Challenges of LPG and Good Governance: Regulatory State, Governance Networks, India

Introduction: Meaning, scope and significance of Public Administration; Wilson’s vision of Public Administration; Evolution of the discipline and its present status; New Public Administration; Public Choice approach; Challenges of liberalization, Privatisation, Globalisation; Good Governance: concept and application; New Public Management.

This article: Challenges of liberalisation, privatisation and globalisation (LPG) for public administration; governance and good governance: concept and application.

Official Syllabus: Paper I · Unit 1-01 Introduction

From the 1980s, a wave of change swept across the world.

• Liberalisation loosened the state’s controls over the economy.
• Privatisation moved enterprises and services from public to private hands.
• Globalisation tied national economies, cultures and problems together.

These forces did not abolish public administration, but they changed what it does (less producing, more regulating and enabling), with whom it works (markets, civil society, international bodies) and how it is judged (by results, transparency and citizen satisfaction). The answer to these challenges took the shape of a new vocabulary: governance and good governance.

1. The Context: Crisis of the Welfare State

1.1 Why the big state came under attack

• Fiscal crisis: the oil shocks of 1973 and 1979, stagflation (high inflation with unemployment) and rising welfare bills left governments with chronic deficits. James O’Connor called it “the fiscal crisis of the state” (1973).
• Government failure: public choice theorists (Buchanan, Tullock, Niskanen) argued that bureaucracies over-supply, waste and serve themselves (see the article on New Public Administration and Public Choice). Government came to be seen, in Ronald Reagan’s words (1981), as “not the solution to our problem; government is the problem”.
• The New Right: Margaret Thatcher (1979) and Reagan (1981) promised to “roll back the state“: cutbacks, deregulation, privatisation.
• Failure of state-led development: many public enterprises in developing countries ran losses; the debt crisis of the 1980s (from Mexico, 1982) forced countries to borrow from the IMF and World Bank on conditions.
• Collapse of command economies (1989–91) strengthened the case for markets.
• Technology and capital mobility: cheaper transport, telecommunications and later the internet let capital, goods and ideas move fast across borders.

1.2 The Washington Consensus

• The economist John Williamson (1989) summarised the reforms that the IMF, World Bank and US Treasury, all based in Washington, were urging on Latin America. He listed ten policies: fiscal discipline; reordering public spending towards health, education and infrastructure; tax reform; market-determined interest rates; competitive exchange rates; trade liberalisation; openness to foreign direct investment; privatisation; deregulation; and secure property rights.
• These became the core of structural adjustment programmes (SAPs) attached to loans: first stabilisation (cutting deficits and inflation), then structural reform (LPG).

1.3 India’s turn: 1991

• India had liberalised partly in the 1980s, but a balance of payments crisis in 1990–91 (Gulf War oil prices, falling remittances, short-term debt, political instability) left foreign exchange reserves enough for only about two weeks of imports by mid-1991. The Reserve Bank pledged gold abroad to raise funds.
• The 1991 reforms:
  • devaluation of the rupee in two steps in early July 1991 (about 18–19 per cent);
  • the New Industrial Policy (24 July 1991) abolished industrial licensing except for a short list of industries, opened sectors reserved for the public sector and welcomed foreign investment;
  • disinvestment in public enterprises; trade and tariff reform; financial sector reform and new private banks; tax reform;
  • loans from the IMF and World Bank with conditions.
• Laws rewritten in the following decade: the Foreign Exchange Regulation Act, 1973 gave way to the Foreign Exchange Management Act, 1999; the MRTP Act gave way to the Competition Act, 2002; the Electricity Act, 2003 opened power to private players; independent regulators followed (SEBI made statutory in 1992, TRAI in 1997).

2. Liberalisation

2.1 Meaning

• Liberalisation is the relaxation of government restrictions on economic and social activity: removing licences, controls on prices, production, investment, imports and foreign exchange.
• More broadly, it reorganises institutional space to shift the balance of power from the state towards the market and private actors.
• Its roots in liberalism:
  • Political liberalism (Locke): the individual as a rational, moral being with rights to life, liberty and property.
  • Economic liberalism (Adam Smith): laissez-faire, private property, market prices and a minimal state confined to defence, law and order, justice and a few public works.
  • Neo-liberalism (Hayek, Friedman): its late-twentieth-century revival.
• Liberalisation and privatisation are separable. A sector can be opened to competition while the state keeps its own firm in it (India opened airlines, telecom and insurance to private firms but kept public ones), and a state monopoly can be sold to a private monopoly without any liberalisation.
• Names for the package: New Economic Policy, Structural Adjustment Programme, economic reforms; in public administration, “reinventing government“, “government by the market“, “hollowing out” or “slimming” of the state.

