Indian Digital Service? Meghnad Desai says time to think more innovatively about bureaucracy

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Published: October 16, 2017 4:39:45 AM

The Economic Advisory Council which was chaired by Dr Rangarajan during the UPA days was quietly abolished. The finance ministry was entrusted to Arun Jaitley but then he was burdened with the defence ministry, corporate affairs and information and broadcasting, to begin with.

Slowly, the economics advisory apparatus for the prime minister is falling into place. To begin with, the PM relied very much on his redesignation of the Planning Commission as NITI Aayog, and with Arvind Panagariya at the head, he thought he had done enough. (Reuters)

Slowly, the economics advisory apparatus for the prime minister is falling into place. To begin with, the PM relied very much on his redesignation of the Planning Commission as NITI Aayog, and with Arvind Panagariya at the head, he thought he had done enough. Meanwhile, the chief economic adviser position was filled by Arvind Subramanjam who succeed Kaushik Basu. At the RBI end, the replacement of Raghuram Rajan was unnecessarily controversial. The Economic Advisory Council which was chaired by Dr Rangarajan during the UPA days was quietly abolished. The finance ministry was entrusted to Arun Jaitley but then he was burdened with the defence ministry, corporate affairs and information and broadcasting, to begin with. Later, this burden was reduced, but most of the time, we have had Arun Jaitley carrying more than one major portfolio. The message seemed to be that the PM was happy with the bureaucracy at the PMO and apart from the removal of the Planning Commission, no further change was needed. As chief ministers often do, he believed that he could carry the heavy load of economic policy on his own with his bureaucracy team.

Two major changes during the last 12 months have showed up the problems with this set up. Demonetisation was, in my view, a good idea. It, was, however not well-implemented. New currency was not available on time and the fiasco with the ATM machine and the new shrunken 2,000-rupee notes was unforgivable. A lot of the distress with shortage of currency was entirely avoidable. While it may not have done any political harm to the BJP, it did cost at least one half of one percentage in the GDP growth rate. This cost was unnecessary. The other innovation was the GST. This has been in the making for 15 years. While it was necessary, it was extremely complicated, firstly, due to the federal political structure. But the compulsions of ‘socialist’ economic policies meant that every taxing authority—state or metropolitan area—thought nothing of adding another obstacle to the free movement of goods. Taxes were imposed, including Octroi, on any and all goods at varying rates. The aim was never to help economic growth but to maximise revenue. This led to the horrendously complex structure as well as the tenacious resistance on part of the states to giving up their economically irrational taxing powers.

The result has been a single tax, but imposed at multiple rates. Again, the implementation of GST has been full of teething troubles and has imposed unnecessary costs. Most surprisingly, the digital apparatus has not been foolproof, and many SMEs have had problems. Obviously, no one ran any simulations to check whether it worked. If they did, they were not very competent. This is yet again an unnecessary cost due to faulty implementation.

The prime minister has tried to convey an image of modernity and tech-savviness. He has tried to harness Indian talents in digital technology to speed up the economy. But it looks like, at the top, the PMO may be letting him down. Now, with 18 months to the 2019 election, a bit of stocktaking is in order. On the advisory side, the Council of Economic Advisers has been revived under the chairmanship of Bibek Debroy, and good luck to them. It would be better if the apparatus of economic advice—chief economic adviser and the Council of Economic Advisers—were both put on a statutory basis with some coordination between them.

It may also be time to think more innovatively about the bureaucracy supporting economic policy. Does India need a high-level Indian Economic Service like the Indian Foreign Service? Does India need a cadre of high-tech Digital Service recruited from the best available? Could these tech-service people be taken from the corporate private sector on a temporary—say, a five-year basis? The one successful new policy implementation we have had in the last 15 years was Nandan Nilekani’s work with Aadhaar card. The government of India has not derived appropriate lessons from that experience.

It is time the BJP/NDA government took economic policy making more seriously. At the outset, it seemed to be saying that apart from the finance ministry playing second fiddle, the real change was going to be driven by the prime minister’s initiatives. There were many such initiatives—Swachh Bharat, Make-in-India, MUDRA, Jan-Dhan, etc. We do not know how far these schemes have progressed, but in any case, important as they are, the government will be judged by the macroeconomic indicators—GDP growth rate and inflation rate, the budget-deficit ratio, the farmers’ debt relief . Those indicators are temporarily not looking good. There needs to be a serious consolidation of the support mechanism if the government is to regain initiative on the economic front. It is time the policy-making machine and those in charge of that machine were given their proper roles so that India can prosper.

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