There was a time when Indians considered themselves fortunate to have inherited colonial-era bureaucracy. Capable civil servants ensured that while our neighbours were racked by instability, we weren’t. Today, few Indians would offer similar words of praise.
A report released last week by Hong Kong-based Political and Economic Risk Consultancy (Perc) ranks India’s bureaucracy last among 12 Asian nations, lambasting civil servants for being “a power centre in their own right”. This “suffocating bureaucracy” has made commerce very difficult: A recent World Bank Doing Business survey ranked India 122 out of 181 countries.
Government after government since Rajiv Gandhi has understood this problem in theory, but done little in practice. The last government set up the second Administrative Reforms Commission, but didn’t implement its suggestions. Last week, President Pratibha Patil in her parliamentary address called for better governance. But when will this happen?
In large part, administrative reforms aren’t easy: The same bureaucracy requiring change is the one implementing it. But at the same time, they’re only responding to existing incentives. Public choice theory shows that civil servants are self-interested agents looking to maximize whatever utility can be found in the system. The cure, then, is modifying the system itself.
First, politicians have to hold their subordinate bureaucrats more accountable. Perc noted that one problem with civil servants is their arrogance. The US system has a key lesson here: The US president often brings in political appointees from the private sector for a short stint in government. These outsiders can shake up the bureaucracy by checking internal lethargy and resistance.
Second, reforms that scale back the state are important. Both India and China, which Perc ranks poorly, were command and control systems that put civil servants at the economy’s “commanding heights”. The less the state is involved, the fewer the perverse incentives that exist for bureaucrats. In that light, expanding state largesse, as the rural jobs scheme has done, may be counterproductive.
The ongoing economic crisis is sure to increase demands on the government. But without reforming its civil services, India can neither provide necessary welfare, nor allow stable growth.
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