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Shopping at Supermarkets in Argentina? No, Thanks!

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Image credit: Vauvau, flickr/The Argentina Independent

How the price freeze at supermarkets in Argentina left consumers in an unrelenting dilemma with regard to grocery shopping

By Sreetama Sen (@SenSreetama)

The Argentinian government, under the presidency of Cristina Fernandez de Kirchner in 2013, imposed a strict price control mechanism on necessary goods being sold at larger supermarkets across the country. This action of capping the price is a price freeze scenario, which is similar to a price ceiling, wherein the prices of goods are fixed in such a way that they can’t increase beyond the set limit.

This measure was introduced in the aftermath of the International Monetary Fund (“IMF”) censuring Argentina for providing inaccurate data. Also, we must keep in mind that Argentina’s inflation and hyperinflation woes date back to several years.

In 2013, the official records stated an inflation of around 10.9-11% in Argentina whereas, according to independent analysts, the actual figures were 25-28%. The price control mechanism was implemented by the government to bring down this double-digit inflation rate as well as to protect the interests of consumers by maintaining their standard of living in the short term. Additionally, the supermarkets utilised the already high inflation rates to sell the goods at an even higher rate to the final consumers while they themselves continued to pay six times lesser than the final price to the producers. Hence, this measure was aimed at ensuring that such producers were not at a disadvantage in addition to controlling the soaring inflation rates in the country. Even in recent days, there have been instances of protests by these producers for not being paid the adequate price.

In the initial stages, the government followed a two-pronged action plan – (i) identifying several goods which were daily necessities, including groceries (cooking oil, cereals, beer, etc.); and (ii) capping the prices at which such goods could be sold by large retailers for a period of two months. This period was subsequently extended in phases till Mauricio Macri took over as President in 2015.

By December 2013, the Argentinian government entered into an accord with the popular supermarkets operating in the country like Carrefour SA, Wal-Mart Stores Inc. Cencosud SA, etc. whereby the prices of these goods were frozen for one whole year. During the time when this mechanism operated in Argentina, the number of regulated goods, rose to as many as five hundred. Interestingly, the accord also included an understanding between the parties that such price fixation on goods should not result in shortage of supplies by the supermarkets.

The question that arises now, is whether the inflation rates were actually controlled? Well no, as of 2015, the inflation rate was at 23.5% as per data released by the World Bank. Secondly, the effect on consumers was also undesirable. This mainly happened because the supermarkets found a way to counter the fixed price by displaying lesser supply of those goods and in turn, the smaller sellers, due to a rise in demand also raised the prices of those goods – hence demand for the particular good kept increasing for the consumer and yet he/she was unable to purchase it because the supply was considerably reduced, artificially or by market forces. As a result, the producers were not getting paid for sales, and thus, were unable to produce any good due to lack of capital.

So, why is any of this still baffling, considering that the IMF has lifted the censure on the country in November, 2016? Here is why:

The first and foremost unintended consequence was a deficit in the supply of the goods – whole point of fixing the prices was because they were ‘necessary’ goods and yet consumers found it difficult to purchase the same items. The smaller vendors, taking advantage of the fact that supermarkets were unwilling to sell these items, further increased the prices of those items, leaving consumers in a limbo. It also resulted in black marketing of such goods, catering only to those consumers who could afford to pay higher costs to meet their demands.

The intended recipients did not receive the intended benefits of this price control mechanism. It most definitely did not achieve what it set out to achieve. But, what is even more surprising is that, three years and a government change later, the condition in Argentina is not very different. This is important because – it is one thing to know that a control mechanism did not work and it is another to see the same control being removed and yet the same issues still persisting. The recent proposal by the legislators in Argentina in relation to regulation of prices in supermarkets in Argentina to curb rising prices and inflation rates is that there needs to be a law that governs this sector and a law that is passed after due consultation with all stakeholders.

Thus, it remains to be seen whether the extremely high double digit inflation rates in the country is a consequence of continuous economic mismanagement by the authorities or misplaced causation by the stakeholders.

