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India’s Big Government: The Intrusive State & How It's Hurting Us
In India’s Big Government, Vivek Kaul questions the apparently honest intentions under the garb of which the government approaches its policy-making and implementation.
Whether it’s infrastructure, primary education, agriculture, manufacturing and industry, banking, taxation, employment, labour or welfare, Kaul holds the mirror up to modern Indian governments ever since Independence. And it’s not a pretty image to behold.
He delves deep and covers a lot of ground in making the case for an India that does not deserve the government that it has, an ambitious government with a questionable track record and one which Indians have quietly accepted till date. But things may be reaching a tipping point now, and Kaul convincingly makes the case that the government needs to totally reform itself before it leads India to disaster. India’s Big Government is a must read for anyone who has an interest in India’s, and therefore their own, future.
Whether it’s infrastructure, primary education, agriculture, manufacturing and industry, banking, taxation, employment, labour or welfare, Kaul holds the mirror up to modern Indian governments ever since Independence. And it’s not a pretty image to behold.
He delves deep and covers a lot of ground in making the case for an India that does not deserve the government that it has, an ambitious government with a questionable track record and one which Indians have quietly accepted till date. But things may be reaching a tipping point now, and Kaul convincingly makes the case that the government needs to totally reform itself before it leads India to disaster. India’s Big Government is a must read for anyone who has an interest in India’s, and therefore their own, future.
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About the author
Vivek Kaul
18 books164 followersVivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past.
Currently he works as an economic commentator. Other than Equitymaster, his writing has appeared across various other publications in India. These include The Times of India, India Today, Business Standard, Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, BBC.com, Quartz.com, DailyO.in, Business World, Huffington Post India and Wealth Insight.
In the past he has also been a regular columnist for Rediff as well as Firstpost. He has lectured at IIM Bangalore, IIM Indore, IIM Kozhikode, TA PAI Institute of Management and the Alliance University (Bangalore).
Currently he works as an economic commentator. Other than Equitymaster, his writing has appeared across various other publications in India. These include The Times of India, India Today, Business Standard, Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, BBC.com, Quartz.com, DailyO.in, Business World, Huffington Post India and Wealth Insight.
In the past he has also been a regular columnist for Rediff as well as Firstpost. He has lectured at IIM Bangalore, IIM Indore, IIM Kozhikode, TA PAI Institute of Management and the Alliance University (Bangalore).
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Displaying 1 - 12 of 12 reviews
November 12, 2018
I was impressed by the articles that Vivek Kaul had written about the potential failure and inefficient implementation of Narendra Modi's demonetization program in late 2016. I liked Kaul's simple style, extensive use of data and explanation of terms which may not be known to the layman.
So when I heard about this book, I decided that I had to read it. I was not sure what the book was about. The title was interesting. I thought it would be about the Indian government interfering in the lives of Indian citizens - like banning alcohol or making the Aadhar card compulsory. But emails that the publisher Equity Master sent me to publicize the book suggested that it was about the loss-making companies run by the Indian government.
Whenever Indians read about inefficient and ineffective Government policies or large scale corruption in newspapers, we make very general statements like "The government is not doing anything yaar". Well, this book suggests that the Government may be doing too much. And much of India's problems could be because the Government has its black hands (a favorite phrase of former Kerala chief minister K.Karunakaran) in too many areas of the economy.
The books contains chapters about the nationalization of Indian industries and how it created many loss-making ventures, the sorry state of the Indian primary education system due to overzealous Government policies like the right to education, the myth that is India’s demographic dividend, India's archaic labor laws and land acquisition laws, lax taxation system, Government interference in the pricing, production and distribution in the agricultural sector through the FCI and how corruption has reduced the effectiveness of the MNRGEA.
India’s Big Government is a 700-page tome and it would take a lot of time to explore every single aspect of this book. So I will write in detail about the parts that I found to be the most interesting.
