Before announcing a big programme, govt should test it: Iqbal Dhaliwal

Iqbal Dhaliwal is global executive director of J-PAL (Abdul Latif Jameel Poverty Action Lab), the anti-poverty center at the economics department of Massachusetts Institute of Technology that was founded in 2003 by Nobel laureates Abhijit Banerjee and Esther Duflo. Banerjee and Duflo pioneered Randomised Controlled Trials (RCTs) used to test the effectiveness of a particular intervention to determine whether a change causes a specific effect. In an interview with Asit Ranjan Mishra, during his recent visit to attend the Kautilya Economic Conclave in New Delhi, Dhaliwal spoke about evidence-based policymaking in India, and universal basic income, among other things. Edited excerpts:

After the Nobel award to two of your founders, how things have changed for J-PAL? Have RCTs become more acceptable?

Yes, we get less questions about the methodology issues. A lot of criticism that comes to RCT is because of the impression that people create RCT. We have always said that RCT is a very good tool in some situations, and it is a very bad tool in other situations. And the problem is people interpret somehow that we are saying: “Do an RCT for everything”. But that is not the case. In fact, at J-PAL, we say “no” to more requests to do RCT, than we say “yes”. I would say the ratio is actually not more than 10:100. But yes, I think after the Nobel Prize, there is definitely more understanding and recognition.

When it comes to India, especially the central government, do you think evidence-based policymaking has increased in recent years?

I don't think I'm the right person to judge that, because we don't do an aggregate analysis of how many programmes are based on evidence or not based on evidence. Actually, that might be a good exercise for NITI Aayog or somebody else to do! There is definitely a recognition that the final outcomes are important. For instance, 10 years ago, nobody used to talk about learning outcomes. Everything used to be about the quality of teachers, how many students are graduating from high schools. And now, the government of India talks a lot about learning outcomes, so things have improved.

But my plug would be that India in general is sitting on a lot of good quality administrative data. The main reason for that is how aggressively the government has connected this digitization. Now, Aadhaar card is linked to everything. The key to unlocking more evidence-informed policymaking is to analyse that data. We are very good at collecting data. We are very good at selectively putting dashboards around the data, but we don't systematically analyse that data as much as we should. We should use that data to train more of our own AI (artificial intelligence) models, rather than use a model from America and all of that. But even before we think about AI, we need to think about simple tools like machine learning.

Lots of states, even the Centre, are now doing direct cash transfers for particular groups. There was a big debate sometime back about universal basic income. Where do you stand on these issues?

Universal basic income is unsustainable. What we need is targeted basic income. There is no reason why you and I should be getting an income for anything. We have gone very quickly in India from thinking cash is bad to the other extreme, where we are giving cash for any kind of reason. I feel that eventually we need to settle into something in the middle. What research has shown is that cash is good and all the things that we were worried about, it actually doesn't manifest in the real world. You'll find a lot of studies where they say people actually invest that money into businesses; their health shocks reduce. Abhijit just completed a long-term study, which shows that it's not even as if the benefits persist for one year, but they persist for a long time after that.

What we need to do is better target who the poor are, and what do you want to give that money for? Secondly, what are the subsidies that we are giving them currently and how do you cut that subsidy and turn it into cash? Otherwise, it will lead to fiscal stress.

My hope would be that the Centre, the states and experts come together, design a nationwide programme where everybody agrees —these are the minimum needs for the dignity of our people, we have to transfer X amount to any household, which is below a certain level. But then stop there. These are my opinions as an economist, not necessarily opinions of J-PAL.

The government is now using nudge theory in policymaking, like schemes to incentivise hirings and skilling by companies. Do you think this will work?

Everything should be tested, is my answer. There is no programme which is good or bad, unless you rigorously test whether it is good or bad. My humble request all the time to governments not just in India but everywhere else, you are putting so much effort into this new programme, before you scale it up to the whole nation, let us pick up a few industrial clusters. Before announcing a big programme, let's test it out and let many ideas come.

Even if incentive is correct, what is the right amount of incentive? If they are being trained, how are you measuring the training? If the intention is that this person should get gainful employment afterwards, you need to measure that. Otherwise, the system is so easy to be gamed, and we'll be back to square one. We are now in this situation where we actually have the best tools possible. Let's use these tools to measure and do the right thing.