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Economic reforms: Ideas for India

Economic researchers have become an important resource for policymakers in their struggles to design policy reforms, since the former have developed new tools of analysis

By: | Published: September 22, 2016 6:22 AM

The 25th anniversary of the beginning of concerted Indian economic reforms has come and gone, and the hard work of changing the economic system to function better and support higher growth remains. Policy-makers in India seem to have a hard time staying focused and implementing some kinds of reforms. The long time it took to make progress on the GST was understandable, given the technical complexities and political challenges of a far-reaching change in a major source of revenue for the central and state governments. In other cases, however, the ideas are more straightforward but implementation still lags. In other cases, it may be difficult to identify which policy reforms should be prioritised, when the impacts cannot be known beforehand.

Economic researchers have become an important potential resource for policymakers in their struggles to prioritise and design policy reforms, since they have developed new tools of analysis, including deliberate field experiments as well as techniques for studying “natural” experiments, where some external change allows for a policy impact to be “identified” in the data. Nowhere is this resource more clearly accessible than on the website, Ideas for India (I4I, at www.ideasforindia.in), founded in 2012 by a handful of economists, but now with over 500 contributors on record. Most articles on the website provide non-technical summaries of new empirical analysis of aspects of the Indian economy, and draw out policy implications where possible.

For example, consider the issue of open defecation, something practised by half of India’s population, which became the basis of the slogan “Not temples, but toilets,” in the 2014 national elections. In an I4I column in February of 2013, Dean Spears, then a doctoral student at Princeton doing fieldwork in India, argued convincingly that open defecation has been a major contributor to child stunting in India. In August that year, another I4I column, written by Sangita Vyas, a researcher at the Research Institute of Compassionate Economics (founded by Spears), summarised the discussions at a two-day conference that solidified these findings. In January 2014, Jeffrey Hammer, a professor at Princeton and expert on India’s healthcare, wrote another column arguing that the data demonstrated that prioritisation should be given to sanitation infrastructure and creating awareness, before providing publicly funded medical care.

These researchers had already noted that building toilets is not enough: maintenance is important, and so are behavioural patterns. Dinesh and Meera Mehta mapped out the problem in India’s cities in an April 2014 article in I4I: access to latrines helped, but it was far from sufficient to ensure usage. In August 2014, after the election had been fought and won by the purveyors of the slogan, Diane Coffey published an article documenting the impacts of religious, cultural and social norms (including, unsurprisingly, issues of ritual purity and pollution) on latrine construction and use. A follow-up article the same month by Michael Geruso demonstrated that there is a substantial spillover effect in open defecation—a household’s health outcomes depend more on what all their neighbours are doing, not just whether they use a toilet. This finding magnifies the importance of public policy intervention. A third article in the series, by Dean Spears, demonstrated that the focus of policy had to be on changing behaviour, much more than just building more toilets.

The new prime minister addressed the topic from the ramparts of Red Fort on Independence Day in 2014, and the Swachh Bharat Mission was launched. An article in October 2014 by Varad Pande evaluated this program, noting the emphasis on effecting change in attitudes, as well as decentralising implementation and tracking actual usage. But by March 2015, an article by Sangita Vyas suggested that the government’s resolve was not being expressed in action. The budget was much smaller than originally proposed, and the guidelines were mostly repetitive from older policy pronouncements. It was even suggested that the way new programme was funded would reduce accountability.

Fast forward to September 2016, and an article by Bhaskar Pant revisits issue. The article documents the minimal, almost trivial progress made in the last two years on what is arguably a national emergency. It suggests greater decentralisation, greater emphasis on behavioural change, and use of modern technology for tracking usage as well as maintenance.

So, what is the point to be made? Even an inexperienced, non-technically-trained government official reading through this sequence of articles would have a good sense of why this is an important policy issue, what needs to be done, and what the obstacles are to implementation. The ideas are all laid out in easily digestible, scientific, well-written form. The question is then why policy formulation and implementation still lags so abysmally. One answer is the incentive structures within government, which can often lead to good ideas going nowhere. Another is the manner in which government officials are trained, so that absorbing new information and using it to shape policy is a weak or absent skill. A third is that citizens are also uninformed or uncaring, so that they fail to pressure government from outside, to do the things that will have high social benefits. But at least they have I4I now, to help them.

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

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