Opinion | Some hindsight wisdom that could be useful next year4 min read . Updated: 30 Dec 2019, 10:18 PM IST
Whether or not success is about strategy more than execution, an experimental approach may serve us well
The New Year is upon us and there are already many viral memes playing out. Will this year pass quickly because it is 2020, like a 20-over cricket match? Will it be the same as the previous year, since it’s only marginally different (i.e. just a matter of 19/20, unnees bees in Hindi)? The most obvious turn is on 20/20, which is often but wrongly interpreted as “perfect vision". In fact, 20/20 just means that you are able to see at 20ft distance what someone with “normal vision" can see at 20ft. This sounds like a recursive definition, since it leaves “normal" undefined. More importantly, a person with 20/20 vision can be terribly long sighted—i.e., unable to see what lies up close. This is a condition of many 40-somethings who can see very well what lies 20ft or farther away, but still need glasses to read at closer range. In some ways, this may also characterize economists, who have a 20/20—or actually a 10,000m—view of the economy, but often fail to see what is in their immediate vicinity. It is also the bane of leaders who get the big picture, but lack appreciation of micro realities. That’s why we have successful leaders in two camps, the execution camp and the strategy camp. The former includes those who managed the Kumbh Mela, say, or who rebuilt villages after the Kutch earthquake, or those who conduct national, state or municipal elections. The latter include people of the corporate sector, such as the successful leaders of Unilever, Dupont or Apple. We have also had a few strategic visionaries in politics, such as Lee Kuan Yew. Rare is the person who can be counted in both camps, Verghese Kurien, “India’s milk man", being a shining example. Some management gurus believe that a successful strategy is nothing but an obsessive focus on execution. Gurus of the other camp say that if your strategy is right, you will stumble your way to success even if the execution is imperfect.
We are not going to settle the debate here, but there may be a middle way. Through an experimental approach. Cross the river by feeling the stones, as propounded by Deng Xiaoping. Or, as articulated by 2019’s Nobel laureates in economics. Their approach to problems, especially of development and poverty, is completely open-minded. They conduct experiments, and let the evidence speak for itself. They have hypotheses, but their insights are drawn from data collected out in the field. Maybe a rich theory could emerge from their findings. And, if there’s evidence to the contrary, junk the theory, not the data. In the words of Esther Duflo: “Economists are more like plumbers; we solve problems with a combination of intuition grounded in science, some guesswork aided by experience, and a bunch of pure trial and error."
So, here is some hindsight wisdom for the year that’s coming up. First, fiscal deficit mostly does not matter, at least in the range that is under consideration. Even with a declining deficit, the economy’s growth rate has fallen. Conversely, we have had high growth along with high deficits, and higher than current interest rates, in the past. When you are close to what looks like a liquidity trap, you just have to push the fiscal pump. One way to do this without upsetting the bond market too much, is through a private placement with the Reserve Bank of India—say, for ₹1 trillion.
Second, it is clear that the solution to farm distress lies outside the farm sector. No amount of price tinkering, loan waivers, or pouring in subsidies will do. Unless job opportunities beyond farming do not open up in a very big way, the agricultural sector will remain depressed. Of course, it might help to deregulate exports, allow direct contact between corporate buyers and farmers, and remove land-use restrictions. But the real lesson is that we must let farmers be free, and focus on job creation elsewhere.
Third, learn from the success of mobile phone manufacturing. There was a time when India was the world’s fastest growing telecom market with a billion handset users, but hardly any domestic production of hardware. Then Nokia appeared on the scene and set up a top-class facility, employing thousands of workers, mostly women, to make handsets in India. Then it had to shut down that factory. Today, we have reached 320 million units in annual production, thanks to participation in global value chains. We can and should emulate that approach in textiles, auto-ancillaries and other electronics. Even if little value is added here, jobs will be generated.
Fourth, we might as well abandon the one-size-fits-all approach. Going cashless may work in some cities, but not all villages. Direct cash transfers may work for cooking gas cylinders, but not for fertilizers. The rural jobs guarantee needs to be implemented only in the most backward districts, not all of India. Public procurement can be of rice and wheat in some regions, and jowar and bajra elsewhere. The system needs to be decentralized. Some food procurement could be on a trial-and-error basis, too.
Fifth, reduce the trust deficit between the government and taxpayers by using insights gained in recent years. Take the goods and services tax, for instance. Officials should not insist on the authentication and reconciliation of every transaction in real time, for our net connectivity does not support it. Trust those who comply with it. Punish those who don’t, if spotted in a statistical random test, post facto. Simplify. Let it leak a bit, but gain trust.
These are only some of the several ideas that are strengthened by hindsight. Here’s wishing all readers a great 2020!
Ajit Ranade is an economist and a senior fellow at The Takshashila Institution