2.2 What liberalisation demands of public administration

• From controller to facilitator: the licence officer becomes a regulator and promoter of investment; single-window clearances, time-bound approvals, self-certification.
• Deregulation and decriminalisation of minor offences (India’s Jan Vishwas Acts of 2023 and 2026).
• New skills: economic analysis, negotiation, contract management, regulation.
• New values: speed, transparency and predictability instead of discretion and delay.
• Regulatory capacity: without strong regulators, liberalised markets turn into private monopolies or cartels.

3. Privatisation

3.1 Meaning and forms

• Privatisation is the transfer of ownership, control or delivery of enterprises and services from the public to the private sector. Its antonym is nationalisation.
• It is as much a political as an economic act: it redraws the boundary between state and market.
• Forms:

Form	What it means	Example
Denationalisation / strategic sale	Sale of ownership and control	Air India to the Tata group (2022)
Disinvestment	Sale of a minority stake, state keeps control	Initial public offering of LIC (2022)
Stock-market flotation	Shares sold to the public	British Telecom (1984)
Management or employee buy-out	Sale to managers or workers	Several UK bus companies (1980s)
Contracting out / outsourcing	State pays, private firm delivers	Municipal solid-waste collection
Leasing, franchising, concessions	Private operation of a public asset for a period	Airports leased under public–private partnership
Asset monetisation	Leasing brownfield assets for upfront revenue	National Monetisation Pipeline
Load-shedding / withdrawal	State simply stops providing a service	Ending public production of non-strategic goods
Deregulation of entry	Private firms allowed into a public monopoly	Telecom, aviation, insurance

3.2 Arguments for and against

For privatisation	Against privatisation
Efficiency and productivity improve with profit motive and competition	Private monopoly may replace public monopoly; efficiency depends on competition, not ownership (Vickers and Yarrow, 1988)
Frees public money and managerial attention for core functions	Equity suffers: profitable customers served, poor and remote ones neglected
Reduces political interference and losses	Accountability weakens: contracts replace answerability to legislature
Brings capital, technology and management skills	Assets may be undervalued; crony capitalism
Raises revenue and reduces debt	Job losses; loss of strategic control

4. Globalisation

4.1 Meaning

• Globalisation is the growing interconnectedness of the world: flows of trade, investment, finance, technology, people, information and culture across borders, and the compression of time and space.
• Different lenses see it differently:
  • economists: an integrated world market;
  • political scientists: a new world order with supranational bodies (WTO, IMF, World Bank, regional blocs);
  • business: borderless opportunities;
  • sociologists: a shared global culture. John Tomlinson wrote that “globalization lies at the heart of modern culture; cultural practices lie at the heart of globalization”.
• Dimensions: economic, political, cultural, technological, environmental, and security (terrorism, pandemics, cybercrime).
• Key works: Kenichi Ohmae, The Borderless World (1990) and The End of the Nation State (1995); Francis Fukuyama, “The End of History?” (1989); Joseph Stiglitz, Globalization and Its Discontents (2002); Dani Rodrik, The Globalization Paradox (2011), with his “trilemma“: a country cannot have deep economic integration, national sovereignty and democracy all at once; it must sacrifice one.

4.2 Three perspectives (Ali Farazmand)

Perspective	Thinkers	View	Implication for public administration
Proponents	Fukuyama, Ohmae	A global village of free markets and consumers; nation-states fade	Shrink the state; market-friendly administration
Opponents	Cerny, Gill, Korten, Farazmand	A new imperialism of corporations: threatens sovereignty, culture, democracy and labour	Defend public administration as guardian of citizens against corporate power
Middle ground	Susan Strange, Jan Aart Scholte	Inevitable but manageable; states must adapt	Build national and local capacity, regulation and global cooperation

4.3 The five challenges of globalisation

• Governance: problems such as financial contagion, tax avoidance and cyber threats escape national control.
• Equity: gains are unevenly shared within and between countries.
• Security: terrorism, pandemics and transnational crime.
• Ecology: climate change and biodiversity loss.
• Energy and resources: competition for oil, minerals and water.

4.4 Globalisation after 2008: slowing but not reversing

• The 2008 financial crisis, the COVID-19 pandemic and great-power rivalry exposed fragile supply chains; scholars speak of “slowbalisation“.
• Protectionism returned: in August 2025 the United States raised tariffs on many Indian goods to as high as 50 per cent; after an interim framework in February 2026 the rate was cut to 18 per cent.
• Rules are being renegotiated: the 15 per cent global minimum corporate tax (OECD/G20 Pillar Two) was modified in January 2026 by a “side-by-side” package that exempts US-headquartered groups from parts of the rules.
• New trade blocs: India signed a Comprehensive Economic and Trade Agreement with the United Kingdom (July 2025) and concluded a free trade agreement with the European Union (27 January 2026).
• The lesson: globalisation is selective and contested, and states, far from disappearing, are actively managing it.

