The central tendency of the Indian bureaucracy has been to be an obstacle to change, said former Niti Aayog Vice Chairperson Arvind Panagariya. He, however, said that there are some incredibly good officers in the bureaucracy and without their presence, none of the reforms could have happened.
The chief of the 16th Finance Commission was responding to a question on reforms in bureaucracy by Aroon Purie, Chairman and Editor-in-Chief of the India Today Group, at the 4th Columbia India Summit hosted by Columbia University in New York.
"Changing the entire (bureaucracy) system is so difficult that I have always felt that lateral entry is one way to proceed. But even that has been extremely hard," the economist said.
Purie pointed out that there has been no reform in the bureaucracy, which he said was still running with a colonial mindset. "What former Prime Minister Manmohan Singh did was homeopathy, but what India needed was surgery in terms of the bureaucracy," he said.
Panagariya said the present government has tried to introduce reforms. "In my Niti Aayog (tenure), I did introduce that reform, and one-third of the staff at Niti Aayog is lateral," he said, adding the socialist philosophy that the country inculcated during the Nehru era was so deep-rooted it made any reform long haul.
"So whether you talk of the bureaucracy, or the political class or the intellectuals, particularly the economists, even the businessmen - the philosophy of socialism has continued through this inheritance. The new IAS officers come and they learn from the old ones. New economists who come in get taught by the old economists," he said.
Panagariya, who teaches political economy at Columbia University, said at some point he asked himself a question - "can I identify a handful of economists who were home-taught, who didn't go abroad or didn't work abroad, who were pro-market." He said he could think of only one amazingly. "So virtually everybody that I could think had some connections with abroad - they studied abroad or worked abroad for several years."
"This has penetrated everywhere and that is what makes the change (in bureaucracy) far more difficult. This is why people like us have to continue to push and luckily I think there has been a payoff to doing this. We will continue to do that," he said.
Giving an example of a bureaucratic mindset, Purie touched upon the number of slabs and product classification under the GST. Panagariya said it may look messy, but the big part of the reform is the fact that on any given product there is only a single tax. "For the given product there is a single market India-wide that's a huge reform," he said, but agreed that multiple rates are not a great thing.
The economist said there's also some sort of inversion in some of the rates where the inputs are taxed more heavily than the final product. "That is the nature of the process in India. Gradually, we will clean up and we'll also reverse occasionally as we have done in the case of tariffs. But I think that overall direction is absolutely on the side of liberalisation."
Panagariya served as Niti Aayog's Vice Chairperson from January 2015 to August 2017.