The book begins with how the socialist Nehru Government got involved in nearly every sort of business after independence. Kaul traces the beginning of this involvement to a meeting of Indian industrialists in 1944 in Bombay. The industrialists decided that they required the protection of the Indian government from foreign competition and capital. This lead to nationalization of many important Indian industries and sectors. Indira Gandhi accelerated this nationalization of industries when she came to power. Kaul provides tables and graphs to show how public sector enterprises run by the Indian government make profit only in certain sectors (like coal and oil) where they have no competition from the private sector. But even in sectors like coal, India does not produce enough to meet its domestic demand and in fact had to import coal using valuable foreign exchange. So monopoly through nationalization ended up hurting India's economy. Kaul explains how government run companies like Air India, BSNL and MTNL continue to exist despite generating massive losses. Kaul believes that corrupt and egotistic politicians who want to rule over these companies could be a reason why these loss-making companies are not shut down or their management handed over to people with proven track records.
Kaul explains how the Indian primary education system is plagued by teacher absenteeism and government policies such as the “Right to Education” act. The “Right to Education” act made elementary education a fundamental right for children between the ages of six to fourteen. Kaul believes that this input specific policy which emphasizes the completion of syllabus is not clear about the learning outcomes. This has led to a huge number of Indian kids being unable to read and write or solve simple mathematical problems.
The scariest portion of the book is when Kaul busts myths like “India’s demographic dividend”. He argues that various studies have found that over the next few years, 12 to 18 million Indians would enter the workforce every year. This is approximately a million to 1.5 million young people entering the workforce every month. This could have terrible social and political consequences as India is simply not producing that many jobs. CPSE’s (Central Public Sector Enterprises) run by the Government employ approximately 13 lakh (or 1.3 million people) and they have not created any new jobs in the last decade. The Central Government employs approximately 40.5 lakhs or 4.5 million people but added only 30,000 jobs in the 2006-2014 period. The private sector employs more people than the Government (12 million as of 2012). But 92% of Indians work in the informal sector, most of whom are unskilled laborers. Also, economic growth does not usually translate into higher employment opportunities. This is due to economic growth occurring in less labor-intensive sectors like services and automation of many manual jobs.
For the Make in India policy to succeed, Kaul suggests massive reform of labor laws (increase the number of people that can be employed by a firm and also resolve the issue of contract workers), sorting out land acquisition laws and improving physical infrastructure.
Kaul draws attention to the nonperforming loans of India’s public sector banks which run into thousands of crores. A nexus between huge corporations and corrupt politicians is the reason for the spike in bad loans.
He also explains how a lax taxation system has cost the Government thousands of crores of rupees in potential taxes.
He explains in detail how the Government interference in the pricing, production and distribution in the agricultural sector through the FCI (Food corporation of India) has led to selective cultivation of sugar, wheat and rice (while ignoring the production of pulses), selective use of harmful pesticides, mass leakages and discrimination against small farmers.
The large-scale corruption in the Mahatma Gandhi National Rural Employment Guarantee Act (MNRGEA) forms the books final chapter. Kaul concludes on a warning note about how large scale unemployment could have severe political and social repercussions.
I liked the way Vivek Kaul tied up all these issues together. For example, he would explain in detail how a large amount of bad loans would affect others parts of the economy. Sure, a lot of the problems can be attributed to Indian corruption and tendency towards mediocrity. But a big government ruining India’s chances in the global rat race is an interesting idea. Kaul presents some very compelling arguments backed by data and excerpts from other writers and economists.
Kaul is like a pragmatic and unemotional accountant who lays down all the facts and figures (he uses tables and graphs extensively). Nothing in the book rings of anger or cynicism or partisan attitude towards any political party. This is also a bit of a drawback because the book does read like a large research report written by a financial analyst or a text book at times. I have been checking Kaul’s twitter feed and he is a man who is interested in crime fiction and movies. While there are references to The Third Man and Bollywood film songs, I wished there was more of the author in this book. It did seem like parts of the book were hastily written.
This is not the sort of book I would normally read. But I am glad I read it. Sure, the subject matter is not very “sexy” to urban Indians like me. But this is a truly scary book even though Kaul does not indulge in fear mongering (it is not his style). And it makes me curious about some of his earlier work.
