Tag Archives | public policy

A welcome twist to demonetization

Image Source: newsexperts.in

Image Source: newsexperts.in

The government’s most recent amendment mandating that wages be paid by cheque or bank transfers is a welcome by-product of the demonetization drive.

President Pranab Mukherjee promulgated with immediate effect an ordinance amending the Payment of Wages Act, 1936 on 28 December 2016 (Ordinance). Amending an 80 year old law that required payments to be made only in cash, the Ordinance allows employers to pay wages by cheque or by electronic transfer. It provides employers with the option to pay their employees in cash, except where the worker is employed in an “industrial or other established sector”. In such cases, wages must be paid only through cheque or bank transfer.

The Payment of Wages Act, 1936 (POW Act) applies to persons earning up to Rs. 18,000 per month. Importantly, it makes specific provisions for persons employed in specified “industrial or other establishment”, that is, sectors where government regulation is required for the protection of workers, (for instance, railways, coal mines, etc.).

Shortcomings of the Ordinance

Although the Ordinance has been viewed as a welcome change, it leaves certain issues unaddressed. For example, it proceeds on the assumption that all workers have functioning bank accounts, and know how to operate them. This not necessarily being the case, workers who lack such facilities may be more inconvenienced. The Ordinance also does not contain any provision aiding the transition for workers without bank accounts to be accommodated into the new regime. Ensuring that employees have functional bank accounts and are aware of how they operate would iron out major creases in implementation.

Aside from such operational hurdles, the Ordinance is expected to increase transparency in wage payments. It could reign more salaried people in under the tax net, and ensure that workers are paid the fair wage due to them.

Manasa Venkataraman is a Research Associate at the Takshashila Institution and tweets from @nasac.

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Towards 24×7 Electricity Supply in Andhra Pradesh

The emergence of Andhra Pradesh as a power surplus state is a testament to the cooperation between the Union and State governments.

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Image courtesy of The Hindu

By Revendra (@adj_r_squared)

The AP Reorganisation Act – 2014 put the state of Andhra Pradesh at a huge disadvantage with its provisions that favoured more power supply to the state of Telangana. As a result, the state faced a capacity loss of 1,142 megawatts (MW) and an annual energy shortage of 8,700 mega units (MU). After the reorganisation of Andhra Pradesh, the state had a total generation capacity of 8,307 MW (as per power allocation), 6.9% of energy deficit and 17.6% of peak deficit units.

The major thermal power stations (Dr. N. Tata Rao TPS, Rayalaseema TPS, and Simhadri TPS) had coal stocks lower than the specified critical levels, not lasting for more than a day. The finances of the DISCOMS too did not look encouraging. The higher purchase power agreements rate and lower power tariffs led to a debt of Rs. 11,000 crores, and the capital expenditure loans and bond-related liabilities came to about Rs. 3,700 crores to the DISCOMS. The interests on these debts burden the DISCOMS with Rs. 330 crores annually. Lastly, the average per unit price was around Rs. 7.30, burdening both consumers, and the government.

Energy resources

Andhra Pradesh has negligible sources of non-renewable energy. No coal deposits exist, and the crude oil and natural gas reserves are estimated at 13.19 million tonnes and 48.44 billion cubic meters respectively. Though the sources of renewable energy estimated at 54,916MW, look promising, only 2192.6MW of this electricity produced is connected to the grid. Thus, the infrastructure is not available to harness renewable energy to produce electricity for consumption in the state.

Power for All

In addition to the lack of energy resources ailing DISCOMs and the poor state of power sector, the growing energy and peak demand are estimated to be 82,392 MU and 13,436 MW respectively by FY2018–19. Together, these issues presented significant challenges to put the State’s power sector back on track. Without dodging a bullet, both the State and Union governments got to the bottom of the issues, and jointly came up with the “Power for All” initiative to provide reliable 24×7 power to the domestic, industrial and commercial consumers, supply 9 hours per day of electricity to the agricultural consumers, electrification of all unconnected households, augmentation of generation and distribution capacity to meet the projected demand, and keep the transmission and distribution losses to a minimum.