Sreetama Sen is an alumna of the Takshashila GCPP15 and tweets at @SenSreetama

[This blogpost is part of an assignment of the Economic Reasoning coursework. For the assignments, students were asked to submit essays on identifying instances of price controls in the world; who the intended beneficiaries were; and what were the unintended consequences of the price control.]

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When Economic Policy Saved India from the Mongols

By Anirudh Kanisetti

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Featured Image: coinindia.com

13th century, an era when the Mongols were considered the Scourge of God, had rulers from Hungary to China quaking in their boots at the mere thought of a Mongol attack. One potentate however was a notable exception: he was, in fact, in the habit of defeating Mongol raids and keeping his dominion, among the world’s most prosperous, conspicuously safe from pony-riding barbarians.

Sultan Alauddin Khilji of the Delhi Sultanate was one of the finest generals in the history of the Indian subcontinent. He came to the throne after a coup against his uncle, and his successful military expeditions against the Mongols required a large and efficient standing army. It would take one of history’s most innovative economic policies to maintain it.

The Sultan’s solution to the problem was as brutally efficient as his military campaigns. The larger the army, the higher its upkeep. However, if prices of essential commodities were lowered, he could assure the same quality of life for his soldiers at a lower cost to the treasury without compromising their fighting calibre.

If the prices of essential commodities were fixed to buy the support of the military, the prices of every other commodity would also have to be controlled to ensure a similar quality of life for cultivators and merchants. The controls, therefore, were extended to every commodity available in Delhi’s markets – ranging from fine cloth to ponies – in an ever-expanding bureaucratic maze.

Fundamental market rules haven’t really changed much from the 13th to the 21st century. Price controls inevitably led to black market trading as a new equilibrium is reached between buyers and sellers. In addition, famines inevitably led to hoarding and shortages.

A policy like this would be impossible to maintain in a state which had to adhere to human rights. Luckily for the Sultan, the Delhi Sultanate was famous for many things, but humanitarianism was not one of them.

Draconian punishments were applied to any merchant who dared to hoard and sell items on the black market. Peasants were forced to come to Delhi and sell only to government-approved merchants at government-approved prices. This is in addition to the land revenue they already paid – which the Sultan paid back to the merchants, allowing for a small profit margin.

An intricate spy network ensured that any violations to the system were reported and dealt with. In times of scarcity, the entire city of Delhi was put on rations and fed only from government granaries, which acquired grain at fixed prices.

Within a few years of Alauddin’s accession, Delhi became unrecognizable. A totalitarian state where the Big Sultan knew all, its markets boasted possibly the most elaborate system of price controls ever conceived, at relatively cheap prices compared to global standards. In times of famine, amazingly, every household in the city had something to eat. Contemporary travellers’ accounts describe the fixed prices, come hell or high water, as a wonder of the world. But the downsides of the policy are not difficult to comprehend.

First, the peasantry had absolutely no incentive to increase production, as they would earn the same regardless. The Sultan refused to lower the taxes they paid. The countryside was essentially bled dry so that Delhi could live as he ordained. Merchants, too, could not pursue profits beyond what the Sultan allowed. This led to the economy stagnating for the duration of Alauddin’s rule: nearly twenty years.

Second, in a stagnating economy, it became more and more difficult for non-military professions to lead a good life. The prices of goods did not change for years, but incomes inevitably rose and fell with the Sultan’s military campaigns. “The price of a camel is two coins,” laments a contemporary, “But where do I get the two coins?”

The policy was clearly meant to benefit the army first, and the average Delhiite second. On the first criterion, it was a success, on the second it was a disaster (except in times of famine). Its implementation required a massive, expanding bureaucracy and spy network to fix everything from trading licences to profit margins and to discover and punish violators. Finally, it led to a miserable existence for the non-military classes, who could only live as well as the Sultan permitted them, and thus had no incentive to increase production, leading to economic stagnation and a long-term weakening of the Sultanate.

