EDITORIAL 1: The right size of government
Introduction
For a large, fast-growing and complex economy like India, there is a necessity for a certain minimum size of the government. While this is true for every aspect of the government, it is particularly crucial for public services that touch ordinary citizens on a day-to-day basis such as law and order, healthcare and education. Together these determine the quality of life of an average citizen within the country.
A sharp contrast
- Technological advancements and innovations in governance models have led to unprecedented improvements in the efficiency of welfare programmes in India.
- By most staffing norms, we have an acute shortage of nurses, policemen, teachers and public development officers.
- The ideological belief that smaller governments are better for the growth and development of a nation stands in sharp contrast to the economic reality of market breakdowns, particularly in areas of health, education and safety.
- Human resource investments in areas of public health, public education and law and order are critical for long-term economic growth and improvement in basic quality of life for an average Indian.
Lessons from China’s Qing dynasty
- Given the size and complexity of India, among the lessons from history, on the perils of evangelical allegiance to the ideology of a smaller government, the example of the pitiful demise of the Qing dynasty is worth recalling.
- The Qing dynasty’s government size was notably small, primarily due to ideological constraints rather than structural limitations.
- The Qing state’s fiscal conservatism was deeply influenced by Confucian political ethics and the traumatic memory of the Ming dynasty’s collapse, which was attributed to excessive taxation.
- This historical lesson led Qing rulers to adopt a cautious approach. Consequently, the government maintained a minimal presence in economic affairs, resulting in a grossly limited capacity to mobilise resources and people for state functions.
- When compared to other contemporary states, the Qing government was exceptionally small.
- While European and Japanese states had tax-to-GDP ratios ranging from 10 per cent to 20 per cent, the Qing’s formal tax revenue constituted only about 1 per cent of GDP by the mid-19th century.
- Qing dynasty’s small government size was not merely a result of economic or administrative limitations but was fundamentally shaped by ideological beliefs that prioritised small government and feared the social and economic consequences of fiscal expansion.
- This ideological framework not only defined the Qing state’s fiscal policies but also had lasting effects on China’s economic development trajectory for two centuries.
On the mode of ‘improvement’
- Within the context of India’s current status, improving “state capacity” for good governance is at the heart of most reforms — at the central as well as the state levels.
- The real economy of India is moving much faster than our traditional data are able to capture, hence our administrative capacity is constantly doing a catch-up.
- Technology is a great enabler and critical to modernisation, but not a complete substitute for human resources.
- Shortage of human resources becomes a binding constraint to overall improvements in outcome.
- This is obvious in public health, public education and maintenance of law and order in particular – where no matter how much improvement occurs in infrastructure, budgets and technology – the feet on the ground remain a critical bottleneck.
Way forward
- We need to recruit more people for public service in India, across different sectors and we need to do this urgently.
- We have to ensure that the most capable and hardworking people are brought into public service. This requires innovations in recruitment and parity with the rest of the fast-growing economy to avoid long-term distortions.
- Parity in terms of pay as well as performance. Keeping the government sector small and privileged has long-term economic and social costs for the nation.
- While we modernise the economy, we must also modernise the state – by strengthening quality as well as its numbers.