Just spending more will not change the situation, what issues will the new government have to focus on

Ananya Shroff
7 Min Read

Writer: Karthik Muralidharan

In its 75th year as a sovereign republic, India has much to celebrate. Recent elections have demonstrated our vibrant democracy, and we are the world’s fastest-growing large economy. But, we also face serious challenges that impede both individual and national progress, including education and skills, health and nutrition, police and public safety, courts and justice, social security and welfare, and insufficient high-quality jobs. When a new government comes to power, the natural response to these challenges may be to advocate for increased budgets for these sectors. However, research shows that higher sectoral budgets often do not translate into better outcomes, reflecting weaker governance. On the contrary, even modest investments in better governance have a much bigger impact than increasing ‘government as usual’ spending.

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How will the 'car' evolve under changed circumstances?

In many ways, the Indian nation is like a 1950s Ambassador car. So political parties compete over who will drive it, which passengers to prioritise and where to drive it. However, the car itself is outdated! Increasing sectoral budgets without improving government efficiency is like putting fuel into a 1950s car. It can make the car run, but the distance covered by this fuel will be extremely limited. However, party manifestos and policy discussions focus on the direction of the car, with little attention paid to the functioning of the car. Therefore, an important message for the new government is that more public spending alone will not solve our major social and development problems. Instead, we need to focus more on improving the effectiveness of the Indian nation.

The new government will face many challenges including GST and inflation, it will have to deal with these policy issues

These areas need attention

The good news is that we have both the knowledge and technology needed to implement governance reforms to strengthen public systems. Such reforms would greatly enhance India's 'state capacity' for service delivery and help governments maintain a stronger focus on citizens at any level of spending. This reform requires the government to focus on key systemic areas.
(a) Information about data and results
(b) Public personnel management which includes recruitment, training, posting and rewarding based on performance
(c) To create better spending and purchasing power for better functioning of markets
(d) Increasing the quantity and quality of tax revenue
(e) Greater decentralisation of funds and functionaries for service delivery
(f) Building better regulatory and procurement capacity to better operate markets and harness private profits for public good.

How do you get more benefits?

High-quality research across diverse fields has shown that investing in governance and state capacity can yield returns (ROI) ten times greater than the costs. So, we have a way to accelerate India’s growth by investing in strengthening our public systems for better service delivery. Building a more effective state should be a top priority for all Indians across the political and ideological spectrum. It will enable us to deliver basic services and welfare more effectively to the poor and vulnerable. It will promote the equality and justice valued by the economic left. But it will also increase public spending and create a sustainable basis for long-term growth.
Think carefully this time…why does the BJP need to strike a balance with introspection?

Reforms in public expenditure

Traditional policy debates focus more on the 'top line' of budget allocations to different sectors, rather than on how the allocations improve the lives of citizens. However, this focus distracts us from a more important issue. Improving the effectiveness of public spending – regardless of what we spend on. Budget debates become futile because increased allocations in any sector come at the cost of cuts (or more debt) in other sectors. However, investing in better public systems can improve outcomes across all sectors, leading to greater improvements in citizens' lives, rather than increasing the budget and spending more 'on the government'.

Equality among citizens

Improving the effectiveness of government is an economic and moral imperative. India's constitution ensures equality among citizens through universal suffrage. Yet, weak public service delivery limits the ability of the poor and marginalised to transform the political equality of 'one person, one vote' into greater equality of opportunity through better education, health and essential services. This is why building a more effective state is the greatest unfinished task of Indian democracy.

For decades, the government has been trying to

This agenda will require broad political consensus and a long-term vision. India’s great achievements, from our nuclear and space programmes to delivering welfare benefits through digital infrastructure, have been built on decades of effort by many political parties and governments. Similarly, building more effective public systems is a long-term project that will require close collaboration, engagement and trust between central, state and local governments.

Who will be the important driver of the country's development?

Just as the performance of a car driver in a race depends on the quality of his car, the effectiveness of political leaders is limited by the government machinery they rely on to serve voters. This is why upgrading the Indian state car by investing in better public systems should be a top political priority for the new government. This will be a key driver of accelerating India's growth.

(Muralidharan is the Tata Chancellor's Professor of Economics at the University of California, and the author of Accelerating India's Development: A State-Led Roadmap for Effective Governance.)

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