National Reform Agenda: Post Modi 1 year Update

Introduction

My January 2014 paper titled “National Reform Agenda for Growth and Welfare” proposed a reform agenda for the five years of the Government that would be formed after the General Election in May 2014.[i]  At that time, a number of pre-election Pols predicted that the BJP-NDA could be the largest party-coalition in the Lok Sabha, there was far from consensus on how far they would be from a majority. Thus the paper can be taken as an objective assessment, given the data and information available till that time, on what needed to be done. 

    A recent paper, titled “National Reform Agenda: Year One of Modi Government,” by the author, Evaluates the actions taken on the issues reaised and suggestions made in the January 2014 paper.[ii] There were three main sections in the Agenda(January 2014)[iii]: The Broad Objectives and aims, Reviving Growth by correcting the mistakes made in the previous four years, with particular reference to Governance, and Economic & Institutional reforms for putting growth on a sustained fast growth path. The paper, uses the same format and headings as in the earlier note, and considers each of the 15-16 sets of issues and suggestions. In each case the action taken by the Modi government is listed and commented on, followed by further suggestions. The first broad suggestion and the conclusions are reproduced here to give a flavor of the paper:

Objective: Closing Welfare Gap

Issue: Welfare Gap It is the gap between our per capita GDP (at PPP) and the World average, which (along with corrupt governance systems) results in our having higher poverty ratios and worse social welfare indicators than those of better off countries. The fundamental objective of any Indian government must be to close the welfare gap of the Indian people with the rest of the World.  This will require a restoration of per capita growth to 6.5% (~ 8% GDP growth) and policies to sustain this growth rate.  If we can sustain such growth for two and a half decades, Indian welfare levels will equal the rest of the world by 2040.

Action Taken: This government seems to understand the critical link between economic growth, employment generation and public welfare. This is reflected in the change in focus from “poverty alleviation” to “poverty elimination” and economic & technological development and employment creation as the principle instrument for achieving it. Another indicator is that it has adopted, as its principle foreign policy objective, the need to close the economic and technological gap with the rest of the World.

        The other issues and suggestions range from reform of laws passed in the last few years, to Governance and corruption issues and Policy and Institutional reforms to put economic growth on a sustained low inflation fast growth path. (for details see policy paper).

Conclusion

 The January 2014 paper suggested that, “It is not necessary to accomplish all the listed reforms within three years, though it may be opportune to take the politically sensitive steps within the first few years.  It is however essential to outline the broad direction of reforms and to take credible steps to implement them.”

  The government has taken action in virtually all the areas suggested by the paper. Thus we can say that it has taken credible steps to implement the suggested reforms. There are undoubtedly a few areas in which action has not been initiated, but this is to be expected from any government. Good progress has been made in a majority of areas, with one exception. The performance on income tax reform issues has been dis-appointing.  Government has, however shown responsiveness by responding quickly to widespread protests on what were seen to be backward steps.

   Inflation has declined sharply from 11% in Oct-Dec, 2013 to 5.3% in Jan-Mar 2015 (CPI2012). Both food (weight 0.39) and Core (weight 0.54) have contributed to this decline, with food inflation down from 14.7% to 6.4% and core inflation from 8.7% to 4.5%. CPI Fuel (weight 0.68) inflation has actually risen from 1.6% to 2.3% because of lags in pass through.

  Economic Growth has accelerated by 0.4% to 0.6% in 2014-5 relative to 2013-14: 0.4% in the case of GDP which approximates what was earlier called GDPMP and by 0.6% in terms of Gross Value Added(GVA) which approximates what was earlier called GDPFC. This is a little lower than what the author had projected, based on the old GDP series.[iv] However, the decline in Inflation is much greater than any analyst (including the author) had forecast. Thus inflation as measured by the Private consumption deflator has declined from 8.5% in 2013-4 to 4.6% in 2014-15 and inflation as per the CPI2012 base has declined from 9.5% to 6.3%. The global factors that have aided the fall in inflation are the same ones that have slowed the recovery of World GDP and World demand for tradable goods and services and thus contributed to the slower recovery of the Globalized part of the Indian Corporate sector.  Thus to the extent that success in inflation control can be attributed to global developments, the same developments also resulted in slower recovery of GDP growth. 