5. Challenges of LPG for Public Administration

5.1 Changes in the role and character of the state

• From positive state to regulatory state: Giandomenico Majone (1994) described the rise of the “regulatory state” in Europe: the state shifts from taxing, spending and producing to rule-making through independent agencies.
• From welfare state to “corporate state” (2015 PYQ): critics such as Farazmand argue that globalisation has reshaped the state to serve capital accumulation: competing for investment through tax cuts, labour flexibility and subsidies, while welfare is trimmed. Colin Crouch called the result “post-democracy“: elections continue, but key decisions are made in partnership with corporate elites.
• From rowing to steering: policy, contracting and regulation instead of direct production.
• From government to governance: decisions shared with markets, civil society and international bodies (see section 6).
• From domestic to global: ministries negotiate with the WTO, credit-rating agencies and investors; national policy is shaped by international standards.

5.2 Specific challenges for administrators

• Regulatory capacity: designing and running independent regulators, preventing capture and overlapping jurisdictions.
• Negotiating capacity with multinational corporations and international organisations.
• Competitiveness: ease of doing business, speed, simplification and digitisation.
• Equity and inclusion: protecting those whom markets leave out: informal workers, farmers, the poor, remote areas.
• Transparency and anti-corruption: large contracts, public–private partnerships and disinvestment create new opportunities for corruption.
• Decentralisation and partnership: working with local governments, NGOs and self-help groups.
• Personnel reform: merit over seniority, specialists alongside generalists, lateral entry, continuous training.
• Ethics: reconciling business values (profit, speed, risk) with public values (equity, legality, accountability).
• New domains: disaster management, cybersecurity, data protection, climate adaptation.
• Resisting blind imitation: reforms that worked in rich countries may fail where markets, courts and regulators are weak.

5.3 Transnational corporations and public administration (2019 PYQ)

• Scale: the largest corporations earn more in a year than the GDP of most countries.
• How they affect government:
  • Bargaining power: they can choose where to invest, so states compete through tax concessions, land, labour laws and subsidies (the “race to the bottom“).
  • Tax base erosion: profit shifting to low-tax jurisdictions led to the OECD/G20 BEPS project and the global minimum tax.
  • Investor–state dispute settlement: companies can take states to international arbitration over regulation and taxation. India’s retrospective tax amendment of 2012 led to arbitration with Vodafone and Cairn; Parliament withdrew retrospective demands through the Taxation Laws (Amendment) Act, 2021.
  • Lobbying and regulatory influence: standards for data, pharmaceuticals and agriculture are shaped by corporate lobbies.
  • Digital platforms handle citizens’ data and speech, forcing new laws such as India’s Digital Personal Data Protection Act, 2023 and its 2025 Rules.
• The other side: corporations bring investment, jobs, technology and global standards; they are partners in public–private partnerships and corporate social responsibility (Section 135, Companies Act, 2013).
• The administrative task is not to resist corporations but to regulate them in the public interest: competition law, tax cooperation, data protection, labour and environmental standards.

5.4 Regulation in the age of globalisation (2021, 2022 PYQs)

• Regulation is old (weights and measures, guilds, factory acts) but more necessary than ever because:
  • privatised utilities need economic regulation of prices and quality;
  • global markets need common rules (Basel banking norms, WTO, food safety, aviation);
  • new risks (financial derivatives, data, AI, climate) need social regulation.
• Regulatory governance means rule-making, monitoring and enforcement by a mix of state agencies, international bodies, industry self-regulation and civil society standards. David Levi-Faur and John Braithwaite call the present era “regulatory capitalism“: markets grow, but so does regulation.
• Potential: stability, consumer protection, fair competition, predictable rules that attract investment, cross-border cooperation.
• Limits: capture by the regulated; overlapping jurisdictions (hence the recurring debate on a unified “super-regulator”); weak capacity in developing countries; democratic deficit when unelected regulators decide; rules made in global forums where poorer countries have little say.

5.5 The paradox: LPG and NPM promised a smaller state, yet it grew (2025 PYQ)

• The promise: limit government functions and cut public expenditure.
• The reality: across OECD countries, general government spending averaged 42.6 per cent of GDP in 2023 (after a peak of 48.3 per cent in 2020), well above levels of the mid-twentieth century. Very few states shrank permanently.
• Why functions and spending rose:
  • Wagner’s law: as incomes rise, demand for public services (education, health, pensions) rises faster.
  • Ageing populations raise pension and health costs.
  • Regulation needs administration: every privatised utility and liberalised market needs a regulator, courts and monitoring staff.
  • Contracting has costs: writing, monitoring and enforcing contracts (transaction costs) often offset savings.
  • Crises: the 2008 financial crisis and COVID-19 forced massive state rescue and welfare spending; states became “insurers of last resort“.
  • Globalisation’s losers need compensation and safety nets (retraining, unemployment benefits, food security).
  • New risks: terrorism, cybersecurity, climate change, pandemics.
  • Democratic pressure: voters demand more services, not fewer.
  • Infrastructure push: developing countries need large public investment.
• India: the state withdrew from many industries but expanded welfare and infrastructure: food grains free of cost for about 81 crore people under the Pradhan Mantri Garib Kalyan Anna Yojana (extended for five years from January 2024), the health insurance scheme Ayushman Bharat, record public capital expenditure, and direct benefit transfers.

