Many pundits in the media, and also leaders in the industry, had expected big bang reforms by the new government in this Budget and seemed disappointed by their absence with comments such as the speech was too long and badly drafted or it had the same tenor as those presented by the UPA government. In my view, these comments miss the wood for the trees, and as the aforementioned chairman of the infra company had recognised, this Budget strategy seems to be guided by Prime Minister Narendra Modis oft-quoted phrase less government and more governance. The strategy is focused less on big bang policy announcements and more on smaller but critical steps to remove the many roadblocks to growth and new investments.
In my view, we do not suffer from the inability to formulate radical policies like the National Investment and Manufacturing Zones (NIMZ) in the industrial sector, or the Right to Food or Education in the social sectors. What we do suffer from is the inability to ensure their effective and efficient implementation and many of them remain on paper or at best partially implemented. And if there is one area of big bang reforms, we desperately need it is in our institutional and people capabilities to ensure effective and efficient last-mile delivery of our policies.
Let us take the example of social sector policies which saw the highest growth in budgetary allocation over the past decade. If we take five areas of food, education, health, employment and child development, we spend over R2 lakh crore annually on them. When the Right to Food was passed by the UPA-2 to be implemented through the Targeted PDS (TPDS), the Centre wanted the states to do so in one year, adding nearly 200 million new beneficiaries, even though it was commonly accepted that 10-20% of current beneficiaries were fake, and leakage from the TPDS was as high as 40% in some states. There was very little appreciation of what it would take to implement the Right to Food, or detailed guidance and support to the states to manage the huge transformation required in the TPDS.
Over the past few years, the Boston Consulting Group (BCG) has been working with several states in improving the execution of some of these social sector policies. If I distil our experience to identify the reasons for the poor execution, they fall into three broad categories. First, our policy-making often does not take a systemic view including the ground realities of the politico-economic or the legacy systems that have every incentive to keep the inefficient and/or leaky systems going. Why should those benefiting from the leakages in TPDS allow it to be made more efficient unless we factor them in while developing the policy, and have explicit incentives and penalty to make them change The second reason is that we do not have well-defined metrics and progress milestones to measure the effectiveness (for example, how many of the targeted rightful beneficiaries have received food under the Right to Food) or efficiency (for example, what is the cost to serve these beneficiaries) of our execution. Moreover, there is very little accountability for the success of implementation. Even where metrics exist, there is rarely single point accountability and no repercussions for non-delivery, or structured feedback loops for end-beneficiaries in the system. Finally, the capability and analytical skills of the people manning the last-mile delivery are often a big challenge, and given the low average tenure of our senior bureaucrats, there can be lack of continuity of leadership at the state level, one of the most critical success factors in any successful execution.
To give an example, when our analysis found out that nearly 80% of the fair price shops (FPS) in a state were supposedly loss-making (and thus a big incentive for the store-owners to steal) and discussed this with senior people in the government, the immediate response was that we should increase the commission paid to these FPS owners. We then showed them further analysis that increasing the commission even three times, as was being suggested, would increase the percentage of profitable stores from 20% to just 32%. The profitable FPS owners would make more money while majority will continue to lose it and thus have incentive to steal! What was required was a much more nuanced and segmented approach to increase store profitability.
No policy can be executed effectively without active change management which impacts all the stakeholders in the ecosystem that will implement the policy, particularly addresswhat a perceptive UN official told me recentlythe entrenched politico-economic structure that benefits millions and have no interest to change. State school systems can never improve the quality of education unless we measure the learning level outcomes in schools, and if teacher unions continue to believe that this will only increase the workload of teachers and possibly to victimise those who are not performing, quality will never improve however much money we spend through various programmes. To succeed, we have to co-opt the teacher unions and our state education officers will need the skills to do so.
Finally, all successful transformation programmes need an engine, a programme management unit (PMU) that will develop the detailed transformation roadmap (which could be a multi-year one), including the milestones and metrics, and then support the government leadership in the execution. When we tried to set up one in a state for a centrally-funded social sector policy, we were told that there was no budgetary allocation for a PMU costing few tens of crores of rupees a year to drive the implementation of a programme where thousands of crores are being spent every year.
Is this a lost cause then Our experience in BCG of working with these last-mile delivery systems shows that there are enough capable and motivated people on the ground who can make execution happen. We have to build their skills and capabilities in planning and executing large-scale transformation in a systematic manner which addresses all these challenges listed above. Most importantly, we need the leadership of our country and states to put execution at the centre of our policy-making, and not as an afterthought. We must breathe life into the slogan more governance and less government.
The author is managing director, the Boston Consulting Group (India). Views are personal