This ambitious “Power for All” initiative requires resolve and a systematic approach from both governments to ensure fuel resources for thermal and gas-based power plants, electrification of all households in the state, and the financial turnaround of the DISCOMs.

The first challenge is to address the unavailability of energy or fuel resources. In the last two years, the coal supply to power plants has significantly improved with the coal stocks’ availability ranging from 2 weeks to 2 months of consumption per power plant. Additionally, coal reserves of approximately 930 million tonnes were allotted to the Government of Andhra Pradesh. The domestic coal suppliers have certain constraints to match the demand of thermal power plants in Andhra Pradesh. Keeping this in mind, Andhra Pradesh is permitted to import coal stocks of 3-5 metric tonnes per annum till 2019. The LNG fuel is available to generate only 500MW of the 2770MW of installed LNG based power plants in the state. These initiatives are taken by the Union to allocate gas in a phased manner to all power plants before 2019.

The second priority is electrification of un-electrified households and strengthening the systems of distribution and transmission networks, and improving the electricity access in rural and urban areas. A sum of Rs. 899.8 crores was sanctioned through the Deendayal Upadhyaya Gram Jyoti Yojana for rural areas, and Rs. 653.95 crores were sanctioned under Integrated Power Development Scheme (IPDS) for urban areas. The funds from IPDS were reserved to establish IT-enabled data, disaster recovery and customer care centres, and improve meter-based billing and efficiency in collections.

The Ujwal DISCOM Assurance Yojana (UDAY) provided benefits of Rs. 4,200 crores during the turnaround period, saving Rs. 330 crores to the DISCOMS annually. Further, the state DISCOMS will enjoy a benefit of Rs. 6,200 crores every year post-turnaround period.

Apart from these, to meet the immediate power requirements, the Union Ministry of Power is providing 525MW of power to Andhra Pradesh from the Central Generating Stations. At the power exchange, average price per unit is less than Rs. 3.00. The Andhra Pradesh government has benefitted by procuring 385MW from the power exchange.

The sustained efforts from both the governments led to 100% electrification in the state, an increase in per capita power consumption to 982 units, reduction of the transmission and distribution losses to 9%, addition of 4,265MW of installed power, and reduction of the energy and peak shortages to nil.

The assistance from the Union Ministry of Power has been valuable in realising 24×7 power supply to all domestic, commercial and industrial consumers in Andhra Pradesh.

[Views in this article belong to the author. It is part of a blog series tracking governance in the reorganised Andhra state]

Revendra is a Bangalore based student of Public Policy and tweets at Revendra (@adj_r_squared)

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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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Why Free Basics is a bad idea

Free basics violates the basic principle of net neutrality despite being within the four corners of the law and must not be allowed

 

In the last couple of days, Facebook has inundated Indian newspapers with full page ads about Free Basics. The savvy marketing seeks to woo the consumer by asking an innocent question like who could be possibly against free internet? Mark Zuckerberg has tried to make a convincing case in his blog post in the Times of India. In trying to corner a slice of rapidly growing Indian market, free basics junked its old avatar of Internet.org and tried to position itself as messiah of the poor and needy. What could be the main objections to Free Basics? What did the campaign for free basics achieve?

There is nothing ‘free’ about it. When Free Basics planned to launch with Reliance Jio network, its aim was to corner a giant share of the Indian market with selective apps and ads riding on its application. Of course the apps on Facebook are free but what about other start-ups and entrepreneurs/businesses? Simple analogy will be to compare a newly built superhighway, which allows only Mercedes or Audis to operate and discriminates against all other forms of transport. The Telecom Service Provider (TSP) will provide good network speeds for Facebook. What stops TSPs from giving slower/limited access to other websites? Mark Graham, Associate professor of Oxford University argues that free basics is able to read all the data passing through its platform in whatever form it may be. Big data is the oil of the future. E-commerce companies are ever hungry for data. Making Free Basics succeed would only mean cartelising the Internet with some specific telecom service providers having a greater share of the market. Free Basics would ride on some specific TSPs and nothing stops it from setting its own terms and conditions.  It would mean shifting from the consumer to certain clients and their business interests. Nikhil Pahwa, well known Internet activist quotes evidence from research to say that less & low income groups prefer access to unrestricted Internet. Free basics is no way altruistic or charitable in its approach.