Was the policy a success? In terms of Alauddin’s objectives, yes. Was it a success on other counts? The answer is a qualified no – in purely economic terms, it was a disaster. But the positive externalities of keeping the entire Subcontinent safe from the Mongols justified the massive transaction cost to the economy of Delhi: the ends justified the means.

Besides, the citizens of Delhi were still eating Alauddin’s cheap grain in 1334 (he died in 1316), so perhaps they didn’t mind all that much?

Anirudh Kanisetti is an alumnus of the Takshashila GCPP15.

[This blogpost is part of an assignment of the Economic Reasoning coursework. For the assignments, students were asked to submit essays on identifying instances of price controls in the world; who the intended beneficiaries were; and what were the unintended consequences of the price control.]

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The Lampost Framework: Why India Struggles With the Implementation of (some) Reforms

The ecosystem for implementation of reforms in India is structurally setup to solve acute, visible problems, but not chronic issues that require long-term monitoring.

By Akshay Alladi (@akshayalladi)

In much of our public policy discourse, many Indians are dismissive of state capacity. Much of what is run or managed by the state is shoddy- shabby hospitals, poor schools, crumbling roads and only intermittent power.

However, on closer examination, there are some areas where the Indian state’s performance is not just adequate, but indeed quite spectacular. Conducting elections in a free and fair manner, the eradication of polio through one of the largest public health programs in the world etc. are remarkable achievements.

Consider the case of polio eradication: The campaign was started only in 1995, and the total coverage of the target population was 99.7%! The WHO has now declared India to be totally polio free. Just a decade ago, the universal vaccination coverage in a state like Bihar was only 30%

What explains this seeming paradox?

If you look at it, a pattern emerges of the sorts of reforms the Indian state implements well, and what it doesn’t. The state manages to get several children into school, but fares very poorly on learning outcomes. It has been very successful in the eradication of diseases such as polio, but does badly on delivering healthcare in general. With the Mangalyaan mission it managed to reach Mars at an incredibly low cost, but struggles in delivering high quality science education to a broad mass of people. And as noted by Nobel laureate Professor Amartya Sen, the Indian state has prevented any famine from occurring in modern India (unlike in China or much of the developing world), but has a very poor track record on malnutrition.

The acute and the chronic

The pattern to note is that the Indian state does relatively well in handling “acute” conditions- that is those that require a specific intervention, for a limited time period, and with a clear, visible goal- which can measured at relatively low cost. The Indian state however struggles with chronic conditions- those that require painstaking management over a longer period of time, and where success is not as readily visible, so considerable cost and effort is required to measure progress.

The reason in some ways is the nature of Indian democracy. In Amartya Sen’s landmark work ”Democracy as Freedom” he asserted ”No famine has ever taken place in the history of the world in a functioning democracy”, and the reason he adduced was that democratic institutions—regular free and fair elections, independent courts and legislatures, free press and vibrant civil society—are all effective mechanisms of upholding the basic rights of citizens and would prevent a famine by providing effective feedback and pressure on the Government to act.

But why do the same mechanisms then not work in solving problems of a more chronic nature?

The lampost framework

To explain why reforms are difficult to implement in India (as opposed to why they are difficult to formulate and pass) I propose a new model (called the “lampost” framework). This framework  builds off the key concepts of Allison/ Elmore’s models as well as a modified version of Kingdon’s window specific to implementation (see schematic below). To illustrate the framework I use the case of sanitation or open defecation (OD) as an example.

Schematic1

Several initiatives, such as the recent Swachh Bharat, and the earlier Nirmal Bharat and Total Sanitation program (TSP) have sought to eliminate open defecation, but have progressed only on toilet construction, but not on the Information, Education and Communication (IEC) to improve toilet usage. Even now an estimated 600 million Indians defecate in the open, and only 46% of the toilets built in Year 1 of Swachh Bharat are reported to be used.

Explanation based on the framework: Absence of toilets is measurable at low cost, and building toilets is a one time activity addressing an acute issue (shortage of toilets). Hence, both for the media and for the public at large, by bounded rationality there is far greater emphasis on toilet construction and voters are rationally ignorant about toilet usage.

