Little excites policymaking commentary in India more than a debate on the size of government. Recently, a raft of government departments (Indian Railways, certain state police forces) announced large recruitment programmes – engendering another round of cautionary, even borderlineapocalyptic, prognosis on the immediate adverse impact on the economy.
As it is, for a government that had “minimum government” as a campaign slogan, a point usually made in popular commentary is how little the present government has done to cut what is described as a “bloated” public sector.
The impression has been further magnified by the absence of any major movement towards that touchstone of reform-achievement – privatisation.
The key question that is missed though is: do we have a “large, bloated” government as is constantly alleged? And is it the large size of the government that is dragging down efficiencies, resulting in sub-optimal economic outcomes? While there is no predictable benchmark of size of government and economic outcomes, it is useful to subject the popular hypotheses against available data.
On headline government spending as percentage of GDP, India, far from having an extraordinarily large government footprint, is actually an outlier on the other side – government expenditure contributes very little to GDP. A snapshot below gives the picture.
Further, the trend over the last decade shows that India has actually been squeezing down government expenditure as % of GDP, while the trend in most other countries has been a lot more expansionary. On top of headline expenditure, policymakers in India have internalised a bunch of buzzwords that have likely had adverse impact on outcomes — a definition of “revenue expenditure bad”, “capital expenditure good”. As a result we have a huge expansion of road networks without commensurate addition to municipal and road safety services, new schools/universities/institutions and significant investments in the physical upgradation of existing schools without a commensurate increase in the numbers (and quality) of teachers/administrative personnel, shiny new public hospitals in remote corners of India without enough doctors/nurses/sanitation workers. As a result, our outcomes on key human development metrics – education, healthcare, quality of life – seem to lag the investments being made in the areas.
The issue seems to be one of state capacity – the Indian state simply doesn’t have enough human capital bandwidth to provide its citizens with reasonable quality public services. Data on the numbers of public servants is sketchy, but there are enough indicators to hold the hypothesis up. The 7th Pay Commission (SPC) report gives comparative numbers of the numbers of public servants in India and US, another large country with a federal political structure. Total number of civilian non-postal/railways Central Government employees in India (in 2014) is around 18 lac. The comparative number for Federal employees in the US is 21 lac. Adjusted for population, the difference is stark – for every lac of population, India has a total of 139 Central government employees, while the comparative number for the US is 668.
Adding in state government and local bodies too, from the Labour Ministry Statistical Handbook, the numbers move up significantly, but still short of comparable international standards.
The best concentration of public servants (as percentage of population) are in remote hilly and border states, besides insurgency-prone regions – these are states where there are special funding programmes from the Central government to increase state capacities to deal with insurgency, border management and geographic remoteness. So Himachal Pradesh has 3,700 public servants for every lac of population, while Manipur, Tripura and Nagaland are all in the 3,000-3,500 range. Even these exceptionally elevated numbers are far short of comparable international levels. For the vast majority of states though, including comparatively richer states like Gujarat, Maharashtra and Haryana, the numbers hover between 1,000 and 1,300 for every lac of population. While there are no empirical studies on causality between delivery outcomes of public services and numbers of public servants – the numbers do indicate a serious dearth of state capacity, which perhaps explains why even the more prosperous states are struggling to meet key human development goals.
The rhetoric of “large government” constrains India when our gaps in service outcomes on a range of social and economic indicators. The Indian state gives the impression of being all pervasive without the capacity to deliver a fraction of its optical presence (and promise). Further cutbacks in the size of the Indian state would only exacerbate our relative deficiencies against the rest of the world. Its time that the India state grew bigger, and not smaller, while citizens demand more accountability from the larger state capacities. The popular rhetoric notwithstanding.
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