There are times when media blitz campaigns have certain unintended consequences. Facebook’s campaign has had one positive effect. It coalesced the Indian middle class opinion that those who cannot afford connectivity must be provided some basic free connectivity as an entitlement. This is a little surprising because the middle class sentiment is largely pro free markets and anti subsidies. The public policy on this subject is yet to emerge with some sense of clarity. The government’s National Optical Fibre Network(NOFN) project is expected to be in place in two to four years which will form the backbone infrastructure for Digital India. This is not an argument for freebies. But neither Free Basics is the answer. For the time being, focus must be to prevent Free Basics from succeeding.

 

Guru Aiyar is a research scholar with Takshashila Institution and tweets at @guruaiyar.

Featured image credit: Link-up with Mosman Library on Facebook, licensed under Creative Commons.

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The welfare state: an alibi or a mafia lord?

The welfare function of modern states has a disproportionate effect on the way citizens perceive the state.

by Pranay Kotasthane (@pranaykotas)

Economist Bryan Caplan in his latest EconLog post explains how the welfare function of a state melts the conscience of its citizens. His contention is that human beings tend to lose objectivity when they witness a highly emotional act such as philanthropy. This applies even to individuals who are merely observers, and not just those who are recipients of the philanthropic act. This loss of objectivity means that individuals are likely to forget or obfuscate the previous acts of wrong-doings by the benevolent actor.

 

How does this relate to the state and its citizens? The author claims that one such apparently benevolent actor is the welfare state itself. A government of a welfare state may display acts of philanthropy towards its citizens, fully aware of the cognitive bias of its citizens, which tends to give a higher weightage to acts of philanthropy. The agents of the welfare state may then use this illusion to commit acts of corruption and impropriety.

 

The author says that welfare states..

melt people’s consciences, leading them to excuse and minimise the most horrible of crimes.

 

Caplan further suggests:

when organisations that kill people for a living – like crime families or governments – loudly help the needy, we should indeed shudder.  Why?  Because their perceived philanthropy makes it easy for them to get away with murder.  Maybe they’ll use their power over life and death wisely and fairly.  But they probably won’t – especially if they’re surrounded by devoted fans eager to excuse their shortcomings.

 

Beyond this libertarian argument, there are two other observations to be made about this relationship between a welfare state and its citizen.
First, a welfare state can end up becoming a perfect alibi for the selfish citizen. A marginal citizen is likely to refuse taking up acts of compassion, empathy or philanthropy. This is because he/she considers that the execution of these functions are the raison d’être of a welfare state. Why should then he/she take the initiative of helping others out? Such a citizen is likely to claim that his/her contribution to taxes is by itself his/her generous contribution to the society. The result of this dereliction of duty is that a welfare state has few competing philanthropic agents. The lack of competition reinforces the bias which makes us ignore its crimes. Acts of wrongdoings by governments then become fait accompli — almost as a collective cost that the society necessarily needs to incur in order to  ensure that the state performs its welfare role.

 

Two, citizens need to keep a constant vigil on a government that grandstands its welfare role. A citizen needs to be sceptical of governmental actions, ensuring that governments do not easily get away with some other not so charitable acts. The good news is that in republics such as the Indian state, even the government is subject to the authority of the constitution. The constitution then becomes the reference point that citizens should evaluate all government acts with, on every single occasion, regardless of its importance as an agent of welfare. Citizens of some other states are not as lucky: often the reference point is itself subservient to the government or to a party.
Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas
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Distortionary Public Policy

Bad public policy creates severe distortions in the economy, can lead to macroeconomic imbalances, and often has large societal costs.