Though the media does highlight non-usage of toilets, such information is anecdotal, just given the high costs of gathering large scale information on toilet usage (a chronic condition). Hence, from a “demand” standpoint  it is easier for agenda setting on toilet construction (which then gets into the window of policy implementation), rather than usage (which is left out of the window).

The “supply” analysis is as follows: As a rational response to the “demand” side, both politicians and the bureaucracy prioritise toilet construction as a visible, measurable win; this is also because the allocation to IEC is lower (in fact it has been reduced to 8% of total funds in Swachh Bharat from an already low 15% earlier).

Given resource constraints the Government also cannot get a new, specialized implementation workforce focused on IEC- e.g., out of 76,108 Swachhata Doots required, only 8890 were recruited, the Communication and Capacity Development Units (CCDUs) that were supposed to implement this did not have dedicated staff, and had multiple objectives (Source: Arghyam Trust).

Hence the ‘bureaucratic actor’ who has multiple objectives, but not the commensurate capacity, rationally deprioritises the part that is less funded, and less measured- i.e., IEC. As an example of this behavior, in Himachal Pradesh IEC was initially prioritised with very good results for toilet usage, but as central allocation (and measurement) became far higher for construction, the bureaucracy prioritised construction, reversing the gains on sanitation.

The top down design of the sanitation program, also gave the line level bureaucracy very little autonomy or say in the policy design (as shown by the Himachal example)- hence from an Organizational Development standpoint the motivation to implement is lowered.

IEC and on-going toilet usage also depends on the last mile of the state- most of whose members are drawn from the same society who share the same prejudices about sanitation and are hence imperfect agents of change in social behaviour.

Finally, the activities of on-going maintenance and monitoring require coordination between multiple agencies. For example to build and maintain running water in the toilets, local officials must cooperate across more than 10 departments to obtain the relevant information, inputs and clearances as well as work with citizens and panchayats. These departments all have different objectives and priorities, and hence implementation for on-going maintenance is much more challenging.

I call this the “lampost” framework after the droll story about the medieval philosopher Nasruddin Hodja; when Hodja lost his keys he famously looked for them only under the lampost even though he likely dropped them elsewhere, because as he reasoned- what is the use of looking for something in the dark where it cannot be seen anyway! Much of the decision making in the Indian policy making is governed by the same principle- which explains the focus on visible wins that will be noted by the media, and hence the people, as opposed to the intervention that is likelier to have impact but is harder to measure.

This framework explains why India is good at solving acute issues/ crises/ one-time goals such as preventing famine (as Amartya Sen showed) or eradicating polio, but bad at implementing policies to address chronic issues that require sustained implementation and monitoring such as sanitation, malnutrition etc.

Akshay works in the e-commerce industry, and was a management consultant serving clients in the financial services and Government spaces. He is also an alumnus of the Takshashila GCPP13 Cohort.

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Bites from the classroom: Principled Negotiation

By Shreya Das

When the 1978 Egyptian-Israeli negotiations at Camp David started, the sides’ positions were completely opposed to each other. Egypt insisted on complete sovereignty over the Sinai Peninsula (which Israel had occupied in the 1967 six-day war), while Israel insisted on keeping control of at least some of the Sinai. Map after map was drawn, each with different dividing lines. None managed to meet the positions of both sides simultaneously.

The strategy of negotiation between parties in conflict is primarily based on positional bargaining, i.e. holding on to and repeating a fixed idea without considering the underlying interests of the other party. Such negotiation, based on its nature, can be classified into soft and hard negotiations. Soft negotiations prioritise the cordial relationship between the two parties and make compromises while looking for a quick settlement; hard negotiations, on the other hand, constitute the typical scenario of international high-level talks and they aim to achieve maximum benefit for the individual party. Most importantly, in positional bargaining, a consistent, unwavering argument becomes a part of the person, and therefore, the person becomes part of the problem.