• Conclusion: LPG changed the form of state action (from producing to financing, regulating and transferring) rather than its size.

5.6 Did LPG resolve the welfare state’s crisis at the cost of equity? (2026 PYQ)

• What LPG resolved: balance-of-payments and fiscal crises; shortages and licence raj inefficiencies; it raised growth, consumer choice and foreign investment; India’s high growth after 1991 funded later welfare schemes.
• What it undermined: inequality widened in many countries; user charges and privatisation sometimes excluded the poor; labour lost bargaining power; public services were judged by efficiency rather than equity (the value New Public Administration had championed).
• The correction: “second-generation reforms“, “inclusive growth” (the Eleventh Plan, 2007–12), rights-based laws (MGNREGA 2005, Right to Education 2009, National Food Security Act 2013), and the good governance agenda that put equity, participation and accountability back alongside efficiency.

5.7 “In globalised public administration, hierarchy creates more ethical problems than it solves” (2013 PYQ)

• Problems hierarchy creates:
  • Diffusion of responsibility: in long chains of command no one feels responsible; Dennis Thompson called this “the problem of many hands” (1980).
  • Obedience over conscience: officials follow orders even when wrong (the Milgram experiments; Hannah Arendt’s “banality of evil“).
  • Information distortion: juniors tell superiors what they want to hear (Tullock).
  • Silence: whistle-blowers face retaliation.
  • Rigidity: in networked, cross-border work (supply chains, joint ventures, international bodies), hierarchy cannot trace accountability across organisations.
• What hierarchy still does: it fixes responsibility and makes officials answerable through a clear chain to elected ministers; without it, network governance can become “accountability-free“.
• The answer is not to abolish hierarchy but to add ethical infrastructure: codes of conduct, conflict-of-interest rules, whistle-blower protection, transparency and a culture of personal responsibility.

6. From Government to Governance

6.1 Meaning of governance

• Governance is “the process of decision-making and the process by which decisions are implemented (or not implemented)” (UNESCAP).
• World Bank (1992): “the manner in which power is exercised in the management of a country’s economic and social resources for development”.
• UNDP (1997): “the exercise of economic, political and administrative authority to manage a country’s affairs at all levels”, comprising the mechanisms, processes and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations and mediate their differences.
• Kaufmann and Kraay (World Bank): “the traditions and institutions by which authority in a country is exercised”, including how governments are selected, monitored and replaced; the capacity to formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern them.
• Lynn, Heinrich and Hill: “regimes of laws, rules, judicial decisions and administrative practices that constrain, prescribe and enable” public action.
• Three sets of actors (UNDP): the state, the private sector and civil society, interacting constructively.
• Actors beyond the state (UNESCAP): landlords, peasant associations, co-operatives, NGOs, research institutes, religious leaders, financial institutions, political parties, the military, media, lobbyists, donors and multinational corporations; and informal, sometimes illegitimate, actors such as land mafias and “kitchen cabinets“.
• Levels: corporate, local, national and international (global governance).

6.2 Governance as self-organising networks (2021 PYQ)

• R. A. W. Rhodes, “The New Governance: Governing without Government” (1996), listed six uses of the term: the minimal state, corporate governance, New Public Management, good governance, a socio-cybernetic system and self-organising networks. He preferred the last.
• Self-organising, interorganisational networks have four features:
  • interdependence between organisations (state, private and voluntary); boundaries blur;
  • continuing interactions among members, who must exchange resources and negotiate shared purposes;
  • game-like interactions rooted in trust and regulated by rules agreed by participants;
  • a significant degree of autonomy from the state: networks are not accountable to it and govern themselves; the state can only steer them indirectly.
• Gerry Stoker (1998) offered five propositions: governance refers to institutions and actors from and beyond government; it blurs boundaries and responsibilities; it involves power dependence; it is about autonomous self-governing networks; and it recognises that the capacity to get things done does not rest on the power of government to command.
• Jan Kooiman: governance as interactions among public and private actors to solve problems; B. Guy Peters: governing has become “a process of bargaining and mediating rather than of applying rules“.
• Managing networks needs new skills: activating the right partners, framing shared goals, mobilising resources and synthesising agreement (network management, or “meta-governance“: the governance of governance).
• Limits: networks can be closed, captured by insiders, unaccountable and slow; the state still holds law, money and legitimacy (the “shadow of hierarchy”). Bob Jessop warned of “governance failure” as real as market or state failure.

