Post on 03-Feb-2016
description
transcript
This pain pain and misery and misery is TOTALLY is TOTALLY unnecessaunnecessaryry
This Conference is about changing India
13 and 14 April 2013, New Delhi
India Policy InstituteHyderabad
Indian Institute of Public AdministrationDelhi
GOVERNANCE REFORMS CONFERENCE
Introductory Session 13 April10 am: Mr T N Chaturvedi invited by Sanjeev to chair the session10:02 am: Introduction to the Conference (Sanjeev)10:10 am: Inaugural address (Gurcharan Das)10:25 am: First half of talk by Sanjeev11 am: Tea break11:15 am Second half of talk by Sanjeev12:05 pm: Special Guest’s comments (Justice Tewatia)12:10 pm: Chairman’s comments12:30 pm: Lunch break (1 hour)
INTRODUCTION TO THE CONFERENCE
Sanjeev Sabhlok
Welcome!
Welcome to the elegant campus of Indian Institute of Public Administration
Who is attending this Conference? Intellectuals
Senior officials, academics and business executives
Reformers Young leaders from middle class India
(Freedom Team of India/ Centre for Civil Society)
Ordinary citizens interested in governance
Thank you for coming
You are uniquely interested in improving the governance of India From all across India Significant time and cost
Despite short notice Thank you for making the effort to
attend Thanks to IIPA for making this happen
We’ll have participant introductions after lunch
Objective
To identify reforms in governance frameworks to create world-class governance in India Public administration frameworks Economic policy frameworks Regulatory policy frameworks
The Conference won’t have much time to identify sectoral policy reforms eg. Education But we’ll conduct preliminary discussions on a
few areas
Framing this Conference
HOW do we reform India’s governance?
We need to know precisely what to do. E.g. if you become Prime Minister
what will you do?
“Insanity: doing the same thing over and over again and expecting different results. Einstein”
Root cause of misgovernance: Policy/system design failure Policies are badly designed
Policy frameworks are not used System’s incentives are flawed
Inevitability of corruption Modern thinking (including
Arthashastra) not used Politicians make policy on whimsy, not analysis Bureaucrats are totally unaccountable
This Conference is about changing the system
व्यवस्था� परि�वर्तन
We should not hesitate to adopt the world’s best ideas World best practice governance
frameworks Evidence-based economic/regulatory policy Public administration frameworks
In 1970s/80s, the world discovered economic and regulatory reforms
In the 1990s, the world discovered governance reforms
India has adopted neither
Broad structure of the ConferenceIntroductory session on first day: Inaugural address by Gurcharan DasTwo part presentation by Sanjeev (1.5 hours)
Post lunch on first day (and on second day)Detailed workshops
One paper presented on SundayPreparation of Strategic Plans for use by:
Government of India/ major political parties Future political parties and reform movements
Conference Summary/ Report to be published
But first, some housekeeping Please wear ID card at Conference for
meals Restrooms - location Water Tea
Served at 11 am sharp Maximum 15 minutes
Lunch break 12:30 pm for 1 hour
For any assistance please contact IPI/ Freedom Team of India volunteers
Dipinder Sekhon KK Verma Sureshan P Akshay Shah Vidyut Jain Abhijeet Sinha Rajan Mehta
etc
Language at the Conference We’ll use only English at the
Conference You can discuss in Hindi with me/
FTI/IPI members after the conference
Following will be uploaded on IPI website
These final slides Key recommendations/ strategic
plans Papers that are presented/
shared at the Conference
INAUGURAL ADDRESS
Gurcharan Das
Inaugural Address: Gurcharan Das
World renowned author
India Unbound and
India Grows at Night
HOW WE - TOO – CAN GET
WORLD CLASS GOVERNANCE
Sanjeev Sabhlok, former IAS (1982 batch)
Questions later
Questions/answers will not be possible in introductory session
Please note your questions for discussion in the afternoon session.
