Analysing public sector efficiency of the Indian States

As part of globalisation and privatisation, the role of the public sector in providing both economic and social services has been under question. It is based on the assumption that the private sector is more efficient than the public sector. In this context, it is important to understand the public sector's efficiency at the sectoral level and different levels of governments such as national and sub-national (State) governments. Consequently, an attempt has been made to estimate the relative efficiency of eleven major public sector expenditures of 29 Indian States: education, health, water supply, and sanitation, information and broadcasting, social welfare and nutrition, rural development, irrigation and flood control, energy, roads transport, public works, and police. The efficiency is computed using the output-oriented Data Envelopment Analysis approach over 2005-2018. It finds that the efficiency of public sector expenditures across the sectors and the Indian States is rather diverse. There is a scope for improvement without compromising the current public spending. Most of the southern and western States have better public sector performance than the eastern and central States. The results suggest that inefficient States could follow their peer groups (better performing States) and improve their performance.