6.3 Hollow state and third-party government (2020 PYQ)

• Third-party government (Lester Salamon, 1981): government increasingly acts through other organisations (grants to states and local bodies, contracts with firms, loans, tax incentives, vouchers, funding to non-profits) rather than directly.
• Hollow state (H. Brinton Milward and Keith Provan, 1993, 2000): an extreme of this, where government becomes a funder and broker of services delivered by networks of contractors and non-profits, with the agency relying on others to jointly produce and deliver public services.
• Why governance became the organising concept: when government no longer produces most services itself, studying the bureaucracy alone misses most of public action; the field must study networks, contracts and partnerships.
• Critical view:
  • The state is not hollow in the sense of powerless: it still sets rules, finances and regulates. Many scholars speak of the state “filling in” with regulatory and monitoring units even as it hollows out production.
  • Hollowing can erode capacity (the state forgets how to do things) and accountability (who answers when a contractor fails?).
  • In India, the core bureaucracy remains central, though partnerships (PPPs in highways, NGOs in health and education, self-help groups) have grown.

6.4 Has public administration shed its statist character? (2019 PYQ)

• Yes, in part:
  • The discipline now studies civil society, markets, networks, international bodies and citizens as co-producers, not only state agencies.
  • Good governance values (participation, consensus, responsiveness) are society-centred.
  • The terms “governance”, “public management” and “public policy” replace “public administration” in many programmes.
• No, not entirely:
  • The state remains the ultimate authority for law, coercion, taxation and legitimacy; good governance itself is largely about reforming the state (rule of law, accountability, effectiveness).
  • In developing countries, the state remains the main agent of development.
  • After 2008 and COVID-19, there has been a “return of the state“: industrial policy, public health, welfare.
• Balanced view: the discipline moved from a state-centric to a state-led, society-inclusive view: the state is “first among equals” in governance.

6.5 “Governance is neither a paradigm nor a panacea” (2019 PYQ)

• Not a paradigm: “governance” covers many different ideas (Rhodes listed six); it lacks a single theory, method or agreed definition, and different users (World Bank, UNDP, Rhodes, Kooiman) mean different things. It is better seen as an organising perspective or “umbrella concept“.
• Not a panacea: networks can fail; partnerships can be captured; participation can be token; accountability blurs. Some problems need hierarchy (defence, law and order) or markets (private goods).
• Useful when other methods fail: for “wicked problems” (Rittel and Webber, 1973), such as climate change, urban poverty or pandemics, which no single actor can solve, governance through networks, participation and collaboration is often the only workable approach.
• Hierarchy, market and network are three modes of coordination; good administration uses the right mix for each task.

6.6 Governance theory and governmentality (2014 PYQ)

• Governmentality is Michel Foucault’s idea (lectures of 1977–79): the “conduct of conduct“, meaning the ways power shapes how people govern themselves through knowledge, norms, statistics and techniques (censuses, audits, health campaigns, self-help), not only through law and force. Nikolas Rose, Peter Miller and Mitchell Dean developed it.
• Points of convergence:
  • Both decentre the state: power and rule are spread across many actors and practices.
  • Both look beyond formal institutions to networks, techniques and practices.
  • Both explain the turn from command to steering at a distance (targets, contracts, incentives, audits).
• Why they run on parallel lines:

Basis	Governance theory	Governmentality
Question	How are collective problems solved effectively?	How is power exercised over and through subjects?
Nature	Empirical and normative (often reformist)	Critical and genealogical
Unit	Organisations, networks, institutions	Rationalities, discourses, techniques
View of networks	Self-organising partners	Ways of making citizens self-governing in line with official goals
View of good governance	A goal to achieve	Itself a neo-liberal technique of rule (making the poor “responsible”, entrepreneurial)

7. Good Governance: The Concept

7.1 Origins

• World Bank, 1989: Sub-Saharan Africa: From Crisis to Sustainable Growth blamed Africa’s development failure on a “crisis of governance” and first used the idea prominently; it called for an efficient public service, a reliable judicial system and an accountable administration.
• World Bank, 1992: Governance and Development defined governance and identified three aspects: (a) the form of political regime; (b) the process by which authority is exercised in managing economic and social resources; (c) the capacity of governments to design, formulate and implement policies and discharge functions. Because its Articles of Agreement bar political interference, the Bank focused on (b) and (c).
• Why it caught on in the 1990s (Arndt and Oman, OECD, 2006):
  • the end of the Cold War freed aid from strategic loyalties and let donors demand reform;
  • the World Bank’s 1996 campaign against the “cancer of corruption” (James Wolfensohn);
  • growth of international investment in developing countries;
  • the relative failure of Washington Consensus reforms showed that institutions matter;
  • New Institutional Economics (Douglass North): institutions are “the rules of the game”.
• Indian roots: the ideal is ancient.
  • Kautilya: “In the happiness of his subjects lies his happiness; in their welfare his welfare; whatever pleases himself he shall not consider as good, but whatever pleases his subjects he shall consider as good.”
  • The Shanti Parva of the Mahabharata: Bhishma instructs Yudhishthira that the king’s duty is to protect and please the people.
  • Ashoka’s edicts: the welfare (yogakshema) of all subjects.
  • Rulers were bound by dharma, a higher law above the king.