Good job, Vivek. Thank you for writing this book. It must have been tedious to read all those research papers written by foreign researchers when you could have been reading Scandinavian crime fiction. Thank you for this tremendous effort.
So when I heard about this book, I decided that I had to read it. I was not sure what the book was about. The title was interesting. I thought it would be about the Indian government interfering in the lives of Indian citizens - like banning alcohol or making the Aadhar card compulsory. But emails that the publisher Equity Master sent me to publicize the book suggested that it was about the loss-making companies run by the Indian government.
Whenever Indians read about inefficient and ineffective Government policies or large scale corruption in newspapers, we make very general statements like "The government is not doing anything yaar". Well, this book suggests that the Government may be doing too much. And much of India's problems could be because the Government has its black hands (a favorite phrase of former Kerala chief minister K.Karunakaran) in too many areas of the economy.
The books contains chapters about the nationalization of Indian industries and how it created many loss-making ventures, the sorry state of the Indian primary education system due to overzealous Government policies like the right to education, the myth that is India’s demographic dividend, India's archaic labor laws and land acquisition laws, lax taxation system, Government interference in the pricing, production and distribution in the agricultural sector through the FCI and how corruption has reduced the effectiveness of the MNRGEA.
India’s Big Government is a 700-page tome and it would take a lot of time to explore every single aspect of this book. So I will write in detail about the parts that I found to be the most interesting.
The book begins with how the socialist Nehru Government got involved in nearly every sort of business after independence. Kaul traces the beginning of this involvement to a meeting of Indian industrialists in 1944 in Bombay. The industrialists decided that they required the protection of the Indian government from foreign competition and capital. This lead to nationalization of many important Indian industries and sectors. Indira Gandhi accelerated this nationalization of industries when she came to power. Kaul provides tables and graphs to show how public sector enterprises run by the Indian government make profit only in certain sectors (like coal and oil) where they have no competition from the private sector. But even in sectors like coal, India does not produce enough to meet its domestic demand and in fact had to import coal using valuable foreign exchange. So monopoly through nationalization ended up hurting India's economy. Kaul explains how government run companies like Air India, BSNL and MTNL continue to exist despite generating massive losses. Kaul believes that corrupt and egotistic politicians who want to rule over these companies could be a reason why these loss-making companies are not shut down or their management handed over to people with proven track records.
Kaul explains how the Indian primary education system is plagued by teacher absenteeism and government policies such as the “Right to Education” act. The “Right to Education” act made elementary education a fundamental right for children between the ages of six to fourteen. Kaul believes that this input specific policy which emphasizes the completion of syllabus is not clear about the learning outcomes. This has led to a huge number of Indian kids being unable to read and write or solve simple mathematical problems.
The scariest portion of the book is when Kaul busts myths like “India’s demographic dividend”. He argues that various studies have found that over the next few years, 12 to 18 million Indians would enter the workforce every year. This is approximately a million to 1.5 million young people entering the workforce every month. This could have terrible social and political consequences as India is simply not producing that many jobs. CPSE’s (Central Public Sector Enterprises) run by the Government employ approximately 13 lakh (or 1.3 million people) and they have not created any new jobs in the last decade. The Central Government employs approximately 40.5 lakhs or 4.5 million people but added only 30,000 jobs in the 2006-2014 period. The private sector employs more people than the Government (12 million as of 2012). But 92% of Indians work in the informal sector, most of whom are unskilled laborers. Also, economic growth does not usually translate into higher employment opportunities. This is due to economic growth occurring in less labor-intensive sectors like services and automation of many manual jobs.
For the Make in India policy to succeed, Kaul suggests massive reform of labor laws (increase the number of people that can be employed by a firm and also resolve the issue of contract workers), sorting out land acquisition laws and improving physical infrastructure.
Kaul draws attention to the nonperforming loans of India’s public sector banks which run into thousands of crores. A nexus between huge corporations and corrupt politicians is the reason for the spike in bad loans.
He also explains how a lax taxation system has cost the Government thousands of crores of rupees in potential taxes.
