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Improving the capability of the Indian state

  • Published
    2nd Dec, 2023


Public institutions' flawed incentives and officials' skill gaps hinder good policies, undermining effective formation and implementation.

State Inefficiency and Bureaucratic Challenges

  • Complex Regulations Stifle Growth: Excessive licenses and permits in India hinder business and construction, creating a bureaucratic maze that impedes progress.
  • Understaffed Public Sector: Despite being a populous country, India's civil servant per capita ratio is the lowest among G-20 nations, affecting public services.
  • Resource Scarcity in Public Goods: India's state, though small by some metrics, faces challenges in tax-GDP ratio and public expenditure, leading to resource scarcity in public goods provision.

Improving State Capability and Technocratic Gaps

  • Decentralized Decision-Making Success: Countries like Australia demonstrate separating policy decisions and implementation accelerates execution; India should adopt such decentralized models.
  • Addressing Technocratic Deficits: A lack of technocratic skills at top levels results in outsourcing crucial tasks. Regular lateral entries and skill-specific training can bridge this gap effectively.
  • Strengthening Regulatory Bodies: Professional staff in market watchdogs like SEBI and RBI is insufficient. Augmenting their strength is vital for effective governance and oversight.

Corruption Challenges in Public Sector

  • Salary Disparities Breed Corruption: Public sector salaries, higher than private wages for most skill levels, contribute to corruption and the allure of government jobs.
  • Incentivizing Intrinsic Motivation: Performance-linked pay is less effective in the public sector. Moderating pay raises, reducing upper age limits, and fostering intrinsic motivation can curb corruption.
  • Balancing Economic Growth: Economic growth reducing the appeal of government jobs and periodic, moderate pay raises can minimize corruption and attract socially-driven individuals.
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