In the land of make believe, ad hoc responses trump improving our processes

For more than a decade, the well-known medical writer and doctor, Atul Gawande, has publicised a checklist for hospitals to work from to avoid common mistakes in, say, delivering a child. The rules are often simple: the need for health care providers to wash their hands with soap before a vaginal examination, or having a machine hooked up and ready in the event that a new-born has difficulty breathing. Despite some improvement, high rates of maternal mortality remain a problem in India, in part because Gawande’s checklist is routinely ignored. 

It’s possible that the architects of ‘the largest healthcare scheme in the world’ had read Gawande’s checklist and still chose to prioritise insurance and the private sector over improving and building more primary health centres. It’s more likely that the expanded scheme was just cobbled together. As Soumitra Ghosh, an assistant professor at the School of Health Systems Studies, Tata Institute of Social Sciences, pointed out recently, even in a relatively developed state such as Maharashtra, less than 3 per cent of eligible families were found to have been enrolled in the government’s health insurance scheme, which was introduced a decade ago, in 2016. More common was the creation of bogus beneficiaries by insurance companies. 

Whether the Congress or the Bharatiya Janata Party is in charge, we remain the land of ad hoc decisions. The decision to boost minimum support prices, for instance, is not only likely to prove inflationary but continues the practice of skewing support of crops that extract a heavy cost environmentally because of their disproportionate use of water. As for boosting agri exports: a column in the Hindustan Times observed that 10 trillion litres of water was in effect ‘exported’ with India’s basmati exports (not covered by the MSP) in 2014-15. 

Similarly, the concerted move by India’s stock exchanges to stop supplying local securities data to foreign exchanges will certainly hurt the Singapore exchange in the short run because it had made a good business from offshore Nifty futures trading, but might well result in MSCI reducing India’s weighting in its emerging markets index, which is tracked by thousands of fund managers. If the idea is to divert the offshore derivatives business from Singapore to the Gujarat International Finance Tec-City (GIFT), it is unlikely to work. When I visited a few years ago, the scale model of the place, likely inspired by Singapore’s financial district, Clark Quay, seemed its most impressive aspect. GIFT’s gift is that it is mostly devoid of people, which runs contrary to the cosmopolitan hubbub of every other financial centre in the world. The two towers are like a new age financial theme park, complete with garbage disposal with Swedish knowhow.

Such self-aggrandisement that might end up as self-mutilation applies also to the higher customs duties put on a wide range of goods, ranging from mobile phones to automotive parts. Ostensibly an effort to boost the government’s Make in India push, it could have the opposite effect. As former finance secretary Montek Singh Ahluwalia noted at a conference hosted by The Hindu in Bengaluru on Sunday, the move runs contrary to more than two decades of steadily reducing this country’s tariffs. As it is, India is the odd man left out of so many regional trade groupings; this lurch towards protectionism will not improve our popularity. 

The push for higher customs duties was also likely a response to India’s consistently overvalued exchange rate. As in so many aspects of Indian governance, the law of unintended consequences applies here, too. It is not easy to discern what the Reserve Bank of India’s policy on the rupee is. Paradoxically, the RBI’s ad hocism allows a substantially overvalued exchange rate to persist that handicaps Indian manufacturing while allowing foreign investors to take advantage of our high interest rates by investing in our overly liberal bond markets with relatively little currency risk, pushing the rupee up further. Other central banks in Asia speak about their currencies often enough, but the minutes released this week of the monetary policy committee meeting in early February had not a word on the rupee even as it cast a wary eye at the ups and downs of Brazilian politics. “RBI and the MPC do not have an explicit FX policy,” writes Ananth Narayan, a professor at SP Jain Institute of Management Research in Mumbai, in an excellent blog earlier this year. “To say that market forces determine the value of the INR …rings hollow when MPC action and specific RBI intervention methodology makes them a huge FX market player.”

And as Ambit Capital points out in the wake of the epic bank heist at Punjab National Bank, the post of the RBI deputy governor in-charge of banking supervision remains unfilled for the past seven months. In the land of make do and make believe, inadequate ad hoc responses almost always trump improving our processes.