A blueprint for reform in India

Updated: Feb 24 2014, 09:20am hrs
In my last column, I discussed the conduct of monetary policy in India. I suggested that the quality of technical analysis is improving, and that is a cause for optimism. I also noted that what is happening with the quality of leadership and organisational decision-making is another positive sign. While monetary policy is a relatively centralised undertaking, the idea that people and technology can combine to improve economic outcomes is a general one. Individuals acting within organisations need to have their incentives aligned to achieve broader goals, and technology can play an important supporting role in achieving this, as well as changes in organisational structures. Again, these innovations typically need to go hand in hand. In this column, I offer three examples to illustrate this proposition: private sector management, public sector schools, and local government.

Evidence has accumulated that many Indian firms display poor management practices. Establishing this claim has required systematisation of how to measure good management, and detailed surveys across a range of firms and countries. This knowledge is now firm. Less clear are the causes, but they include lack of training and awareness, as well as lack of external pressures for improvement in practices. Lack of competition plagues Indian industry. Less surprisingly, the same problems are manifest in schools and hospitals, where competitive pressures would be expected to be much lower, and asymmetries of information much higher. In the case of manufacturing firms, there is also evidence that information technology investments increase productivity. Such investments can improve the efficiency of resource use, quality of products, and attention to customer needs. In other words, information technology (IT) has the potential to substitute for the absence of adequate human management. Alternatively, it can serve to enhance the effectiveness of human managers. Specific examples of this phenomenon are not well documented for India, but one that comes to mind is the early and widespread adoption of Tally accounting software by small Indian firms (not just in manufacturing).

Using IT to improve how businesses run is a natural idea, but there have been two roadblocks. One is that business requires complex coordination tasks, and a correspondingly complex and varied set of IT tools: these have not always been designed or adapted to the Indian context (Tally is again an example to the contrary). The second obstacle is the need for people in those organisations to have the knowledge and training needed to use IT. In fact, the problem of inadequate knowledge and skills is pervasive in Indian business, and not just for using IT. The roots lie in Indias broken educational system. Recent research has been documenting the fact that increased government spending on education has not been translated into improved learning outcomes. One remedy that has been suggested is the use of teaching assistants (TAs), who may be more motivated and less expensive than teachers who are primarily government bureaucrats rather than educators. But TAs also lack training, and are likely to get sucked into the deadening education bureaucracy. On the other hand, a range of online efforts in developed countries show that technology can revolutionise education: these include the Khan Academy, the posting of videos of lectures by premier American universities, the spread of online university degrees, and even the numberless how-to-videos on YouTube. IT allows rapid scaling up of the dissemination of knowledge. What is needed is the adaptation or creation of context-appropriate educational content (e.g., dubbing Khan Academy videos in Indian languages), and low-cost access (including bandwidth as well as hardware). At an even more basic level, it is possible to build dedicated machines that teach reading and arithmetic through games. Or one can create smartphone apps.

A final example of using technology is that of local government. Certainly, local governments in India need more unrestricted funds, better trained functionaries, and clearer assignments of functions. But software that allows them to maintain their own financial accounts, see what other local governments are doing, and also to get a view of higher-level government spending and revenues will empower local governments in ways that lay the foundation for actually spending money effectively. The use of IT for governance has often been focused on citizen access to services, or top-level budget management, but providing local government leaders with the right IT tools tackles the weakest link in the chain of information and financial flows.

Of the three areas I have suggested for improving the synergy between people and technology, education is clearly the most important, since it involves young people with flexible minds and internal motivations. Giving Indias young people access to educational content and guided learning through IT is an avenue that has not been adequately explored, whether for primary schooling or post-secondary vocational training, or any number of other specific educational needs. Information technology is not a magic bullet for improving learning, but it is a potential game-changer, empowering students and teachers alike.

Nirvikar Singh

The author is professor of economics, University of California, Santa Cruz