A year or two before I was born, my parents both took and passed this exam called “SAS” (no clue what it stands for), following which they were both promoted to officer grade (they used to work for the erstwhile Karnataka Electricity Board (KEB) back then).
Many of their colleagues elected to not take up this exam (or perhaps took and flunked it) and didn’t get promoted for the rest of their careers, remaining “senior assistants”. While they didn’t “progress” in their careers, they didn’t do all that badly financially, with their pay scale growing more or less at the same rate as it would have had they become officers.
This examination-based division into officers and “staff” was not limited to KEB, of course. It was (and is) prevalent across all public sector units. If you passed the exam, you had a chance at career progression, though that also typically meant harder work and longer hours. It wasn’t necessary for everyone to be ambitious, though, since they could choose to remain at a non-officer grade where things were chiller.
While there might have been noble intentions for this bifurcation (making the pyramid thin at a low enough level, for example, and also addressing lumpy/bursty recruitment), the problem with the practice was that it created a rather large cadre of rather unambitious workers.
Given that it is not easy to sack someone from a PSU job (unless there has been gross misbehaviour), the only way to incentivise PSU employees to work is by showing them carrots. While tenure or seniority based promotions have put paid to such incentives, it is still reason enough to keep a section of the officers motivated. For Senior Assistants who have hit a wall on that front, it is simply not available.
Given the shape of the pyramid and the lack of carrots for Senior Assistants (and equivalent) what this policy has created is a large army of government/PSU officials who lack any motivation or incentive to do their job effectively.
With most government departments being monopolies, this is a problem only for the taxpayers and public (and not so much for the departments themselves). Where this hits PSUs hardest is where they compete with the private sectors, in banks, for example.
I’ve maintained that one of the advantages of PSU banks is that the staff there are much more experienced, so if you have a non-standard thing to do, you would rather go there than to a private bank that might throw the rule book at you.
The problem, though, is that while some staff might be motivated enough to use their experience and help you out, not all of them might be that way, for most of the clerical staff belong to the aforementioned “Senior Assistant” category, with no explicit incentive to keep them going. The same is the case with non-customer facing staff as well.
I understand that various other careers can also have “career-limiting moves” (after which you don’t get promoted) but the problem with the Indian PSU system is that such moves happen pretty early on in the career, which creates a lot of deadweight for the system to carry.