He explains in detail how the Government interference in the pricing, production and distribution in the agricultural sector through the FCI (Food corporation of India) has led to selective cultivation of sugar, wheat and rice (while ignoring the production of pulses), selective use of harmful pesticides, mass leakages and discrimination against small farmers.
The large-scale corruption in the Mahatma Gandhi National Rural Employment Guarantee Act (MNRGEA) forms the books final chapter. Kaul concludes on a warning note about how large scale unemployment could have severe political and social repercussions.
I liked the way Vivek Kaul tied up all these issues together. For example, he would explain in detail how a large amount of bad loans would affect others parts of the economy. Sure, a lot of the problems can be attributed to Indian corruption and tendency towards mediocrity. But a big government ruining India’s chances in the global rat race is an interesting idea. Kaul presents some very compelling arguments backed by data and excerpts from other writers and economists.
Kaul is like a pragmatic and unemotional accountant who lays down all the facts and figures (he uses tables and graphs extensively). Nothing in the book rings of anger or cynicism or partisan attitude towards any political party. This is also a bit of a drawback because the book does read like a large research report written by a financial analyst or a text book at times. I have been checking Kaul’s twitter feed and he is a man who is interested in crime fiction and movies. While there are references to The Third Man and Bollywood film songs, I wished there was more of the author in this book. It did seem like parts of the book were hastily written.
This is not the sort of book I would normally read. But I am glad I read it. Sure, the subject matter is not very “sexy” to urban Indians like me. But this is a truly scary book even though Kaul does not indulge in fear mongering (it is not his style). And it makes me curious about some of his earlier work.
Good job, Vivek. Thank you for writing this book. It must have been tedious to read all those research papers written by foreign researchers when you could have been reading Scandinavian crime fiction. Thank you for this tremendous effort.
November 2, 2017
I had heard Vivek Kaul speak on a couple of podcasts and was therefore keen to read this 700+ page book by him. Bought it in a Diwali scheme for Rs.199 and it was a gr8 buy.
My key takeaways from this book:-
A) The Central Govt doesnt excessive employees, contrary to our popular perception but they have to perform a number of duties sometimes. This is bcoz the "big" govt tries to do too many things.
B) The Central (and by implication State) govts present the budget based on cash accounting method. So expenses made by its subsidiaries (say food corporation of India) by borrowing from banks is not accounted for.
C) Govt teachers are not underpaid and have a high rate of absence. The private schools have a better rate of learning outcome but have been dealt a blow by RTE act.
D) The demographic dividend maybe a demographic bomb with their low level of skills and education.
E) Public sector banks were forced to cleanup by Rajan and hence he was made d scapegoat.
It was very readable for a engineering graduate. Infact I read it during a trip. Will read more by the author.
My key takeaways from this book:-
A) The Central Govt doesnt excessive employees, contrary to our popular perception but they have to perform a number of duties sometimes. This is bcoz the "big" govt tries to do too many things.
B) The Central (and by implication State) govts present the budget based on cash accounting method. So expenses made by its subsidiaries (say food corporation of India) by borrowing from banks is not accounted for.
C) Govt teachers are not underpaid and have a high rate of absence. The private schools have a better rate of learning outcome but have been dealt a blow by RTE act.
D) The demographic dividend maybe a demographic bomb with their low level of skills and education.
E) Public sector banks were forced to cleanup by Rajan and hence he was made d scapegoat.
It was very readable for a engineering graduate. Infact I read it during a trip. Will read more by the author.
May 21, 2021
I really enjoyed 'Bad Money' and had high expectations from 'India's Big Government' - it did not disappoint. This is quite similar in flavour to 'Bad Money' - well researched and does not hold back any punches. Where it differs from 'Bad Money' is in its scope - which is vast. The book covers everything from the dire state of education in India to the ill effects of subsidies to the so called demographic dividend which might turn out to be a demographic time bomb - and everything in between. The book does not shy away from statistics and numbers - but digs deeper to get to the actual story behind the numbers. Another thing I really like about Mr. Kaul is his references to the works of other authors which is really helpful for someone who is looking to dig deeper.
