One basic problem is that India failed to invest in education. "Indian planners were at the opposite pole from planners in all the Communist countries ....[who] all valued universal standard school education. Interestingly they were also ignoring... Milton Friedman, who submitted an enlightening 'memorandum to the government of India' in 1955 where he emphatically argued that Indian planning was giving too much importance to physical capital and grossly neglecting 'human capital'."
They compare India with other South Asian countries and note that Bangladesh, with a much lower per capita income, is ahead of India on many social issues (including life expectancy at birth).
They have an excellent though of course rather depressing chapter on Accountability and Corruption. They point out the need to distinguish between "two different questions:
- In what areas can the public sector, given feasibly good arrangements, serve the interests of the public better than the private sector?
- How can public sector institutions be made accountable so that the serve well the purposes for which they are set up?"
They point out how damaging subsidies of electricity and fertilizer are (the latter accounted for 1.5% of India's GDP in 2008-9 which was more than public expenditure on healthcare!) and "revenue foregone" in taxes is 5% of GDP.
They also note that "no government employee can be prosecuted for dereliction of duty without prior permission of the government, which is rarely granted...'previous sanction' of the concerned government is required even to 'take congnizance' of a violation of the [Prevention of Corruption] Act on the part of a public servant."
There is much more wonderful material which I haven't yet got time to blog. Do read the book!