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[i] Virmani, Arvind, “National Reform Agenda for Growth and Welfare,” Policy Paper No WsPP 1/2014. https://sites.google.com/site/drarvindvirmani/policy-papers   

[ii] Arvind Virmani, “National Reform Agenda: Year One of Modi Government,” Policy Paper No. WsPP 5/2015: https://sites.google.com/site/drarvindvirmani/policy-papers

[iii] Virmani(2014) op cit FN 1.

[iv] We had projected an increase of growth rate of GDPFC of 1% +/- 0.25 ie between 0.75% & 1.25%. Thus the actual increase in GVA is a little below this range.

PM Modi’s Development Objectives & Reform Possibilities: Big Bang or Incremental?

Introduction

     One year ago (13/9/2013), I wrote that, “India needs an alternative narrative of economic growth and welfare, that politically challenges the monopoly of the left intellectuals.[i]  I also indicated that BJP leader Modi may be the ‘non-intellectual leader who overthrows this monopoly and creates a new "governance and growth," "right of center" national narrative to compete with the "socialist ideology"? I went on to conclude that, “Shri Modi has a better than even chance of becoming the next Prime Minister of India and of changing the political narrative of National welfare, governance and growth.” Prime Minister Modi’s actions and his government’s performance to date strengthens my belief that he is indeed that leader.

      Several eminent economists and analysts have expressed their disappointment that Prime Minister Modi has not used his election mandate and his majority in the Lok Sabha to introduce “major” reform. I am not one of them because it has been clear to me for more than a year that, it is not his style. He is laser focused on the objectives and goals he has outlined, first in the BJP manifesto, then in the President’s address to the first session of the new Parliament and in subsequent speeches.  And he will make whatever policy & institutional changes that he is convinced are necessary to achieve them, no more and no less.

Likely Approach to Reforms

Given PM Modi’s personal experience and achievement in Gujrat, his first inclination is to improve governance, speed up decision making, make administration more effective, improve the functioning of Departmental Public Enterprises, Public sector Banks and Public sector units and he has started doing all this. But a second, perhaps equally important element of PM Modi’s approach is the understanding that  it is business that will create productive, self-sustaining jobs across the entire spectrum of skills( from unskilled to semi-skilled to highly skilled). Hence to be “pro-poor” is to be “pro-growth” (of economy and employment) and to be “pro-business” is consistent with being “pro-poor.”  Thus it is essential to cut through the jungle of laws, rules, regulations, procedures and controls, to make it easy to set up and run new (job creating) businesses. All business is welcome, domestic or foreign, if it “First Develops India(FDI)” and helps us to close the large economic and technological gap with China and the rest of the World.

  Are “big bang” reforms of the kind whose lack has been bemoaned even by political opponents, needed to achieve PM Modi’s objective of providing job opportunities for every youngster, making India a manufacturing hub and closing the economic & technological gap with the World?  That is the question that I believe the PM will seek an answer to over the next six months.  In my judgment, PM Modi will undertake those reforms that are essential for achieving these results, no more and no less. Thus the initial focus is likely to remain on governance and other incremental reforms that have been outlined in the PMs speeches. If and when the limitations of these improvements is apparent and the PM is convinced that major policy reforms are needed to achieve the objectives he has outlined, only then is he likely to undertake such policy reforms.  The opposite of the same coin is that he is unlikely to undertake (in his first term) any policy or institutional reforms that are either peripheral to his task or whose likely contribution to these objectives is uncertain.

Phasing and Timing

  What are these reforms and how should they be introduced?  My experience of Indian economic reforms from 1987 to 2009, shows that the cost-benefit calculus for any reform must account for the risk of a substantive political counter-reaction as part of the cost of reform. Operationally this means that reform objectives must be kept clearly in mind at all times, but the timing and phasing of their introduction must depend on this modified benefit-cost calculus. The pace of introduction must therefore be “with all deliberate speed” without either being politically foolhardy or being overwhelmed by so called “political compulsions”. Fortunately, PM Modi has demonstrated that he can communicate directly with the public to reduce the political risk and thus increase the benefit-cost ratio from reforms.

