India should fix its wraped state-citizen reationship

Context: The state must focus on providing public goods well and stop giving subsidy to private goods.

Issues with the Indian State:

• An anti-thesis of what a state would do: It barely provides public goods and is instead overwhelmingly present in provisioning and subsidizing private goods or regulating private interactions. 

• Spending on private entitlements has two effects:
• Leads to high fiscal deficit and borrowing crowding out private investments.
• High opportunity cost since, money spent on public goods provisioning is likely to attract more private investment and private exchange. 

Analysis of State-citizen relationship:

• The state as Nightwatchman: Proposed by Since Adam Smith, it prevents private predation by maintaining law and order, enforcing contracts, administering criminal justice and limiting itself to public goods provisioning.
• Centralized Planning State: This type of state arose in the 20th century, where the state controls or produces nearly all the goods and services in the economy.
• Central planning has destroyed economies, caused famines killing millions, excessive control over individual freedoms and stifling of free speech.
• Liberal welfare state: Democracies have drifted towards an ever-expanding welfare state which is a consequence of the redistributive nature of democratic politics.
• These states have made a massive investment in public goods and infrastructure but are challenged in innovation due to high taxation and redistribution.

 Lessons for India:

• Developing Capacity to deliver public goods: including law and order, the functional justice system, enforcement of contracts, strong public health, sanitation system and quasi-public goods such as free primary education.
• Public goods infrastructure increases private investment and fosters private exchange.

• Complete redesign of the state-citizen relationship - 

• Exiting from the area of provisioning of private goods by significantly rolling back regulatory and socialist state approach, whether it is in establishing news channel, power plant, shop or a university.
• Focusing solely on public goods and developing strong state capacity to deliver. 

Conclusion: As India battles a health crisis, an economic slump and a fiscal crisis, it has never been more urgent to redefine the state-citizen relationship.