Economic liberalisation in India’s context meant delicensing, deregulation, disinvestment and privatization


In July 1991, India formally announced what is known as the New Economic Policy, which marked a radical departure from the prevalent Nehruvian economic philosophy and heralded the era of liberalisation and free market economy characteristic of western capitalism. Economic liberalisation in India’s context meant delicensing, deregulation, disinvestment and privatization.

The ‘license- permit raj’ was to be dismantled and so was the ‘Subsidy State’. Privatisation of industries was to be consciously promoted. In short, the New Economic Policy led to the replacement of the mixed economy, where the public sector controlled the commanding heights of the economy, by a market-friendly economy heralding the era of retreat of the state. The policy of liberalisation thus marks a qualitative departure from the past.

The country, as a result, stands committed to inviting foreign capital and is thus integrating itself with the world market; the world market, too, on its part, is integrating itself with India. Globalisation, thus viewed, is an integral part of the process. Under liberalisation, the state is to eschew the role of a direct producer and instead to cultivate the role of a regulator and facilitator.


Administrative reform under liberalisation demands redefinition of the role of public administration with a corresponding change in its corporate culture. With the growing space to be occupied by the private sector, the career bureaucracy is called upon to ensure that private sector organizations comply with the laws of the land.

Public administration of the country is thus to create new types of organizations on the pattern of the Independent Regulatory Commissions of the USA. Public administration will interact increasingly with multinational organizations, which requires that it possesses new skills and competences.

At present, it is suffering from several pathological weaknesses which it must shed. Excessive secrecy, limited accountability, and inadequate performance appraisal weaken the civil service effectiveness, as do the problems of political interference in specific situations and government’s widespread and intricate interventions that delay action, create unwarranted power, and provide opportunities for corruption.

Numerous government commissions have pointed out the particular problems of the civil service and made recommendations to tackle them, but their recommendations have largely been ignored.


Support for what are essentially the second generation reforms in India has flowed in an organized way from the Fifth Central Pay Commission (1987) although mention also deserves to be made of the Chief Ministers’ Conference held in 1997 and the Expenditure Reforms Commission (2001). However, the Fifth Central Pay Commission is the most explicit text book of the second generation administrative reform in India.

Most admirably, the report of the Commission provides the basic framework of reform and the Expenditure Reforms Commission lays down the necessary basis of building the road map of its agenda, the case supporting the shift having originally been made out by the L.K. Jha Economic Administration Reforms Commission.

The following recommendations of the Fifth Central Pay Commission are particularly important for the reform of the civil service and public administration:

1. A multi-pronged approach to employment reduction in Government of India targeting a 30 per cent reduction over a ten-year period. Contrary to this recommendation and despite the modest measure abolishing four secretary-level posts announced by the Finance Minister in his 1999 Budget speech, central employment has instead grown resulting in a projected increase in staff expenditure of 10.5 per cent over 1998-91.


2. Restructuring and ‘rightsizing’ central government services by decentralizing functions to states and local government, by converting departmental undertakings such as the Indian Railways into public undertakings and by entrusting certain functions to NGOs, cooperatives, and autonomous bodies.

3. Doing away with arbitrary and frequent transfers of bureaucrats, particularly those in all-India ser at state level by laying down minimum tenures for posts and the need to clear all premature through a civil services board, to be constituted for this purpose.

The annual confidential (ACR), arbitrary transfers, and sale of posts are alleged by many observers to be the principal of subverting or circumventing the civil service, leading to corruption.

4. Restructuring performance appraisal to make the current ACR system more effective and coupled with a five-yearly high-level review of higher civil service to decide whether it’s me should undergo compulsory premature retirement or not.


5. Increased transparency by passing a Right to Information Act and corresponding revision of Official Secrets Act.

6. In addition, a closer link between performance and promotions or pay increases, improved to ensure individual accountability for lapses, and improved enforcement of sanctions are more broadly, a simplification and liberalisation of excessive restrictions, along with privatize should reduce red tape and the scope for corruption.

In addition, it would permit a downsizing of the civil service and a focus on fewer, truly activities, where better delivery could be demanded. All these measures would be far effective if they were conducted within the framework of a clearly defined and articulated vi for the reform of the country’s administrative system has to be delivering in order to re levels and by introducing level-jumping in order to combat delays.

7. Large, unwieldy sections have to give way to small, business-like desks, the vast army ministerial staff may be gradually replaced by executive assistants, with the group ‘D’ person being trained as multi-skilled functionaries.


8. Automation and computerisation should be brought in wholesale, so as to cut down on paper work. Employees could be seated in large ergonomically designed halls in furniture of modula design in an aesthetically pleasing environment. Their productivity can be increased remarkably, by cutting down on holidays, keeping a check on punctuality by adopting the time-clock system and asking the canteens to serve tea right at their tables.