Policy Reform Menu

 In my view the following reforms, can restore and sustain growth at 8% for several decades:[ii]

  1)      Macro Pivot:[iii] Scale back government consumption expenditures including subsidies and transfers, to bring Revenue deficit to zero in three years and Fiscal deficits to zero in five years. This will reduce government debt, the Current account deficit and foreign indebtedness and raise the national saving rate, allowing RBI to ease monetary policy and stimulate investment and consumer durable demand without fear of increasing Non Performing Assets or inflation. A UID linked mobile payment system provides the most effective means for delivering cash to all those who need & deserve public welfare support. Competitive auction of all natural resources will reduce corruption and raise more revenues. It is hoped that the Expenditure Reforms Commission will spell out a road map for improving the revenue & fiscal deficits.

  2)      Public sector: Close loss making units and reduce shareholding in profit making ones. Sell those units in industries that are inherently competitive (e.g. steel, airlines, power/ railway equipment, hotels, machinery; banks, insurance).[iv] This will stimulate a surge in manufacturing productivity (as in 1990s).  Use the proceeds of Public sector bank (PSB) share sale to recapitalize them and thus lift constraint on bank lending.[v]  Use PSU share sales to expand the fund for Govt. investment in Public goods infrastructure like highways, seaways, higher speed rail lines, MRTS & sewage collection & disposal networks.

  3)      Environment Protection has become a big bottleneck to investment because of its sweeping authority and expansive mandate.  A professional, technocratic, ‘environment protection agency (EPA)’ should be set up to deal with all types of environmental pollution (water, air, land; chemical, nuclear). The EPA should set standards for different forms of pollution and have the authority to impose penalties for violation of norms.  The environment ministry should have no discretion on application of these norms and standards.  The Supreme Court’s Green Bench, the only court of appeal, must be strengthened to ensure expeditious disposal.  An organization similar to the EPA, should be considered for dealing with ecological issues (forest, wetlands, coast, river basins, mountains).  Ecological issues must be defined and circumscribed much more carefully to eliminate endless governmental reviews and scope for corruption.

  4)       Land Acquisition Relief and Rehabilitation Act. The extremely laudable objective of fairness in compulsory acquisition of land has been converted into an expansive ecological and social agenda. Purely private voluntary land transactions must be removed completely from the ambit of this law and the enormous bureaucratization of rules and procedures rolled back. In addition the process & procedures for changing land use must be made transparent. The concerned minister has already initiated discussion with States, who are now becoming aware of the threats to growth that the law poses. This discussion needs to be carried through to changes in the Act.

5)      Institutional Reform: Fundamental political/electoral, police, judicial, legal and bureaucratic reform to address the issue of pervasive, systemic corruption and restore good governance on a sustainable basis.[vi]  Public safety & security is the right of all citizens as is “equality before law.” In the long term, the “rule of law” is critical to sustaining growth in a democratic open society. With good governance, we can even dream of welfare catch up with China! The e-governance and digital India initiatives can help in reducing corruption as will competitive auction of all natural resources. The law minister has already announced that many outdated laws will be repealed and more will be considered from repeal, amalgamation & simplification. The PM has also announced his support for measures to reduce the presence of criminals in legislatures. Tentative announcements on judicial and police reform need to be pursued more vigorously.

  6)      Infrastructure:  Break up government monopoly in coal and infrastructure sectors and introduce competition.  Convert the Indian Railways, Ports and Airports into publicly owned Ltd companies and set up professional independent regulatory structure to oversee free entry & benchmark competition in these sectors.  Enforce open access in electricity distribution & transmission & separate farm feeders for irrigation. The Digital India mission will be facilitated, particularly in rural areas, by “open access” to telecom land lines and electricity wires. This will set of a cycle of self-sustaining infrastructure growth and productivity improvement. The Coal nationalization act must be amended to allow private entry into coal mining. Coal India should be re-divided into 4-5 companies that compete with each other & shareholding reduced to 49%(to start with).

