The Hindu Business Line : Transparency in policy-making

Transparency should be a watchword for governments, their bodies and corporate entities. Transparent practices influence decisions to consume and invest and help form expectations about how economic variables would move. A code on transparency practices applicable to all entities is definitely needed, says A. Vasudevan.

POLICY-MAKERS often claim that they are transparent and provide a wholesome picture of what they do and how they function to enable those who transact in the market place to know where they stand vis-à-vis the policy-makers. Sadly, though, there are very few organisations that announce their policies on transparency practices.

The transparency practices policy should state in clear, unambiguous terms, the processes of decision-making, and the rationale of the decisions. The latter requires that comprehensive explanations be given of the considerations that underlie the decisions.

Some view the discussions on transparency policy as a new fad, but they are important and necessary in economies transiting from centralised policy regimes to decentralised ones wherein the market influences would be dominant.

Transparency should be a watchword for governments, government-bodies established by Acts of Parliament and private corporate entities. For transparency practices often influence decisions to consume and invest and help form expectations about how economic variables such as prices, interest rates or exchange rates, to name a few, would move in the near future.

Transparency is often mistaken for providing mere information. There is, no doubt, a lot more information (both statistical and other) nowadays about every financial and non-financial institution and about each and every activity, both in printed and electronic forms than was the case some ten years ago.

A number of organisations, particularly in the public sector, place on their Web sites reports of the study groups or committees, often inviting the public's comments on them. Some Web sites have FAQs (frequently asked questions) about the concerned organisations or about certain activities of the organisation.

Policy decisions are in certain cases announced very quickly, almost on real-time basis, but they serve no more purpose than new information. They still fall short of providing insights about the decision-making processes and the considerations underlying the decisions.

Web sites have an almost infinite reach but not many, at the present level of awareness and facilities, access Web sites on a regular basis. It is for this reason that press releases need to be given out to explain what is being put out on the Web.

Web sites can have large texts as attachments to the summary positions, leaving the choice to the readers to choose between the summaries and the full texts. But so long as there are a large number of persons that consult printed versions, press releases have to be complemented by publication of the main documents.

There are also cases where the Web sites have been frustratingly time-consuming. The site, for instance, of the Securities and Exchange Board of India, in my view, needs to be friendlier, with better technical and analytical presentation and management.

The present one expects the user to wade through years and years of notifications to arrive at the evolution of the Board's regulations under each subject-head. There is much less information on the rationale behind each of the notifications.

In any case, putting out year-wise notifications is easy: subject-wise classification of the notifications and referencing to subjects in the notifications that deal with yet another subject in a major way or with more than one subject requires some expertise and willingness to be helpful to users.

What is often not well understood is that subject-wise preparation of the Web sites would be useful for the organisations themselves in their policy follow-up apart from the fact that they facilitate the markets' perceptions in a manner that would often have feedback effects that organisations should value.

A careful study of Web sites would give some idea of what the organisations' perceptions of what transparency practices mean for them.

Giving large amount of statistical data, putting out speeches of top executives, placing reports— annual, special ones and working/study groups— and giving policy announcements with such opaque rationale as "in the light of the developments in (so and so) variable or variables", are taken as sufficient to meet the concerns about the transparency practices. But the quality and type of data that are required are not given enough consideration. Again, very little effort is made to put out the data that would be of interest from the point of further research.

There are many instances of organisations not willing to give data that outside (often academic) researchers seek (at times by e-mails) on grounds that are hardly defensible. The reasons range from the pathetic one of suggesting that the data asked for are not collected or not collected in the way the researcher requires to the one of stating that the data are not stored.

The aversion to giving data of the past relating to what some perceive as market-sensitive makes it impossible for outside researchers to test the analytical propositions.

For example, data on forex intervention, say six months prior to the current date on a daily basis, the quotes of market participants to auctions, and the order books of stock exchanges and the matching exercise that follows are data that give rich insights about the market behaviour as well as the policy makers' judgments.

Where there is more than one agency, then comparison of the cost-effective functioning of the agencies would help know as to which of the agencies is relatively efficient. For example, data on the impact costs of each of the order book driven transactions at the National Stock Exchange can be obtained at a nominal cost.

If anyone tries to get similar data relating to the Bombay Stock Exchange, either from the Exchange or from the SEBI, one has to go around in circles, as some of my academic friends from abroad have found out recently.

Most organisations have large data warehouses, and they normally exercise the privilege of not providing some market-sensitive data for the latest period.

This is understandable but they could well provide data for the past periods, say up to six months prior to the current date. This point could well be highlighted while releasing the transparency practice policy.

A matter of concern are the recent phenomena of (a) having too many committees/working groups with a handful of persons functioning in more than one committee in different capacities, and (b) not giving details about the actions taken on the recommendations of different reports and the reasoning behind the said actions.

Enhanced credibility depends on how diversified and professional the group is. Action taken reports are rarely provided by private corporate entities.

Surprisingly, one hardly gets to know the actions taken on the programme evaluation reports of the Planning Commission. These reports do not even get press briefings at the time of their release. One wonders why the Commission adopts such a studied indifference.

Can one have a standard or a code on transparency practices and policies applicable to all entities? If so, who should ensure their compliance? In my view, the central bank of the country should be asked to handle this matter since it is always under the public scrutiny and surveillance of international organisations.

Otherwise, we would continue with the present situation of information gaps and infirmities: it is as good as saying good-bye to market and macroeconomic discipline and corporate governance.

(The author, a former Executive Director of the Reserve Bank of India can be accessed at asurivasudevan@hotmail.com)