If there is one complaint I have of this book it is this - it could have used a better editor. Entire paragraphs are often repeated greatly adding to the length of an already sizeable book.
One thing I am taking away from this book is not the take the 'India growth story' for granted and be wary of anyone who tries to sell that story. India has the potential to be a superpower - but like every kid with a lot of potential it needs focus and directed effort to realise it otherwise it would be like that one classmate who peaked in high school.
If there is one complaint I have of this book it is this - it could have used a better editor. Entire paragraphs are often repeated greatly adding to the length of an already sizeable book.
One thing I am taking away from this book is not the take the 'India growth story' for granted and be wary of anyone who tries to sell that story. India has the potential to be a superpower - but like every kid with a lot of potential it needs focus and directed effort to realise it otherwise it would be like that one classmate who peaked in high school.
January 9, 2021
Finished with this one.
Man, what a book this is. A kind of crash course (yet adequately detailed) on the state of Indian Economy, Education, Land System, Black Money, Agriculture, MSP and Employment.(IDK why he missed on healthcare).
Book covers all the events which had impacted these areas till 1947 to 2017.(In some cases, going upto 1800s also).
While I knew many of facts before reading this book, still the way this book presented those with tons of new info is simply amazing. You get to know exactly why India didn't grow in last 70 years.
I was completely unaware of some things like -
1. When Indian economy started in 1947, along with Nehruji's economic model (obviously socialism and much discussed in our history books), there was one more economic model presented which was more simplistic and better suited to India. But as it wouldn't have give Nehruji a chance to make iconic quotes like 'Temples of Modern India', it was quickly discarded.
2. Nehruji's fascination with Temples of Modern India and Socialism made sure that while India made giants leaps in higher education (IITs, RECs, IIMs), our primary/secondary education received body blows and remained worse for decades. There cannot be more unfortunate thing than this for any young nation.
3. India never changed Land laws of Britishers which made the Land Acquisition is India unfair to the common people. But in 2013, when MMS changed those laws, he brought such a devastating amendment (to please Indian Leftists) that within a year, projects worth 6 lakh crores got stalled. This made the land problem in India for bad to worse.
4. The much hyped 'Right to Education 2010' act gave a body blow to Indian Primary Education. India's overall learning fell(which was already poor), thousands of Private schools got shut down due to this, and corruption got increased in the education system. Not to mention, RTE is a communal act.
5. Indian PSUs are successful only when there is a monopoly. When market comes in, they crumble like anything. Also, many PSUs are freeloaders. They don't produce a rupee in profit and our hard earned money goes towards keeping them afloat.
6. India's Manufacturing policies are made in such a way that SMEs and MSMEs don't even think about growing and are happy to be small.
Well, I can go on and on with the info but that will be too long.
My request will be for you to take this book and read it once. This will give you a clear picture on what ails India and what are the possible solutions.
Man, what a book this is. A kind of crash course (yet adequately detailed) on the state of Indian Economy, Education, Land System, Black Money, Agriculture, MSP and Employment.(IDK why he missed on healthcare).
Book covers all the events which had impacted these areas till 1947 to 2017.(In some cases, going upto 1800s also).
While I knew many of facts before reading this book, still the way this book presented those with tons of new info is simply amazing. You get to know exactly why India didn't grow in last 70 years.
I was completely unaware of some things like -
1. When Indian economy started in 1947, along with Nehruji's economic model (obviously socialism and much discussed in our history books), there was one more economic model presented which was more simplistic and better suited to India. But as it wouldn't have give Nehruji a chance to make iconic quotes like 'Temples of Modern India', it was quickly discarded.
2. Nehruji's fascination with Temples of Modern India and Socialism made sure that while India made giants leaps in higher education (IITs, RECs, IIMs), our primary/secondary education received body blows and remained worse for decades. There cannot be more unfortunate thing than this for any young nation.
3. India never changed Land laws of Britishers which made the Land Acquisition is India unfair to the common people. But in 2013, when MMS changed those laws, he brought such a devastating amendment (to please Indian Leftists) that within a year, projects worth 6 lakh crores got stalled. This made the land problem in India for bad to worse.