  7)      Labor Laws, rules & procedures: A reform of labor laws can play an important role in the success of “Make in India” campaign and is critical for generation of better quality jobs for unskilled & semi-skilled youth.  Exit clauses (5-6) in labor law can be repealed, with existing employees in organized sector grand fathered. Allow private competition in Employee State insurance (ESI), Employee Provident Fund (EPF) and other monopoly social welfare schemes for employees.[vii] Reform “Contract labor Act” to make it easier for labor contracting firms to comply with labor laws and increase provision of contract labor to industry. The already initiated reform Apprenticeship Act, to encourage training, instead of hindering it, is a good step.

  8)      Agricultural Policy: [viii]  Halt procurement price led inflation and massive overstocking of wheat and rice, repeal Agricultural Produce Marketing Act and Essential Commodities Act. Remove all policy restrictions on FDI in food retail.  Replace the policy of Ad hoc agricultural import-export bans by import-export tariff bands that offer transparent protection within limits. Re-establish scientific approach to GM crop trials and introduction of GM crops. These & related reforms will reduce Indian food inflation to the much lower levels prevailing globally, and thus help control overall inflation. They will also incentivize farmers to raise productivity and farm profitability.

  9)      Education:[ix] Research has shown that the private non-profit (NPO) sector provides education of quality equal on average to that of the public sector, but at 1/3^rd the cost. By requiring the NPOs to double or triple the salaries of teachers, RTE Act will drive them out & do incalculable damage to the cause of education. These clauses need to be dropped. The “license-permit raj” control system in education, needs to be replaced by a modern system of performance/quality rating and transparent accounting/financial disclosure, that allows students-parents to judge for themselves the quality & cost of education in different schools & colleges.

Conclusion

 The above menu of policy reforms is not cast in stone. As the economy recovers, other policy changes may need to be added to the list and perhaps some removed. The history of economic growth shows, that sustaining fast growth is much more difficult than raising it from a slower level.[x] Many countries have raised growth to higher levels for short periods, few have sustained it for long enough period to move from Low income levels to high income (or even upper-middle income) levels. Success has usually come to those who have a non-ideological, pragmatic approach to economic development, growth and welfare, and have pursued these objectives with determination.[xi]  Successful countries are those who respond to shocks and challenges as they arise instead of ignoring them or allowing them to fester.

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[i] http://dravirmani.blogspot.in/2013/09/modi-anti-intellectual-icon.html

[ii] First presented in http://dravirmani.blogspot.in/2013/12/reforms-2014-19-for-employment-and.html  and Arvind Virmani, “National Reform Agenda For Growth and Welfare,: Policy Paper No WsPp1/2014, January 2014. https://sites.google.com/site/drarvindvirmani/policy-papers .

[iii] http://dravirmani.blogspot.in/2013/02/macro-pivot-rebalancing-of-indian.html.

[iv] For rationale, see https://sites.google.com/site/chintan1997reg/institutional-reform/governance-corruption

[v] A recent  calculation shows that the market value of the 23 largest PSBs (excluding SBI) is less than the market value of one private bank. Thus a large portion of the national debt could be eliminated by selling these 23 PSBs. All those who are declared eligible for bank licenses by the RBI could be authorized to bid for controlling shares in a competitive auction of the smaller, less profitable PSBs (with 51% minimum govt. holding deleted). Govt. would also sell 25% of its shares in the other 23 PSBs (reducing it from 51% to 26%) so as to capitalize them.

[vi] See institutional reforms at, https://sites.google.com/site/chintan1997reg/institutional-reform

[vii] The New Pension Scheme (NPS) for government employees already allows private management of these funds.

[viii] See Agriculture reform at https://sites.google.com/site/chintan1997reg/economic-policy-and-regulation/agriculture. 

[ix]  “Sustaining Employment and Equitable Growth:  Policies For Structural Transformation Of The Indian Economy,” Working Paper No. 3/2006-PC, Planning Commission, March 2006. http://planningcommission.nic.in/reports/wrkpapers/rpwpf.htm.

