#238 Everything's Connected

India Policy Watch #1: Like a Kid in a Candy Store

Insights on current policy issues in India

— Pranay Kotasthane

In the previous edition, I asked you to name your favourite sports policy to date. I don’t have a great answer myself. Nevertheless, my candidate would be liberalising FDI in retail.

When posed with such questions, we often get anchored to the way governments are organised. The best sports policy can only be made by the sports ministry; the best education policy can only be made by the education ministry, and so on. These answers assume that the public policy system is a linear, deterministic system with a small number of variables and negligible overlap across ministries.

But as we discussed in edition #213, it is useful to characterise public policy as a complex system. Such a system is greater than the sum of its parts and these parts interact and share information with each other. Complex systems display non-linear behaviour as small actions can have large effects while large actions can have small effects. As a result, decomposing the system into its constituent parts, and analysing them separately often results in inaccurate analysis.

Deploying the complexity lens makes us think beyond narrow sectoral policies. In the case of sports, it means we can think beyond the obvious candidates such as Target Olympic Podium Scheme (TOPS), Fit India, or Khelo India. As an amateur sports enthusiast, I contend that liberalising FDI in retail had a disproportionately positive impact on sports in India because that policy led to the world’s largest sporting retailer setting up shop in India.

Until fifteen years ago, buying sports equipment was not very different from purchasing soap at a kirana store. The options were limited and the buying experience was consistently disappointing. Moreover, equipment of only the most popular sports found space in the retail storefront.

All that changed with the entry of the French sports retailer, Decathlon; first in the cash-and-carry segment starting in 2009 and as a single-brand retailer in 2013 after the FDI policy allowed 100% FDI in single-brand retail. Decathlon has given the Indian sports enthusiast a choice and a range of sporting equipment that my 20-year-old self would find unimaginable. Allowing FDI in e-commerce was the next step jump, making these sports equipment accessible to people outside Tier-I cities.

I wish we had a real study of the consumer surplus generated by FDI liberalisation. Nevertheless, this example shows how sector-agnostic liberalisation can have a major impact. Ten years after the entry of Decathlon, further liberalisation of multi-brand retail is needed to bring more competitors into the sector, benefiting Indians at large.

Of course, no one policy can solve all problems. All success is multi-causal, especially in a complex system like public policy. But my aim here was to make you think beyond ministry turfs when approaching questions of this nature.

India Policy Watch #2: Holiday Reading

Insights on current policy issues in India

— Pranay Kotasthane

The year-end holidays are approaching. So what’s the best way to spend the holidays? Reading, of course. This time around, I want to recommend some classic reports that tried to diagnose India’s condition. Initial conditions matter a lot in a complex system, hence I’ve picked out reports that give a fair account of the problems that India inherited in various domains around the time of independence.

* Economy: Milton Friedman visited India twice in the 1950s and wrote two stunning articles on “Indian Economic Planning” and “A Memorandum to the Government of India 1955”. His diagnosis rings true even today. Centre for Civil Society has compiled the essays into a book.

* Public Policy and Administration: Paul Appleby’s Public Administration in India-Report of a Survey was an important report where the American consultant tries to diagnose problems with India’s public administration. The report is available on the Internet Archive.

* Science Policy: AV Hill was called by the British government in 1943 to advise on the organisation of scientific and industrial research in India. Some of our over-centralised scientific establishment cut off from the university ecosystem can be traced back to this influential report.

* Politics: It’s amazing how Ambedkar’s diagnosis is accurate in so many areas simultaneously. In Thoughts on Linguistic States, he identifies “one language, one state” and “one state, one language” as the two different approaches for state creation. His election manifesto for the Scheduled Castes Federation from 1951 identifies problems with India’s economy, foreign policy, and society. On the emotional issue of partition, he displays an amazing clarity of thought and analysis. With the benefit of hindsight, we can say that his analysis foresaw events and phenomena other leaders of his generation couldn’t.

Enjoy reading! And share your thoughts on these reports with us.

HomeWork

Reading and listening recommendations on public policy matters

* [Paper] The 2023 RBI CD Deshmukh Memorial Lecture (there’s also an equally excellent NCAER CD Deshmukh Memorial Lecture Series) by Arvind Panagariya argues that India could become the second-largest economy, surpassing the US, 50 years from now. You might well disagree with the conclusion, as do I, but the paper’s worth a read.

* [Article] It takes earth-moving prowess to enjoy a monopoly and yet run into a loss. No surprise that only governments are capable of such feats. Shekhar Gupta masterfully narrates how the Delhi Development Authority has an unsold inventory exceeding ₹18000 crore in value, despite the monopoly power it has enjoyed since 1957.

* [Podcast] The always wonderful Rest is History podcast has a seven-part series on the JFK assassination that you mustn’t miss. I was hooked.

* [News] The union government has banned onion exports now. Controls on exports of non-basmati rice and wheat are already in place. Expect more controls until the 2024 elections. With interventions like these, there’s little hope for agriculture to become a normal area of economic activity.