7.2 Good governance adds normative and evaluative attributes (2024 PYQ)

• “Governance” describes how governing happens: who decides, through which processes and institutions.
• “Good” adds:
  • a normative element: the values governing ought to serve (rule of law, accountability, participation, equity, human rights);
  • an evaluative element: standards and indicators against which real governance is measured and compared (World Bank indicators, Good Governance Index).
• So good governance converts an analytical concept into a reform agenda and a report card. This is its strength (it sets clear goals) and its weakness (whose values? which yardstick?).

7.3 The eight characteristics (UNESCAP and UNDP)

Characteristic	Meaning
Participation	Men and women take part directly or through legitimate institutions; requires freedom of association and expression and an organised civil society
Rule of law	Fair legal frameworks enforced impartially; protection of human rights, especially of minorities; independent judiciary; incorruptible police
Transparency	Decisions and their enforcement follow rules; information is freely available and understandable to those affected
Responsiveness	Institutions serve all stakeholders within a reasonable time
Consensus orientation	Mediating different interests to reach broad agreement on what is in the best interest of the whole community, with a long-term perspective
Equity and inclusiveness	All, especially the most vulnerable, feel they have a stake and opportunities to improve their well-being
Effectiveness and efficiency	Processes produce results that meet society’s needs while making the best use of resources, including sustainable use of nature
Accountability	Government, private sector and civil society are answerable to the public and to their stakeholders; impossible without transparency and rule of law

7.4 Other formulations

• World Bank: sound public sector management, accountability, a legal framework for development, and transparency and information. Its programme of governance-related lending built capacity in civil service, budgeting, judiciary and anti-corruption.
• IMF and World Bank in the 1990s (market version): an enabling framework for the private sector, a reduced direct role for the state, devolution, anti-corruption, privatisation, removal of controls, codes of conduct and an independent judiciary.
• UK’s Department for International Development: legitimacy, accountability, competence, and respect for law and human rights.
• Kofi Annan (UN Secretary-General): “good governance is ensuring respect for human rights and the rule of law; strengthening democracy; promoting transparency and capacity in public administration.” He also called it “perhaps the single most important factor in eradicating poverty and promoting development” (1998).
• Nayef Al-Rodhan (Sustainable History and the Dignity of Man, 2009) proposed eight minimum criteria for good national governance:
  1. participation, equity and inclusiveness;
  2. rule of law;
  3. separation of powers;
  4. free, independent and responsible media;
  5. government legitimacy;
  6. accountability;
  7. transparency;
  8. limiting the distorting effect of money in politics.
  9. For global governance, he listed effective multilateralism, effective and representative multilateral institutions, dialogue, accountability, transparency, burden-sharing and partnerships with civil society.
  10. He also grounds governance in human dignity needs: reason, security, human rights, accountability, transparency, justice, opportunity, innovation and inclusiveness.
• Comparing the UN and Al-Rodhan criteria (2016 PYQ):
  • Shared: participation, rule of law, transparency, accountability, equity.
  • Al-Rodhan adds: separation of powers, media freedom, government legitimacy and control of money in politics. These are more political and democratic.
  • The UN list stresses process qualities (responsiveness, consensus, effectiveness).
  • Critique of both: they are lists of virtues without priorities or trade-offs; they assume Western liberal democracy; and they are hard to measure and operationalise in poor, divided societies.

7.5 Measuring governance

Tool	By	What it measures
Worldwide Governance Indicators	World Bank (Kaufmann, Kraay and others)	Six dimensions: voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; control of corruption
Corruption Perceptions Index	Transparency International (since 1995)	Perceived public-sector corruption
Country Policy and Institutional Assessment	World Bank staff	16 criteria in four clusters, used for aid allocation
Freedom in the World	Freedom House	Political rights and civil liberties
International Country Risk Guide	PRS Group (since 1980)	Political, economic and financial risk for investors
World Governance Survey	Hydén, Court and Mease (UN University)	Six arenas (civil society, political society, government, bureaucracy, economic society, judiciary) × six principles (participation, fairness, decency, accountability, transparency, efficiency)
State of Democracy	International IDEA	Popular control and political equality through seven mediating values
Good Governance Index	India’s DARPG (2019, 2021)	Ten sectors and 58 indicators across states and UTs

Critique of measurement:

• Most indicators are perception-based, drawn from experts and business surveys, and so biased towards investors’ concerns.
• They mix processes (elections held) with outcomes (services delivered).
• They give national averages that hide variation between states and districts (India’s states differ more than many countries).
• Donors’ mandates shape them: economic governance for the World Bank and IMF; democracy and rights for the UN, USAID and DFID.
• Ranking can reward cosmetic reforms.
• The need is for disaggregated, pro-poor, gender-sensitive and objective indicators.

