Policy devoid of principles

Watching evening debates on Indian television is an unnerving experience. Besides the uncontrolled shouting and the lack of intelligent and respectful discussion, it is always a slugfest about policies and rarely about principles. Most Indians would be hard-pressed to identify the set of principles that guide different political parties. Election manifestos are a worthless listing of populist programmes and not compelling documents of a party’s guiding and uncompromising principles.

But, if India is going to change, it will need transformational ideas that are based on principles and not a mishmash of policies. It is essential, therefore, to differentiate between principles and policies. India’s policymaking often mirrors the chaotic and unplanned growth of its cities because it lacks the key element of nation building — a clear, enunciated set of broad principles that bind people, policy and governance. Political leaders must outline a set of principles which will eventually provide a roadmap for all policies. Because without clearly laid-out principles, policymaking becomes reactive, chaotic, conflicting and wasteful.

Policymaking involves finding solutions to problems. But in the absence of principles, it becomes a disorderly process. Ask a hundred people to solve a problem, and you will likely get a hundred different solutions. But once a framework of principles is laid down, the set of feasible solutions narrows. Take GST, for example. It was developed without a clear set of principles on what was to be achieved. Was it maximising revenue collection, or unifying taxes across states, or tax simplification, or increasing the tax base? As a result, it ended up being a ragbag of conflicting rules. More than 35 changes have already been made to GST in less than five months — not a good testimonial for policy consistency. Imagine how much more efficient, clearer, and transparent GST would have been had it been based on the simple principle of ‘minimising the burden of paying taxes’. Every GST rule would then have been driven by the question: Does it help simplify things and make compliance easier? And, if that had been done, we would not have had the needlessly complicated boondoggle that we have today.

Principles are broad, clear and stable descriptions of what a person believes. For example, I believe in the principle of free markets and economic freedom. These positions have been arrived at after years of studying alternative economic systems. As a result, my policy prescriptions for the vast majority of India’s problems are market-based and rely on the instinctive ability of people to decide for themselves what is in their best interest. A socialist, on the other hand, would run every solution through the government because he believes that people are generally stupid and that only the government (and its bureaucracy) has the wisdom to dictate how things ought to be done. A policy prescription for India’s banking problem for a free-market advocate like me would, therefore, be to do away with government-owned banks by selling their existing assets to private parties and letting the new owners find outside capital to inject into the banks. The person guided by socialist principles would entrust the government to bail out the state-run banks using taxpayer money. Different principles, entirely different policy prescriptions.

Consider another principle of modern statehood — the size of the government. It is a fundamental question about how we wish to be governed, what form of government we want, how much power we are willing to let it wield, and how much we are willing to pay in taxes to sustain it. A big overreaching government is expensive to maintain, and because it attempts to do too much, it often ends up doing nothing well. On the other hand, a small, lean, efficient government focuses only on a small set of enumerated responsibilities, and, as a result, provides good, effective governance. Prime Minister Narendra Modi, in his pre-election speeches in 2014, often referred to “minimum government and maximum governance”. Many of us, who believe India’s salvation lies in a small and less intrusive government, were hopeful that his government’s policies would be driven by this principle. He has had multiple opportunities to reduce the number of ministries, reduce the government’s involvement in business activities, and reduce the country’s overwhelming bureaucracy and stifling regulatory burdens, but he has whiffed on every opportunity. So, after three and a half years of the Modi administration, the government is now bigger, and at the front and centre in every aspect of economic and social activities. Demonetisation is a good example of the heavy hand of a big government. A handful of people, without expert advice, created a policy that put an entire nation of 1.25 billion people on hold.

Lee Kuan Yew transformed Singapore from a British colonial outpost with limited natural resources, racial unrest, high unemployment, domestic instability, and economic uncertainty into a prosperous city-state in a span of 25 years. He had one underlying principle that guided his policymaking: He fundamentally understood that people were everything. He believed that the development of the people of Singapore was the key to the country’s social development and long-term economic prosperity.

Contrast this with Indian policymaking which is driven primarily by political expediency and not principles. People become tools, and policymaking starts favouring one group over another. Take Minimum Support Prices (MSP) for agricultural goods, for example. It benefits only a tiny section of the farming community (mostly the large, wealthy farmers) but adversely affects a majority of people who have to pay higher prices for inefficiently produced food grains. Exempting people from income taxes based on their occupation and not their income — as in the case of agriculture — is another example of policies built not on the underlying principle of fairness but on politics.

The transformation of India and the prosperity of its people will depend critically on electing leaders who are driven by principles.

The author is the founder, contractwithindia.com. Views expressed are personal.