The execution deficit matters more than the fiscal deficit to the demographic dividend. The budget must focus on expenditure reforms rather than expenditure.
The 2011 budget will be presented by a politician with an economist as prime minister. This contrasts with the 1991 budget that was presented by an economist with a politician as prime minister. But “bees saal baad” is also an interesting point to reflect on economic reforms and increase the effectiveness in government spending. Economic reforms—and Union budgets —are not about fiscal deficits, government spending or goofy rich guys buying Mercedes cars, but creating what Sunil Khilnani calls the “infrastructure of opportunity”. This involves fixing the 3Es (education, employability and employment) so that the most important decision a child in India makes is not choosing their parents wisely.
At a personal, company or country level, there is nothing wrong with spending money you don’t have as long as it creates outcomes such as capabilities or assets. But converting spending into outcomes requires execution—life in the fourth decimal place of goal setting, conditional resources, capability building, performance review, punishment and reward. This is particularly relevant to the 3Es and this budget must shift focus from strategy to execution. From expenditure to expenditure reforms. From poetry to plumbing.
Is money spent, outcomes delivered? Are rights legislated, rights delivered? Has the Rs 108,000 crore spent on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) delivered a right to work? Will the Rs 50,000 crore annual Right to Education (RTE) spend improve learning outcomes now that we have licked the enrolment problem? Will Rs 100,000 crore required for the Right to Food Act move the needle on malnutrition and hunger? More people in India have cellphones than bathrooms; should we have a right to bathroom Act? Or should we try unpacking, understanding and replicating how the telecom revolution—however dirty it’s birthing—accomplished what it did?
Many people in India are unemployed, unemployable, underemployed, and illiterate not because of inadequate government spending—you don’t repair leaky pipes by turning up the water pressure—but because of poor outcomes from government spending, no legitimacy for private sector participation, and lack of sustainable frameworks for public-private partnerships (PPPs) in the 3Es.
The finance ministry does not control every ministry, but the golden rule is that who has the gold rules. It must start attaching strings to money provided. It must insist that 100 days under MGNREGS morph into an apprenticeship programme that leads to measurable skills.
It must insist that wages under MGNREGS be capped at levels that make it a safety net, not a hammock. It must provide money for RTE only if it funds students not institutions, does not timetable the death of 25% of India’s schools, and reduces ambiguity that will breed corruption. It must insist that all state and Central skill programmes comply with the operating principles of the National Skill Policy by 2013 to qualify for recurring funding. It must expand the allocation of open architecture programmes like the Modular Employment Skills of the ministry of labour, but insist on transparent operations by linking payments to Aadhaar. It must create competition and capacity by enabling PPPs in schools, industrial training institutes, employment exchanges and higher education by allowing government money to be made available for private delivery. It must insist that the ministry of human resource development end the adverse selection among education entrepreneurs—mostly criminals, politicians or land mafia—by scrapping the requirement that all schools need to be non-profit on paper even though 90% of school capacity created in the last two decades is for-profit.
It must insist that we delink the mindless and backdoor application of the Sixth Pay Commission government teacher pay scales to private school teachers that is leading to higher fees. Finally, instead of singling out a single university or college for a large grant, it must make an allocation of Rs1,000 crore for creating 20 community colleges in every state as PPPs. These community colleges would create a mezzanine layer by offering two-year associate degree programmes with employers at the heart of academics, admissions and certification. States would make joint applications with private partners and the most innovative proposals—a modified version of the successful US race to the top programme—would be funded.
The spectacular increases in India’s 3E spending are a child of economic reforms. This spending could have been done differently but was better than doing nothing. But the next wave of public policy impact does not lie in higher or lower spending, but smart spending that drives metrics, operations and performance management. This is not a lack of vision or ambition but a grounded view of where sustainable, scalable and tangible change comes from.
The author is chairman, TeamLease Services.
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