Investment bank Goldman Sachs has estimated that civil service reforms that include a bureaucracy that is merit-based rather than seniority-based, could add nearly a percentage point annually to India’s per capita growth, which stood at 3.4 per cent last year.
The report reiterates recommendations from the Administrative Reforms Commission (ARC) such as reduction in the age for entry and the number of attempts allowed for civil service aspirants, and encouraging lateral entry of technocrats from the private sector. “We estimate that if India were to pursue civil service reforms and reach the Asian average on government effectiveness, it could add 0.9 percentage points annually to per capita GDP... Institutional quality is a crucial driver of economic performance.”
Reforms will ensure younger officers
Goldman Sachs in its report on civil service reforms in India has compiled drivers of effective civil service in other countries. Singapore promotes officers solely on merit and Malaysia has recently put in place a new performance appraisal and remuneration system for promotion and salary hikes. In Japan, supervisors, peers and juniors appraise civil servants for merit ratings. India is one of a very few countries where the annual salary of civil servants is not based on performance.
For example, of the five Secretaries in the Finance Ministry, the senior-most in terms of the year of entry into service usually becomes the Finance Secretary.
Even though the median age in India is 26, due to seniority being the main criterion for promotion, the highest ranking civil servant in each ministry is usually in his/her late 50s and early 60s and only a few years away from retirement. By contrast, the average age of senior bureaucrats in the U.S. and China is 54 years to 55 years. In Singapore it is 52 and in the UK it is about 53 years.
To arrive at its estimation, Goldman Sachs used the World Bank’s latest Worldwide Governance Indicators (WGI) data released in September. India’s WGI ranking deteriorated from 55th percentile in 2004 to the 47th percentile in 2013. WGIs report six dimensions of governance over the period 1996-2013 for 215 countries. These are largely on the quality and implementation capacity of the civil service.
India’s growth could increase by 0.28 percentage points for every one index point change in effectiveness of government, according to the Goldman Sachs results.
