A case for specialists

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FRBM Act

Mains level : Paper 2- Challenges in policy making

Context

Given the fact that political input in economic policymaking is becoming dominant as regional and state-level issues assume overriding significance, it’s perhaps time to consider sheltering economics from politics and vice versa.

Continuity in policy

  • The sudden withdrawal of farm laws last year and the repeal of the land acquisition ordinance in 2015 are two examples of policy backsliding in an otherwise decent record of policy continuity since 1991.
  • The overall trajectory of tariffs has been downward and average tariffs are now below 10 percent compared to over 400 percent before 1991.
  • As a favored rule, domestic policy priorities should not be held hostage to external pressures, but they can and ought to be used to push through difficult and desirable domestic reform.

Challenges in achieving high growth

  • Challenges in reforms: Relying on chance events to drive reform might work in rare circumstances, but not when the aspiration is to become a $10 trillion economy by 2030.
  •  Realizing this target or even coming close to it will require sustained growth of over 15 percent per annum in nominal GDP — that’s no mean task.
  • The golden period of India’s growth fetched an 8.1 percent increase in real GDP between 2004 and 2009.
  • Even during this period, the growth story was cut short by the global financial crisis and devilled intermittently by institutional weaknesses.
  • Failure of institutions: The coal scam and the 2G scam are examples of the inability of institutions to keep pace with rapid growth.
  • As growth occurs, institutions also require sophistication, knowledge, and some (not complete) protection from political interference.

Need for the fiscal council for budget-making process

  • The Monetary Policy Committee (MPC) in 2016, replaced RBI’s internal decision-making driven by the central bank governor to include three external experts to strengthen and bring transparency into monetary policy decisions. 
  • This can be extended to other important government functions, such as the budgetary process
  • Successive finance commissions and the Fiscal Responsibility and Budget Management (FRBM) Review Committee have recommended the creation of a fiscal council that, like the MPC, will bring transparency in the budget-making process.
  • The idea is simple, moderate the influence of the political agenda and powerful interest groups that could, and often do, capture the process.

Suggestions on policymaking

  • It is art and science: Policymaking is nothing if not art that invokes science when expedient.
  • Domain experts should be an integral part of the formulation process.
  • Implementation, of course, can be left to the executive.
  • When the TRAI was first set up, it had a healthy combination of domain experts and public policy professionals, resembling a specialized regulatory agency that reflected a serious intent to strengthen capacity.
  • Importance of domain experts: Instead of going down the chosen path, TRAI has reversed gear and today resembles a government department.
  • In fact, this is the same affliction with almost all regulatory and policy institutions that are now a feature of India’s increasingly market-based economy.
  • As more sectors (for example, the Gati Shakti initiative) engage the private sector, lessons from the last quarter-century should not be wasted — domain expertise is conspicuous by its absence in regulatory and policy institutions.

Way forward

  • Create a cadre of professionals: Commissions tend to be made up of retired civil servants or retired judges.
  • This is worrying and, therefore, it is vital to create a cadre of professionals with technical expertise for the complex tasks of managing the policy processes.
  • Distancing politics from the policy: The net needs to be cast wider so that politics and policy are distanced, not completely but certainly more than it is today.

Consider the question “Politicians and economists have a love-hate relationship; they can’t do without each other. In context of this examine the issues with policymaking in India and why role of the domain expert is important in policymaking today?”

Conclusion

India should not be in a situation in which it is in perpetual hostage to vested interests of politics and business.

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