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Public debate should shape key policies

The Indian economy is passing through troubled times with a falling growth rate and historically high levels of unemployment.

Public debate should shape key policies

Vital: Criticism allows course correction to policy and gives bureaucrats the room to speak the truth to their political masters.



Subir Roy
Senior economic analyst

The Indian economy is passing through troubled times with a falling growth rate and historically high levels of unemployment. Hence, it is urgently necessary to find the right mix of policy to combat the current negative trends and get back to the high growth path.

Since solutions to overarching national economic issues are seldom taken straight out of textbooks, it is critical to have an ongoing public debate which yields the contours of a workable policy. For this, a free and open environment is needed in which people do not hesitate to come out with opinions which can run contrary to the received official wisdom of the day. 

This was recently stressed by Raghuram Rajan, former governor of Reserve Bank of India, whose departure a bit too soon pointed to an atmosphere in which advice was not sought out. He held that suppressing criticism was a ‘sure-fire recipe’ for policy mistakes. “If every critic gets a phone call from a government functionary asking them to back off, or gets targeted by the ruling party’s troll army, many will tone down their criticism.” “Governments that suppress public criticism do themselves a gross disservice.” 

Criticism allows public course correction to policy and gives government bureaucrats the room to speak the truth to their political masters. “No community has a monopoly on ideas, and an attempt to impose a uniform majoritarian culture on everyone can kill minority community characteristics that can be very disadvantageous to growth and development,” said Rajan. Since growth is under stress, is there an atmosphere in which the government is getting the right advice? 

Barely a month after Rajan’s observations, Subramanian Swamy, the bete noire of all those in power, irrespective of whether he is on their side or not, said, “Unemployment will supersede every other thing, including the Ram mandir. But Modi does not listen. He listens to people who do not tell him the truth....He doesn’t want any minister to talk back to him, let alone in public, but in private cabinet meetings too.”

The problem with Finance Minister Nirmala Sitharaman, adds Swamy, is that “she does not know any economics.” The problem with the country today is ‘poor demand’. “Supply is not the problem.” Corporate taxes have been relaxed, enabling corporates to write off their debts. “You should abolish income tax instead so people can go out and spend. People cannot buy biscuits. Go and speak to Britannia.”

The current economic reality is causing people, who were quiet till now, to speak up. The corporate sector, in fact, the entire business class, solidly backed this government when it came to power. The twin shocks of demonetisation and introduction of GST hit mainly the lower strata of business, including informal small businesses. But the corporate sector continued to look forward. The current slowdown, affecting the demand for cars, consumer durables and a lot more, is, however, beginning to tell.

Rahul Bajaj, known for his outspokenness, raised the issue of criticising the government at a function in the presence of the Union Home Minster, Finance Minister and Railway Minister. “During UPA-II, we could abuse anyone. You are doing good work, but if we want to openly criticise you, there is no confidence you will appreciate that. I may be wrong but everyone feels that.”

This view was endorsed by Kiran Mazumdar-Shaw, head of Biocon, who said, “Hope the government reaches out to India Inc for working out solutions to revive consumption and growth. So far, we are all pariahs and the government does not want to hear any criticism of the economy.”

If this went down poorly, what the Finance Minister had to state in response is revealing. “Home Minister Amit Shah answers on how issues raised by Bajaj were addressed. Questions/criticisms are heard and answered/addressed. Always a better way to seek an answer than spreading one's own impressions, which, on gaining traction, can hurt national interest.” This is a giveaway of sorts. If the national interest is invoked to respond to public criticism of economic policy then that tells its own tale.

The growth rate falling below 5 per cent in a  global environment of deceleration is disappointing but not calamitous. One reason why this can have attracted strong criticism is the government's own policy of making much of a high growth rate to project a muscular image of the country.  

A policy to get out of the present slowdown will best emerge from public debate. Such a policy will have the greatest chance of being realistic and achievable. To do otherwise, ie hand down a policy that has been structured sans public input, will be fraught. 

The most well-known recent example of working out a major policy initiative without public input is demonetisation. Any number of experts would have pointed out that the move will likely not work as did not the attempt to demonetise high denomination currency notes during the Janata Dal rule under the leadership of Morarji Desai. One reason why Rajan fell out of grace is speculated to be his advice against this move, which was willed by none other than Narendra Modi. 

The economic failure of communist regimes is attributed in part to their being closed societies in which the party knew what was good for everybody. The party, thereby, scripted its own demise. Democratic India can and has till now done much better by being an open society. And so it must remain. 

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