathy and corruption. The government’s subsidies fail to reach the poor, its schools fail to teach them and its rural clinics fail to treat them. 

In fact, this trend towards counter-productivity is far more entrenched than we may realize:

  According to the Congress-led government’s own estimate, most development spending fails to reach its intended recipients. Instead it is sponged up, or siphoned off, by a vast, tumorous bureaucracy. That is why, despite India’s commitment to universal health care, water and education, only five countries have a lower portion of health spending in the public sector; over half of urban children are educated privately; and nearly all investment in irrigation is private. Under stress of tube-wells and a four-year drought, the water table in Jalaun has fallen by up to 15 metres. Despite the proximity of two great rivers, only 40% of the district is irrigated; no canal has been dug since colonial times. 

Fundamentally, the Economist concludes, in order “to provide poor Indians with halfway decent services, the bureaucracy needs, root-and-branch, to be made accountable.”  The article suggests a more “seismic reform”, namely in the form of a resurgence of the “16-year campaign to decentralize power from the states to local elected bodies known as panchayats, cutting out much of the bureaucratic cancer altogether.”  This process of reinstating power in the hands of local governance, however, will be a lethargic one in the face of bureaucratic opposition, especially given the current state of affairs:

 India’s panchayats, or local governments, are in theory responsible for managing welfare and development schemes in their district or urban area. But many are powerless. In only two states, Communist-ruled Kerala and West Bengal, have they been given control over their own budgets—with patchy success.   

In order to make sizable strides in the direction of both economic growth and development, especially with respect to the poor, the Indian government must make administrative reform a priority.  

3 Responses

  1. Good work Prerna. I was gonna post on this sometime this week, but you beat me too it.

  2. sounds a lot easier said than done, no?

  3. […] employees recommended to get 40% pay hike. (See here for the problems this may […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: