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Resizing the State- What if the Indian state is actually not big enough?

By MILAN VAISHNAV | October 1, 2012
Although India can conduct elections for more than 750 million people, the state’s ability to deliver services remains lacking.

IT IS SOMETHING OF AN UNDERSTATEMENT to say that the state of the Indian state is unwell. In recent years, ’s governance institutions have acquitted themselves poorly. By now, the list of scams involving government’s abuse of its discretionary authority rolls off the tongue with relative ease: Commonwealth Games, Adarsh Housing Society, 2G, Coalgate.

These, of course, are merely the scandals that have captured widespread media and popular attention. There is a seemingly endless roster of B-list scams that have enjoyed their own 15 minutes of fame: Jharkhand chief minister Madhu Koda amassing illicit wealth equal to one-fifth of his state’s budget; YS Rajasekhara Reddy’s “pay-for-play” method to recruit backers for family businesses in ; or the massive rural health mission fraud in Uttar Pradesh under Mayawati. And this is just a short list from a sample of notable chief ministers.

In light of such spectacular corruption, it comes as no surprise that commentators have written extensively—and unflatteringly—about the failings of the Indian state. But despite our inclination to focus on the short-term failures of the Indian state, this is both an endemic issue and an existential one. Much as we feel the need to blame the state, and to devise ways of restraining its power in order to minimise these abuses, we need to acknowledge an inconvenient truth: while the Indian state may be the problem, it is also a principal element of the solution.

In this sense, the Indian state suffers from an acute identity crisis: it is in places where it should not be, while it is nowhere to be found in places where it should. On the one hand, it angers and outrages us by ham-handedly censoring SMS messages and Twitter accounts in the wake of rumours of ethnic strife. It presides over a system of land acquisition that virtually guarantees transactions will produce sleaze and dishonesty. At the same time, as the recent power crisis illustrates all too well, the state often abdicates its authority over inherently governmental functions.

Given this duality, the current “reform” debate seems lopsided. With few exceptions, it is largely focused on restraining the state. Implementing a Goods and Service Tax (GST); injecting greater competition into the energy sector to address Coal India’s virtual monopoly; opening up civil aviation to greater foreign direct investment—all are worthy goals. Yet they are all fundamentally motivated by a desire to get the state out of the way.

While the state undoubtedly needs to cede authority over certain realms, it needs to expand its authority in others. The call to reinvest in state capacity is not novel: since Independence, there have been concerns about the decidedly mixed ability of the Indian state to carry out its writ. Elite, highly functional institutions like the Election Commission and the Reserve Bank have long coexisted with muddling, dysfunctional ones. As the economist Lant Pritchett has argued, India is not a failing state but a “flailing” one: it can conduct elections for over 750 million voters, but it can’t stop millions from going hungry every year by properly distributing surplus food stocks.

State capacity, however, is an ill-defined term. In its simplest form, it is the ability of the state to effectively design and implement public policies. But the concept can be further broken down into at least two constituent parts: incentives and competence. Economists have by and large prioritised the former, arguing that getting incentives right is paramount, if the government is to do right by the people. And on this score, India doesn’t perform well. It is common knowledge that many bureaucrats in India face little incentive to perform honourably and in the public interest—or even to do their jobsat all.

But even if India’s leaders are able to set the right incentives for government rank and file, there remains the question of competence. Are officials well trained? Do they have the right skills? And there is an even more fundamental challenge than skills and training: across almost all dimensions, India’s public sector institutions are grossly undermanned. In many parts of the country, the state lacks presence. In a way, this mirrors the debate raging across capitals of the industrialised world—from Athens to Washington—about “rightsizing” the state. There is one key difference, however, in the Indian context: we are not talking about modifying the state but—in many corners of the country—building it from the ground up for the first time.

Presence, of course, requires adequate personnel. As Shashi Tharoor has pointed out in these pages (‘In the Ministry of Eternal Affairs’, July 2012), India’s diplomatic corps is roughly the size of Singapore’s. During the most recent US-India Strategic Dialogue, The Times of India reported that while the India desk at the US State Department has 18 staffers, its counterpart in the Ministry of External Affairs has just three.

Although this runs counter to the images most of us conjure up when we think about India’s bureaucracy, the problem with the Indian state is not that it is too big; it is that it is not big enough. For all the talk about India as a “patronage democracy” par excellence, it has one of the lowest rates of per capita public sector employment of any G20 country.Indeed, public sector employment—across all levels of government—which nearly doubled between 1971 and 1991, hit its peak at 19.5 million workers in 1995; since then, the number has declined, to around 17.9 million in 2010.