Badly designed public policy can cause a lot of harm. It can cause severe distortion in the economy, misalign incentives, and finally produce bad outcomes in the economy and society at large. Take one example of a large US federal scheme that is worsening the drought conditions in the West coast.

The US states of California and Arizona are facing one of the worst droughts in recent history. It has received sparse rainfall in the past four years, less than 34% of expected rainfall, and there is a severe water shortage in the desert land. With experts claiming that the drought like situation could last for a few more years to come, this has already been termed as a ‘megadrought’.

California Drought: Before and After

California Drought: Before and After

Exacerbating the natural crisis is the pattern of agricultural land use. The preference of most farmers in the region is to grow cotton, which is one of the thirstiest crops, in a desert landscape. Each acre of cotton planted here demands six times as much water as lettuce and sixty percent more than wheat. That precious liquid is pulled from a nearby federal reservoir, siphoned from beleaguered underground aquifers and pumped in from the Colorado River hundreds of miles away. Ironically, billions of dollars have been spent on building reservoirs, aqueducts, and power stations to push water from the Colorado river to the dry states of Arizona and California. Similarly in California, production of almonds, another exceedingly thirsty crop, is expanding and it now accounts for nearly 80% of global production. However, it also consumes more than 10% of the state’s annual agricultural water use – or more than what the entire population of Los Angeles and San Francisco use in a year.

The reason that farmers are growing water thirsty crops in the middle of the desert during a harsh drought like situation is basically misdirected government policy. A relict from the dust bowl era in the 1930s, the US Farm Bill, provides misdirected incentives to farmers to grow certain crops, though it may not be in the societal interest at large. No American law has more influence on what, where and when farmers decide to plant. And by extension, no federal policy has a greater ability to directly influence how water resources are consumed in the American West.

The Bill offers monetary incentives to farmers planting cotton seeds in the ground; it also provides heavily discounted loans, which they do not have to repay in case the crop fails. Further, the government provides insurance cover on the entire cotton crop, guaranteeing that the farmers will be financially protected even when natural disasters like drought prevents a good harvest. In total, farmers in Arizona and California have received $4.1 billion in cotton aid.

The subsidies are bad enough in creating a fiscal strain and in creating incentives that draw farmers away from growing other crops. Also, due to the implicit government guarantee on the crops, banks are more willing to lend to farmers growing cotton than any other crop. However, the bigger damage it does is in distorting water usage and providing incentives to use more water than would be used in an open market. The final push comes in the form of providing water all the way from the Colorado River, a distance of 230 miles, for a minimal price. The government is also considering building a billion dollar desalination plant to purify ocean water and feed the crops.

If farmers were charged for the water, as well as for the cost of transporting water (using generators to pump the water, cost of building the infrastructure, etc), no farmer would even consider planting a water intensive crop.

In their textbook, Tyler and Alex Tabarrok dwell on this subject:

Farmers use the subsidized water to transform desert into prime agricultural land. But turning a California desert into cropland makes about as much sense as building greenhouses in Alaska! America already has plenty of land on which cotton can be grown cheaply.  Spending billions of dollars to dam rivers and transport water hundreds of miles to grow a crop which can be grown more cheaply in Georgia is a waste of resources, a deadweight loss. The water used to grow California cotton, for example, has much higher value producing silicon chips in San Jose or as drinking water in Los Angeles than it does as irrigation water.

Closer to home, there are several governmental agricultural policies in India that have similarly changed the incentive structure for crop choice. The Minimum Support Price, the minimum price paid by the government to the farmers for their produce, has introduced severe economic distortions. Rice and wheat have a higher MSP than most other crops, which naturally tilt the preference of farmers towards them; rice is a fairly water intensive crop and despite this, it is grown in arid areas across India. Pulses, which do not get much support from the government, are not grown in adequate quantities. There is a chronic shortage of pulses on the Indian market, prices have risen and it has to be imported in large quantities.