8. Good Governance in Application

8.1 The Indian framework

• Constitutional base:
  • the Preamble (“We, the People”; justice, liberty, equality, fraternity);
  • Fundamental Rights: Article 14 against arbitrariness; Article 21, read by courts to include the rights to livelihood, privacy (Puttaswamy, 2017) and a clean environment; Articles 15–17 and 23–24 against discrimination and exploitation;
  • Directive Principles: Articles 38, 39, 41, 46, 47;
  • the 73rd and 74th Amendments (1992) for local self-government;
  • independent institutions such as the CAG, the Election Commission and the UPSC.
• Plans and reports:
  • the National Human Development Report, 2001 first applied a governance approach (institutions, delivery mechanisms and supportive legal framework);
  • the Tenth Plan (2002–07) devoted a chapter to governance;
  • the 2nd Administrative Reforms Commission (2005–09) wrote on ethics (Fourth Report, Ethics in Governance, 2007) and citizen-centric administration (Twelfth Report, Citizen Centric Administration: The Heart of Governance, 2009).
• Benchmarks: a Model Code of Governance discussed at the Conference of Chief Secretaries covers service delivery, weaker sections and backward areas, technology, financial management, accountability and transparency, anti-corruption, decentralisation and incentives for reform.
• Committees on civil service reform: Alagh (recruitment, 2001), Yugandhar (in-service training, 2003), Surinder Nath (performance appraisal and placement, 2003), Hota (civil service reforms, 2004).
• Good Governance Day (25 December, since 2014) and the Good Governance Index (DARPG, 2019 and 2021; ten sectors).

8.2 Good governance and the Millennium and Sustainable Development Goals (2010 PYQ)

• The UN Millennium Declaration (2000) committed states to “good governance within each country and at the international level” and set eight Millennium Development Goals for 2015 (poverty, education, gender, child mortality, maternal health, disease, environment, partnership).
• Why governance is the key factor: money and schemes fail without capable institutions to deliver them; corruption diverts funds; without accountability and participation the poor cannot claim services. Amartya Sen showed that no major famine has occurred in a functioning democracy with a free press, because governments are forced to respond.
• Evidence: corruption lowers growth and raises inequality and child mortality; but the link between governance and poverty reduction is complex (some countries reduced poverty with weak governance indicators).
• Sustainable Development Goals (2015–30): seventeen goals and 169 targets, with SDG 16 (“peace, justice and strong institutions”) making effective, accountable and inclusive institutions a goal in itself.

8.3 Democracy and good governance: contradiction or complement? (2004 PYQ)

Arguments that they conflict:

• Democracy can bring populism, short-termism, vote-bank politics and coalition paralysis.
• Policy is slowed by protests and litigation (land acquisition, infrastructure).
• Some authoritarian states (Singapore, China, the East Asian “developmental states”) scored well on efficiency and growth.
• Good governance indicators stress efficiency and regulatory quality, which do not need elections.

Arguments that they complement each other:

• Accountability, participation, transparency and rule of law are democratic values; good governance without them is merely efficient administration.
• Kaufmann and Kraay find better governance raises growth, and voice and accountability are part of governance.
• Democracies avoid catastrophic failures (famines, purges) and correct mistakes through elections and free media (Sen).
• India’s long-term record shows democracy and development can coexist.

Balanced view: keep “democraticness” and “good governance” analytically distinct (Dirk Berg-Schlosser). Democracy does not automatically produce good governance; it supplies the accountability that makes good governance legitimate and sustainable.

8.4 Ethics and good governance: Appleby’s dictum (2011 PYQ)

• Paul Appleby, Morality and Administration in Democratic Government (1952), held that administrative morality in a democracy lies in responsiveness to the public through political processes: the official must weigh the interests of all affected and act through responsible, accountable institutions. Hence “responsible government is ethical government“.
• Civil servants as “social moralists in action” means:
  • Integrity: resisting corruption and conflicts of interest.
  • Moral judgement in discretion: applying rules humanely and fairly.
  • Equity: serving the weakest, in the spirit of social equity.
  • Openness: accepting scrutiny.
  • Courage: speaking truth to power, giving frank advice and refusing illegal orders.
• Indian anchors: the All India Services (Conduct) Rules, 1968 and the Central Civil Services (Conduct) Rules, 1964; the 2nd ARC’s call for a statutory code of ethics and Public Service Bill (Fourth Report, 2007); Mission Karmayogi’s stress on attitudes and values.

8.5 Assessing good governance

• Overall: good governance is best treated as an ideal to strive for and a set of tools, not a single blueprint. Its application must be contextual, sequenced and owned by the country.

