Create a CEO dashboard for India

Information technology (IT) has created new markets, allowed firms to unbundle and outsource as never before, and, less visibly to the layperson, changed the way that firms manage internal information flows. The latest manifestation of this latter trend is the creation of ?CEO dashboards,? which use IT to give the big boss a concise and current picture of the essentials of a company?s performance, starting with an aggregate view, but drilling down as deeply as needed, even to individual performance. What should be on the dashboard, and its effects on employees, are still the subject of experiment and learning, but the idea is clearly here to stay.

At Budget time, it is natural to think about what a CEO dashboard for India, if we had one, might tell the PM and FM. (Put aside for the moment the differences between a company and a country.) This would presumably start with measures of performance: overall growth and its sectoral breakdown, plus employment growth, inflation and the like. Trade, capital flows, exchange rates and reserves would also be significant indicators. Of course, such measures are available in the Economic Survey of India, Reserve Bank Annual Reports, and various other statistical compilations. How would our hypothetical dashboard data be different? First, they would be more up-to-date and more reliable. Second, they would be compiled from the ground up, allowing our ?CEO? immediate access to the disaggregated source data.

Suppose manufacturing growth is looking anaemic?let?s find out which sectors are worst off, and even whether specific firms are struggling. Even better, one could see how the head office?in this case, the ministries that are supposed to put governance into practice?is doing in coordinating and supporting the different parts of the organisation (or in this case, the economy). Where is the money coming from, where is it being spent, and does it make a difference? Are those big fiscal deficits worth it, in terms of the bottom line, or do they represent a black hole, swallowing money without leaving any trace?

For now, in the absence of a real dashboard, which would distill all the data that is out there?from government, industry and academic sources?one relies on conventional analyses, or meta-analyses. For example, Brian Pinto, Farah Zahir and Gaobo Pang, of the World Bank, have recently asked ?whether India can grow even faster, all without…fiscal adjustment.? In exploring the links between ?the soundness of the public finances and the microfoundations for growth,? they come down against any prescription for increasing government spending on infrastructure that ignores the short-term fiscal deficit consequences. They conclude: ?Chief among the fiscal policy priorities are steps to improve the composition and efficiency of existing expenditure and revenue mobilisation. Revenue deficits need to be lowered and capital expenditure raised. The recommendations of the Twelfth Finance Commission (TFC) aim precisely to do this.?

Actually, it is not clear that the TFC?s scheme for getting the states to better balance their budgets will work: it is complex and hard to enforce, especially in the absence of a good dashboard. The push for market borrowing will have a more lasting effect, but will take time. The TFC and its predecessor have both critiqued the muddle of planning and plan transfers, and made specific suggestions for reform there, but they have failed to touch the core problem of ?gap-filling? transfers. Ultimately, the missing link, as I have argued previously, is the need to incorporate standard microeconomic incentives into the working of government at all levels.

The studies synthesised by Pinto et al document how Indian industry has made itself more efficient, given the necessity and opportunity to do so after 1991. Only now, with civil service reform on the agenda, is there a similar move for government. Only detailed organisational restructuring of government will improve the ?efficiency of existing expenditure.? There will be resistance, of course: in tax administration, detailed microeconomic reforms would aid ?revenue mobilisation,? but have considerably lagged problem recognition.

Structural reforms of the internal organisation of government will make dashboards possible as well as productive. When one focuses sufficiently, the dashboard idea becomes less fanciful. A Planning Commission dashboard might be a place to start, accompanied by a restructuring of the process of plan formulation, transfers and implementation. If Oracle CEO Larry Ellison can track 20,000 salespeople, tracking 600-odd districts is in the realm of the possible. This may sound just like Chandrababu Naidu redux, but that should not be an argument against it?how well it is done is key.

What does all this have to do with the upcoming Budget? Much of that exercise will involve policy changes that will please some and not others. The hope is that overall, tax policy will continue to be rationalised, and more of the remaining nonsensical restrictions on agricultural and industrial development will be relaxed. It is heartening that more and more policymakers in India understand how to shape economic policies that favour growth and development. The weak spot remains expenditure quality and policy implementation. Restructuring government incentives, based on improved information flows, will go a long way towards tackling this weakness. That is what corporate dashboards are about. Our government can use them too. Our government can choose to be efficient. It can seriously put its world-class IT industry to work, to make that happen.

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