As the example of Farm Bill and MSP show, bad public policy and unnecessary government intervention creates severe distortions in the economy, which leads to macroeconomic imbalances and often has large societal costs.

Anupam Manur is a Policy Analyst at Takshashila Institution. He tweets @anupammanur

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Hyper multi-objective optimisation: the bane of policymaking

Policies fail when they try to optimise for several objectives, ultimately creating a system that fulfils none of them.

by Pranay Kotasthane (@pranaykotas)

Multi-objective optimisation is that step in any design process which tries to make a system suitable for several objectives at the same time. This concept is applied in several branches of science like engineering, economics and logistics.

In engineering, this process of multi-objective optimisation translates into design constraints. Some common design constraints are: performance, cost, reliability and usability. The whole design problem then is about coming up with a solution that is optimal on all these counts. For example, a hardware engineer designing a chip tries to optimise it for higher speed, smaller size, a wide temperature range of operation and low costs.

Often, increasing design constraints both in terms of their number and their strictness makes the system design so complex that it becomes impossible to construct it. This is because objectives are often conflicting and trying to optimise for one leads to a degradation with respect to the other. In such a case, system design can only proceed if one objective is traded-off to some extent. In other words, for a nontrivial multi-objective optimisation problem, there does not exist a single solution that simultaneously optimises each objective.

Multi-objective optimisation is particularly applicable to government policies. Apart from the usual design constraints of equity, efficiency and costs, there are several other constraints like political feasibility and ease of implementation. Thus, designing good policies is essentially a case of multi-objective optimisation.

Now, the problem with many policies is this: governments try to optimise a policy or an agency for several objectives at the same time. Just like an engineering system design returns a null solution when strict conflicting objectives are applied at the same time, public policies trying to optimise for several objectives end up failing.

Now, the argument that this blog post makes is that the reason some government policies in India fail is because they try to do hyper multi-objective optimisation, ultimately creating a system that meets none of the objectives. Let’s consider a few cases:

The first illustrative example is that of India’s tax policy. India’s tax policy is extremely complicated, with several layers of rebates and raises across sectors, income levels and geographic areas. The reason behind this complexity is that India’s tax policy has been burdened with several objectives. And hence, it is no surprise that such a system does not function as desired. Dr. M. Govinda Rao summarises this condition best when he says:

Although many countries’ tax policy is used as an instrument to accelerate investment, encourage savings, increase exports and pursue some other objectives, Indian’s obsession is perhaps unique. In addition to the above, India’s tax policy is loaded with objectives such as industrialisation of backward regions, encouraging infrastructure ventures, promotion of small scale industries, generation of employment, encouragement to charitable activities and scientific research, and promotion of enclave-type development through Special Economic Zones (SEZs). These objectives are pursued through various exemptions, differentiation in rates and preferences which enormously complicate the tax structure and open up avenues for evasion and avoidance of tax and create rent-seeking opportunities.

The second illustration is that of National Rural Employment Guarantee Act (NREGA). It was originally meant to be a scheme to augment the income of households by providing wage employment opportunities in rural areas. However, several new objectives were subsequently added. For instance,
creating sustainable rural livelihoods through regeneration of the natural resource base, and strengthening rural governance through decentralisation and processes of transparency and accountability. Thus, far from being optimised for increasing wages, this is also seen as a process of regeneration of natural resources and for strengthening rural grassroots democracy. This hyper multi-objective optimisation thus is the bane of MGNREGA.

Third, an urban example. The traffic police system was created with the objective of upholding the rule of law on roads i.e. ensuring that the traffic rules, whatever they may be, are adhered to on roads. But this same police force is also tasked with an objective of reducing traffic congestion i.e. ensuring a smooth flow of vehicles. Often, the two objectives of faster vehicular traffic movement and upholding of traffic rules conflict with each other. The result is that neither objectives are met.