A bit about me
IAS 1982 batch, PhD Economics from USA Taught at Lal Bahadur Shastri National Academy Resigned in January 2001 to reform India – from
outside 15 years of reform work
Preliminary work in February 1998 (India Policy Institute)
December 2000: Moved to Australia after finding unresponsive bureaucracy/politicians/ citizens
Joined National Executive of Swatantra Bharat Party (2004)
Started Freedom Team of India (December 2007) Wrote Breaking Free of Nehru (2008) Organised National Reform Summit at Haridwar on 5-8
April 2013
This talk is:
A distillation of key learnings from over 30 years of experience in the IAS and Victorian Public Service
Given limitations of time I will focus only on key frameworks (systems):Public administration systemEconomic policy systemRegulatory policy system
Plan of my presentation
Part 11) Theory of good governance2) India’s system compared with Australia’s3) Public administration reforms for India
Part 24) Economic policy reforms for India5) Regulatory policy reforms for India6) Transition from India’s system to world-best system
1) THEORY OF GOVERNANCE
What’s our policy about policy? Think from the highest level first:
what is policy and what should it consider?
We need a policy about policy Frameworks and systems Without good frameworks, bad
policy is inevitable
Two main questions to ask
What should a government do? Are there limits to what a government can
do? How do we arrive at these limits (eg. net
benefit test) How should it do it?
How can a government comprising self-interested politicians and bureaucrats do what we want it to do? (public choice theory)Policy that doesn’t consider both these
issues will be fundamentally flawed
The “What” must be well thought out“Bad administration, to be sure, can destroy good policy, but good administration can never save bad policy.”
- Adlai E Stevenson Jr
The “How” must also be well thought outPolicy that is unable to pierce the veil of incentives during implementation is bad policy
Good policy necessarily considers implementation issues
This is what we want
Goal
This is what we get
OurGoal
Bureaucrat
(black box)
…. by failing to think about the politician’s and bureaucrat’s incentives
Bureaucrat’s goal
Sequencing of my talk
I will discuss the “How” first Public administration (delivery) reforms
Then I will discuss the “What” Policy framework and gatekeeping Economic policy
A word re: Arthashastra
Arthashastra underpinned India’s past success For 12 out of the past 20 centuries India
was the world’s wealthiest, and 2nd wealthiest in six out of the remaining eight centuries Due to the public policy stance outlined
in Arthashastra
Let’s put Arthashastra squarely into the centre of public policy discourse Most analysts of Arthashastra have
missed its point its insights are extremely modern we should read between the lines to
understand what Chanakya is trying to tell us
All about INCENTIVES (including disincentives)
Chanakya wanted a strong, minimal state, with control over incentives
Two axes: liberty, incentives
Liberty
Incen
tives
Reminder: incentives include disincentives!
Key dimension #1: Liberty
Liberty is an end in itself. But also necessary for people to do their best
Lao-Tse’s advice to the king: “Win the world by doing nothing. How do I know it is so? Through this: The more prohibitions there are, the poorer the people become… The greater the number of statutes, the greater the number of thieves and brigands.”
“I love quietude and the people are righteous of themselves. I deal in no business and the people grow rich by themselves.”
India was much wiser in ancient timesकहा�वत
जहाँ�� का� ��ज� हाँ� व्य�प��� वहाँ�� का� प्रज� हाँ� भि�खा���
Government should not engage in business
Free markets Free enterprise
The natural effort of every individual to better his own condition is so powerful, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.
