A Rigorous, Refreshing Argument On The Government's Benign Role In Development

Accelerating India’s Development: A State-Led Roadmap for Effective Governance. Karthik Muralidharan. Pages 812. Penguin/Viking. 2024. Rs 1299.

The Indian growth story is beyond debate. India does well and will continue to do well. But all such assertions are with respect to a metric. The most obvious of these is GDP and its growth. As one takes stock of India@75, there are many reasons to be proud of what we have accomplished in 75 years of Independence. 

To quote from the initial lines of this book, “Taking stock of India as we reflect on over seventy-five years of Independence, we have much to be proud of spanning political, economic, and administrative fronts.” 

Indeed, it is not just the economic, but also the political, with India nurturing and sustaining democracy, except for a minor aberration in the 1970s, and democracy and empowerment also extending to the third tier of governance. 

However, beyond GDP, there are other metrics of development. Poverty, however measured, is one. When poverty is measured not as head-count ratio, but multi-dimensional poverty index (MDPI), there are similarities with something like HDI (human development index), based on three heads of per capita income, health and education.

Health and education are often described as social sector indicators. There is an inevitable correlation between GDP growth and improvements in such social sector indicators and without citing figures, this is evident in any India-related number, MDPI, HDI, SDG-related indicators and access to basic necessities. Inclusion, defined as universal access to physical and social infrastructure, technology and financial products, has been a hallmark of the two Narendra Modi governments.

Have these indicators improved? There is no denying they have. Should they have improved more? There is no denying they should have. If one tracks something like HDI improvements, these have primarily come about through per capita income increases, less through improvements in health and education indicators. Yes, there are problems with data and cross-country metrics used to measure development and deprivation.  Nevertheless, it is disingenuous not to accept that India should have done better. 

Reforms aren’t about abdication by the government. While reforms are about competition and efficiency, they are also about discovering a right role for the government. The bits about reducing the malign role of the government and eliminating unnecessary government intervention are easy to conceptualize, even if they are difficult to implement. 

They are both G2B and G2C and the PM has spoken about ease of doing business and ease of living (better G2G facilitates both). Books have been written about this malign role and liberalisation, privatisation, and globalisation. 

In contrast, this book is about the government’s benign role. In more advanced countries, where basic necessities are already available to people and where markets are more developed, the benign role is relatively less important. Not in a country like India. As a percentage of employment, the government’s share is low in India (just about 20 million in employment, though the government’s share in GDP is higher). Truly reformed, with the government in the right places, government employment ought to be higher.

As a practitioner, with considerable influential empirical work, it is difficult to believe this is Karthik Muralidharan’s first book. Running into 812 pages, it is a weighty volume. Economists are rigorous and their writings are often brief and succinct. But a couple of books have deviated from that template. Ashok Lahiri’s book (India in Search of Glory) had 790 pages and Karthik has broken that record. 

The terrain in both books is similar, but the approaches are completely different. If the government has to be in the right places, we need to decide on a few questions. 

First, what are the public goods the government needs to focus on? Karthik’s list includes education and skills, health and nutrition, police and public safety, courts and justice and social protection and welfare.

Who can demur? The government lacks the administrative and fiscal capacity to do too much, with the former more of a constraint than the latter. Unfortunately, the government’s temptation is to do too much. This is like shooting pellets with a shotgun, in the belief that something sticks somewhere. The government expenditure lacks focus and is dissipated. 

Second, at what level of government are these public goods best delivered? They can be sub-optimal both above and below that level. Since most public goods are delivered at local body level, this gets into areas of fiscal devolution and decentralisation of funds, functions and functionaries. Such issues aren’t only union-state, but intra-state too. 

Third, how will resources (tax and non-tax) be raised to perform these public good functions? 

Fourth, is a bureaucracy, inherited from colonial days, truly equipped to carry India forward to the 2047 trajectory? 

Fifth, what are some successful examples on incremental interventions which have delivered huge bangs for the buck? Most of Karthik’s empirical work has been on this, primarily on health and education. With limited resources, this is about using scarce resources more efficiently (one can think of these instances as randomised control trials, or simply as estimates, across interventions, of benefit-cost ratios). 

In passing, one must remember the heterogeneous nature of India’s States and that most social sectors are in the state or concurrent lists of the Seventh Schedule. Dr Muralidharan also delves into incentive structures for politicians and bureaucracy.

The title is generic. The sub-title is more indicative of what the book is about — a state-led roadmap and reinventing the state. To quote again, “A core argument of this book is that India’s weaknesses in basic service delivery reflect inadequate investments in the capacity of the Indian state to deliver these goals. 

However, investing in state capacity does not imply that we just need to increase public spending on health, education, law, or the police. As shown throughout this book, a large body of research evidence has documented the very poor quality of expenditure under the status quo. This sums it up. 

There are 18 chapters. Other than the first introductory chapter, the others are divided into four heads of the key actors, building an effective state, accelerating India’s development and making it happen. These heads are a trifle misleading. They sound like motherhood statements. The chapters, especially under the second and third heads, are deeper. The book is dedicated “to the people of India.” We the people need to read this refreshing book. It is for all of us.