Public attention has quite rightly been focused on the series of mysterious deaths of those involved in what has come to be known as the Vyapam scam. It is now quite clear that there was massive corruption in the competitive exams for professional courses and government jobs in Madhya Pradesh.

A careful statistical analysis by one of our quant writers, Karthik Shashidhar, shows that the number of deaths linked to the case is highly unusual, especially those in the past few days. Shashidhar assumed that 7,000 people were involved in the scam and took into account the relevant mortality data of all Indians. The probabilities change in case you assume a different number of people involved in the scam as well as a different number of deaths. Yet, there is ample reason to suspect that something is wrong in the way people linked to the scam have died.

There is another worry that also needs public attention. The iron framework of the Indian nation state has already become brittle; what has happened in Madhya Pradesh should be seen as an advance warning that there is worse in the offing. The corrupt examination system will further damage Indian public services. Citizens will have to depend on engineers, doctors and bureaucrats who are essentially incompetent but have managed to get plum postings by gaming public examinations.

India needs to build adequate state capacity if it is to meet the growing aspirations of its citizens as well as hold its own in a hostile neighbourhood. China is the inevitable point of comparison. For all their faults, our national public institutions are still islands of competence: think of the Supreme Court, the senior civil servants, the Armed Forces and the Reserve Bank of India, for example.

The problem is more acute in the lower levels of government. Why should this matter? There has been a clear movement towards administrative decentralization in recent years. Prime Minister Narendra Modihas often spoken about the importance of the states. The last two Finance Commissions have also said that more money should flow to the second and third tiers of government, or the state and local authorities. Centrally sponsored schemes are also being cut down to size.

This newspaper has generally welcomed such empowerment. But we have also previously warned that such a transfer of resources to lower levels of government will work only if there is adequate administrative capacity and human capital on the ground. The Vyapam scam should thus be read as a warning in this context. Will taxpayer money be handled by people who have paid their way into jobs? Will the public health system be manned by doctors who would have not even got into a medical college in normal circumstances?

India built an interventionist state after independence, initially driven by the noble intent of pushing development from the commanding heights but eventually ending up as the corrupt licence-permit raj. It junked that model in 1991. India now needs a regulatory state that will protect the rule of law, address market failures and provide social protection to the genuinely poor. The current government system is fundamentally incapable of doing the job, especially at the state level and below.

The interventionist state created massive opportunities for rent seeking. The recent results of national civil services show that there are still very bright youngsters who are prepared to work at low salaries with missionary zeal. But the harsh reality is that a majority of those who enter the government system, especially at the lower levels, accept low salaries (and bribe their way to government jobs) only because they hope to make money at the side.

The meddlesome interventionist state hid its inadequacies under the guise of promoting socialism and inclusive growth. India now needs to reimagine its state machinery in terms of the requirements of a genuine liberal democracy. Such a state needs to be smaller but more competent. What the Vyapam scam tells us is that the transition has barely begun. The deaths are genuinely worrisome; but there are other lessons as well.

Do states have adequate administrative capacity to handle more responsibilities? Tell us at views@livemint.com

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