- Adam Smith 1776
“Any restriction on liberty reduces the number of things tried and so reduces the rate of progress”
- H.B. Phillips (mathematician)
1
2
3
n
Two obstacles to freedom
Opportunity(technical
frontier)
Governance must enable liberty
(social reform is not a government’s job)
Ideasdon’t
come fromgovernments
People create ideas, and wealthGrowth = f (freedom, opportunity)
Innovationpushesout the frontier 2) Social control
• interfering religious beliefs• science and critical thinking insufficiently valued
People innovate better if the
government getsout of their way
1) GovernmentNanny, paternalistic state:• interfering policies and laws• “Food police”
Injustice• contracts not enforced
Key dimension #2: Correct incentives Chanakya thoroughly understood incentives:
Best talent in government High salaries for top officials and Ministers But vigorous checks/ audits (even spying) Instantaneous dismissal and severe punishment for
non-performance/corruption
Today we have the OPPOSITE incentives in India! The results achieved today are inevitable
Singapore follows Chanakya’s principles and succeeds
The problem of government failure Policy makers typically focus on market
failure
But the real elephant in the room is government failure
“Power corrupts, absolute power corrupts absolutely” Politicians lavishly spend taxpayers’ money Bureaucrats maximise their empire
Understanding incentives
Institutions (rules)
Incentives
Response
EndowmentLocal circumstances
(beyond the control of the policy maker)
SystemCreated by policy maker}
Examples: Incentives explain behaviourDisposing personal rubbish
The same Indians don’t throw rubbish on the roadside in Singapore
Tenure Without job tenure an IAS/IPS officer will focus on
delivery, for fear of losing the job
Corruption Indians were incorruptible when British
merchants first came to India. (They were astonished at such integrity!)
But today Indians are world-famous for corruption. Why?!
Incentives are at work 24-7
We ask our politicians to lose crores of rupees during elections. Then we pay them very low salaries. Question: Will such people serve us or loot us?
=> Conclusion: our system guarantees corruption.
Chanakya would have understood But we don’t care to see the world scientifcally
Burying our head in sand won’t make incentives disappear
Incentives are at work even in our dreams!
Incentives are as powerful as a physical force
Gravity pulls downwards, hence water flows downhill
Incentives drive human behaviour and almost entirely determine what someone will do
But incentives are difficult to analyseInvisible, complex, layered, and conditional
Despite this difficulty, we ignore incentives at our peril
Example of the power of incentives I offer you Rs. 100 or Rs.200. Which will you
pick? Rs.200 Always.
Incentives may be invisible but have REAL, PREDICTABLE EFFECTS
Incentives need not only be economic But economic incentives usually overwhelm
others
Myth: that Indians are somehow “different” Apparently we have a natural
tendency to be corrupt
Not true
Indians respond to incentives EXACTLY as predicted Chankya predicted it Modern economics predicts it New public management predicts it
China has moved toward incentives and markets-based governance Teachers are dismissed in China if
a class’s academic results are below par While in India some teachers get
paid even if they don’t ever go to school!
Naturally China does better than OCED in PISA, India is at the bottom of the world
Results exactly as predicted
Half of Class 5 kids in India can’t read Class 2 texts
The incentive (principal-agent) problem
Agency theory Company owners motivate managers through incentive contracts so manager actions (which are unobserved) can be aligned to owners’ goals.Usually:
1. Base salary (for participation) plus2. Performance pay (incentive compatible wage)
Plus hire/fire instantly based on performance
Controlling bureaucrats is very hard
Citizens, the masters, have to solve a TWO STAGE problem:
1) First controlling representatives (politicians) 2) Second, how politicians can control
bureaucrats
Citizen
How to control
?
How to control
? Black boxof incentives
Black boxof incentives
Lots of hidden actions & complex incentives!
Politicians’ interests are totally different to ours Politician’s goal is to get re-elected He knows that citizens can’t agree on anything
Impossibility theorem He can game the system by catering to a
niche Median voter theorem Lobbying/ pandering (subsidies/loan waivers)
In addition, he must necessarily be corrupt in India, it being a mandatory requirement of the Indian electoral system
How we can force politicians to look after our interest Meet the participation constraint
Partly fund elections by the state to reduce use of black money and allow good people to contest Australia pays about $2 per valid vote cast
High salary to attract good people into politics Pay incentive compatible wage
Salary high enough to prevent incentives for corruption
Link pay with performance Reduce tenure (from 5 to 3 years) to keep them on
toesSingapore and Australia pay politicians well, thus attracting top talent and reducing incentives for corruption – Chanakya would have approved.