There can and should be a debate about what the scope of the Indian state should be, but at a very minimum, most sensible people can agree that any state must be able to do at least four things: raise revenues, adjudicate disputes, uphold law and order, and provide public goods. Across these four crucial dimensions, the Indian state is woefully inadequate. Consider each in turn.

There has been a robust debate in recent months about the future of tax policy. This has been brought to the fore both by questions about GST implementation and controversies over the introduction of the new GAAR (General Anti-Avoidance Rules) regulations. But what this debate misses entirely is the fact that India’s federal tax authorities have long suffered from a lack of manpower to enforce collection even under existing statute. Indeed, in response to a question from a parliamentary standing committee, the Income Tax department disclosed that it was seeking authorisation for 20,000 additional personnel.

The state’s ability to adjudicate disputes provides an equally dim picture. Last year, the Supreme Court reported that one-third of seats in the state courts and one-fifth of seats on the district and subordinate courts remain vacant. The court estimates that there are 32 million pending cases working their way through the clogged Indian justice system. The backlog is so severe that a state high court judge famously stated that it would take India until the year 2330 to clear it—assuming no new cases are filed in the interim.

Even in the allegedly revered realm of national security, there is a pattern of endemic weakness, as academic Devesh Kapur has noted. The Indian Army is facing a serious shortage of officers—more than 12,000 in 2011 after recruiting fewer than 1,500 in 2010. Despite major internal security concerns like continuing Maoist violence, the Intelligence Bureau has more than 9,000 vacant posts.

Finally, despite major new government social sector programmes, the state’s ability to deliver basic public goods is seriously lacking. Public health is a case in point. According to a 2011 study in The Lancet, India’s stock of allopathic doctors, nurses and midwives is roughly half the World Health Organization’s benchmark of 23 workers per 10,000 population, even factoring in the sizeable private health system. Suffice it to say, government hospitals and health centres operate with serious staff shortfalls. The picture is even more depressing when one considers quality as well as quantity: initial research findings by Sudhir Anand and Victoria Fan suggest that only 43 percent of India’s allopathic doctors have a medical qualification. As many as 73 out of 593 districts lack even a single nurse with a medical qualification.

As the healthcare situation makes clear, building up the public sector’s human capital base involves more than getting people in place—it is about getting the right people in place. Here, the talent pool for public service faces severe limitations.

Consider what the Union Public Service Commission (UPSC) itself has reported. Among the seven examinations the UPSC has given between 2009 and 2010, only one—for the Forest Service—was able to recommend enough applicants to fill sanctioned vacant positions. This is particularly alarming given the astonishing number of applicants per post: no examination had fewer than 13 times as many applicants as available positions while several had a ratio greater than 200 to one.

The roots of this tightness in the labour market for public sector employment are deep and multifaceted. They are in no small measure related to the well-documented weaknesses in India’s higher education system, not to mention the continued opposition from various public sector entities to the idea of lateral entry into public service.

Of course, incentives do matter at the end of day. Unfortunately, how to properly align public officials’ incentives so that they serve the public and not themselves is still an area where trial and error prevails. But researchers have mined India in recent years in order to test creative ways of improving incentives that might enhance government accountability. For instance, the economists Karthik Muralidharan and Venkatesh Sundararaman have demonstrated in a wide-ranging experiment in Andhra Pradesh that paying public school teachers on the basis of performance significantly raised student test scores in just two years. The economist Abhijit Banerjee and colleagues have shown that implementing a freeze on police transfers in Rajasthan has not only improved police effectiveness but also the satisfaction of the public and crime victims. Institutions of “horizontal accountability” like Lokayuktas and legislation like the various “Right to Service” bills which have been implemented in several states also have the potential to encourage better behaviour among public officials.

As a steady stream of damning Comptroller and Auditor General reports continues to trickle in, the impulse to condemn the Indian state will be intense—and perhaps even justified: its myriad shortcomings make a mockery of the notion that India desires to be a major player on the international stage, with a seat on the United Nations Security Council. But bashing the state is shortsighted (even if it does provide some momentary satisfaction). Investing in building and strengthening state institutions must be part of the current reform agenda. It is undoubtedly true that getting institutions right means much more than simply getting people in place. But as that renowned social scientist Woody Allen famously remarked, “Ninety percent of life is just showing up.”

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