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News: The recent regulatory breaches at the National Stock Exchange is an example of why India needs more regulatory expertise.
In this article, the author argues for inclusion of more domain experts in policy making.
Why there is need to consider protecting economics from politics and vice versa?
One, there was continuity in policy implementation since 1991, but the sudden withdrawal of farm laws and the repeal of the land acquisition ordinance in 2015 are two examples of policy discontinuity. It shows intermixing of politics and economics.
Two, the political input in economic policymaking is becoming dominant as regional and state-level issues are assuming overriding significance.
Three, domestic policy is also influenced by other factors. For instance, external pressure should not be the basis of reforms, but it can be used to push desirable domestic reform. For example, India’s entry into the WTO mandated the recognition of product and process patents. This was politically hard to accept, and there were differences between economics and politics.
Why there is a need for specialists?
First, relying on the crisis to drive reform only work in rare circumstances. When the aspiration is to become a $10 trillion economy by 2030, then a sustained growth of over 15 percent per annum in nominal GDP is needed. But as growth occurs, institutions also require sophistication, knowledge, expertise, and some protection from political interference.
For instance, between 2004 and 2009, India experienced 8.1 percent increase in real GDP. But the growth story was cut short by the global financial crisis and institutional weaknesses such as coal scam and the 2G scam.
Second, the Monetary Policy Committee (MPC) in 2016, replaced RBI’s internal decision-making to include three external experts. MPC minutes are also published. This has enhanced the transparency into monetary policy decisions and efficiency. Hence, similar reforms should be extended to other important government functions, such as the budgetary process.
Also, successive finance commissions and the Fiscal Responsibility and Budget Management (FRBM) Review Committee have recommended the creation of a fiscal council to bring transparency in the budget-making process. It will help in moderating the influence of politics and powerful interest groups.
Third, domain experts should be an integral part of the policy formulation process. Implementation can be left to the executive. For instance, when TRAI was first set up, it had a healthy combination of domain experts and public policy professionals. Capacity was limited, but the intent was clearly visible. But instead of strengthening it more, TRAI resembles a government department now.
Fourth, India has more and more professionals as universities offer courses on regulation and public policy. The diaspora has always been available to fill the gap.
Fifth, since more sectors (for example, the Gati Shakti initiative) engage the private sector, lessons from the last quarter-century should not be wasted. Domain expertise helps in creating a cadre of professionals with technical expertise and also helps in managing the complex tasks of policy processes.
What is the way forward?
Policies should be independent of vested interests in politics and business. Agencies tasked with protecting the public interest should work in the interest of the public. Also, retired bureaucrats are excellent for policy institutions, but they should not be an entitlement.
Source: This post is based on the article “A Case for Specialists” published in Indian Express on 17th Feb 2022.