Bureaucrats’ interests are different to ours, too“Lurking below each public servant is a full-fledged human being with predictable self-interested behaviour” (Sabhlok,BFN)
His goal: to expand his empire (importance) Obstacles/ inefficiency/ symbols, not real work
Solution:Meet participation constraint
High salary to attract good peopleIncentive compatible wage
Performance based reward/pay Tenure totally abolished at executive levels Stern punishment for underperformance/ corruption
Consider Chanakya’s wisdom re: incentive compatible wage "the highest salary paid in cash, excluding
perquisites, was 48,000 panas a year and the lowest 60 panas a year. The ratio of the highest salary to the lowest, was eight hundred to one.” (Balbir Sihag)
If lowest salary is Rs.4000 per month, then highest should be Rs. 32 lakh per month (or Rs.3.8 crores per year)
Even a top salary of Rs.1 crore will go a long way.
But there must be ability to instantaneously fire.
India’s bureaucracy: The current situation Salary is not high enough to:
A) attract demonstrated high quality talent B) prevent corruption
Indeed, there are rewards for corruption
No punishment for non-performance Tenure is particularly insidious Articles 310,311
=> Our politicians can’t control bureaucrats
Paying in “patriotism cash equivalent” is not always a good idea
Market rate for a particular skill
Australia pays market rate + incentives
India pays 1/3rd market rate+ nationalism
Sacrifice “for
the nation
”
Incentive to perform and be honest,
else will lose job – and money!
Incentive to be arrogant
(doing “sacrifice” for country) and unaccountabl
e
Minimum conditions must be metPasteur: Milk must boil before bacteria die
Participation constraintAND
Incentive constraint must be met
XTo kill incentives for corruption
What about transparency?
Can transparency (by itself) eliminate corruption? No.
Easy for corrupt officials to provide “transparent reasons” for awarding large government contract to bribe-giver
We can have all the transparency we like, but the corrupt will find a way
We must attack INCENTIVES, and must not PREACH
Unless participation and incentive constraints have been met, other factors don’t have any effect
What about Lokpal?
Can punishment (by itself) eliminate corruption? (eg Lokpal)
No.
Low possibility of detection: When 95 per cent are corrupt, chance of getting caught is small, so why worry?
Risk premium on corruption: Lokpal will allow corruption “rates” to increase on due to increased risk of punishment
Unless participation and incentive constraints have been met, other factors don’t have any effect
Commonly advocated anti-corruption solutions can work after basics are met Transparency CAN work Lokpal CAN work
Basic conditions will make 95 per cent people honest
After that remaining 5 per cent corruption can be eradicated by transparency and lokpal
Where will money to increase wages come from? First, we must remember: “penny wise
pound foolish” If the top levels can become honest, the rest
will follow Singapore PM is paid $2 million
Government should stop doing things it should not be doing in the first place That will give citizens the freedom to
produce => greater revenues
2) INDIA’S SYSTEM COMPARED WITH AUSTRALIA’S SYSTEM
Flexible control over bureaucracy Bureaucracy is controlled by Acts of
parliament Public Service Acts of 1902, 1922 and 1999 In Victoria, recent Public Administration Act
2004
This, being flexible, allows continuous improvement
Agile system. Empowers but demands total accountability Secretaries appointed by Prime Minister/Chief
Minister Contractual, with clearly defined KPIs
Secretaries empowered to hire and fire other staff Hire and fire option with 4 months notice Secretary appoints Deputy Secretary
who appoints Directors, etc. down the line Open market recruitment by application for each
position Remuneration parity with private sector Contractual service at all executive levels Portability of employment contributions for retirement
Australian government doesn’t dabble excessively with the economy Extremely limited role of government
in managing economic activity (in comparison with India) Almost no administered price, including
in the utilities sectorTargeted subsidies to the poor
Freely floating currency Very low duties (free trade) Almost no subsidies for any sector
=> Starkly different governance! Superior management (including project
management) skills Self-actualising organisational culture Strong performance management system Diverse background of government
employees (most with private sector experience)
Head of civil service often in mid-30s Good performers are rapidly promoted
Extensive delegation of responsibility Free and frank policy advice Significant use of modern IT
Strong system for accountability KPIs and performance contracts for
Secretaries KPIs flow into performance plans of lower officials All executives are fully accountable for contracted
results Independent review of Secretaries’ performance
Performance bonus contingent on performance
Not uncommon for executives to be demoted or dismissed for non-performance
Organisational culture
Blue culture on the "circumplex“
Self-actualising No one is called
"Sir", only first names.
