Public Policy in India: A discussion

Bangalore, 2020

This evening the city had some of the best civil servants and policy thinkers to speak on reforms in India. The group was brought together to discuss Vijay Kelkar and Ajay Shah’s new book In Service of the Republic: The Art and Science of Economic Policy. There were the authors themselves, Govinda Rao (of the 14th Finance Commission), C B Bhave and K P Krishnan. A panel of five, speaking on public policy in India meant that the discussion wasn’t just cause and effect but teleological as well. I have followed Ajay Shah’s blog for years and I think at NIPFP his team produces outstanding and highly relevant research in law, economics and policy. In 2015, he wrote a blog post Become a public policy thinker in three easy steps . I haven’t forgotten the beauty of that simple, straightforward and practical piece even after these many years. I felt he had a lot to share about the practice of public policy then. With his recent book, I am not surprised that he deep dives into policy making. I’d agree with Krishnan when he says that this is a book that was waiting to be written.

The point of this post is to put together some of the ideas and references from the discussion. Govinda Rao cites Mancur Olson’s 1983 paper Dictatorship, Democracy and Development on the need for government. Olson concludes that ‘The conditions necessary for a lasting democracy are the same necessary for the security of property and contract rights that generates economic growth.” Kelkar and Shah’s book dwells into role of the state. I find this refocusing on the role of state necessary in order to examine the way in which public policy is approached in India.

On the role of the government and its functions, Govinda Rao cites Musgrave and Buchanan’s contrasting views during a symposium at the University of Munich in 1998. Musgrave’s view of government as a benevolent entity was in contrast to Buchanan’s idea that the state constraints freedom of the individual. Buchanan argued for the need for rules to restrain governmental interference while Musgrave points to market failures and inequities that call for corrective public policies. The proceedings were published as a book, Public Finance and Public Choice: Two Contrasting Visions of the State. We have had the state exhibiting both these behaviours over the years. Kelkar and Shah’s book discusses instances of both. However, their emphasis remains on state capacity. I could identify a consensus in believing that policy making in India is saturated with analysis and lacks action on implementation.

On what constitutes good regulation Krishnan reflects that it starts with the law –

“The word regulation is used to mean all three functions of the government- legislative, executive and judicial, all rolled into one agency. This is fundamentally anathema to the idea of checks and balances and separation of powers. A lot of problems in Indian regulations are to do with the combination of these functions in one entity without accountability.

This is a useful perspective as it problematizes the configuration in which these functions are incorporated into a typical regulation. As he spoke about this, I could place a few regulations that exemplify this (TRAI, RERA, CRZ).

Similarly, on poverty rate (expressed as percentage of population that is below one dollar a day in consumption) Ajay Shah observes that 99% of the variation in poverty rate between countries is explained by one number i.e the median income –

What you can do to the income of 50th percentile of the country controls 99% of the destiny of poverty rate. Everything else we do – poverty programs, redistribution… what have you, can at most potentially account for one per cent. In this book we would really push the primacy of growth. Above all, what we need is a vibrant growth process in India.

Towards the end Krishnan brings in the common refrain we hear in India – it is a great policy that is not being implemented well. He finds this an oxymoron because the machinery that will administer the policy is known and therefore often what is called policy in India is a statement of good intentions and desirable outcomes. I completely agree with this argument. Here onward, here is Krishnan in his own words –

Policy is about identifying a) clearly the problem that you want solved b) making out a role for the state then figuring out all the rest. I think lot has been said about (markets)… I thought (a reform above markets) would be to abolish the IAS! Because my point is, go back to the design, find out what was the design of the bureaucracy. See if the design has been meddled with and then come to the conclusion about is this machinery delivering? If the state wantonly destroys its capacity, we have to collectively find the answer. Why isn’t the polity reforming the IAS. The answers are deeper. State capacity is the next serious issue that India needs to address.

The view that political will exists and that it is often the bureaucracy that sabotages the policy outcomes is an intriguing perspective that hasn’t quite made it to the policy schools yet. I’d expect that with this book, we might have a few more works published that will dwell into practical aspects of public policy in India and not confine itself to the theory and imagination of it.

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