4. The much hyped 'Right to Education 2010' act gave a body blow to Indian Primary Education. India's overall learning fell(which was already poor), thousands of Private schools got shut down due to this, and corruption got increased in the education system. Not to mention, RTE is a communal act.
5. Indian PSUs are successful only when there is a monopoly. When market comes in, they crumble like anything. Also, many PSUs are freeloaders. They don't produce a rupee in profit and our hard earned money goes towards keeping them afloat.
6. India's Manufacturing policies are made in such a way that SMEs and MSMEs don't even think about growing and are happy to be small.
Well, I can go on and on with the info but that will be too long.
My request will be for you to take this book and read it once. This will give you a clear picture on what ails India and what are the possible solutions.
June 11, 2021
I love Vivek Kaul's style of writing. No use of heavy English, simple presentation of facts in support of his argument. He makes light work of reading his otherwise mammonth book.
October 19, 2018
To someone following Vivek Kaul's writings, or even a decent business newspaper (like Mint or Business Standard) the issues covered in this book would be fairly familiar. In the book, however, the author has covered these issues in great detail and has been lucid in his approach making it quite comprehensible.
It may sound ludicrous, but I think the author should have covered some more issues. The most important issue which has been missed out is the role of State Governments. He has touched a few issues tangentially, but I think a chapter (or maybe two!) dedicated entirely to poor governance in States would've done more justice to the title of the book.
Overall, it is a brilliant book and I'd suggest it should be converted into a documentary or a podcast and given a wider audience.
It may sound ludicrous, but I think the author should have covered some more issues. The most important issue which has been missed out is the role of State Governments. He has touched a few issues tangentially, but I think a chapter (or maybe two!) dedicated entirely to poor governance in States would've done more justice to the title of the book.
Overall, it is a brilliant book and I'd suggest it should be converted into a documentary or a podcast and given a wider audience.
August 14, 2019
The Intrusive State & How it’s hurting us: India’s Big Government by Vivek Kaul is an insightful book about the problems associated with the government’s policy making and implementation.
Too much of a good thing leads to disaster
Generally, the government tries to do too many things loosely rather than doing few things with focus. The book traces historical account of this big government post India’s independence. There is a general argument that post India’s independence the private companies would have neither the money nor the risk appetite in setting-up companies in sectors like steel with long gestation period, and therefore it’s the duty of the government to set-up such plants. But this pattern of setting-up public sector enterprise continued and got strengthened. The private sector was there, but it was held in check & controlled by industrial license and various other policies. The public sector through various public sector enterprises was the centerpiece of national policy.
The economic system and growth was driven through centrally planned Five Year Plans for the country. The structures were built on socialist pattern that the government running businesses would ensure that Indians could control their own well-being.
When the first five-year plan was launched in the year 1951, there were just five public sector enterprises. The socialistic instincts of the government further increased with the nationalization of banks during 1960s. By 1985, the number of public sector enterprises went to around 200. The public sector enterprises intruded even consumer oriented sectors textiles, bread, newsprint, paper, footwear as well as drugs, hotels etc. The government even started nationalizing & taking over sick private companies in order to ensure that jobs were not lost (Cotton Mills, National Bicycle Corporation of India).
“The larger point being that the Indian government is present in many areas where we do not need it but absent in those areas where we do really need it.”
There was virtually no space for entrepreneurship, risk taking and innovation that drives economic progress. It resulted into slow economic growth for many decades commonly referred as Hindu rate of growth. It averaged around 3.5 % between 1950 and 1980. This was the time when South East Asian countries were growing at 8 to 15 %, or even more.
The government ventured into managing profit making business whereas the bureaucratic system that India inherited from the British continued was not meant for management of profit making enterprises. The system was meant for administration and enforcement of laws, rules and regulations.
Economic Reforms of 1991
The economic reforms of 1991 (LPG Labialization, Privatization & Globalization) resulted into unleashing the entrepreneurial instinct of private sector, and things started changing. The private sector was allowed into many sectors it was not previously allowed. Most of the public sector enterprises were not able to compete with the private players, the share of public sector enterprises started declining. The private sector in the field of telecom services, running airlines, ports, banking resulted into substantial improvement. The government kept on bailing out loss incurring public sector enterprises, and in sectors where the private sector has been allowed entry, it has flourished, and the government companies have had to take a back seat.
