Why India should invest in building institutions that will create foundations of the future

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Published: February 17, 2017 4:18:50 AM

To power the nation’s growth and prepare it for the future, India should expediently invest in building institutions that will build the foundations for the future

degree-l-reuIn general, institutional development is an area where India has made some progress, but has a long way to go after almost 70 years of being a republic. (Reuters)

Many welcomed the long awaited cabinet approval of the IIM Bill that grants autonomy to these institutions and ensures accountability. However, almost half the faculty positions would be subject to quota reservations—a contradictory measure. Especially, as enforcing this would severely dilute the quality of instruction imparted at these hallowed institutions. As we know, the fundamental objective to unshackle IIMs is to provide them with the freedoms required to become world-class institutions.

In general, institutional development is an area where India has made some progress, but has a long way to go after almost 70 years of being a republic. The result—weak bench strength of the executive and the judiciary amongst others. For now, let us focus on the executive. India’s 6,000 plus coveted Indian Administrative Service officers, is a glaringly small number for a country of 1.2 billion people. These, Group A officers rotate between the centre and state, and are often under equipped and grossly understaffed with experts to discharge their duties.

For instance, the US department of transport employs over 50,000 people. In India, the ministry of road, transport and highways, ministry of shipping, ministry of civil aviation, and the ministry of urban development across which the transport function is distributed, has only a short staff of skilled workforce. Experience shows that ministries across the government often lack the knowledge and intellectual capital required to design effective policies. Flagship programs, like the Smart Cities Mission, that do not explicitly tackle urban governance critical to fix India’s urban woes is an example of this. Sadly, this is the state of affairs after the government sponsors about 533 autonomous institutions with an annual budget of R60,000 crore.

Typically, these institutions are meant to provide the government with intellectual fodder by operating as expert bodies. However, in reality many simply provide sinecures to retired officers. Some are bloated with support staff. For example, in the urban sector alone, over 105 professionals are employed across seven government–owned institutions. Further break–up shows that over 70 administrative staff are employed across three institutions.
Such anaemic institutional performance has enabled scores of powerful lobbies, and various interest groups in many avatars to provide pro bono intellectual services, and in turn become powerful brokers in India’s political economy. However, is this viable for India? As the vice chairman, NITI Aayog led committee evaluates the performance of India’s 533 autonomous bodies it merits looking at examples of some highly successful institutions in the country. In this case, I refer to two that I have seen evolve closely.

Working with Rajat Kumar Gupta to help establish Public Health Foundation of India (PHFI) that was launched by former PM Manmohan Singh in 2006, and through much of my McKinsey career helped me understand the impact philanthropically-led independent institutions can have in society. My experience at the Indian School of Business (ISB) where I was a visiting fellow in 2009-10 reaffirmed this belief.

The common facets across these institutions Rajat Kumar Gupta founded are remarkably unique. First, both institutions have highly prestigious, professional and independent boards that bring together the finest minds from business, public life, civil society and academia. This board construct is immensely valuable to bring a business-like and practical approach to help craft programs and policy approaches to address real world problems with alacrity from civil society, lessons from academia, and support from the government.

Second, given the financial construct of these institutions, they are not beholden to any one donor or individual. The multiplicity and divergence of donors both international and Indian, institutional and philanthropists, have provided these institutions with the freedom to make independent decisions rather than play to the interests of a particular sponsor or the government. Most often, a single sponsor construct comprises the independence of institutions as experience has shown.

Third, these institutions have been designed to attract high calibre talent from India and overseas. Consequently, a hallmark of these institutions is their culture. A culture that fosters openness, diversity of thought, and debate; is bereft of steep hierarchies. These institutions equally take pride in providing competitive compensation and benefits to their employees.

Fourth, each of these institutions was founded with strong partnerships with renowned international institutions. These partnerships facilitated expeditious knowledge transfer necessary to be become world class and achieve scale. The impact these institutions have had since they were established is phenomenal. ISB has graduated more than 7,500 students since it opened its doors in 2001. PHFI has five state level institutions, which offer on-site and distance learning degree programs, and has trained thousands of public health practitioners and professionals, undertaken significant research and invested in strengthening the health systems across the centre and states.

Drawing upon these experiences could enormously benefit India. Revamping many institutions to make them independent and autonomous while seeking partnerships with the private sector, not-for-profits and globally renowned institutions could transform their governance and performance.

Those unable to withstand change will fold up, or merge and that may not necessarily be bad. In fact, if India were to dismantle some of these it could help add others in the many areas that suffer from institutional capacity vacuum—urbanisation, financial inclusion, digitisation, environmental sustainability, transportation, and agriculture amongst others.

To begin with, getting the Urban Institute of India (UII) approved by the Cabinet in 2014, to take off would be a start. Established as a not-for-profit institution, UII is an equal public private partnership designed to play a catalytic role in capacity building and urban transformation given the scant institutional knowledge and resources. Neglecting capacity and institutional issues in urban and semi-urban areas that will account for about 70% of India’s incremental GDP by 2025 is likely to stunt economic growth.

To power the nation’s growth and prepare it for the future, India should expediently invest in building institutions that will build the foundations for the future, much like the IITs, or the Indian Institute of Science (IISc). Building independent and autonomous institutions and such institution builders is prudent, and timely.

India needs many like Rajat Gupta to help build its next generation institutions. Getting him back to continue his philanthropic work would be helpful. After all, he turned the spotlight on philanthropy in India with the launch of the Indian School of Business. He is one of a handful of professionals who selflessly and wholeheartedly committed himself to philanthropic pursuits. Many flirt with them for the prestige, access and networks they provide post retirement from the high career table.

The author was with McKinsey & Company from 2004–15 and co-founded UII. Views are personal

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