Government efficiency is key for India to become a developed nation: Finance Secretary

Government efficiency will be a key factor for India to become a developed nation, said TV Somanathan, Union Finance Secretary.

To become a developed nation, India’s per capita income must reach $13,000 from current levels of around $2,000. To achieve this, the economy has to grow between 7% and 7.5% over the next 25 years, he said on Saturday, delivering the G Ramachandran Endowment Lecture at the Madras School of Economics on “Development in Changing Times : the role of government efficiency”.

But he dismissed notions that India needs to have a faster pace of growth, similar to that of countries like Japan, China and other East Asian nations when they took off. He pointed out that countries have historically become developed economies with growth below 6 percent. He also said that you don’t need a particular demographic profile to become a developed nation. He pointed out that some countries grew even when they had a high mortality rate.

obstacles ahead

Somanathan also highlighted how the situation on the ground has changed over the years. China, he said, was able to grow rapidly in an era of rapid international trade liberalization, high level of investment, reduction of international conflicts, low interest rates and young population around the world. In the next 25 years, global trade restrictions will increase, supply chain offshoring or amicable offshoring will occur, conflicts between nations will increase, climate change will become a major factor, interest rates will rise and the young population will be restricted. only to India and sub-Saharan Africa. Under these circumstances, India needs to find its own way of growth to become a developed economy. One way, he said, is to improve government efficiency. He also said that one thing India can learn from China is the huge levels of investment, both foreign investment and domestic savings, in the economy. India, he added, can take a better step and ensure that capital is spent efficiently. That is something that China could not do.

He highlighted four steps that can be taken to improve efficiency in government. First, the government must delegate decision-making. Today, more and more, decisions are made at higher levels. This is because there is a general feeling that the bureaucracy at lower levels is less competent and corrupt. Furthermore, collective decision making is considered better than individual decisions. There is no evidence of all this and delegation in decision making will also save time, she said.

Second, the level of supervision needs to be improved. Today, more attention is paid to goal setting and less to achievement, especially in terms of quality. Third, he also called for changing the rules to change behavior. You need to make it easy for an officer to do the right thing. He cited the rule that has recently been framed where it is mandatory to pay within 10 days if the invoice is correct. Lastly, he called for high quality continuous training for capacity building in the bureaucracy, especially at the middle and lower levels.

Former RBI Governor and Madras School of Economics Chairman C Rangarajan said India has a long way to go to become a developed nation. He agreed with Somanathan when it came to focusing on investments and efficiency in implementation. “We have to run fast. Even faster,” he said.

currency value

Meanwhile, Somanathan said that India needs to learn to live with a strong dollar. He clarified that the dollar has appreciated and has appreciated against all major currencies. Seeing it as a weakening of the rupee is incorrect. He pointed out that the rupee had strengthened in many other currencies. Exploiting foreign exchange reserves by trying to drive the rupee to some imaginary dollar value is not the right thing to do, he said. It would be better to let market forces determine the value of the dollar-rupee.

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