First, the straight forward consequence is that weak state capacity decreases the returns to governments’ investment. Governments make huge investments in resources. When they don’t function properly, we end up wasting a great deal of money. For instance, government may recruit 1 lakh teachers but if they do not attend schools or don’t deliver value, the money is essentially going down the drain. The additional 1 lakh teachers have not resulted in any value addition but increased fiscal burden. Lant Pritchett and Yamini Aiyar estimate that with the existing inefficiencies of public school system, it would need an extra 2.78% of our GDP, or Rs. 2,32,000 crore to be able to reach the learning levels of private schools in India.
A person once rightly asked a professor - "You have well functioning public school system in your country. Why are you are coming to us and asking us to settle for low budget private schools?" Weak state capacity is at the root of this question.