Although these types of negotiation have been the rule of the game, they have nonetheless, in most situations, proven unsatisfactory. The Harvard Negotiation project challenged exactly this sort of a positional negotiation.

The strategy of principled negotiation, as an alternative to positional bargaining, emerged as a result of such predicaments faced by the common negotiator. In Roger Fisher and William L. Ury’s book Getting to Yes: Negotiating an Agreement Without Giving In, the importance of principled negotiation over positional bargaining is explained. The method of principled negotiation is based on four important principles:

Making the problem a separate entity from the people involved, understanding that the conflict may be subjective and involving the ability to analyse the other party’s view, making it easier to focus on communication, common values, and variety of flexible solutions that each side has to offer.

Focusing on interests, not positions, two things that often get confused with each other and lead to an erroneous understanding of the other party’s demands and interests; Interests rather than positions have to be negotiated, because behind opposed positions may lie compatible interests.

Inventing viable options for mutual gain once interests have been acknowledged, which should be concerned with multiple strategies of different strengths to benefit from.

Insisting on objective criteria while making decisions to ensure the presentation of facts and legitimate options.

In Getting to Yes, Fisher and Ury illustrate the importance of principled negotiation by examining the 1978 Egyptian-Israeli negotiations at Camp David. “Looking to their interests instead of their positions made it possible to develop a solution. Israel’s interest lay in security; they did not want Egyptian tanks placed on their border, ready to roll across at any time. Egypt’s interest lay in sovereignty; the Sinai had been part of Egypt since the time of the Pharaohs.” (Fisher and Ury, 1981). By reframing the conflict in this way, a solution was reached. Egypt was given full sovereignty over the Sinai, but large portions of the area were demilitarized, which assured Israel’s security at the same time.

Carter also followed the concepts of principled negotiation insofar as he focused the negotiation on the substantive issues in dispute i.e. sovereignty and security concerns, and used shuttle mediation to avoid the very severe “people problems” (antagonism) between Anwar el Sadat and Menachem Begin. Shuttle mediation prevented them from meeting each other face-to-face anytime except at the beginning and the ending of the negotiations, and aimed to convince them to shift from position to interest. He also used interest-based framing to allow the two sides to invent options for mutual gain–a way that they could both get what they needed at the same time.

Israel wanted security and to keep Egypt at bay by securing their borders. Thus, the peninsula meant nothing to them other than in terms of security. But for Egypt it came to be an integral issue of sovereignty. Thus when there was a shift from positions to interest, then the whole picture changed to needs of security versus sovereignty.

This same reason of positional bargaining can be argued to have led to the failure of talks between USA and USSR at the beginning of the Cold War. Both parties could not agree upon the number of inspections in a year in each other’s country. Disarmament and the arms race was the main issue. Ury and Fry to this suggested that there should have been a clear definition of what “inspection” meant instead of arguing along their respective positions. The problem was accentuated with the presence of no neutral third party. Although just this week a settlement was reached between the US and Iran, we can in general see the same problem today regarding the international community putting pressure on Iran regarding its nuclear capacities.

Shreya Das is a student of the Graduate Certificate of Public Policy.
This post is part of a series by the students of the GCPP. Other posts from the series can be read here.

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Empirical tax rulings by courts

By Surya Prakash B. S.

The judiciary is in focus.  Some judges are facing immense public scrutiny. And amidst the entire din on the personalities in the judiciary, one feels that the focus on the decision making process of the Courts is being drowned out. An empirical data based approach to a Constitutional question adopted by the Delhi High Court some months back is interesting to note in this context (CIT vs. Maruti Suzuki)

There is much to commend about such an approach by Courts when dealing with situations that affect a large number of taxpayers, with provisions that have been in operation for some time.

However, such a purely ‘consequentialist’ approach is not without its detractors. For such people, there are absolute truths even in tax laws. But surely Courts could at least request for larger data sets from relevant authorities and consider them before concluding. This would also ensure that Tax Departments further strengthen their information systems and give a fillip to initiatives such as the National Judicial Reference System (NJRS), a comprehensive database of all tax appeals, envisaged by the CBDT.