Thus, hyper multi-optimisation is a challenge for policymaking. There are broadly two responses to this challenge.

The first one is augmentation. This involves creating separate agencies or policies, each of which is optimised only for one or two objectives. This is a common response observed in India. For example, in pursuance of the objectives of promoting a rapid rise in the standard of living of the people, increasing production and controlling the direction of the economy, the Planning Commission instituted in 1950.

The second response is that of withdrawal. This involves a realisation that a few objectives just cannot be optimised efficiently by government policies. They can be best handled by the market or by the society. This would mean that policies could leave some objectives unoptimised or only marginally optimised. For example, the traffic police can return to its original duty—ensuring that traffic rules are adhered to. The objective of managing vehicle flows can be left to automated traffic signals. Beyond that, it is for individuals to assess and build consensus for reducing travel times. Similarly, given that absolute poverty is its biggest concern, the government may choose to leave the moral question of relative poverty and the pursuit of zero inequality to a future date.

The second response is definitely the tougher one. Not only does it require a projection of what policies can do, it also needs the humility to accept and explain what government policies cannot do.

Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas
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Do we need the Lokpal or is economic liberalisation enough?

Karthik Dinne

Any debate about the Lokpal generally ends up being an argument over either the function and structure of the Lokpal or about its need. People, who question the need for the Lokpal, term “economic liberalisation” as the solution for corruption and also more often as a panacea. Some of them truly believe that economic liberalisation is the only solution for the problem of corruption. But most others take up this argument just to damage the credibility of Team Anna which is bearing the brunt of the movement.

Corruption in India is a complex problem and there is no single point magic solution, be it a Lokpal or be it economic liberalisation. Lokpal has its own limitations. And so does economic liberalisation- mainly for two reasons. Firstly, economic liberalisation is essentially reducing the role of the government in the business or economy of the country, withdrawal of the government from certain sectors and removing the barriers for the market forces to operate freely. No matter how hard we try to limit the role of the government, it certainly has its role to play in certain vital sectors and areas where markets don’t offer solutions- law and order, universal primary health care and public infrastructure to name a few. If the presence of the government is the cause of corruption and since the government can’t get out of all sectors, there is always a possibility of corruption in those key sectors where government has a certain role to play.

Secondly, designing public policies in those sectors which ensure zero percent possibility for corruption during its implementation is an impossible task. Keeping in view the vastness and diversity of India, one cannot make a rigid set of implementation procedures or rules at the micro level and paint the whole country with the same brush. Some amount of discretion has to be left at the lower levels to ensure flexibility so that the policy can be adapted to the local conditions. But there is always a danger of this discretion leading to graft and other such problems. Maintaining this balance of discretion vs. the rules is one of the most challenging tasks in designing a public policy.

It is in some sense similar to controlling a crime. Some crimes can be prevented by delving deep into their root cause and for some there is no other way than punishing, thereby creating deterrence. Lokpal is one such deterrence mechanism. The absence of such a strong deterrence mechanism only creates incentives for people to be more corrupt. If people believe that even if they get arrested, they can conveniently get out of it by exerting their political influence or owing to the delays in the court judgements, if they think that can comfortably live on by using this convenient argument of “corrupt not until found guilty by court”- it is even more dangerous. The need of the hour is to have such an investigation agency free from political agency and a speedy delivery of the judgement. Lokpal ensures both of these and hence is very much essential.

There might be other possible solutions for corruption, each effective in its own sphere. Some may be “necessary but not sufficient” but that cannot be the argument to downplay that solution. Each step may only advance us a little, but we have to start somewhere and proceed towards having holistic solutions. This excessive obsession with both Lokpal and economic liberalisation is equally dangerous. As Swami Vivekananda once said “We take the highest point of ours and compare it with the least point of others and then downplay them”. Hope we don’t let this happen, because this nation simply can’t afford it.

The Author is a student at the Indian Institute of Technology, Kharagpur. 

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