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. 

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