The Consultocracy

Relevance: GS2 - Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures. Government policies and interventions for development in various sectors

(Source: Indian Express, 12/14/2023)

Click here for Daily Current Affairs

Why in the news?

• Recently, the Government of India hired the Boston Consulting Group (BCG) to prepare a foundational Vision 2047 document to identify the country’s strategic priorities.
• Similarly, the government has sought consulting assistance in key projects such as the clean-up of the River Ganga, the Swacch Bharat Mission, the Jal Jeevan Mission, the corporatization of the Ordinance Factory Board, and assisting Uttar Pradesh in achieving its target of $1 trillion economy.

What is consultocracy?

• The word, “consultocracy” has been coined to describe the spread of consultants into governmental activity leading to the diminishing of the traditional role, functions, and capabilities of public servants.
• Governance has been dominated by the “new public management” (NPM) school of thought since the late 1980s.
  • The NPM school argues that private consultancies offer efficiency, market competition and business-like models, which validate their inclusion in governance.
• According to reports, various ministries of the Union government paid around ₹5,000 million in fees to global consulting firms over the last five years.
• Government consulting in India is dominated by globally integrated firms. This includes
  • Strategy consultants like McKinsey, BCG, and Bain offer advice in policy formulation at the highest levels.
  • The Big 4 (EY, PwC, KPMG, and Deloitte) offer services in policy advisory and programme execution support.
• The Union Government has hired the Boston Consulting Group to develop its Vision 2047 document to identify its strategic priorities.
• Consulting support has been used in various marquee projects of the Union and state governments.

Global trends

• In 2016, Germany established a public sector consulting firm while in 2017 Denmark established a public sector body after concluding that outside agencies had compromised the state’s ability to govern.
• The University of Sydney recently hired India’s TCS to develop research and educational partnership opportunities between India and Australia.
• Controversies:
  • Australia had ordered a review of contracts between its agencies and PwC following controversies over the private firms' activities.
  • China has accused multinational consulting firms of corporate espionage and imposed restrictions on them.

What are the advantages of consultancy in government functioning?

• Expertise: Programme formulation and service delivery in sectors such as agriculture, transport, energy, finance, etc require a great deal of domain expertise.
  • However, these skills may not be available within the government so it would be sensible to employ relevant experts.
  • For example, government programmes like the digitization of services and the Direct Benefits Transfer programme require technical expertise.
  • Consultancies like BCG can offer diverse skill sets that complement the knowledge and experience of senior bureaucrats and technocrats.
• Efficiency: Experienced consultants can help improve the efficiency of programme implementation and ensure that projects are not affected by delays.
  • They can also help with monitoring and review procedures involved in service delivery.
  • Some experts also argue that the use of consultancies can help counter the corruption that has plagued the system in India.

What are the concerns associated with the hiring of consultants by governments?

• Hollowing out of government abilities: The unrestricted use of consulting firms by the government has led to a hollowing out of government capabilities.
  • Consequently, governments have come to depend excessively on consultants to perform their routine functions like file preparation and note-making.
  • Consultants are hired as “Programme Management Units” attached to senior officials with broad remits and roving mandates.
• Demotivation of bureaucracy: The outsourcing of the government’s routine functions disincentivizes the state from recruitment and training of its bureaucracy.
  • As a result, the state apparatus would become disenchanted and demotivated from functioning efficiently resulting in the public suffering.
• Mission creep: Officials could become comfortable and overly dependent on their consulting teams resulting in mission creep and redeployment.
  • Consulting firms could take advantage of this to secure repeated employment.
  • This would allow them to participate in sensitive policy matters and manipulate upstream policy decisions to benefit them in executing downstream work.
• Accountability and corruption: Governance in a democratic framework is guided by the principle of accountability to the public.
  • However, private firms are accountable solely to their ideas and stakeholders. So unregulated use of consultants could distort public policy objectives and abet amoral decision-making.
  • This could foster corruption, poor programme implementation, and bad governance.
  • This can be seen in the surge of consultancy-related corruption scandals across the world.
• Dependence on foreign firms: The qualifying conditions set out by public sector and government departments make it impossible for local Indian companies to qualify.
  • These conditions include high annual turnover threshold, significant full-time employee strength, and a large number of offices inside and outside India.
  • This could be detrimental to the nation as global firms are not neutral or accountable.
  • As a result, reports prepared by such firms are sometimes cut and pasted from previous reports, which undermines their value.
• Bias to the private sector: There is a risk of consulting firms influencing policies to benefit their private sector clients and create a parallel bureaucracy comprising non-state, private employees.
• Financial burden: Outsourcing consultancy to private firms is expensive and also has unestimated strategic costs associated with it.

Way forward

• The government is likely to continue hiring consultancies since it is unrealistic to expect government officials to keep evolving their skill sets in line with modern advancements.
• However, this use of consultancies must be regulated within a comprehensive regulatory environment based on principles such as fairness, transparency, and openness.
• Protocols must be developed to curb rent-seeking approaches and oversee knowledge transfer and internal capacity building.
• The government must in line with its accountability to the public implement measures to disclose the value added by the consultancies.
• The inclusion of private consultancies in governance through a carefully calibrated process within a transparent and normative regulatory framework would help add quality and effectiveness to public service delivery.

To learn more, click the link.

(*Click this link to read prelims specific weekly current affairs articles)

FAQs

MCQs

Question: 1. In India, under cyber insurance for individuals, which of the following benefits are generally covered, in addition to payment for the loss of funds and other benefits? (UPSC 2020)

1. Cost of restoration of the computer system in case of malware disrupting access to one’s computer
2. Cost of a new computer if some miscreant wilfully damages it, if proved so
3. Cost of hiring a specialized consultant to minimize the loss in case of cyber extortion
4. Cost of defense in the Court of Law if any third party files a suit

Select the correct answer using the code given below.

(a) 1, 2 and 4 only

(b) 1, 3 and 4 only

(c) 2 and 3 only

(d) 1, 2, 3 and 4