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They have been unable to tackle basic problems, be it in education or power
Indian policy debates follow the law of opposites. If the public sector does not deliver, the private sector will; if centralisation has failed, put your weight behind decentralisation. Instead of attending carefully to the conditions under which one might succeed or fail, we succumb to a logical fallacy: if X has failed, its opposite will succeed. The latest euphoria in this regard is the new-found enthusiasm for states. If the Centre is faltering, states will save India. But this leap of faith fails to recognise that states are also the source of our fundamental and more enduring problems.
There are two components to this enthusiasm for states that have some truth in them. One is a normative one. Administrative power and financial allocations in India are centralised. The Planning Commission's relation to states is nothing short of a constitutional usurpation. Centrally sponsored schemes come at the cost of flexibility to states and produce gross misallocation. So there is a case for more power to states.
Two, not surprisingly for a country of India's size, there are interesting experiments and administrative successes all over the place: PDS, mid-day meals or public health in Tamil Nadu, the manufacturing prowess of Gujarat, bicycle distribution in Bihar and so forth. When they put their minds to it, several chief ministers in mission mode can do a few schemes well: whether it is the distribution of free medicine in public clinics or building some infrastructure. The impressive growth rates being clocked up by states like Bihar and Orissa make people optimistic about states. But despite some manifest successes, most states have been unable to tackle certain fundamental challenges holding India back.
The prime exhibit in this is the power sector. If you are cursing government while sweltering in the heat or because your energy costs are high, blame the states. As the recent Indian Express survey of the power sector reminded us, power is a mess in almost all states. The shocking irony is that this is not because of shortage of power. The finances of the power sector are in a shambles, preventing it from buying power. And in several states, the government will not let power be supplied even to paying customers for fear of alienating constituencies that it thinks are used to free power. If energy is the bedrock of growth, the majority of states have been complicit in a colossal botch-up.