The Economic Administration Reforms Commission, chaired by L. K. Jha, former Governor of the Reserve Bank of India, was established by the Ministry of Finance and Pranab Mukherjee (Minister of Finance), in response to severe economic challenges during the late 1970s and early 1980s, including high inflation and fiscal deficits. Committee members included Raja J. Chelliah and R. Tirumalai. The commission’s mandate included examining measures for reducing public expenditure and improving efficiency of administrative operations of the government.

In its report on economy in public expenditure, the committee found that from 1960/61 to 1980/81, central-government expenditures grew significantly, rising from 8.42 to 12.16 percent of gross national product. Current expenditure on wages, goods, and services remained stagnant after 1965/66, while transfer payments such as subsidies and interest payments increased substantially. The number of civilian central-government employees increased from 29.7 lakhs in 1975 to 34.4 lakhs in 1982, and expenditure on pay and allowances rose from Rs. 1,468 crores in 1974/75 to Rs. 2,960 crores in 1981/82. The number of civil employees doubled from 6.11 lakhs in 1961/62 to 13.04 lakhs in 1981/82, reflecting an annual growth rate of 3.36 percent.

The commission identified several inefficiencies, including ineffective traditional economic measures and excessive centralization of decision-making. Routine activities often required high-level approvals, causing delays. To address this problem, the commission recommended enhancing the delegated authority of ministries and reducing the need for central clearances for routine actions. It emphasized the need for tighter control on creating new posts, regular review of existing positions, and avoiding mass renewal of temporary posts. Organizational restructuring was suggested to reduce clerical levels and increase the number of officers for a more efficient structure. The commission also highlighted consolidating services with similar functions to reduce redundancy and improve career prospects, such as merging various financial and audit services. Additionally, new governmental activities should be evaluated for their staff and expenditure implications before approval and, whenever possible, entrusted to existing agencies to avoid creating new bureaucratic structures. Granting greater operational freedom to public sector undertakings and statutory corporations was also recommended.

The commission’s report suggested that the proposed regulations would likely make it easier to do business by reducing bureaucratic inefficiencies and centralization. Streamlined processes and reduced need for high-level clearances would expedite decision-making and project implementation. Enhanced delegation of authority and improved coordination among departments would reduce delays and improve the overall business environment. The focus on reducing nonessential activities would allow resources to be allocated to critical and developmental projects, fostering a more business-friendly environment. While achieving significant economies in public expenditure would require detailed professional studies and task forces, the overall impact would be increased efficiency and a more effective administration.