The background: Tax Department passes an order and a demand is raised. Tax payer appeals to the Income Tax Appellate Tribunal (ITAT) and asks for a stay of demand. Earlier ITAT could stay the demand for any length of time without any limitation. The Income Tax Act was amended in 2008 to the effect that the Tribunal could not in any case grant a stay beyond 365 days. This limitation is irrespective of the fact that the ITAT has not been able to rule on the merits of the case only because the Tax Department has sought adjournments. The question before the Delhi High Court was the Constitutional validity of what was said to be curtailment of the powers of the ITAT.

The Court ruled that it found no reason to interfere with the amendment – however, it left the question of Constitutional validity open.

What is interesting for us is how the Court went about satisfying itself that the ‘curtailing of powers’ was not causing harm to the taxpayer. It asked for data pertaining to all appeals from the ITAT and Delhi High Court registries. The data obtained showed that over a three year period about two-thirds of the appeals to ITAT for which a stay had been granted had been disposed of within 365 days.  Therefore, no great harm is being caused by the ITAT not being able to grant stay beyond 365 days was what the Court opined. Without going into the merits of the outcome, such a data based approach to a question of tax law is rare.

The data quoted in the ruling also shows up other interest trends. For example, over the most recent five year period almost 85 percent of the appeals filed with the Delhi High Court are by the Tax Department. For those in the know, such a low percentage of orders by the Tax Department being upheld by the ITAT come as no surprise.

Surya Prakash B. S. is a student of Takshashila’s Graduate Certificate in Public Policy.

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Come, litigate in India

By Surya Prakash B. S.

‘Tis the times of rallying calls. And courts. And judges.

But everybody in India knows that the windmills of Courts and appeals grind slowly. As the number of cases pending disposal swell and as the Court halls burst at the seams with litigants, there is no running away from the fact that a fix is required.  And therein lies a tale.

One of the ways to solve the tax litigation pile up is also to prevent fresh cases from being filed.

Let us take a look at a recent move by the Central Board of Direct Taxes (CBDT) on disposals by Commissioners of Income Tax- Appeals (CIT-A).

When a taxpayer faced with an order by his Assessing Officer does not agree with its conclusions, the recourse available to him is to approach the CIT-A (ignoring for a moment the option of the Dispute Resolution Panel available to a select few taxpayers). If the ruling of the CIT-A is not agreeable, either to the Tax Payer or to the CBDT, then an appeal is filed with Income Tax Appellate Tribunal (ITAT), then to High Court and then finally to the Supreme Court.

Disclosures by the Finance Ministry in its Annual Reports clearly show that the number of cases pending disposal are increasing at all levels. Of course this is not unique only to tax matters. The topic of disposal rate of Courts is the subject matter of extensive study in the Law Commission’s latest report – Report No. 245. The solution therein, albeit very formulaic and mathematical, is to increase exponentially the number of judges so as to increase the disposal rate – after all, isn’t justice delayed justice denied?

In this background, CBDT’s move to dramatically increase the number of posts of CIT-A from 360 to around 600 to dispose of around 90,000 cases (about 40 percent of the pending cases) before March 2015 may seem logical.

Along with these quantitative targets, could the CBDT also not have set some qualitative targets? Data from the Taxation Administration Reforms Committee’s (TARC) first report (page 229) show that CIT-As rule in favour of taxpayers in only around twenty to thirty percent of the cases. However, the success rate for taxpayers increases substantially at ITAT (around 45 percent) and High Court (about 60 percent).

CBDT needs to strictly implement a series of administrative measures to make this happen, like introducing a more scientific analysis for filing appeals rather than just tax-impact monetary thresholds, which are anyway low, or ensuring that rulings of higher courts are followed by its officers by strictly enforcing disciplinary action against those officers who do not so follow (as stated in a recent internal instruction).

And until such time a more systemic fix is implemented, a hoarse throat is imminent.

Surya Prakash B. S. is a student of Takshashila’s Graduate Certificate in Public Policy.