[x] “Accelerating And Sustaining Growth:  Economic and Political Lessons,”  IMF Working Paper No. WP/12/185, July 2012. [ http://www.imf.org/external/pubs/cat/wp1_sp.aspx?s_year=2012&e_year=2012&brtype=default ].

[xi] https://sites.google.com/site/chintan1997reg/economic-policy-and-regulation/skills-education or Arvind Virmani, “Sustaining Fast Growth In India: Economic and Political Economy Lessons,” Working Paper No. WsWp 3/2012, June 2012 [ https://sites.google.com/site/drarvindvirmani/ ].

BHARATIYA VIKAS NITI SANSTHAN (BVNS): Indian Development Policy Institute (IDPI)

INTRODUCTION

      The honorable Prime Minister announced to the Nation in his independence day address that,  “we will replace the Planning Commission with a new institution having a new design and structure, a new body, a new soul, a new thinking, a new direction, a new faith towards forging a new direction to lead the country based on creative thinking, public-private partnership, optimum utilization of resources, utilization of youth power of the nation, to promote the aspirations of state governments seeking development, to empower the state governments and to empower the federal structure. Very shortly, we are about to move in a direction when this institute would be functioning in place of Planning Commission.”

     The abolition of the Planning Commission means that there will be no National five year plans, no annual plans related to it or flowing from it, and no meetings of Chief Ministers in Delhi to discuss “State Plans.”  Correspondingly there will be no ‘plan allocations’ or financial approvals (by the erstwhile PC or the new institution). The mandate of the National Development Council would have to be modified (perhaps) by replacing “Plan” by “Policies” and “Planning Commission” by BVNS/IDPI). The distinction between Plan and non-plan expenditures will also dis-appear and needs to be replaced by the economic (functional) distinction between “consumption” and “investment” expenditure, with ‘repair and maintenance” of assets, included in the latter.  Its treatment as “revenue” expenditure in government budgets leads to neglect and deterioration of physical assets. By definition, “current” expenditures have a ‘short’ and “investment” a ‘long’ time horizon.

The Finance Commission, set up under the constitution, with a fresh set of members every five years, to recommend the division of tax revenues between Center & States and Grants in Aid from the Center to the States, focusses on economic & social needs during the five years. Though “Grants in Aid” can cover “capital” Grants, these are based on demands put forward by States,  comments by Center (with inputs from the Planning Commission), and any expert who wants to depose before the FC or is requested by the FC to do so.  With the abolition of the PC, inputs based on systematic research and integrated analysis of long term issues and problems would be reduced or eliminated.

     The ministries of government, including the Finance Ministry, are usually consumed by short term issues with a horizon of a few years and are looking for quick answers. They do not have the time or capacity for medium-long thinking or for obtaining an input from a wide variety of relevant sources on a continuing basis.  The new institute is designed to fill this gap in government operation. Its experts can act as a bridge between the routinized political or occasional crisis driven, operation of most government Ministries and Departments, and the new ideas and thinking across the country and World.[i]  Global experience shows that there is little or no transfer of new knowledge from Universities, research institutions and scholars to Government decision makers, unless there are experts within the government who can understand and appreciate new thinking and research and translate it into practical policy advice and programs.

 SCOPE

 The new institute would combine three overlapping elements,

a)      National Think Tank that does ‘policy oriented’ research on important national issues,

b)      Policy Planning: An organization for holistically examining Central Government (CG) objective, goals, policies, institutions and programs, suggesting improvements/changes and doing “operational” planning to achieve Central Government goals,  with respect to the Central list & part of concurrent list, that come under the purview of CG ministries and departments. [ii] The Ministries would be required to give to IDBI, all data required to fulfill this role!

c)       Federal Forum for States to contribute to and gain from analysis of development goals and problems related to the States (State list and part of concurrent list handled by States) and solutions thereof.

        Unlike the Planning commission, which formally approved the detailed allocation of “Plan funds” on an annual basis, the BVNS/IDPI‘s recommendations relating to Central government ‘investment’ and CG “capital grants” to, and debt market borrowing limits for,  States for their ‘investment’, would be advisory.  This would provide to the PM a considered view independent from the parochial views of the Central Ministries and Departments. The formal financial allocation process would be undertaken by the Finance ministry, in the light of Finance Commission recommendations “Grants in Aid” to States for Investment and the directions of the PM.

