While excellent newsletters on specific themes within public policy already exist, this thought letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. If this post was forwarded to you and you liked it, consider subscribing. It’s free. India Policy Watch #1: Sangh Sings The BluesPolicy issues relevant to India— RSJA lot of commentary over the past couple of weeks has been on how Modi 3.0 will work in light of the mandate that has strengthened the voice of the opposition and given the NDA coalition partners seats at the high table, quite literally, if you were to go by the pictures. The PM sent out a message that it was business as usual by retaining the same team for key ministerial portfolios and announcing the release of ₹20,000 crores for farmer welfare and housing schemes for the poor on the first day at the office.
The multiple stories on the pre-budget consultations that the finance ministry is having with the industry also indicate we will have a greater focus on PLI schemes, MSME subsidies, and minor relief to taxpayers. From big announcements and talks of reforms with an undercurrent of welfarism, which was how Modi 1.0 and 2.0 began, we will likely see significant stress on welfarism with an undercurrent of reforms in this budget. That’s the way the wind seems to be blowing at this moment. The question of how Modi 3.0 will work depends on what lessons the party has drawn from the 2024 mandate. This will take a few more months to crystallise and we will then see it play out on the economic, social and political agenda of this government. And what lessons a party draws from any election results depends on how comfortable it is to discuss all the issues while not leaving out the proverbial elephant in the room. The early signs from the party on what went wrong have been on the predictable spectrum - refusal to acknowledge failure, ticket allocation, blaming the opposition for spreading misinformation (heh!) and some conspiratorial whispers on internal sabotage in key states. This is the kind of postmortem we have come to expect from Congress over the years, where the core questions, like why did the central message not resonate or did the leadership fail to connect with people, are routinely ignored. So, it will be interesting to see if they are brought up in a party which has, in the past few years, turned into a two-man show. After all, but for the positive surprises in Odisha and Karnataka, the BJP could have been about fifty seats short of a simple majority. Things would have looked very different then. As if in anticipation of this reluctance to discuss the core issues that went wrong in these elections and continue with business as usual, the RSS fired a pre-emptive salvo last week with its chief Mohan Bhagwat’s speech to the cadre in Nagpur. The speech has been analysed quite extensively in the past week, given the role of the RSS in the Hindutva project and its tone in relaying its concerns. I have picked a few soundbites that I thought were particularly pointed with the intention of ensuring they are picked up in any atmachintan that the BJP does.
When I read the above, I did a double check. I went back to make sure that the link hadn’t mistakenly taken me to some site on Gandhian (the Mahatma, not Rahul) thoughts. The liberal media seems to have lapped the speech up in the spirit of my enemy’s enemy is my friend. I have my reservations, though. Firstly, these are wonderful sentiments to express after the verdict is out, and you get a sense of how people have responded to a campaign. Would this speech have been made if chaar sau paar (400+ seats) had materialised? You may argue that a speech of this kind couldn’t have been made in public during the campaign. Fair enough. Maybe it could have been made when the exit polls were showing a clear majority to the BJP. It would have rang truer in its intention then. To come out with these pious intentions after the verdict and place oneself above the political shenanigans of the party is largely an opportunistic play. The speech is a wonderful positioning exercise for the RSS to show how it places the nation above everything else. But only the gullible won’t see through its convenient timing. Secondly, as I mentioned before, the most likely proximate reason for the speech is to set the agenda for any introspection that happens within the party. Anyone who wanted to bring up uncomfortable topics for discussion but didn’t know how to now has the convenient shoulders of the RSS chief to raise any of the topics covered in the speech. In that sense, having an external ‘hegemon’ like RSS is a good bulwark against the hijacking of inner party democracy by strong leadership that routinely happens in India. The BJP might actually do a much better job of analysing the reasons for its relative failure than the Congress might do in figuring out the reasons for its relative success. Lastly, the most important reason for the speech was to diversify the risk of the larger Hindutva agenda from brand Modi. And this is important. The RSS has ridden on the popularity of the PM over the past ten years without putting any real constraint on the cult of personality that was being built. That popularity has helped strengthen the RSS organisation and helped it to spread faster than at any time in its history. Now that it senses that possibly peak brand Modi has been reached, it is astute enough to distance itself, however gradually, from it. Any kind of tight coupling there will impact its image and, therefore, its ability to grow. More than anything else, this strategic distancing of the RSS from the PM’s image and its reiteration of being above the mundane electoral politics is the clearest sign that we have possibly reached peak brand Modi. It will be interesting to see how things play out from here. Is the PM capable of a reinvention that preserves his strong man cult while simultaneously satisfying the expectations laid out in Mr Bhagwat’s speech? Will the party, too, like RSS, look to diversify its risk for 2029 and begin to ask questions on the agenda for Modi 3.0 and its positioning? If these things were to come to pass, would the jostling begin for the leadership of the party in a post-Modi scenario? Or, like other dominant parties in India in the past, will there be no change and it will be business as usual till the electorate decides one way or the other in 2029? Hum dekhenge. Thanks for reading Anticipating the Unintended! Subscribe for free to receive new posts and support our work. India Policy Watch #2: We Shall Never LearnPolicy issues relevant to India— RSJThree news reports for you. First, from ET on June 22, 2024: India’s ‘sin’ is govt’s bounty: GST cess may deliver Rs 70,000 cr bonanza
Second, this sad news from The New Indian Express on June 22, 2024: TN hooch tragedy death toll climbs to 37; 'illicit liquor sale was rampant in Kallakurichi, police turned a blind eye.'
