The Indian state is paradoxical: bureaucratic red tape complicates basic tasks like starting a business, yet it has one of the lowest civil servant-to-population ratios among G-20 nations, causing governance inefficiencies.

Size and Scope of India’s Public Sector

• Small Public Sector Workforce: India’s public sector is relatively underdeveloped in comparison to its peers, both in size and scope. Key indicators include:
  • Public Sector Employment: India’s public sector makes up just 5.77% of total employment, half of what it is in Indonesia and China, and about a third of the UK.
  • Civil Servants per Capita: India has approximately 1,600 civil servants per million people. This is far fewer than countries like the US, which has 7,500 civil servants per million. 
• Understaffing in Key Sectors: India also lags behind in critical sectors such as healthcare, education, and law enforcement: 
  • Doctors, Teachers, and Regulators: India has the lowest per capita numbers of doctors, teachers, police, judges, and other essential public service workers, even compared to countries at a similar development level.
  • Public Spending and Services: The Indian state also has relatively low tax and public expenditure-to-GDP ratios. This results in a scarcity of public goods, welfare, and justice services. 
  • Impact: Due to limited state capacity, the government often outsourced services, like primary healthcare, and visa services that are better managed by the private sector.   

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Debate on Expanding or Reducing the State

There is an ongoing debate about the role of the Indian state.

• Proponents of Inclusive Development: Proponents of inclusive development argue for increased state intervention, particularly in health, education, and social security. 
• Critics: However, critics highlight the poor performance of the state across various domains—such as education outcomes, maternal and child health, farm productivity, traffic conditions, and crime rates—and argue for a smaller, more efficient state.

Root Causes of State Inefficiency

• In their book State Capability in India, IAS officers T. V. Somanathan and Gulzar Natarajan share where the real problem lies. 
• Concentration of Power: A key issue in India’s governance is the concentration of policymaking and implementation powers within departments, which prevents them from highlighting ineffective policy implementation due to accountability concerns.
  • Case Example of National Highways Authority of India (NHAI): The NHAI, which executes national highway projects, while policy decisions are made at the ministry level.
  • Case of Other Countries: While some countries like Australia, Malaysia and the United Kingdom have successfully separated these roles, allowing for better execution and innovation, India’s current structure has led to delays, corruption and inefficiencies.                                                                                                                   
• Lack of Delegation and Accountability: Indian bureaucracy often struggles with inadequate delegation and a lack of accountability at the frontline level. 
  • Frontline personnel are often constrained from making implementation-related decisions, fostering a culture of mistrust.
    • Solution: To break this cycle, the government needs to delegate financial and administrative powers to frontline functionaries, with clearly defined processes and responsibilities. 
• Skill Gap and Technocratic Shortage: One of the biggest challenges facing India’s state apparatus is the lack of technocratic skills. 
  • As the world becomes more complex due to AI, war, etc, there is an increasing need for skilled professionals in areas like finance, contracts, and economics.
• Dependence on Consultants: In the absence of adequate internal expertise, the central government has increasingly relied on consultancy firms. 
  • Reports suggest that over ₹500 crore was spent in April 2017 to June 2022 on outsourcing key tasks to firms like PwC, Deloitte, KPMG, and McKinsey. 

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Solution

To address the skill gap, India must promote lateral entry into civil services. Nandan Nilekani’s work on Aadhaar serves as a prime example of the benefits of such an approach.

• Qualified professionals from non-IAS services, such as the Indian Revenue Service or the Indian Economic Service, should be given opportunities to hold senior positions based on merit and expertise.
• Mission Karmayogi: Additionally, civil servants can benefit from subject-specific training under initiatives like Mission Karmayogi, which aims to build capacity in the Indian bureaucracy.  

Strengthening Regulatory and Oversight Institutions

India’s regulatory bodies are also understaffed and face challenges in performing their functions effectively:

• Market Watchdogs: Agencies like the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are significantly understaffed compared to their counterparts in developed countries.           
  • Comparison With USA: SEBI, with just 800 professionals, is dwarfed by the 4,500 experts in the U.S. Securities and Exchange Commission, while the RBI’s 7,000 staff is tiny compared to the 22,000 at the U.S. Federal Reserve.
• India’s Oversight Agencies: India’s oversight agencies, such as the CVC, CAG, and CBI, often emphasize hindsight analysis, discouraging bureaucratic discretion. 
  • This leads to poor decision-making, delays in procurement, and unnecessary disputes. 
  • For example, while the army procured arms within three years without corruption, the CAG might overly focus on procedural adherence, ignoring the urgency of the context.
• Political Will: Political will is needed to address issues like the appointment of retired officers to regulatory bodies and tribunals, where they receive high salaries without forfeiting their pensions. This creates susceptibility to political manipulation, affecting their in-service decisions.
  • Solution: The issue could be resolved by raising the retirement age to 65 and setting a strict upper limit for such appointments.
• Incentive Structures in the Public Sector: Unlike the private sector, where performance-linked pay motivates employees, public sector compensation often lacks outcome-based incentives. 
  • High salaries under the 6th and 7th Pay Commissions have attracted individuals prioritizing job security over public service. 
  • To address this, future Pay Commissions should moderate salary hikes and lower the upper age limit for entry, encouraging socially motivated candidates and reducing corruption.

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Conclusion

India’s state requires comprehensive reforms to address its bureaucratic inefficiencies and skill gaps, fostering a more capable, accountable, and responsive public sector. By decentralizing powers, enhancing civil service expertise, and refining oversight systems, the country can drive sustainable and inclusive development.

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