Скачать презентацию This pain and misery is TOTALLY unnecessary Скачать презентацию This pain and misery is TOTALLY unnecessary

4f833986b2dc48e9be4471efa562cb87.ppt

  • Количество слайдов: 154

This pain and misery is TOTALLY unnecessary This pain and misery is TOTALLY unnecessary

This Conference is about changing India This Conference is about changing India

GOVERNANCE REFORMS CONFERENCE India Policy Institute Hyderabad Indian Institute of Public Administration Delhi 13 GOVERNANCE REFORMS CONFERENCE India Policy Institute Hyderabad Indian Institute of Public Administration Delhi 13 and 14 April 2013, New Delhi

Introductory Session 13 April 10 am: Mr T N Chaturvedi invited by Sanjeev to Introductory Session 13 April 10 am: Mr T N Chaturvedi invited by Sanjeev to chair the session 10: 02 am: Introduction to the Conference (Sanjeev) 10: 10 am: Inaugural address (Gurcharan Das) 10: 25 am: First half of talk by Sanjeev 11 am: Tea break 11: 15 am Second half of talk by Sanjeev 12: 05 pm: Special Guest’s comments (Justice Tewatia) 12: 10 pm: Chairman’s comments 12: 30 pm: Lunch break (1 hour)

INTRODUCTION TO THE CONFERENCE Sanjeev Sabhlok INTRODUCTION TO THE CONFERENCE Sanjeev Sabhlok

Welcome! Welcome to the elegant campus of Indian Institute of Public Administration 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 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 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 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 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 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 वयवसथ पर वरतन

We should not hesitate to adopt the world’s best ideas World best practice governance 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 1970 s/80 s, the world discovered economic and regulatory reforms In the 1990 s, the world discovered governance reforms India has adopted neither

Broad structure of the Conference Introductory session on first day: Inaugural address by Gurcharan Broad structure of the Conference Introductory session on first day: Inaugural address by Gurcharan Das Two part presentation by Sanjeev (1. 5 hours) Post lunch on first day (and on second day) Detailed workshops One paper presented on Sunday Preparation 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 - 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 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 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 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

Inaugural Address: Gurcharan Das World renowned author India Unbound and India Grows at Night 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 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 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, Ph. D Economics from USA Taught at A bit about me IAS 1982 batch, Ph. D 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 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 system Economic policy system Regulatory policy system

Plan of my presentation Part 1 1) Theory of good governance 2) India’s system Plan of my presentation Part 1 1) Theory of good governance 2) India’s system compared with Australia’s 3) Public administration reforms for India Part 2 4) Economic policy reforms for India 5) Regulatory policy reforms for India 6) Transition from India’s system to world-best system

1) THEORY OF GOVERNANCE 1) THEORY OF GOVERNANCE

What’s our policy about policy? Think from the highest level first: what is policy 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 Without and systems good frameworks, bad policy is inevitable

Two main questions to ask What should a government do? Are there limits to 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

Good policy necessarily considers implementation issues The “What” must be well thought out “Bad Good policy necessarily considers implementation issues 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 out Policy that is unable to pierce the veil of incentives during implementation is bad policy

This is what we want Goal This is what we want Goal

This is what we get Bureaucrat (black box) Bureaucrat’s goal Our Goal …. by This is what we get Bureaucrat (black box) Bureaucrat’s goal Our Goal …. by failing to think about the politician’s and bureaucrat’s incentives

Sequencing of my talk I will discuss the “How” first Public administration (delivery) reforms 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 A word re: Arthashastra

Arthashastra underpinned India’s past success For 12 out of the past 20 centuries India Arthashastra underpinned India’s past success For 12 out of the past 20 centuries India was the world’s wealthiest, and 2 nd 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 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 Chanakya wanted a strong, minimal state, with control over incentives

Incentives Two axes: liberty, incentives Reminder: incentives include disincentives! Liberty Incentives Two axes: liberty, incentives Reminder: incentives include disincentives! Liberty

Key dimension #1: Liberty is an end in itself. But also necessary for people Key dimension #1: 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 times कह वत जह क र ज वय India was much wiser in ancient times कह वत जह क र ज वय प र वह ह भ ख र ह क परज Government should not engage in business Free markets Free enterprise

 The natural effort of every individual to better his own condition is so 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 “Any restriction on liberty reduces the number of things tried and so reduces the rate of progress” - H. B. Phillips (mathematician)

