Opinion

A change in economic policy priorities?

Subir Roy | Updated on January 09, 2018

The Economic Advisory Council, by focusing on social indices, may usher a shift away from the sole pursuit of GDP targets

There is a chance that something positive may come out of the newly appointed Economic Advisory Council to the Prime Minister. Only the barest outline of its thinking is available and we know that the devil is in the detail, but still the council may be on to something positive.

A brief statement put out after its second meeting indicates its priorities. The roadmap lists skill development, job creation and investment in social sectors such as health and education. This is about right as without skills people cannot become employable and finding jobs for people is priority number one.

About incentives

What follows is more interesting. In outlining the framework for the next (15th) Finance Commission the Council speaks of including incentives for States to achieve better outcomes in health, education and social inclusion. This is on the right track but the issue is — what really incentivises a State government? Which policies will fetch votes in the next elections certainly tops their to-do list. Achieving better outcomes in social sector indicators may be on the agenda but not directly relatable to votes.

Two states, Kerala and Tamil Nadu, are clear leaders in social sector indicators, and successive governments there have adopted agendas to boost these, but their electorates have gone in for flip-flops between their two leading formations (LDF and UDF in Kerala, and AIADMK and DMK in Tamil Nadu). So in achiever States being mindful of social sector indicators is necessary but not enough to return you to power. On the other hand, if a government in laggard States such as Jharkhand or Chhattisgarh is seen to have done a lot in health and education, that may well pay electoral dividends.

But what is most interesting is the Council’s plan to create a monitor for tracking the economy which will seek to link economic growth indicators with social indicators. This presumably means that if positive economic indicators do not at the end of the day translate into positive social indicators then there is a need to look afresh at economic policies.

Course change

It is possible to see a conceptual change-of-course here. The post liberalisation economic policies, vehemently reasserted by the NDA which saw no votes in old-fashioned socialism, put pursuing stellar, world-beating GDP growth on a pedestal. The glee with which a sharp improvement in the World Bank’s tracking of the ease of doing business was greeted underlined this mindset whose foremost articulator has been the CEO of NITI Aayog. If economists now get to shape economic policy rather than senior bureaucrats led by a finance minister who is essentially a lawyer, then that should make a positive difference.

Three-and-a-half years into its tenure, maybe the realisation is dawning that GDP growth is but a means to an end. What really matters and makes a difference is an improvement in the quality of people’s lives; that has a direct link with better health and more purposeful schooling and vocational training which offers an assured pathway to jobs.

If that be so then the policy issue that immediately pops up is the vast variation in social sector outcomes between States so that individual Indian States proximate to both the best in Asia and the reality in sub-Saharan Africa. To overcome this it is imperative for the Centre to mentor and cajole the laggard States. It is essential for the BJP to get out of the present mindset of making life as difficult as possible for non-BJP-ruled States. As it happens, Kerala, Tamil Nadu, Karnataka, West Bengal and Tripura, all non-BJP ruled States, score well in social development indicators whereas the BJP-ruled States, many of which belong to the old BIMARU list, remain laggards.

Administration matters

There are two recent striking examples of both cooperation and the lack of it in Centre-State relations. The introduction of the goods and services tax, no matter how flawed in its present form, is a great example of such cooperation leading to a fundamentally positive policy outcome. This is the way to go.

On the other hand, the lack of joint planning and action between the Centre and the States concerned has led to the appalling state of air quality in Delhi and adjoining areas. It is unpardonable for the Centre to join in the general blame-game in this regard when it should have taken the lead in planning and executing joint action by all concerned. It is critical for India to give a better account of itself in this regard, particularly when China has taken steps to improve the air quality of its major cities which were the worst in the world not so long ago. That dishonourable position is now taken by India’s capital under a political regime that lays great store by enhancing national pride.

Seeking to cajole the laggard States into better performance in social sectors leads us straight to the issue of better administrative performance or governance. That is arguably the single biggest issue facing the Indian state. Even as the quality of administration lags in the laggard States we see the rapid contractualisation of government service across States. Professionals are increasingly being appointed on contract in the States as well as at the Centre. Plus, various services, till recently delivered by the Government, are being outsourced where the unskilled workers are on contract, from catering staff on the railways to “volunteers” doing the job of traffic policemen. It should be easy to get rid of staff on contract or contractors who do not perform, and so the country should be on its way to better government delivery, but none can say that this is happening. This is the overarching dilemma.

The writer is a senior journalist

Published on November 20, 2017

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