Everyone equal as a person
India's culture is very red in comparison!
(Aggressive/Defensive)
Staff are expected to:
show concern for the needs of others involve others in decisions affecting them
resolve conflicts constructively be supportive of others work to achieve self-set goals help others to grow and develop point out flaws (ie not just accept low
standards) be a good listener give positive rewards to others
Staff are not expected to:
do things for the approval of others "go along" with others win against others accept goals without questioning them be predictable never challenge superiors do what is expected oppose new ideas
Focus on world-best policy products Policy officers conduct world-class
research Short, crisp, professional briefings for Ministers
No “peons”/clerks Officers organise everything themselves
Rapid turnaround of documents/emails Independent Board (with non-
departmental directors) provides high quality corporate governance
Productivity tools extensively used. And experts/ academics consulted All documents dealt with electronically
Key documents auto-scanned at time of receipt TRIM to store documents including emails Govdex to share confidential documents across
Federal and State governments Telepresence (Huge TV screens)
No unnecessary travel for meetings Constant interaction with OECD, other
international jurisdictions and world-best academics Eg. Centre for Market Design in University of
Melbourne
3) PUBLIC ADMINISTRATION REFORMS FOR INDIA
Political incentive reforms
As discussed: key reforms could include State funding of elections High salaries but no perks Performance bonus based on
increased GDP reduced corruption, etc
Lokpal to deal primarily with corrupt Ministers
Bureaucratic system reforms As discussed:
Eliminate tenure Contractual appointments (Under Secretary
and above) Salaries comparable with private sector Performance pay related to outcome Ability to dismiss without notice for non-
performance (with 4 months salary in lieu)
Reduce clerical staff and hire policy experts
But this is "not practical”!
Good policy maker must design transition path.Eg. Following steps0: Stop deputations to centre for two yearsAsk an HR company to advertise all Secretary positionsMonth 3: Prime Minister and Ministers appoint New Secretaries on 2-year contract based on merit
Secretaries not successful in getting these job sent to cadre
New Secretaries then advertise Addl and Jt Secretary positions and hire in next three months
Month 6: Those not successful return to cadre
Transition contd.
Month 9: Strategic plans Month 21: Implementation of strategic
plans completed New Public Administration Act Any relevant Constitutional amendment
By end of 2nd year, full transition to be rolled out in the Centre Similar transition rolled out in the States
Within three years civil service would be fully restructured and become agile/efficient
4) ECONOMIC POLICY REFORMS FOR INDIA
Chanakya’s insights, once again
Chanakya does not prohibit anything Alcohol/ prostitution/
most meats He regulates it He promotes trade,
particularly imports Open economy is the
key to prosperity
Liberalisation does not equal deregulation
India: yet another proof that economic freedom works
Freedom is increasing rapidly in India since 1990s Most sectors liberalised
E.g. mobile phonesSome sectors are free because the
government is basically defunct in those areas
Overall, we have very low levels of freedom
=> Need to liberalise most sectorsEducationHealth
India’s output has responded rapidly to very limited increase in freedomTable: Share of world output measured in terms of PPP
Country 1980 1990 2000 2010 2016
China 2.2 3.9 7.1 13.6 18.0
United States 24.7 24.7 23.6 19.7 17.8
India 2.5 3.2 3.7 5.4 6.6
Japan 8.7 9.9 7.6 5.8 5.0
Germany 6.7 6.1 5.1 4.0 3.4
Russia 0.0 0.0 2.7 3.0 2.9
Brazil 3.9 3.3 2.9 2.9 2.9
United Kingdom
4.3 4.1 3.6 2.9 2.6
Australia 1.3 1.3 1.3 1.2 1.1
Economic reforms needed
Review and reduce unnecessary role of government
Fiscal system reform Financial sector liberalisation (with prudential
regulation) Privatisation of utilities and defence production
where possible – with regulatory oversight Open economy (trade) Urban/regional planning reforms to allow markets
to signal demand and supply Infrastructure reforms (PPP etc.)
