Opinion A day at the races
Budget forecasting is big but futile. Can we instead talk about implementation?
Budget forecasting is big but futile. Can we instead talk about implementation?
The media is ramping up for Budget Day. TV panelists and leader writers are speculating vigorously about what the budget has in store,even though they cannot change anything in it. Invitations are going out from TV channels to business leaders to come watch the budget live on giant screens. While the finance minister reveals his budget in Parliament,these businesspeoples reactions will be broadcast widely. The response of the stock market will be displayed alongside,like an electrocardiogram. When the FM announces X,viewers will immediately see how the stock market has responded. Up the index goes with the first announcement,and then down after the second,leaving the viewer hardly wiser. So what is the point of all these discussions that will take up so much time and space before and during the budget? Perhaps,in Shakespeares words,they are full of sound and fury signifying nothing.
Major debates in the media about the economy seem to be mostly about betting on outcomes,and about predicting outcomes,rather than deeper deliberations about how to improve outcomes. For example,debates about what the budget holds in store are bets on an outcome that debaters cannot change. So are discussions about whether GDP growth in 2011-12 will come out at 7 per cent or something else. The year has run out: now,what will be will be. Nevertheless,views of Indian leaders and international analysts on the Indian economys final growth number make front-page news. Predictions of what may happen in the next year may be more useful. At least they can guide investors on how to place their bets. If guessing the growth in a year that is almost over is like betting on a hand of cards already dealt,predicting growth next year is like betting on a horse race yet to be run. Betting is a big industry,and so is economic forecasting.
The talent to ride a horse and win a race is very different from the skills required to predict the winner. Professor Dorit,a legendary teacher at the Harvard Business School,exhorted every class of freshmen,Gentlemen,when you leave here,make something; dont just keep track of it. Decades have passed,his plea forgotten. The best of the best from business schools went into tracking industries,such as financial investments,rather than making industries,such as manufacturing,with consequences for the real US economy,and values that have guided US economic policymaking,that are now apparent. In India too,we must get back to manufacturing and making real things. Predicting whether something will happen,as an economic forecaster might,is not enough. We must make it happen. Therefore,the mass media must engage people more with what is required to get things done,rather than speculations about what the growth rate will turn out to be this year after the statisticians have put their final numbers together,and mere predictions of future growth rates.
The economy will grow if there are more investments. However,the constraint is not whether there will be enough money to invest. The deputy chairman of the Planning Commission is reported to have said,correctly,that while money required will be there for infrastructure,the constraint is in poor implementation of projects. Consider our benighted power sector. India needs a huge amount of power. Investments were attracted by mega power projects devised by government. Sadly,the projects have run into several problems: some related directly to project completion and many to implementation of reforms in related sectors,such as coal supply and power distribution. Therefore,the investment tap is turning off. It can be opened again if we can get done what all we know needs to be done. We have commissions and seminars for reforms of the financial sector,and estimates of how much finance we require. Meetings with investors,economists and trackers also get a lot of attention. And what do they say? Too many hassles on the ground: India should improve implementation. Therefore what are most urgently required now are commissions and seminars on implementation,and more sleeves-rolled-up meetings with makers and doers.
Let the budget pass. It is about finance. And the finance minister has some serious financial issues to address. He has been pressed with demands for more allocations to their sectors by ministries,social activists and business lobbies. He is bound to but let me not speculate! point to concerns about implementation in several sectors and the need for better management of resources to produce better outcomes. After the hype of the budget day is over,the media must move the public discourse to what is required to improve implementation and how the country can get more bang for the buck. Headlines must shift from speculation and prediction of growth rates to getting things done.
The national agenda has to be reforms of institutions. The Second Administrative Reforms Commission (ARC),taking lessons from other countries that have reformed government institutions to produce better results for their citizens,such as the UK,Japan,Sweden,Thailand,and Australia,has described what needs to be done in our country.
The media has shown its power in the last two years to grab public attention and compel political action. Let deliberations now focus attention on implementation of institutional reforms,such as those recommended by the ARC,not merely financial sector and FDI reforms. Because institutional reforms get at the root causes of why,according to international surveys and Indian entrepreneurs too,India is presently not as good a place for investments and for doing business as it has the potential to be.
The writer is a member of the Planning Commission
express@expressindia.com
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