Go for evidence

Go for evidence

Indian economists do well abroad. Why not utilise more economic expertise at home?

Abhijit Banerjee, one of three awardees of the economics Nobel this year, characterised his prize winning work as a movement. The movement, represented by randomised control trials in economics, is devoted to looking for evidence. Some state governments are already using his work to design programmes. The larger message for Indian policy making, however, is the need to use evidence as a critical input in policy making. This is an aspect largely absent today, leading to a situation where even well intentioned policies lead to perverse outcomes. The economic and social costs of policies devised in a vacuum are prohibitive.

Demonetisation is perhaps the best example of an ill-conceived policy whose adverse effects lingered long. The casualness with which it was imposed became apparent when government, after its implementation, informed Parliament it did not have an estimate of black money in the economy. A powerful medicine with wide ranging side effects was administered without a sense of the seriousness of the problem, or much input from professional economists. Medicine without science or evidence is often quack medicine. But even GST, an excellent idea that has worked well in other countries, has been poorly implemented in India.

Evidence is intertwined with data. In this context, India needs to enhance its standard of data collection and ensure its timely dissemination. The credibility of data depends on sticking to a timetable. Instead of undermining the work of the statistical system by being dismissive of data when it is inconsistent with political rhetoric, the government should work on ways of incorporating it into decision making. In a world undergoing unprecedented quantification, undermining or ignoring it can only lead to poor policy choices.

One way to make better choices is to bring in more domain experts into the executive. India does, on occasion, induct domain experts through lateral entries. The Modi government entrusted Swachh Bharat to a handpicked domain expert. The foreign ministry has gained greatly in heft due to the lateral entry of S Jaishankar. Economic management is one of the most complex areas in governance. India, in the face of grave challenges, has strangely avoided inducting more domain experts in economic ministries. This needs to change. Economists of Indian origin excel everywhere. Yet, they remain unwanted at home. The country is poorer for it, not just figuratively but literally. It can’t be a coincidence that India consistently underachieves its vast economic potential.