MANDATE

The national mandate of the BVNS/IDPI could include;

Future Challenges & Opportunities

1.       Analysis of economic, demographic, environmental, social & international trends and forecasting potential problems and opportunities, which will affect the Nation or a group of States (over different time Horizons ranging from 4 to 20 years).  Working out and disseminating potential solutions to problems and ways of exploiting new opportunities through appropriate Policies, institutions. laws or initiatives.

Current goals & problems

2.       Definition of national and States’ goals (development, growth, employment opportunities, poverty elimination, public health, basic education & skills) in operational terms, analyzing current national, regional and States’ problems and searching for approaches/methods that have succeeded in achieving goals most efficiently (in India or in other countries). The analysis would relate to policies, institutions or programs and the most effective mix of government, private and non-profit/non-govt. organizations (including PPPP).  Disseminating “best practices” to States and red flagging methods and approaches that have failed.

Past Review & Learning

3.       Reviewing and analyzing Central and State Government institutions, policies, programs and projects and analyzing the reasons for their successes and failures.  Drawing lessons for the future and devising ways to improve current & future programs and projects.

Resources: Optimal Use

4.       Policies and institutional structure for the optimal use of natural resources (land, minerals, oil, water, energy) and human resources (job skills & education, public health).  Policies and institutional structure to promote efficient and effective use of capital resources (domestic and foreign, government, market & NGOs-NPOs).  The institute on Public Private Partnership, “3P India” proposed in the budget, could be a part of the BVNS/IDPI or an affiliated institute.

State, Federal

5.        Interact with States Governments & experts working on States’ problems, with a view to identifying issues and problems that they are seeking answers for. Searching for solutions among other States and globally. Working with States to adapt, operationalize these solutions. For this purpose it could carry out case studies or pilot projects in States.  Seek the active participation of States to meet national development goals. Devising mechanisms & institutional structures to stimulate and sustain States active participation on a continuing basis.

Advisory Bodies/Mission Groups

     The Institute would set up a number of Advisory Boards on complex issues (e.g. climate change) or issues that required detailed knowledge or expertise (e.g. legal ambiguities in tax laws, PPPs or supply contracts) or which required continuous interaction (creation employment opportunities, “Ease of doing business”). The institute could also appoint task specific advisory committees (e.g. defining the parameters of a “smart city”, propagating specific policy conclusions). 

The new Institute should immediately set up the following groups for translating the PM’s vision, as suggested in the BJP manifesto and the subsequent statements of the Government (Presidents’ address to new Parliament, Budget Speech of FM & Independence day address of PM) into concrete policies, institutional changes and programs.

Digital India Group

      This group would prepare a vision, an integrated Plan and related polices for extending the broadband network to every corner of the country and using it to provide E-gram, e-governance solutions, E-education, E-skilling, E-Public health, E-medicine, E -commerce related to agriculture, etc.

Swach Bharat Group

    This group would prepare national approach to Sewage, Sanitation, Public Toilets, Water pollution and the creation of a solid waste disposal grid and a waste treatment and disposal grid. It would prepare a plan for creating a clean India with the participation of all citizens of India, including issues like public education on health and cleanliness and using the advertising industry and other private groups to promote cleanliness.

Smart Cities, 100 Cities Group

    New Cities/smart cities to create jobs and employment opportunities, efficient use of energy and water, land use planning to minimize transport costs and traffic congestion, integration of public transport, cycling and walking. Cost efficient ways of using technology in a lower middle income country with a population of 1.2 billion. It would also address the issue of why India has slums instead of rental housing for low income people (as in developed countries) and how to change this.

Ease of Doing Business Group

   This group would document the jungle of controls that hamper business and commercial activity and job & employment creation. It would develop comprehensive strategies, legal, regulatory, administrative and political, for cutting oppressive controls and  identify detailed action at every level.

