India needs a third generation of policy economists to provide the political leadership with a broad future agenda on the economy
In an interview he gave to The Indian Express in July 2016 to mark 25 years of economic reforms, Manmohan Singh spoke about the importance of the policy economists who had worked on the reforms agenda in the years preceding the actual event. His statement needs fresh attention at a time when Arvind Panagariya has resigned from NITI Aayog. Two other lateral entries into government in the past few years also moved on after short stints – Kaushik Basu and Raghuram Rajan.
Economic policy is a collaborative effort between political leaders, civil servants and policy economists. The 1991 reforms would definitely not have been possible without the political backing provided by P V Narasimha Rao.
The radical policy changes were pushed through an inertial bureaucracy by senior civil servants such as A N Verma and Naresh Chandra. And a stellar group of policy economists prepared the ground for the change of direction in the years preceding the actual event.
Most of them were lateral entries into government – Manmohan Singh, Montek Singh Ahluwalia, Bimal Jalan, Vijay Kelkar, C Rangarajan, Shankar Acharya, Rakesh Mohan and several others. These economists stayed on for many decades, though a few lateral entries such as Vijay Joshi and Ashok Desai had short stints.
Some of their contributions through the 1980s – and this is not a comprehensive list – are worth repeating here. Manmohan Singh wrote the landmark seventh Five-year Plan that shifted the focus of industrial policy from asset creation to productivity.
Ahluwalia was at the forefront of trade reforms. He also wrote the famous “M Document” in the summer of 1990, which anticipated many of the major policy reforms announced between 1991 and 1993.
Bimal Jalan was the main author of the long-term fiscal policy.
Vijay Kelkar was the driving force behind fiscal and tax reforms, including the goods and services tax.
C Rangarajan committed the Reserve Bank of India to monetary targeting, and also worked hard to end the automatic monetisation of fiscal deficits.
Shankar Acharya was arguably the most influential chief economic adviser ever.
Rakesh Mohan prepared the industrial policy reforms agenda.
Also, outside experts such as M Narasimham and Raja Chelliah provided road maps for financial and tax reforms.
The team that provided intellectual heft to the economic reforms was the second generation of economists in government. It replaced an earlier generation that had people such as C D Deshmukh, J J Anjaria, I G Patel, L K Jha, P N Dhar, Lovraj Kumar, Pitambar Pant – while the Planning Commission itself had used the talents of young economists such as Jagdish Bhagwati, Amartya Sen and T N Srinivasan.
At the same time, B R Shenoy, M Narasimham, Deena Khatkhate, Anand Chandavarkar and V V Bhat were in the economics department of the Reserve Bank of India.
India now needs a third generation of policy economists to provide the political leadership with a broad future agenda on the economy, as well as advice on how to manage it in the short term.
The cupboard looks a bit bare right now, despite the presence of talented economists such as Urjit Patel, Arvind Subramanian, Bibek Debroy, Viral Acharya and Sanjeev Sanyal. This is in sharp contrast to the manner in which China has upgraded the quality of its economic administrators over the past decade, though that reflects not just the political will to get experts into government but also the rapid advances in the quality of Chinese university education.
There are two intersecting routes to strengthen economic expertise in Indian policy. First, there is a crying need to bring a new generation of policy economists into government, similar to what happened in the 1950s and then in the 1980s.
Second, the task of policy research should be done in collaboration with a network of universities and research institutes across the country.
The path-breaking Economic Surveys helmed by Arvind Subramanian over the past three years are an excellent example of how young economists from within the finance ministry, as well as from outside, can be brought into the policy process. More of this needs to be done.
There is a growing chorus of voices arguing that governments do not need economists. All they need are good administrators. The reality is more complex. A motoring analogy could be useful. It is the political system alone that has the right to decide which direction a country should be moving in. Then there is the need for experts to design policy paths that will help the country get there. And the eventual journey is highly dependent on good administrators who keep the vehicle on the road.
India seems to be weak on one of the three components of good economic management right now.
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- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)