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Bites from the classroom: Part 2

Genetics and epigenetics
By Sathish Selvakumar, GCPP-9

Altering the context in which action occurs is the most significant outcome of the five strategies for reinventing government, as proposed by Osborne and Plastrik in Banishing Bureaucracy.  These strategies do not just alter the government’s DNA, but also create conditions for new expressions of existing DNA. They are therefore are a combination of “Genetic” and “Epigenetic” interventions.  This understanding is critical to know in what situations, change of the various elements of a structure are required, and in what situations changes are required in the entire system by which an organisation operates: how it views itself, projects itself to the outside world, and manages external expecations.  Understanding the epigenetic nature of transformation also breaks the notion that all significant change requires a lot of time to manifest.

We all understand the “genetic” nature of change, where a change to the DNA sequence causes a different expression.  There is an emerging aspect of biology – epigenetics – that studies changes to cellular and physiological traits that are not dependent on the DNA sequence.  The books, The Biology of Belief by Dr. Bruce H Lipton and Genie in your Genes by Dr. Dawson Church are excellent primers to the science of epigenetics.  One way I understand the importance of epigenetics is that when the human genome project was started, they expected to find about 100,000 genes as there were that many proteins getting generated in the human body.  It turns out that the final count was less than 20,500 and the count is not very different than that of common mice.  The varied expression of the same gene in different environmental conditions explains this “shortfall” of human genes.

This line of inquiry started for me when I went to the Deputy Resident Commissioners’ office in Guwahati to apply for an Inner Line Permit.  The absolute disdain with which I was treated appalled me.  If I look at the people there as a product of the system rather than them being bad eggs themselves, then replacing the person may not be the solution.  Changing the person would be similar to changing the DNA sequence.  Whereas, if the purpose of their organisation was clear to them, and if outcomes that determined their promotions were altered, the same human beings will exhibit or express different behaviours.  These behaviours will in turn produce more of the results that the citizens and government want.  This is “epigenetic” change.

Determining who steers and who rows and changing the institutional design is genetic change.  Altering how the staff see the purpose of the organisation is epigenetic change.

 

The state of the police and the need for reforms
By Sandesh Anand, GCPP-9

There is little doubt that our police force today is archaic – based on British era laws – and in urgent need of reform. Commission after commission have “recommended” various kinds of reform. Even the supreme court has jumped in and pushed state governments to act. Yet, comprehensive reform seems elusive. This blog will look at some of the many issues facing Indian police forces, particularly manpower.

The topic of police reform itself is vast. Some of the issues that need to be considered when understanding the problems with the police force are budget allocations to the police, corruption (perhaps as a possible side effect of lack of reform), and tasks performed by the police which are not part of their mandate, like “Passport verification” and “VIP protection”. It is also important to think about how civil society can help realise police reform, and about for whom reforms should be made – to make life easier for the people or the police. Interestingly, India does not feature on any “top crime rate” listed countries. While there may be many reasons for this, one of the reasons may be that in many cases, the police simply refuse to file an FIR, because of which there is no record of many complaints.

One of the other major issues facing Indian police forces is manpower. Let’s take the example of Karnataka. Primarily due to the growth of Bangalore city, the population in Karnataka has sky rocketed. However, our police force is not able to scale at the same rate. The below graph shows that the police per lakh population ratio has been dipping for a few years now in the state of Karnataka (Source: Bureau of Police Research and Development).

PolicePerLakh

 

Before we jump to the popular “Oh, there are too many people in Bangalore” argument, take a look at the data for the neighboring state of Tamil Nadu as well as the national average. It is apparent that the curve is similar. The fact is that our manpower (as compared to growth in population) has dipped in the last decade or so.

PolicePerLakh k vs TN vs national

Note: In both cases, the number of policemen per lakh is for “actual police strength” (not allocated) including armed and civilian police force.