5) REGULATORY POLICY REFORMS FOR INDIA
Need for optimal (just right) regulation Liberalisation ≠ deregulation We need regulation to prevent/ punish harmful
effects But no more than that When social marginal cost equals social marginal
benefit (SMC=SMB – equalised for ALL policies) Can be assessed through a cost-benefit analysis
(CBA)Many challenges in CBA but without such test
we get truly bad policy
Points to consider
Policy must not be made in response to a particular incident It must be evidence based (cost-
benefit/ statistical analysis) E.g. cost of saving a life must be
equalised across all interventions
Regulatory Impact Statement Gatekeeping role, includes
Cost benefit test Public consultation (transparency)
Bad policy reduced
The basic idea applies to all projects (eg. infrastructure/ public private partnerships)
But India doesn’t have gatekeeping processes yet
Victoria’s independent gatekeeping mechanism Department prepares RIS Independent Commission assesses the
RIS Minister signs the RIS and publishes
for consultation The Treasury department advices
Cabinet (where appropriate) Parliamentary Committee scrutinises
RIS for integrity and diligence
10 questions to eliminate bad policy
1: What would happen without any role for government2. Identify problem/s with the base case and explain why these are problems3. First principles test (should government intervene at all)4. What can government do about the problem/s?5. Freedom test
10 questions to eliminate bad policy
6. Strategic gaming test7. Government failure test8. Real experience test9. Cost benefit test10. Transition path
(details in Victorian Guide to Regulation/ policy competition held by Freedom Team of India)
Urgently needed regulatory reforms in India Legislate a mandatory requirement for
RIS for any public policy/ significant project Mandate the 10 point process as the basis for RIS
Create independent Commission to assess adequacy of RISs
Ensure public consultation so the truth emerges
Reducing red tape (costs of regulation)
Measuring regulatory costs
Standard Cost Model (European) Regulatory Change Measurement
method (Victorian) Reducing red tape provides
significant benefits businesses and the community
6) TRANSITION FROM CURRENT SYSTEM TO WORLD-BEST SYSTEM
Strategic plans and transitional strategy
This is time to our homework Then good results will be certain
In this conference we will specify each step of what a good government should do in its first six months Transitional path
These goals of good governance are very easy to achieve These are PROVEN methods These are consistent with the views of
India’s greatest economist - Chanakya
Let’s remember that Indians are the same as other humans Same species. No difference in behaviour.
We need to establish a Chanakya School of Governance India has excellent technology, medical and
management schools.
But not one good school of governance (Note: Governance goes beyond public
administration)
We need many excellent schools of governance
Suggested: Let the private sector in India establish a world class Chanakya School of Governance
Federation of reformers recently created
At the National Reform Summit in Haridwar recently, a Sone Ki Chidiya Federation has been created for reformers Vision Agenda for Change
Let this Conference create Strategic Plans for reform
REMARKS OF SPECIAL GUEST
Justice Tewatia
Remarks of Special guest: Justice Tewatia
Former Chief Justice of Punjab & Haryana and Calcutta High Courts
CHAIRMAN’S REMARKST N Chaturvedi, Chairman IIPA
Chairman’s remarks: T N Chaturvedi
Padma Vibhushan Former Comptroller
General of India (1984 -1990)
Governor of Karnataka (2002 to 2007)
Governor of Kerala 2004
Chairman, IIPA
Request to contribute funds
Please contribute to the India Policy Institute which is significantly out of pocket for running this conference.
Please also contribute to Freedom Team of India and Sone Ki Chidiya Federation which are taking all necessary steps to bring governance (including policy) reforms to India.
Lunch Break: 1 hour
Questions and Answers after the break
DAY 1: POST LUNCH SESSION
Plan for post-lunch session
1:30 pm: Initial set of issues, and outline of strategic
plans
2:00 pm: Strategic plan for “How” What should be done? What should the transition plan
look like?
