XKDR Newsletter - Issue 7
Learning by doing in Indian public procurement • Many roads lead to a sound GST • 2nd edition of ISOTR
Learning by doing and public procurement in India
Building state capacity takes time. Performing the same tasks repeatedly builds capabilities of doing it efficiently. This is true of procurement activities by governments as well. In their latest article, Aneesha Chitgupi and Susan Thomas use the data reported by various Ministries in their Detailed Demand for Grants (DDG) to quantify the spending gaps in government procurement expenditure.
Key findings:
Ministries that procure consistently have lower spending gaps in procurement expenditure implying building of state capacity through learning by doing.
Ministries that do not have a large procurement mandate, do not have the necessary experience to undertake sporadic increases in procurement expenditure and suffer from a greater underspend in procurement expenditure.
Ministries that tend to underspend on procurement expenditure do well in managing their overall budget expenditure with cases of overspending. This indicates that ministries have over the years built capabilities of managing their total expenditure but lag in developing state capacity for procurement as it is a small fraction of their budget.
Commentary
Vijay Kelkar and Ajay Shah discuss the importance of a sound GST design in their column in the Business Standard - Many roads lead to a sound GST. Among others, they argue for a low single GST rate, and for a slice of the GST to go to the local governments.
Book release
Revised and updated (2nd edition) of In Service of the Republic: The art and science of economic policy by Vijay Kelkar and Ajay Shah is now available.