Talking globally, according to this list, India ranks 49th in the world in police per 1 Lakh people ratio. While this metric alone certainly does not provide an insight into the effectiveness of our police force, it is telling that most of Western Europe (UK, Germany, France, Italy), The United States and better policed countries in Asia (Singapore, Hong Kong, Japan and South Korea) are all ahead of India on that list.

According to the data in BPRD, we have consistently recruited below the “allocated” force nationally. Perhaps this means that one of our major areas of focus should be to increase manpower. Therefore, another issue to think about is whether the police force is unable to recruit effectively and why.

Sandesh Anand and Sathish Selvakumar are students of Takshashila’s Graduate Certificate in Public Policy. This post is part of a series of opinion snippets. The views expressed here are the authors’.

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Bites from the classroom: Part 1

Girisha Shankar reflects on some concepts in the policy space.

International trade: going beyond “win-win”

A very commonly held view is that trading is good and makes everyone involved better off. However, it can also be argued that this kind of trading is good for countries or entities that are on equal footing or for those who produce commodities that are similarly valued. It may not hold good in cases where the two entities (or countries) involved in trade produce goods that are dissimilar in value. For example suppose country A is specialised in growing mangoes while country B is specialised in making cell phones. If the two countries are trading on these, invariably country B stands to gain compared to country A – since the cost of a cell phone is disproportionately higher than that of a mango.

One can argue that apart from the monetary benefits, both countries are actually better off – Country A gets to enjoy cell phones while country B enjoys taste of mangoes. But assuming an extreme case of country A being only specialized in growing mangoes, it would have to work harder and produce more to be able to equal B in value.

One answer to this could be that there is a higher incentive for country A in investing in its competency building for producing something that can match or better the value of a cell phone.

In practice however, this may not always work out this way. Country A may not really be successful in reinventing itself to create something that is comparable in value of a cell phone. Let me take a real life example of the Indian software industry. Most of Indian software houses are engaged in providing services, though these houses know very well that the software products would perhaps fetch far higher income. Even after a quarter century of being in business, there hasn’t been a big success software product story from Indian shores. On the other hand, some of the other countries quickly turned around – e.g. Israel, Cambridge in UK, Dublin in Ireland etc.

In summary, trading can increase the incomes for both countries involved in trading, but the gains may not be similar. So for the countries involved in trading, the outcome may not be exactly win-win, but rather “small win-huge win”.

 

In defense of an incremental approach to policy making

Nandan Nilekani has talked about need for minimalist policy programs, mentioning that they could be helpful in building much needed consensus in formulating the policy. In R V Vaidynathan Ayyar’s book, Public Policymaking in India, Lindlom’s incrementalism talks about a similar approach for policy – taking short steps at a time.

This method is often questioned because it is slow in achieving the desired benefits. Here I would like to introduce an analogy from the software development process that is commonly used. This model is called the iterative development model. It is typically used in times of uncertainty when the customer’s requirements are not very clear. The model essentially builds the software incrementally – at each step producing something that can be demonstrated to the customer to seek feedback. The feedback can be used in the subsequent increments (also known as iterations) for course corrections. This model is very effective in ensuring that the final product converges to what the customer needs. However, this also has an overhead in the multiple iterations involved and multiple consultations with customers – in this case, citizens – which is not always easy.

The environment where the policy gets formulated and finally gets implemented is far more uncertain than a typical software development environment. A comprehensive analysis of the policy problem is unrealistic in such a case. At best, only a part of the problem might be figured out. Secondly, a policy would certainly build on top of something existing already – seldom on a clean slate (Ref: pg 142, Ayyar).

It is also worth noting also that the Government machinery (especially the executive) is quite risk averse such that it has no incentive in introducing something bold rather than attempting to introduce something smaller that is satisficing (Ref: pg 129, 130, Ayyar).

In such cases, the incrementalism referred above is quite useful. Each iteration resulting in a small incremental policy that can be introduced for implementation, feedback taken and suitable corrections made.

Girisha Shankar is an alumnus of Takshashila’s Graduate Certificate in Public Policy. This post is part of a series of opinion snippets. The views expressed here are the author’s.

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