9. The work of the Government is presently shrouded in mystery and the Official Secrets Act gives the prevalent furtiveness a legal sanction. What is required is a Right to Information Act, under which citizens have a right to find out exactly what is going on, at least immediately after a decision is taken. Transparency also means that all decisions are reasoned ones and contain an innate justifying logic.

10. The society needs a new kind of public servant to fit this new role. For the present, there is no alternative to the competitive examinations held by the Union Public Service Commission, the Staff Selection Commission, and the Railway Recruitment Board etc. to get the best talent.

But these august bodies need not be bothered if recruitment to less than 15 jobs is involved. Employment on contract basis should as a policy is encouraged. Government employees should I have the right to retain their lien for two years in case they wish to migrate to the private sector.

11. Several steps have been suggested in order to make performance appraisal more effective. The annual confidential report (ACR) has been restored for the Group D cadres. The ACR format’ should follow the rating system based on a 10-point scale as in the armed forces. Any performance! Below the benchmark laid down for promotion should be treated as adverse.

The final grading should be communicated to the employees. An important suggestion is that of a quinquennial appraisal of Group An officers, so that a full picture of the personality emerges after every five years. Remarks about integrity would be allowed in such periodical reviews by a knowledgeable group and could lead to compulsory retirement of the officer in a manner that would be upheld by the law courts.

12. Many solutions have been tried out in the past to remedy stagnation. The Commission has suggested an Assured Career Progression Scheme (ACP), under which two guaranteed financial up gradations would be given to Group B, C and D officials after 8 and 16, 10 and 20, and 12 and 24 years respectively. For Group A cadres, there would be three such up gradations after completion of 4, 9 and 13 years of service.

The benefit of higher pay scale, including pay fixation, would be available but not a functional promotion to the higher post. In some cases of isolated categories, it would be known as the dynamic ACP scheme for financial up gradation to higher posts which do not presently exist.

13. There is also a Flexible Complementing Scheme which had been initially designed for the Group A scientists involved in research. A number of functional promotions were made under this scheme in scientific departments notified as such by the Department of Science and Technology.

The Fifth Pay Commission widened the scope of the scheme so as to cover all research and development professionals, whether they were scientists, technologists or medical and computer professionals, at the same time taking out of the scheme certain non-entitled categories which had managed to get the benefit undeservedly.

14. In order to build the spinal cord of the bureaucracy, the Fifth Pay Commission advocated the constitution of a high powered civil services board both at the centre and the states. Minimum tenures would have to be notified for each post. Appointments, even in the states, have been suggested through the mechanism of the civil services board and the Appointments Committee of the Cabinet.

No premature transfer would be allowed except after a particular case giving detailed reasons for such transfer, has been moved to the civil services board, ‘the findings of the civil services board are to be accepted invariably and in case of disagreement, the entire proceedings have to be laid on the Table of the House. Government employees who bring extraneous pressures to bear for their postings and transfers must be proceeded against departmentally.

15. Coming to the employment in the central government the Fifth Pay Commission has analysed the rate of growth in the size of the government machinery. Contrary to popular belief, the annual compound rate of growth in number of civilian employees during 1984-94 has been 1%, while the armed forces personnel have increased by an annual rate of 1.4%. Among the civilians, the central police organisations have multiplied very fast, showing the growth rate of 5.6%.

The Fifth Pay Commission advocated a multi-pronged strategy to cut down numbers. First, there is a backlog of 3.5 lakhs vacant posts.

These could be abolished straightaway. Secondly, there could be a freeze on further employment of junior staff while a sharp cut-back in intake has been advocated for the executives. Thirdly, there is need for a perspective manpower plan under which there would be a downsizing of numbers by 30% in a ten-year period.

This could be achieved by the usual wastage through deaths and retirements, assisted by a greater number of retirements under the voluntary retirement scheme with the golden handshake and compulsory retirement of those who are found to be incompetent or corrupt.

Detailed strategies have been worked out for the optimization of the all-India and central services, scientific, engineering and medical services, and employment in the departments of railway, posts, telecommunications, central police organizations and the defence services. In each of these, a minimum cut of thirty percent in the next 10 years has been recommended.

16. Some quite drastic suggestions have been made in order to increase the time available for work in Government offices. These are:

(a) Shift from 5-days to a 6-day week, with the second Saturday being an off day: This would mean an increase of 40 working days in a year.

(b) Gazetted holidays have been reduced from 17- to 3 – viz. Republic Day, Independence Day and Mahatma Gandhi’s birthday. The reduction of 14 days here has been made up by increasing the number of restricted holidays.

(c) No holidays to be declared on the demise of any leader, except the incumbent President and Prime Minister.

(d) Overtime allowance has been abolished.

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