Key Terms

Term	Meaning in simple words
Liberalisation	Removing government controls and licences so markets decide more
Privatisation	Transferring ownership, control or delivery from public to private hands
Disinvestment	Selling part of the government’s stake in a public enterprise
Globalisation	Growing interconnection of economies, cultures and problems across borders
Washington Consensus	Williamson’s (1989) list of market reforms urged by Washington-based institutions
Structural adjustment	Loan-linked reforms: stabilisation, then liberalisation and privatisation
Regulatory state	A state that governs mainly by making and enforcing rules, not by producing
Regulatory capture	Regulators coming to serve the industry they regulate
Race to the bottom	States cutting taxes and standards to compete for investment
Governance	The process of making and implementing decisions involving state, market and civil society
Self-organising network	A group of interdependent organisations that governs itself on trust and negotiated rules
Hollow state	Government that funds and brokers but no longer produces most services
Third-party government	Government acting through contractors, non-profits and other governments
Meta-governance	The state steering networks indirectly: the governance of governance
Governmentality	Foucault’s “conduct of conduct”: shaping how people govern themselves
Good governance	Governance meeting normative standards: participation, rule of law, transparency, accountability, equity, effectiveness
Good enough governance	Grindle’s idea of realistic, prioritised governance reforms suited to each country
Wicked problem	A problem with no clear definition or final solution, involving many actors

Commissions, Committees and Judgments

Body / case	Year	Key point
World Bank, Sub-Saharan Africa: From Crisis to Sustainable Growth	1989	First prominent use of “governance”; “crisis of governance”
World Bank, Governance and Development	1992	Definition and three aspects of governance
UNDP, Governance for Sustainable Human Development	1997	State, private sector and civil society; characteristics of good governance
National Human Development Report	2001	First governance approach in India
Alagh, Yugandhar, Surinder Nath, Hota Committees	2001–04	Civil service recruitment, training, appraisal and reform
2nd ARC, Fourth Report (Ethics in Governance)	2007	Code of ethics, Public Service Bill, anti-corruption
2nd ARC, Twelfth Report (Citizen Centric Administration)	2009	Citizen’s charters, grievance redress, Sevottam
T.S.R. Subramanian v. Union of India	2013	Fixed tenure; civil services boards; written instructions
Justice K.S. Puttaswamy v. Union of India	2017	Privacy a fundamental right; basis for data protection law

Contemporary Developments

• August 2025: US tariffs on many Indian goods reached 50 per cent; February 2026: an interim framework cut the rate to 18 per cent.
• 24 July 2025: India and the United Kingdom signed a Comprehensive Economic and Trade Agreement; 27 January 2026: India and the European Union concluded their free trade agreement.
• 5 January 2026: the OECD/G20 Inclusive Framework agreed a “side-by-side” package on the global minimum tax.
• November 2025: the Digital Personal Data Protection Rules were notified with phased implementation.
• 23 February 2026: NMP 2.0 was launched with a monetisation potential of ₹16.72 lakh crore for 2025–30.
• 7 April 2026: the Jan Vishwas (Amendment of Provisions) Act, 2026 received assent, extending decriminalisation across about 80 Central Acts.
• December 2025: the government highlighted the Good Governance Index (ten sectors, 58 indicators) on Good Governance Day.

Revision Grid

Thinker / body	Work or report (year)	Key idea
John Williamson	“What Washington Means by Policy Reform” (1989)	Washington Consensus: ten reforms
James O’Connor	The Fiscal Crisis of the State (1973)	Welfare state’s fiscal strain
Kenichi Ohmae	The Borderless World (1990); The End of the Nation State (1995)	Hyper-globalist view
Ali Farazmand	Writings on globalisation and PA	Three perspectives; corporate state
Dani Rodrik	The Globalization Paradox (2011)	Trilemma of integration, sovereignty, democracy
Giandomenico Majone	“The Rise of the Regulatory State in Europe” (1994)	Regulatory state
Levi-Faur and Braithwaite	Writings on regulatory capitalism (2005, 2008)	Markets and regulation grow together
Vickers and Yarrow	Privatization: An Economic Analysis (1988)	Competition matters more than ownership
Lester Salamon	“Rethinking Public Management” (1981)	Third-party government
Milward and Provan	“The Hollow State” (1993); “Governing the Hollow State” (2000)	Government through networks of contractors
R. A. W. Rhodes	“The New Governance: Governing without Government” (1996)	Six uses; self-organising networks
Gerry Stoker	“Governance as Theory: Five Propositions” (1998)	Five propositions
Michel Foucault	Lectures on governmentality (1977–79)	Conduct of conduct
World Bank	Reports of 1989 and 1992	Origin and definition of good governance
UNDP / UNESCAP	1997; “What is Good Governance?”	Eight characteristics
Kaufmann and Kraay	Worldwide Governance Indicators	Six dimensions
Nayef Al-Rodhan	Sustainable History and the Dignity of Man (2009)	Eight minimum criteria
Merilee Grindle	“Good Enough Governance” (2004)	Realistic, prioritised reform
Paul Appleby	Morality and Administration in Democratic Government (1952)	Responsible government is ethical government
Amartya Sen	Development as Freedom (1999)	No famines in functioning democracies