3:15 pm: Tea break
5 pm: Closure for first day
QUESTIONS/ISSUES ON INTRODUCTORY SESSION
Issues in your mind at this point We’ll note on the whiteboard We’ll deal with many of these issues
later (today or tomorrow)
STRATEGIC PLANS
Task: Prepare a strategic plan Imagine you are the Prime
Minister’s main policy adviser. Prepare a strategic plan (with
transitional steps) to deliver governance reforms in: How: Public administration reforms What: Policy/ regulatory
framework reforms
Process that we’ll follow
We’ll sub-divide the question We’ll then break out into small
groups and discuss What’s already happening in India? How can we modify existing practice
to seamlessly bring about change? What are key obstacles and how can
we remove them? Moderators will report back to the
delegates
Task 1: Strategic plans for public administration1) Abolition of tenure [Dipinder]2) Setting market comparable/ performance based salary [Sureshan]3) Recruitment through open competition for each post [KK Verma]4) Change in organisational culture [Rajan/Abhijeet]5) Use of IT and technology [Akshay/Madhu/ Vidyut]
How will each of these be done (including transition)/ what’s already happening in India?
Any other thoughts/issues
Identify any issues/obstacles Identify solutions
Request to contribute funds
Please contribute to the India Policy Institute which is significantly out of pocket for running this conference.
Please also contribute to Freedom Team of India and Sone Ki Chidiya Federation which are taking all necessary steps to bring governance (including policy) reforms to India.
DAY 2: STRATEGIC PLANS CONTINUED
Review of Day 1
Theory and introduction
How can a government do its work? Public choice theory/ Arthashastra
Participation constraintIncentive constraint
Strategic plan for effective public administration
Strategic plan for effective public administration
1) Abolition of tenure2) Setting market comparable/ performance based salary3) Recruitment through open competition for each post4) Change in organisational culture 5) Use of IT and technology
>> We did not discuss improved incentives for politicians, but these are outlined in BFN
Today
What a government should do
School of governance
How can these reforms be implemented?
Concluding session
Timing
9:30 am to 12:30 pm morning session Tea at about 11 am
12:30 pm to 1:30 pm Lunch
1:30 pm to 5 pm evening session Tea at about 3:15 pm
Review of the “What” question Economic policy framework
Maximum freedom subject to accountability
Regulatory policy framework Optimal regulation Red tape reduction
4) ECONOMIC POLICY REFORMS FOR INDIA
Chanakya’s insights, once again
Chanakya does not prohibit anything Alcohol/ prostitution/
most meats He regulates it He promotes trade,
particularly imports Open economy is the
key to prosperity
Liberalisation does not equal deregulation
India: yet another proof that economic freedom works
Freedom is increasing rapidly in India since 1990s Most sectors liberalised
E.g. mobile phonesSome sectors are free because the
government is basically defunct in those areas
Overall, we have very low levels of freedom
=> Need to liberalise most sectorsEducationHealth
India’s output has responded rapidly to very limited increase in freedomTable: Share of world output measured in terms of PPP
Country 1980 1990 2000 2010 2016
China 2.2 3.9 7.1 13.6 18.0
United States 24.7 24.7 23.6 19.7 17.8
India 2.5 3.2 3.7 5.4 6.6
Japan 8.7 9.9 7.6 5.8 5.0
Germany 6.7 6.1 5.1 4.0 3.4
Russia 0.0 0.0 2.7 3.0 2.9
Brazil 3.9 3.3 2.9 2.9 2.9
United Kingdom
4.3 4.1 3.6 2.9 2.6
Australia 1.3 1.3 1.3 1.2 1.1
Economic reforms needed
Review and reduce unnecessary role of government
Fiscal system reform Financial sector liberalisation (with prudential
regulation) Privatisation of utilities and defence production
where possible – with regulatory oversight Open economy (trade) Urban/regional planning reforms to allow markets
to signal demand and supply Infrastructure reforms (PPP etc.)
