No, policy is not too important to leave to the experts

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. One might justifiably quibble over tariff increases over the last several budgets to promote Atmanirbhar Bharat, but the overall trajectory of tariffs has been downward and average tariffs are now below 10 per cent compared to over 400 per cent before 1991. However, there is no reason to believe that what has not happened in the past will not occur in the future. Given the fact that political input in economic policy making 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. We might add for good measure that politicians and economists have a love-hate relationship; they can’t do without each other, and yet politicians routinely mock economists as living in their ivory towers, while economists deride politicians as lacking analytical tools for making robust public policy choices. This may be an oversimplification, but you get the drift.

History is replete with examples of political influence in the legislative process as well as in the implementation of policy. While most such instances are discouraging, like the ones cited above, there are rare cases of creative use of multilateral commitments to engage in tricky domestic reform. As a favoured 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. For example, India’s entry into the WTO mandated recognition of product and process patents that were politically hard to embrace when the dominant model in manufacturing was one of “reverse engineering”. It was possible to offload the political fallout to a non-negotiable multilateral commitment. For similar reasons, crisis-driven reform has a lot of resonance in almost all environments, including ours.

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. Realising this target or even coming close to it will require sustained growth of over 15 per cent per annum in nominal GDP — that’s no mean task. Recall that the golden period of India’s growth fetched an 8.1 per cent 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. The coal scam and the 2G scam are examples of the inability of institutions to keep pace with rapid growth. This is a characteristic of most market-based economies in which institutions play “catch up”, since institutional change is much slower. As growth occurs, institutions also require sophistication, knowledge, and some (not complete) protection from political interference.

For example, the promulgation of the Monetary Policy Committee (MPC) in 2016, replaced RBI’s internal decision-making driven by the central bank governor to include three external experts appointed by the central government to strengthen and bring transparency into monetary policy decisions. MPC minutes are published for wider consumption. 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.

Policy making is nothing if not art that invokes science when expedient. However, science ought to become more integral to the policy formulation process in India, and for that to happen crucial changes are necessary in the ecosystem. Domain experts should be an integral part of the formulation process. Implementation, of course, can be left to the executive. We have often heard a cliché in policy circles: Policy is too important to leave to the experts. That, no doubt, is a clever turn of phrase but it’s not helpful. When the TRAI was first set up, it had a healthy combination of domain experts and public policy professionals, resembling a specialised regulatory agency that reflected a serious intent to strengthen capacity. Capacity was limited then, but the intent was clearly visible. In the quarter century since, more and more professionals are now available in India as universities offer courses on regulation and public policy. The diaspora has always been available to fill the gap. 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.

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. Lest we be misunderstood, we have nothing against retired officers. Retired bureaucrats could be excellent for policy institutions, but not as is the case now, as an entitlement. The net needs to be cast wider so that politics and policy are distanced, not completely but certainly more than it is today.

The recent unravelling of a bizarre episode of regulatory breaches at the National Stock Exchange is just another example of why we need more regulatory expertise. India should not be in a situation in which it is in perpetual hostage to vested interests of politics and business. When agencies tasked with protecting public interest identify with priorities against the interest of the public, they fail to protect the public.

Kathuria is dean, School of Humanities and Social Sciences, Shiv Nadar University and Kedia is fellow, Indian Council for Research on International Economic Relations