“We have invested over one lakh crore of rupees in the public sector so far. The returns therefrom, on the whole, have been very meagre. All this is the people’s money, no one else’s. The present situation is that the Government can no longer collect any more money from the people for further fresh investment in the public sector.” P V Narasimha Rao, the than Prime Minister at the 79th Congress Plenary at Tirupati in 1992.
The big problems in the economic strategy of India was that if state continued funding loss incurring public sector enterprises, it took away money from other important sectors, like education, health, infrastructure, etc.
There is somewhat misplaced impression that the size of the government i.e. the number of people it employs is too big. But the actual problem is that it is big in the number of things it tries to do, and hence, in the process, it messes up other important things.
The programs designed with high on intent and ambition but not taking into account the limited implementation capability of the government will fail. The limited implementation capability of the government needs to be taken into account while designing any policy, program.
“The trouble is that very few states have the administrative capacity to implement the 200 plus schemes sponsored by the central government. Implementing a scheme essentially means assessing the grants, spending the money as per the stipulated conditions, maintaining separate accounts and then submitting reports to the central government. In fact, this capacity is even lower in states which actually need these schemes the most.”
Minimum Government, Maximum Governance
Do not try to take over the markets, let the market function competitively.
In order to benefit from India’s demographic dividend, Big Government in many areas needs to go. The implementation of Minimum Government, Maximum Governance policy will result into significant boosting of the economy and India’s GDP.
The Intrusive State & How it’s hurting us: India’s Big Government by Vivek Kaul is insightful and very useful book for anyone interested or working in the field of public policy. The book is written in a very simple language with very few jargons or technical terms.
Too much of a good thing leads to disaster
Generally, the government tries to do too many things loosely rather than doing few things with focus. The book traces historical account of this big government post India’s independence. There is a general argument that post India’s independence the private companies would have neither the money nor the risk appetite in setting-up companies in sectors like steel with long gestation period, and therefore it’s the duty of the government to set-up such plants. But this pattern of setting-up public sector enterprise continued and got strengthened. The private sector was there, but it was held in check & controlled by industrial license and various other policies. The public sector through various public sector enterprises was the centerpiece of national policy.
The economic system and growth was driven through centrally planned Five Year Plans for the country. The structures were built on socialist pattern that the government running businesses would ensure that Indians could control their own well-being.
When the first five-year plan was launched in the year 1951, there were just five public sector enterprises. The socialistic instincts of the government further increased with the nationalization of banks during 1960s. By 1985, the number of public sector enterprises went to around 200. The public sector enterprises intruded even consumer oriented sectors textiles, bread, newsprint, paper, footwear as well as drugs, hotels etc. The government even started nationalizing & taking over sick private companies in order to ensure that jobs were not lost (Cotton Mills, National Bicycle Corporation of India).
“The larger point being that the Indian government is present in many areas where we do not need it but absent in those areas where we do really need it.”
There was virtually no space for entrepreneurship, risk taking and innovation that drives economic progress. It resulted into slow economic growth for many decades commonly referred as Hindu rate of growth. It averaged around 3.5 % between 1950 and 1980. This was the time when South East Asian countries were growing at 8 to 15 %, or even more.
The government ventured into managing profit making business whereas the bureaucratic system that India inherited from the British continued was not meant for management of profit making enterprises. The system was meant for administration and enforcement of laws, rules and regulations.
Economic Reforms of 1991
The economic reforms of 1991 (LPG Labialization, Privatization & Globalization) resulted into unleashing the entrepreneurial instinct of private sector, and things started changing. The private sector was allowed into many sectors it was not previously allowed. Most of the public sector enterprises were not able to compete with the private players, the share of public sector enterprises started declining. The private sector in the field of telecom services, running airlines, ports, banking resulted into substantial improvement. The government kept on bailing out loss incurring public sector enterprises, and in sectors where the private sector has been allowed entry, it has flourished, and the government companies have had to take a back seat.
