If India is to make significant progress in the areas crying out for action (mostly in the field of social infrastructure -- health, education, water supply, etc), the government has to make a vital mental transition: from the notion of being the monopoly (or dominant) provider of a service, to an agency that lets others do the work, supervises to make sure that it is done properly, and manages fiscal transfers to take care of the poor, who would otherwise not be able to afford private sector services in these areas.
For instance, the notion has long existed that the government has to provide a public school system that it both manages and pays for.
Ditto with the public hospital chain for secondary and tertiary care, with procurement of foodgrains to feed the public distribution system, and much else. The notion of being the monopoly provider exists in specific contexts as well, like running the central government health service for government employees, another for those covered by the Employees' State Insurance Scheme, and a railway hospital system for the railways (so much so that doctors in the railways constitute the single-largest officer cadre in what is supposed to be a transport system!).
It is no secret that many of these services are delivered very imperfectly, and outsourcing is creeping in at the edges. But the notion that you should offer choice to the intended beneficiary, has not replaced the ideology of being the monopoly provider.
With literacy levels climbing slowly, with Pratham surveys showing that students learn by Class 8 what they should have learnt by Class 2, and with government hospitals asking patients to share beds with other patients and dishing out sub-standard medicines, the time has surely come to ask the question: if this model is not working, does a better one exist?
The answer would seem to be that it does, and it has already been implemented in some areas. In road construction, to take an example from the world of physical infrastructure, the work is no longer assigned automatically to the public works department; instead, the highway authority issues contracts and supervises the work done by private contractors.
Similarly, there should be no need for the massive procurement operation that the government mounts for foodgrain, with the attendant system of state warehouses. It should be possible to contract private parties to do the same job (purchase and storage), and to ask for competitive quotations. Given the inefficiencies that have been pointed out in the Food Corporation of India's functioning, it is almost certain that this will save a lot of money.
There is no reason why the logic of contracting out and offering choice should not be extended to education, where in any case the trend seems to be for students to switch more to private schools -- possibly reflecting greater dissatisfaction with public schools.
The Planning Commission has had a furious internal debate in recent weeks on the issue of choice in education, and concluded that once you adjust for the different kinds of students who go to private and public schools, their quality of output is not very different. The logical course of action should then be, since nothing is lost, to offer choice and let the customer decide.
In the field of health, the government may well find that an insurance system funded by the government, running in parallel with the public health system, might deliver superior results, and patients would then be free to choose the doctors and hospitals they want.
Certainly, most government employees would be happy to go to a private hospital to get treatment, especially if the cost to their employer is no different.
To be sure, entrenched interest groups (like the teachers' unions) will oppose such change, but schools exist for students, not teachers.
Also, it has been shown time and again that the public sector tends to work better when it has to compete with the private sector -- the Life Insurance Corporation's spectacular results of the past year, in the face of stiff competition from private insurers, is testimony to this. Once the focus changes to the user of a service and not its provider, the argument is easy to grasp.