National Water Grid

      This would cover issues  of connectivity of rivers, depletion of underground aquifers, spatial agricultural policies for optimal use and conservation of water, supply of clean drinking water to all citizens. Use of flood plains of monsoon fed and seasonal rivers to store and supply drinking water.  Supply and pricing of water for commercial and industrial use. Use of waterways  for internal transport. Cross border transport and to transit across neighboring countries.

Sagar Mala Project Group

   Use of major and minor ports to promote, international and national trade and commerce, to reduce transport costs and energy used in transport.  Policy and institutional changes needed for achieving objectives(eg in Port Trusts Act and the structure and management of Port Trusts).  Promotion of economic integration of all coastal areas as well as the coast with the hinterland through integrated road-rail-river connectivity.

Public Security Group

   Reexamine all aspects related to public safety security of citizens, particularly that of Women and Children in a changing social context of greater mobility(from ancestoral village to other rural & urban areas) , the move from joint families to nuclear ones, girls studying at distances from home or in other village/city, greater number of women working outside the home, young men disconnected from family and childhood support structures. Work out legal, judicial, police and other reforms. Develop ideas for community social, sports and activities and community structures and institutions to support them.

Institutional Structure

    A radically different structure can be envisaged in which there would not be one, but two separate institutions.

        I.            A Development Policy Institute combining the role of a policy oriented think tank and the role of the Economic Advisory council to PM. Thus the PMEAC could become the Governing Board of the Think Tank and its chairperson the primary economic advisor to PM. This would cover all national issues and problems that the Central Government has to address and decide on.

      II.            An Inter-States Forum which is a re-designed ‘Inter State Council’ with its own research Staff and research departments, dealing with issues on the States list of the Constitution and parts of the Concurrent list that are under States’. This body would have much greater representation from the States, Staff with experience in States and Experts on State level issues.

Appendix: Conventional Structure?

If a conventional approach is adopted, the institutional structure could be as follows: The Institute would be managed by a Deputy Chairman/Managing Director/CEO and overseen by a governing board, with PM as Chairmen and the DC/MD/CEO as ex-officio member-secretary.  Members heading the three to five overarching departments of the BVNS/IDPI(below) would also be ex-officio members of the board of governors.  The governing board would have representation of Chief Ministers/State Ministers and Central ministers (current of former). A dynamic former CM/State minister could head the Department dealing with States’ issues. It could also have a couple of active business persons, familiar with the difficulties of investment, job/employment creation and production as members. The rest would be macro-economic, sector, industry or other experts, who head the departments of the institute. 

    The organization below the board level, managed by the DC/MD/CEO could have either of the following structures:

A.      Three major departments, headed by Board Member/Directors, corresponding to the three broad objectives outlined under the “Scope” section: (a) A department corresponding to a high quality “think tank”, (b) A policy planning department for analyzing & suggesting Central Govt.  policies, institutions and resource allocations and assisting Central Govt Ministries in “operational planning”[iii] (c) A department dealing with Issues of interest to the State, particularly those on the States list and parts of the Concurrent list.  Each of these could have a number of divisions dealing with different subjects/issues/goals (eg Transport, Energy, Sanitation & Cleanliness).  This may require a seven person governing board.

B.      Five departments headed by Board Member-directors corresponding to the five mandates:  (1) Future challenges and opportunities, (2) Present objectives and problems, (3) Evaluation of Past experiences, successes and failures, and lessons thereof. (4) Optimal use of the Nation’s natural and human resources, and (5) Strengthening the Federal Structure and greater participation of States in development.  This may require a nine or ten person governing board.

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A version of this article appeared under the banner, “What the Modi Government’s Mandate for the New Think Tank May Include,” on 23^rd August 2014 at   http://ow.ly/ADChr .

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[i] It is assumed that the Economic Advisory Council to PM (PMEAC) will be folded into the new Institution, while the “Inter State Council” would continue, perhaps in a modified form!

[ii] Arvind Virmani, “Planning for Results: Public Accountability  Information System,” Working Paper No. 1/2007-PC, Planning Commission, March 2007. http://planningcommission.nic.in/reports/wrkpapers/rpwpf.htm

[iii] Virmani (2007) op cit.