Eminent economist and former International Monetary Fund (IMF) Executive Director for India, Surjit Bhalla, has sharply criticized the country's bureaucracy, labeling it as India's true 'deep state'. According to Bhalla, the lack of accountability among senior bureaucrats is a primary impediment to economic reforms and progress.
Defining India's 'Deep State'
In a recent podcast conversation, Bhalla clarified his definition of the 'deep state'. He asserts it is not a conspiratorial cabal but rather a structural problem: a system where powerful decision-makers operate without transparent accountability to the public, markets, or even elected politicians. He contrasts this with politicians, who face electoral consequences, and industrialists, who are answerable to markets and boards.
"The deep state involves... people who make decisions and are not held answerable," Bhalla stated, identifying "the babus, senior babus" as these unaccountable figures.
Bhalla has previously identified four groups contributing to India's economic challenges: the government, industrialists, the Congress party, and this 'deep state' of bureaucrats.
Lack of Accountability and Risk Aversion
One of Bhalla's core arguments is that the current administrative structure actively discourages risk-taking and innovation. He contends that bureaucrats are often rewarded for caution and rarely face repercussions for poor policy outcomes. This environment, he suggests, stifles the bold decisions necessary for economic advancement.
He advocates for introducing greater accountability, suggesting that government decision-makers, like their political and industrial counterparts, should be removable for underperformance.
Secrecy in Policy Making and Lateral Entry Failures
Bhalla also critiqued the tradition of preparing the Union Budget in secrecy, calling it an outdated practice in a modern, transparent world. He dismissed concerns that greater transparency would lead to speculation, arguing that such issues exist regardless.
Furthermore, the economist questioned the repeated failures of 'lateral entry' initiatives by successive governments, including those led by Manmohan Singh and Prime Minister Narendra Modi, to induct outside talent into the bureaucracy. He postulates that entrenched interests within the existing system actively resist such changes, hindering the inflow of fresh perspectives and expertise.
Lessons from 1991 Reforms
Recalling his own experience on the Prime Minister's Economic Advisory Council, Bhalla acknowledged encountering resistance to some of his proposals. He cited the transformative 1991 economic reforms as an example of significant change often originating from outside the traditional bureaucratic framework, noting the key role played by figures like Montek Singh Ahluwalia, who was not an IAS officer at the time.