People create ideas, and wealth Growth = f (freedom, opportunity) Two obstacles to freedom People create ideas, and wealth Growth = f (freedom, opportunity) Two obstacles to freedom 1) Government People innovate Nanny, paternalistic state: • interfering policies and laws better if the • “Food police” government gets Injustice of their way out 1 2 Innovation • contracts not enforced Ideas don’t come from governments Opportunity 2) Social control • interfering religious beliefs • science and critical thinking insufficiently valued Governance must enable liberty (social reform is not a government’s job) pushes out the frontier 3 n (technical frontier)

Key dimension #2: Correct incentives Chanakya thoroughly understood incentives: Best talent in government High 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 nonperformance/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 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) se on esp Incentives R Endowment Local circumstances (beyond the Understanding incentives Institutions (rules) se on esp Incentives R Endowment Local circumstances (beyond the control of the policy maker) } System Created by policy maker

Examples: Incentives explain behaviour Disposing personal rubbish The same Indians don’t throw rubbish on Examples: Incentives explain behaviour Disposing 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 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 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 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 analyse Invisible, 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. 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 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 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 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 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. 2. Base salary (for participation) plus 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 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 How to control? Citizen How to control? Black box of incentives Lots of hidden actions & complex incentives!

Politicians’ interests are totally different to ours Politician’s goal is to get re-elected He 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 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 toes Singapore 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 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 people Incentive 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 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 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 Paying in “patriotism cash equivalent” is not always a good idea Market rate for a particular skill Incentive to perform and be honest, else will lose job – and money! Incentive to be Sacrifice arrogant the “for (doing “sacrifice” for nation” country) and unaccountable Australia pays market rate + incentives India pays 1/3 rd market rate + nationalism

Minimum conditions must be met X Pasteur: Milk must boil before bacteria die To Minimum conditions must be met X Pasteur: Milk must boil before bacteria die To kill incentives for corruption Participation constraint AND Incentive constraint must be met

What about transparency? Can transparency (by itself) eliminate corruption? No. Easy for corrupt officials 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 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 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 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 2) INDIA’S SYSTEM COMPARED WITH AUSTRALIA’S SYSTEM

Flexible control over bureaucracy Bureaucracy is controlled by Acts of parliament Public Service Acts 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, 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 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 sector Targeted 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 => 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-30 s 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 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 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 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 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 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 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 3) PUBLIC ADMINISTRATION REFORMS FOR INDIA

Political incentive reforms As discussed: key reforms could include State funding of elections High 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 Salaries appointments (Under Secretary and above) Bureaucratic system reforms As discussed: Eliminate tenure Contractual Salaries appointments (Under Secretary and above) 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 But this is "not practical”! Good policy maker must design transition path. Eg. Following steps 0: Stop deputations to centre for two years Ask an HR company to advertise all Secretary positions Month 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 Transition contd. Month 9: Strategic plans Month 21: Implementation of strategic plans completed New Public Administration Act Any relevant Constitutional amendment By end of 2 nd 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 4) ECONOMIC POLICY REFORMS FOR INDIA

Chanakya’s insights, once again Chanakya does not prohibit anything Alcohol/ prostitution/ most meats He 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 India: yet another proof that economic freedom works Freedom is increasing rapidly in India since 1990 s q Most sectors liberalised q. E. g. mobile phones q Some sectors are free because the government is basically defunct in those areas q Overall, we have very low levels of freedom => Need to liberalise most sectors Education Health

India’s output has responded rapidly to very limited increase in freedom Table: Share of India’s output has responded rapidly to very limited increase in freedom Table: Share of world output measured in terms of PPP

Economic reforms needed Review and reduce unnecessary role of government Fiscal system reform Financial 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 supply Infrastructure reforms (PPP etc. )

5) REGULATORY POLICY REFORMS FOR INDIA 5) REGULATORY POLICY REFORMS FOR INDIA

Need for optimal (just right) regulation Liberalisation ≠ deregulation We need regulation to prevent/ 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 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) Þ Bad Regulatory Impact Statement Gatekeeping role, includes Cost benefit test Public consultation (transparency) Þ 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 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 10 questions to eliminate bad policy 1: What would happen without any role for government 2. Identify problem/s with the base case and explain why these are problems 3. 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 test 7. Government failure test 10 questions to eliminate bad policy 6. Strategic gaming test 7. Government failure test 8. Real experience test 9. Cost benefit test 10. 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 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) Reducing red tape (costs of regulation)

