The way we go about reforms is all wrong

The list of what must be reformed includes economic matters as well as governance matters. Federal governance is being distorted by a centre in haste to make bold reforms to attract large investments. Democratic processes for consultation with stakeholders are being paid lip-service to, even short-circuited, in a haste to implement change. In its apparent anxiety to prove it is ‘strong’, the government is rushing to make big announcements. It is unable to identify the right reforms the country needs because it is not consulting states and stakeholders sufficiently.

The process of making reforms needs fixing to develop and implement the right reforms. Who will benefit from the reforms? And who will be affected by them? Will the reforms be supported by those most affected? Will they be implementable? Have all stakeholders been consulted honestly? What could be the unintended consequences of good reforms in one part of a complex system on its other parts? Have the views of all stakeholders been considered honestly? Will the benefits of reforms be sustainable? These are fundamental questions that any sound process of reforms must systematically address. The government’s difficulties in making bold reforms have arisen because it is using the wrong process.

The methods used for bold reforms in 1991 were appropriate for the type of reforms made then. They will not work for the reforms needed now. The 1991 reforms unleashed industry from licensing and made imports much easier. The reforms’ principal beneficiaries were consumers who could buy imported goods they could not before, and also traders and assemblers of products with imported components. Consumer aspirations were fulfilled. Reform resistance came from some large industries exposed to new international competition. Costs versus benefits were clear. The masses of India benefited, while crony capitalists lost.

Since then, economists and policymakers have been struggling to implement ‘factor market’ reforms for land, labour and natural resources. These affect the livelihoods of the masses. The Bharatiya Janata Party government had to withdraw its proposed reforms in land acquisition. Bold reforms of labour laws formulated by the Centre are stalled at the level of states and continue to be opposed by unions. Reforms of environmental regulations to enable large industrial projects are resisted by organizations representing concerns of local communities. Reforms of agricultural institutions to double farmers’ incomes have been stalled by a stalwart movement of protest by millions of farmers who are the intended beneficiaries of these reforms. The proposed farm-sector reforms are seen to have reversed the equation of the 1991 reforms. This time the beneficiaries will be crony capitalists, farmers say, and they, the masses, will be the sufferers.

India must reform its processes of democratic governance. It must reform economic institutions at the same time to enable incomes and wealth to increase much faster and more widely within its economic pyramid, and not only for the 1% at the top. Economic reforms that affect the masses directly must be developed with the people for the people. They cannot be developed by experts above for people below. Not only is that undemocratic, experts in academic and policy silos can’t comprehend social and political forces within a complex system in which the needs of many stakeholders must be reconciled, unless they listen to them.

Consultation with diverse stakeholders can be messy. But it is unavoidable for finding sound systemic solutions. Any government that pays only lip-service to the slogan “Sab ka saath, Sab ka vikaas", and even short-circuits deliberations in Parliament before announcing bold reforms, can neither make reforms rightly nor conceive the right reforms.

It is time for India’s bold reformers to go back to the drawing board. They must first get the process of systems reform right.

The first step in the process is to be clear about the ultimate purpose of reforms. Are agriculture reforms, for example, aimed at increasing incomes of farmers around the country, or for attracting more corporate investments to build supply chains? Therefore, clarity is needed over who must be consulted the most and whose views on the best way to go about these reforms must prevail.

The second step would be to list the diverse stakeholders who will be most affected by the reforms under consideration—both favourably as well as unfavourably. All of them must be listened to very well, and they must listen to each other too for a consensus on the best and most fair solution.

The process of consultation must be designed and conducted well. When badly designed and poorly conducted, it will not produce good insights and well-rounded solutions, nor any consensus. Therefore, the reforms announced would end up as unimplementable—which has been the fate of most bold reforms the government has tried to make.

Reforms of complex systems, such as India’s industrial-employment ecosystem and the agriculture-livelihoods-ecological system, are difficult. They are like redesigning an aeroplane while it is in flight with everyone aboard. Any bold change to one part of the system when other parts remain unaltered can create an imbalance and bring everyone down.

Reform is an ongoing process of learning, and acting, and learning further together. India needs to build institutional abilities for democratic deliberations and democratic development. This was the principal insight from a pre-2014 review of the failures of ‘planning’ to create more inclusive and sustainable economic growth. This was also expressed in the charter of the Niti Aayog which replaced the Planning Commission. Sadly, Niti Aayog has also been sucked into a top-down process of development and reform which cannot work.

Arun Maira is former member, Planning Commission, and author of ‘Redesiging the Aeroplane While Flying: Reforming Institutions’