Public Sector Spending in India vs. the United States
India allocates significantly less of its GDP to public sector wages compared to the United States and other emerging markets.
- India's spending: 5.5% of GDP on public sector wages.
- United States' spending: 9.5% of GDP.
- Global average: 9.8% of GDP.
Comparison with Other Countries
- India's spending is lower than countries like Brazil, South Africa, and Russia.
- Public sector in India constitutes about 45% of formal employment but only 8% of total employment compared to 45% in Russia.
- Sector-specific employment:
- Health: 7% of public sector employment.
- Education: 30%.
- Public Administration: Less than 25% in India vs. 34% globally.
Perspective on Indian State Size
Criticisms about a bloated Indian state have been countered by research from Johns Hopkins University, suggesting the state's focus on macroeconomic outcomes.
- Macro vs micro policy: Historically better at macroeconomic outcomes. There are recent concerns about diminishing macro policy capabilities.
- Issues such as social cleavage and under-resourced local governments affect outcomes.
Role of Institutions in Governance
The effectiveness of governance is linked to institutional quality rather than just quantitative indicators like headcount or spending.
- Key factors: Rule of law, levels of corruption, and cultural dimensions like individualism vs. collectivism.
- Institutions misaligned with local cultural norms may face rejection, affecting their effectiveness.