The Union and the state governments can keep raising taxes on ‘sin’ goods or banning them. Such taxes or bans won’t change social behaviour. They will either send the market for such goods underground and make criminals of ordinary citizens or create a market for cheap, unsafe knock-offs for the poor to consume. This never ends in India because we don’t learn. And to the third news report. From the Hindu Businessline, June 21, 2024:
Well, who is going to pay for these waivers? What’s the point of having banks and financial institutions go into Bharat and build a ‘credit culture’ if borrowers know they won’t have to pay back a loan because the government will offer a farm loan waiver soon? But who cares about moral hazard and the long term consequences? Hum dekehenge, again. India Policy Watch #3: All States Are SpecialPolicy issues relevant to India— Pranay KotasthaneOver the last two weeks, quite a few articles and explainers have been written on the ‘special category status’ demands of Bihar and Andhra Pradesh. While these articles focused on whether these states deserve this status or not, they missed the bigger picture that all states are special, and none of them deserve a special category status. Here’s how. First, let’s get to the bone of contention. In simple terms, states with a ‘Special category status (SCS)’ get higher fiscal support from the Union government. This term is of the high-planning-era vintage when the Union government ran plans (in addition to centrally sponsored schemes) to direct states. The National Development Council accorded this status on the recommendation of the Planning Commission. The five criteria for making this decision were broad and quite vague: hilly and difficult terrain, low population density and/or sizeable share of tribal population, strategic location along borders with neighbouring countries, economic and infrastructural backwardness, and non-viable nature of state finances. Fiscal support can come in three different ways. First, the erstwhile Planning Commission would give such states more grants and fewer loans to execute their plans. Second, SCS states received higher percentage allocations of plans specifically meant for hill area development, tribal sub-plans, and border area development. Finally, these states again receive higher fiscal support for executing centrally sponsored schemes such as the National Health Mission (NHM). The crucial point here is that there is no constitutional basis for this status. Many articles over the last two weeks mistakenly mention that the SCS was a creation of the Fifth Finance Commission, which accorded it to three states—Jammu and Kashmir, Nagaland, and Assam—in 1969. This interpretation is incorrect and clearly shows that none of the people writing these articles read that report. Since the Finance Commission is a constitutional body, coming up with such a status would have had greater significance. But all that the Fifth Finance Commission said was that some states have special features which ‘tend to increase the level of their revenue expenditure’. In such cases, some allowance was made for these cases while coming up with a common formula for sharing tax revenues among all states. There was no ‘special category status’ accorded to any state. This approach of treating every state as special has been carried over by subsequent Finance Commissions, as illustrated in this paragraph from the 14th Finance Commission report:
Thus, instead of falling into the trap of putting a state in a semi-permanent category that distorts long-term incentives, finance commissions sought to include their special characteristics in the formula used for distributing resources between states. And where this approach still couldn’t meet the state’s expenditure requirements, an additional provision of revenue deficit grants was made in such cases. Thus, the special category status is an anachronism. Given that the unconstitutional entity that recommended it no longer exists (i.e. the Planning Commission), this status must also be discarded. The counter-response to SCS is that all states are special, and the correct way to help states is to increase the quantum of vertical devolution sustainably so that they can determine their own priorities and plans. This requires the Union government to ramp down its many centrally sponsored schemes simultaneously so that the money saved can be passed on to the states via the Finance Commission. States that continue to clamour for a tag that guarantees largesse from the Union government are only encouraging centralisation. HomeWorkReading and listening recommendations on public policy matters
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