Speaking in Parliament last week Prime Minister Narendra Modi asserted "If the public sector is important, so is the participation of private enterprise". This is entirely correct. No one, except those who are ideologically committed to only the state's entitlement to undertaking all economic and commercial activities can contest his proposition. It can also be confidently stated that no major country is run today by completely excluding the private sector from significant economic and commercial activities.
Elaborating his proposition Modi asked "What type of capability have we acquired by handing over the country to babus. Babus belong to us and so do the youth. The more opportunity we give to our youth the more he will benefit". Again, Modi's advocacy of greater avenues for India's youth in taking the nation's economy towards greater prosperity through creativity, innovation and drive can only be fully endorsed. The question though in relation to the babus is more problematic. What should be the role of the civil service in the India of today and tomorrow? Before exploring an answer, a brief look at the evolution of their role after independence would be useful.
The founding fathers of the Republic decided not to disband the colonial bureaucratic mechanism but work for its evolution. From the instrument of the colonial state, it had to become that of the democratic republic. Its role had to radically and qualitatively expand. It was no longer confined to control but to actively assist in the socio-economic transformation of India through the implementation of policies and laws for this purpose. The national transformation then sought was the creation of a 'socialistic pattern of society' with equitable distribution of wealth and income. It was also decided that India would follow a mixed economic model with the public and private sector co-existing but the 'commanding heights of the economy' would remain with the former.
The natural consequence of this system was the creation of a very large public sector. Consequently, in almost all significant economic and commercial areas public sector enterprises were established. In 1969 after the nationalisation of major commercial banks the public sector dominated the country's economic and commercial life. The basic thrust became not so much on wealth creation as on its equitable distribution. Naturally, economic growth rates took a hit.
When public sector enterprises were established questions relating to their staffing and control came up. Their staffing was possible when technical and managerial personnel began to be available from the science and technology educational infrastructure which was established in the 1950s and the next decade. While these enterprises had boards to administer and look after their commercial interests their real control was in the hands of the concerned ministries which were accountable to the concerned legislatures.
For all practical purposes the control of the public sector came into the hands of senior civil servants in the ministries. In time civil servants including those belonging to the non-specialised cadres also began to be appointed as heads of public sector enterprises. In most cases they neither had the training, nor the experience to handle them and certainly not the expertise to make them profitable. To do so would require business decisions involving risks. As a rule—there may be exceptions—civil servants are not inclined to take risks; they are simply not trained to do so. Thus, wealth creation suffered for business involves risk taking. It can be argued that this was inherent in the very model adopted by the Indian state till the reforms of the early 1990s.
Now there has been a complete change in the socio-economic model of the Indian state. Whatever the contending political parties may state the fact is that the entire concept of equitable distribution of wealth and income has been buried and with it the idea of state involvement in economic and commercial activities is in quick retreat. The public sector is no longer a priority for the political class and there is the implicit understanding that the business of government is not business. As this is the case, the civil service's involvement in controlling public sector business enterprises will naturally wither away.
With primacy going to the private sector in all areas of economic and commercial life there is a need of strengthening the regulatory mechanism to ensure the adherence to state laws and policies. This will not be an easy task on account of swiftly changing technologies in the digital age. Regulation will be needed not to control business or make the state more intrusive but to ensure that rules are being observed. This is certainly not an advocacy for a return of the inspector raj but regulators will have to be there especially as big businesses will control significant extent of national GDPs. Global experience also demonstrates that the concept of self-regulation of business is a myth.
The question is if India possess personnel at different levels who will have the skills to become effective regulators. Certainly, that role cannot generally be really undertaken by retired civil servants who would neither have the technological skills nor the experience to do so especially in the present digital age when change is rapid and deep. There is therefore an urgent need for fresh thinking in this area. And that thinking process should open to the door to a full examination of the entire civil service structure so that it becomes capable of meeting the challenges of aspirational India and of fulfilling Modi's vision of a US$ 5 trillion economy in quick time.