“We have invested over one lakh crore of rupees in the public sector so far. The returns therefrom, on the whole, have been very meagre. All this is the people’s money, no one else’s. The present situation is that the Government can no longer collect any more money from the people for further fresh investment in the public sector.” P V Narasimha Rao, the than Prime Minister at the 79th Congress Plenary at Tirupati in 1992.
The big problems in the economic strategy of India was that if state continued funding loss incurring public sector enterprises, it took away money from other important sectors, like education, health, infrastructure, etc.
There is somewhat misplaced impression that the size of the government i.e. the number of people it employs is too big. But the actual problem is that it is big in the number of things it tries to do, and hence, in the process, it messes up other important things.
The programs designed with high on intent and ambition but not taking into account the limited implementation capability of the government will fail. The limited implementation capability of the government needs to be taken into account while designing any policy, program.
“The trouble is that very few states have the administrative capacity to implement the 200 plus schemes sponsored by the central government. Implementing a scheme essentially means assessing the grants, spending the money as per the stipulated conditions, maintaining separate accounts and then submitting reports to the central government. In fact, this capacity is even lower in states which actually need these schemes the most.”
Minimum Government, Maximum Governance
Do not try to take over the markets, let the market function competitively.
In order to benefit from India’s demographic dividend, Big Government in many areas needs to go. The implementation of Minimum Government, Maximum Governance policy will result into significant boosting of the economy and India’s GDP.
The Intrusive State & How it’s hurting us: India’s Big Government by Vivek Kaul is insightful and very useful book for anyone interested or working in the field of public policy. The book is written in a very simple language with very few jargons or technical terms.
August 21, 2022
An excellent book that lays bare much of what plagues our nation. And the author does that without any subjective bias or espousal of any ideology. This book is an attempt at seeing things as they really are.
October 24, 2017
Overall, a good read with some decent analysis by the author to back up his claims. However, he completely ignores the impact of Big Govt on the environment / ecology, which is a topic of personal interest to me. That would have possibly made it a 4-star book for me.
The current version sure could use a good editor; lots of stuff repeated across chapters and by that I mean entire paragraphs are repeated word for word. The book could easily have been 5-10% shorter.
Also, the digital edition needs to be reformatted to be more Kindle-friendly (the data tables do not render well on a Kindle paperwhite 6) even though I bought my copy on Amazon India kindle store.
The current version sure could use a good editor; lots of stuff repeated across chapters and by that I mean entire paragraphs are repeated word for word. The book could easily have been 5-10% shorter.
Also, the digital edition needs to be reformatted to be more Kindle-friendly (the data tables do not render well on a Kindle paperwhite 6) even though I bought my copy on Amazon India kindle store.
May 12, 2020
Highly recommended.
There is a huge rot in the Indian Economy. Vivek Kaul does a great job explaining the different parts that are rotting. The references to papers in public policy, Economics etc are eye-opening when it comes to efficacy of govt run social welfare schemes.
Meticulously researched, lucidly written and shedding much needed light on issues that honest tax paying citizens need to know about. At the same time it is both entertaining and engaging.
Vivek, you have a done great service to the public and in doing that, you have also won a fan.
There is a huge rot in the Indian Economy. Vivek Kaul does a great job explaining the different parts that are rotting. The references to papers in public policy, Economics etc are eye-opening when it comes to efficacy of govt run social welfare schemes.
Meticulously researched, lucidly written and shedding much needed light on issues that honest tax paying citizens need to know about. At the same time it is both entertaining and engaging.
Vivek, you have a done great service to the public and in doing that, you have also won a fan.
January 27, 2020
This book is a ready-reckoner to understand what ails India's economy and businesses -- the government and its policies often stymied for electoral gains. Kaul is a master storyteller and brilliantly uses data to elaborate his points. Ample of cross-referencing to other books/sources. This book is an asset.
August 26, 2017
The language is quite simple and the book presents a very rational view of the subject. Must read for every Indian.
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