Toolkit for policy-makers

In Service of the Republic: The Art and Science of Economic Policy
Author: Vijay Kelkar and Ajay Shah
Publisher: Penguin
Price: Rs 699
Pages: 425
 

In 1970, when Vijay Kelkar had earned his PhD in economics from the University of California, Berkeley, Ajay Shah was probably in the early stages of his primary school education before he, too, bagged a doctoral degree in economics from another noted university in California in 1990.  The age difference of almost two decades between the two well-known economists, however, has made no difference to the quality and impact of their collaboration in economic research in later years.

 
Indeed, by the end of 2019, the two had completed their collaboration as co-authors of this magisterial book, In Service of the Republic: The Art and Science of Economic Policy, which should go down in history as an authoritative toolkit on the art of policy-making. Rarely have economists from two generations come together to co-author a book that is likely to make a deep impact on the way economic administrators should approach tricky questions on governance.
 
When should governments intervene to introduce a policy or fix an existing one? What should the state do when there are market failures? How and why market failures take place? And how should policy be guided to address them? These are some of the key questions the book under review addresses. The answers they provide should not come as a surprise to those who have followed the writings of Messrs Kelkar and Shah over the last many years, as also the policy actions they have initiated, either as part of the government or as members of various official committees.

 
The book was originally supposed to be a monograph, based on the C D Deshmukh Memorial Lecture Mr Kelkar had delivered in January 2017. The lecture was titled “Reflections on the Art and Science of Policymaking”, in which Mr Kelkar had also announced that it was part of an ongoing work with his colleague, Ajay Shah, and that the two were planning to write a monograph on these issues. What was planned as a monograph two years ago is now a book of over 425 pages.
 
The difference in the title of Mr Kelkar’s lecture and that of the book deserves to be noted. The book’s title retains the central issue of the lecture, but adds a new dimension. The role of the republic the book dwells on is what makes the policy toolkit relevant and timely. In its entire analysis, the book frowns on the idea of a robust state that is supremely confident of its knowledge of what is good for the people. It argues that a liberal democracy with a government that is selective in its interventions is the best platform for effective and efficient policy-making.

 
The role of representative democracy is given its due importance. No less important in effective policy-making are the foundations of liberal democracy — the principles of debate, dispersion of power, the rule of law and curtailing executive discretion. It is this dimension that makes the book extremely relevant in a political environment in which a government with a robust political mandate often thinks that it knows the best on what will work for the Indian economy and the people. An excellent section on the roll-out of the Goods and Services Tax regime in the last two years and the implementation of the health policy is an example of how the authors’ prescriptions on policy-making can bring about positive outcomes on the ground.

 
In another section, the authors suggest that the state’s power to use coercion can be a double-edged weapon. There are occasions when such coercion helps governance, if used judiciously and when based on a correct assessment of the nature of the problem. There are also occasions when the use of coercion can lead to sub-optimal and even counter-productive outcomes. The authors, therefore, argue that, ideally, the state should stay away from interfering if it is not required or there are no market failures. Freedom, they say, works pretty well in most situations and if the people, including market participants and economic agents, are left to themselves, the overall outcome is not a cause for concern. Yes, the state must intervene, but under specific circumstances such as in redistribution efforts to address certain kinds of market failures.

 
This is not a book that should scare non-economists. There are no tables, no complex discussion on econometric models, nor any regression exercise. Reading the book may make you wonder if it is primarily written for those civil servants and even some of our current political leaders who have a short attention span and insist on PowerPoint presentations or short notes that should have their thoughts summarised inbrief points.
 
Most policy-making challenges are analysed after summarising the key issues and the recommendations in brief points. You almost get a sense that the book is a by-product of a PowerPoint presentation. However, the style and structure followed have no adverse consequences for readers. The reading pleasure or accessibility are not a casualty. The added advantage is that the structure of the book will be an invitation to the civil servants and the political leaders — the real target audience of this laudable exercise.  The authors’ message at the very start of the book should make everyone sit up and take appropriate policy action. Instead of getting drawn into the current political debate on whether the Indian economy can become a $5-trillion one in 2024, it notes that if India wants to repeat the growth surge witnessed between 1999 and 2011, it needs to fix its policy-making within a finite window of opportunity with a young workforce. “We must get rich before we get old,” the authors note with a warning that policy-makers can hardly ignore. Ajay Shah is a columnist with Business Standard