This is an archived blog post from The Acorn.
What’s holding India back? According to The Economist (link via Abhishek)
Without India’s strength, the world economy would have had far less to boast about. Sadly, this achievement is more fragile than it looks. Many things restrain India’s economy, from a government that depends on Communist support to the caste system, power cuts and rigid labour laws. But an enduring constraint is even more awkward: a state that makes a big claim on a poor country’s resources but then uses them badly.
…India’s 10m-strong civil service is the size of a small country, and its unreformed public sector is a huge barrier to two things a growing population needs. The first is a faster rate of sustainable growth: the government’s debts and its infrastructure failings set a lower-than-necessary speed-limit for the economy. The second is to spread the fruits of a growing economy to India’s poor.[The Economist]There is no doubt that making the public administration more efficient is necessary to improve governance. In a long series of Dr Manmohan Singh’s NATO (no action talk only) measures, civil service reform was the first one. As The Economist notes, the UPA government’s only achievement in this regard is the maintenance of the hiring freeze instituted by the previous one. Yet before concluding that it is the bureaucracy that is holding India back, it is necessary to consider two things. First, the size of the problem. Changing the organisational culture of 10 million people (the size of a small country) cannot happen overnight, or even within the term of one government. It will need sustained, non-partisan political leadership. So while reforming the bureaucracy is important, given the timeline involved, India cannot wait for this to happen.
Second, good policy design can circumvent or mitigate the inefficiencies of the bureaucracy. As Mukul Asher writes in the in-depth section of this month’s Pragati the state of Gujarat has been able to achieve relatively better policy outcomes within a similar overall environment. Given good policy design—for instance, paying attention to incentives—it is possible to deliver efficient public services. Policies that empower the people—school vouchers, for example—achieve better results than those that empower public officials—like the obnoxious rural employment guarantee scheme.
Unlike fixing the bureaucracy, an exercise involving changing the behaviour of at least 10 million civil servants, resolute, responsible political leadership, an exercise that doesn’t involve more than a 1000 leaders, is likely to yield faster results. It is here that the UPA government has not merely failed—but set the clock back—despite having people like Dr Singh and P Chidambaram in the cabinet. The proximate answer to what’s holding back, therefore, are two three letter acronyms: UPA and CMP.
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