5) REGULATORY POLICY REFORMS FOR INDIA
Need for optimal (just right) regulation Liberalisation ≠ deregulation We need regulation to prevent/ punish harmful
effects But no more than that When social marginal cost equals social marginal
benefit (SMC=SMB – equalised for ALL policies) Can be assessed through a cost-benefit analysis
(CBA)Many challenges in CBA but without such test
we get truly bad policy
Points to consider
Policy must not be made in response to a particular incident It must be evidence based (cost-
benefit/ statistical analysis) E.g. cost of saving a life must be
equalised across all interventions
Regulatory Impact Statement Gatekeeping role, includes
Cost benefit test Public consultation (transparency)
Bad policy reduced
The basic idea applies to all projects (eg. infrastructure/ public private partnerships)
But India doesn’t have gatekeeping processes yet
Victoria’s independent gatekeeping mechanism Department prepares RIS Independent Commission assesses the
RIS Minister signs the RIS and publishes
for consultation The Treasury department advices
Cabinet (where appropriate) Parliamentary Committee scrutinises
RIS for integrity and diligence
10 questions to eliminate bad policy
1: What would happen without any role for government2. Identify problem/s with the base case and explain why these are problems3. First principles test (should government intervene at all)4. What can government do about the problem/s?5. Freedom test
10 questions to eliminate bad policy
6. Strategic gaming test7. Government failure test8. Real experience test9. Cost benefit test10. Transition path
(details in Victorian Guide to Regulation/ policy competition held by Freedom Team of India)
Urgently needed regulatory reforms in India Legislate a mandatory requirement for
RIS for any public policy/ significant project Mandate the 10 point process as the basis for RIS
Create independent Commission to assess adequacy of RISs
Ensure public consultation so the truth emerges
Reducing red tape (costs of regulation)
Measuring regulatory costs
Standard Cost Model (European) Regulatory Change Measurement
method (Victorian) Reducing red tape provides
significant benefits businesses and the community
Task 2: Strategic plans for policy framework reform
1) Legislative framework for RIS (including sunsetting requirement) [Dipinder]2) Detailed guidance on RIS/ policy framework [Sureshan]3) Independent commission to assess RISs [KK Verma]4) Review of key legislation and policies using policy framework within 1 year [Rajan/Abhijeet]5) Red tape reduction program technology [Akshay/Madhu/ Vidyut]
ANY OTHER THOUGHTS ON FRAMEWORK REFORMS?
Any other thoughts/issues?
Issues/obstacles Potential solutions
SECTORAL POLICY ANALYSIS
5 policy areas for analysis based on governance/policy framework School and higher education
[Dipinder] Economic policy (trade/commerce/
production) [Sureshan/ Madhu] Local government [KK Verma] Utilities (energy, water)
[Rajan/Abhijeet] Transport (roads and public transport)
[Akshay/Vidyut]
Economic Policy paper by Dr. (Ms) Madhura Mitu Sengupta Associate Professor, Department of
Politics & Public Administration, Ryerson University, Toronto, Canada
Paper accepted: “Economic Policy Reform and Governance - The Challenge of Decentralization”
Flight delays due to bad weather in N. America
Likely to reach, but late
SCHOOL OF GOVERNANCE
School of governance
We have IITs/IIMs but no internationally reputed school of governance
Governance is a science that includes: Public administration and management Economic analysis (particularly public choice,
agency theory, and mechanism design) Policy analysis (cost-benefit analysis) Regulatory analysis (measurement of
regulatory costs) We need a number of world-class schools
of governance
The task: Setting up a world best school of governance How can a financially sustainable (ie. not
dependent on subsidies from government) be established?
Who would like to pay fees and attend courses?
What courses should it teach?
NEXT STEPS OF THE JOURNEY
Who will implement these reforms? Governments/ political parties? Universities/ civil society?
Three governance reform organisations: India Policy Institute (1999), Hyderabad Freedom Team of India (2009), Indore Sone Ki Chidiya Federation (April 2103),
Delhi
>> Influence next government
Concluding comments
Thanks to IIPA Thanks to TN Chaturvedi, Gurcharan
Das, Justice Tewatia and IIPA faculty and staff
Thanks to participants who contributed funds for this Conference
Thanks to other participants for attending and contributing their ideas
Let this Conference mark the beginning of a journey, not its end Please join:
Freedom Team of India and/or Sone Ki Chidiya Federationif you want these reforms to be implemented
India Policy Institute is still out of pocket for this Conference. So please contribute.
VOTE OF THANKS
Dipinder Sekhon
Together let’s change India