The Indian FDI fiasco, and how “my” government would have dealt with it


I've outlined some aspects of a good policy process in BFN, its Online Notes and, more recently, as part of FTI's policy framework. The proposal, today, regarding a Governance and Economic Reforms Commission (here) has added to my many suggestions for a world-class policy making framework for India.

Assuming then that "my" government was in place in India, how would it have dealt with the FDI issue?

First of all, the FDI issue would have formed part of an election commitment. It would have been widely and clearly communicated in advance to the entire country. Its costs and benefits would have been highlighted through a simple FAQ. (FTI is currently working on such a draft FAQ – but we need 100s of such FAQs on a wide range of policy reforms.)

Second, assuming "my" government was voted to power, I would undertake a systematic reform process.

1) I would commission an Intervention Impact Analysis (IIA) on this subject, to be conducted by experts. The IIA would examine the issue from first principles and conduct a detailed cost benefit analysis. 

2) The IIA would then be provided to Governance and Economic Reforms Commission(GERC) for assessment.

3) The IIA, the detailed GERC report on the IIA, and the draft legislative change would then be canvassed widely and publicly. The public consultation period (of up to two months: more if needed) would involve receiving submissions. The relevant Minister would go around the country attending town-hall meetings on this issue and explaining the proposal to the people.

4) After the consultation period, the Minister would incorporate any changes to the legislative proposal emerging from the consultation and provide a public report on the final proposed decision, which would also be provided to Cabinet for consideration.

5) Assuming that Cabinet agreed to the proposal and it was ready to be proposed to Parliament, a massive communication campaign would be undertaken PRIOR to going to Parliament that ensured that all citizens had understood the issues, and reasons for the legislative proposal.

This is what I would have done. Definitely not what MMS has done.

His approach has been totally opaque. There has been no transparency. No consultation. No communication. The government of India doesn't even have an FAQ that addresses  frequently asked questions.

It is stupid, puerile and irresponsible to impose significant policy changes in a democratic country without prior public consultation and broad agreement. 

Democracy requires that citizens AGREE to key policy changes.

The fact that India does not have any IIA process is an indictment of its policy making framework. Without such an open, transparent, consultative processes, we can only expect "bandhs" and demonstrations that block economic reforms.

If a thing is worth doing, it is worth doing well. Let India ensure its policy making is consistent with world-best practice frameworks.

The people of India are not stupid. They are simply ignorant (in many cases). Economics is non-intuitive. It requires significant explanation of the benefits of the free market. The people will probably never become fully literate on economic matters. But  their concerns MUST be heard and responded to – systematically.

India desperately needs a modern policy making process.