The Indian Economy Blog

August 16, 2005

Making Up For The Public Sector

Filed under: Miscellaneous — Amit Varma @ 1:24 pm

Subir Gokarn writes in Business Standard:

I’ve often been asked for my opinion on what the country’s sunrise sectors are. My response, at first tongue-in-cheek, but becoming more and more serious over the years, is that anybody who decides to compete against the government has a great chance of succeeding. Four activities come easily to mind.

Equipment for private supply of electricity—generators, inverters, and so on—are needed to compensate for the inadequacies of the larger system. Private security makes up for the perceived failure of the state security apparatus.

Private education at every level continues to surge, while public institutions sink. And, while access to publicly-provided drinking water eludes an increasingly large proportion of the population, the number of brands and the sales volumes of bottled water continue to climb.

In the rest of his piece, Gokarn writes about how reforms have helped the private sector, which is stating the obvious, and, more interestingly, how the public sector can be reformed. He writes:

[L]et’s remember that market competition in the private domain has its equivalent in the form of political competition in the public sphere. And, by any indication, political competition has intensified enormously during the decade of reforms. No party, at both the central and state levels, can take its tenure in government for granted.

So, the absence of competitive pressure cannot be cited as a reason for the failure of the public system to match the growth and productivity performance of the private sector.

Now, this is the part that I don’t quite understand. The “political competition” that Gokarn refers to has nothing to do with the economy; governments are not voted in or out because of how efficiently the public sector is functioning or how well the Indian economy is doing, but on the basis of narrow identity (mostly caste) politics. And it will take years, if not decades, for the electorate to shift in its priorities.

Reforming the public sector, to my mind, is a bit of a pipe dream. Reducing it makes much more sense.

1 Comment »

  1. For some (more) evidence on the public sector’s merits (or lack, thereof), check out this post on the World Bank blog

    http://psdblog.worldbank.org/psdblog/2005/08/better_an_incom.html

    Better an incompetent for-profit doctor than a competent government-funded one
    The caped crusader, Adamsmithee, points us to an incredible and rather sad piece of research from our World Bank colleagues Jishnu Das and Jeffrey Hammer. Looking at doctors in Delhi, they conclude:

    Under-qualified private sector doctors, even though they know less, provide better care on average than their better-qualified counterparts in the public sector.

    The public sector doctors didn’t bother to take the time needed for a proper diagnosis. Training does help, it seems, but not nearly as much as keen incentives.

    Comment by Prashant — August 16, 2005 @ 10:15 pm

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