Measuring regulatory costs Standard Cost Model (European) Regulatory Change Measurement method (Victorian) Reducing red 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 6) TRANSITION FROM CURRENT SYSTEM TO WORLD-BEST SYSTEM

Strategic plans and transitional strategy This is time to our homework Then good results 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 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 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 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

Remarks of Special guest: Justice Tewatia Former Chief Justice of Punjab & Haryana and Remarks of Special guest: Justice Tewatia Former Chief Justice of Punjab & Haryana and Calcutta High Courts

CHAIRMAN’S REMARKS T N Chaturvedi, Chairman IIPA CHAIRMAN’S REMARKS T N Chaturvedi, Chairman IIPA

Chairman’s remarks: T N Chaturvedi Padma Vibhushan Former Comptroller General of India (1984 1990) 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 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 Lunch Break: 1 hour Questions and Answers after the break

DAY 1: POST LUNCH SESSION DAY 1: POST LUNCH SESSION

Plan for post-lunch session 1: 30 pm: Initial set of issues, and outline of 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 QUESTIONS/ISSUES ON INTRODUCTORY SESSION

Issues in your mind at this point We’ll note on the whiteboard We’ll deal 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 STRATEGIC PLANS

Task: Prepare a strategic plan Imagine you are the Prime Minister’s main policy adviser. 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 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 administration 1) Abolition of tenure [Dipinder] 2) Setting Task 1: Strategic plans for public administration 1) 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]

Any other thoughts/issues Identify any issues/obstacles Identify solutions Any other thoughts/issues Identify any issues/obstacles Identify solutions

Request to contribute funds Please contribute to the India Policy Institute which is significantly 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 DAY 2: STRATEGIC PLANS CONTINUED

Review of Day 1 Theory and introduction How can a government do its work? Review of Day 1 Theory and introduction How can a government do its work? Public choice theory/ Arthashastra Participation constraint Incentive constraint Strategic plan for effective public administration

Strategic plan for effective public administration 1) Abolition of tenure 2) Setting market comparable/ Strategic plan for effective public administration 1) Abolition of tenure 2) Setting market comparable/ performance based salary 3) Recruitment through open competition for each post 4) 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 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 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 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 4) ECONOMIC POLICY REFORMS FOR INDIA

Chanakya’s insights, once again Chanakya does not prohibit anything Alcohol/ prostitution/ most meats He 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 India: yet another proof that economic freedom works Freedom is increasing rapidly in India since 1990 s q Most sectors liberalised q. E. g. mobile phones q Some sectors are free because the government is basically defunct in those areas q Overall, we have very low levels of freedom => Need to liberalise most sectors Education Health

India’s output has responded rapidly to very limited increase in freedom Table: Share of India’s output has responded rapidly to very limited increase in freedom Table: Share of world output measured in terms of PPP

Economic reforms needed Review and reduce unnecessary role of government Fiscal system reform Financial 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 supply Infrastructure reforms (PPP etc. )

5) REGULATORY POLICY REFORMS FOR INDIA 5) REGULATORY POLICY REFORMS FOR INDIA

Need for optimal (just right) regulation Liberalisation ≠ deregulation We need regulation to prevent/ 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 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) Þ Bad Regulatory Impact Statement Gatekeeping role, includes Cost benefit test Public consultation (transparency) Þ 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 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 10 questions to eliminate bad policy 1: What would happen without any role for government 2. Identify problem/s with the base case and explain why these are problems 3. 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 test 7. Government failure test 10 questions to eliminate bad policy 6. Strategic gaming test 7. Government failure test 8. Real experience test 9. Cost benefit test 10. 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 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) Reducing red tape (costs of regulation)

Measuring regulatory costs Standard Cost Model (European) Regulatory Change Measurement method (Victorian) Reducing red 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 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 ON FRAMEWORK REFORMS?

Any other thoughts/issues? Issues/obstacles Potential solutions Any other thoughts/issues? Issues/obstacles Potential solutions

SECTORAL POLICY ANALYSIS SECTORAL POLICY ANALYSIS

5 policy areas for analysis based on governance/policy framework School and higher education [Dipinder] 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 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

School of governance We have IITs/IIMs but no internationally reputed school of governance 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 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 NEXT STEPS OF THE JOURNEY

Who will implement these reforms? Governments/ political parties? Universities/ civil society? Three governance reform 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 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: Let this Conference mark the beginning of a journey, not its end Please join: Freedom Team of India and/or Sone Ki Chidiya Federation if 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 VOTE OF THANKS Dipinder Sekhon

Together let’s change India Together let’s change India