This pain and misery is TOTALLY unnecessary

1. This pain and misery is TOTALLY unnecessary

2. This Conference is about changing India

3. GOVERnance reforms conference India Policy Institute Hyderabad Indian Institute of Public Administration Delhi 13 and 14 April 2013, New Delhi

4. Introductory Session 13 April 10 am: Mr T N Chaturvedi invited by Sanjeev to chair the session 10:02 am: Introduction to the Conference (Sanjeev) 10:10 am: Inaugural address (Gurcharan Das) 10:25 am: First half of talk by Sanjeev 11 am: Tea break 11:15 am Second half of talk by Sanjeev 12:05 pm: Special Guest’s comments (Justice Tewatia) 12:10 pm: Chairman’s comments 12:30 pm: Lunch break (1 hour)

5. Introduction to the conference Sanjeev Sabhlok

6. Welcome! Welcome to the elegant campus of Indian Institute of Public Administration

7. Who is attending this Conference? • Intellectuals • Senior officials, academics and business executives • Reformers • Young leaders from middle class India (Freedom Team of India/ Centre for Civil Society) • Ordinary citizens interested in governance

8. Thank you for coming • You are uniquely interested in improving the governance of India • From all across India • Significant time and cost • Despite short notice • Thank you for making the effort to attend • Thanks to IIPA for making this happen We’ll have participant introductions after lunch

9. Objective • To identify reforms in governance frameworks to create world-class governance in India • Public administration frameworks • Economic policy frameworks • Regulatory policy frameworks • The Conference won’t have much time to identify sectoral policy reforms eg. Education • But we’ll conduct preliminary discussions on a few areas

10. Framing this Conference • HOW do we reform India’s governance? • We need to know precisely what to do. • E.g. if you become Prime Minister what will you do? • “Insanity: doing the same thing over and over again and expecting different results. Einstein”

11. Root cause of misgovernance: Policy/system design failure • Policies are badly designed • Policy frameworks are not used • System’s incentives are flawed • Inevitability of corruption • Modern thinking (including Arthashastra) not used • Politicians make policy on whimsy, not analysis • Bureaucrats are totally unaccountable • This Conference is about changing the system • व्यवस्था परिवर्तन

12. We should not hesitate to adopt the world’s best ideas • World best practice governance frameworks • Evidence-based economic/regulatory policy • Public administration frameworks • In 1970s/80s, the world discovered economic and regulatory reforms • In the 1990s, the world discovered governance reforms • India has adopted neither

13. Broad structure of the Conference Introductory session on first day: • Inaugural address by Gurcharan Das • Two part presentation by Sanjeev (1.5 hours) Post lunch on first day (and on second day) • Detailed workshops • One paper presented on Sunday • Preparation of Strategic Plans for use by: • Government of India/ major political parties • Future political parties and reform movements Conference Summary/ Report to be published

14. But first, some housekeeping • Please wear ID card at Conference for meals • Restrooms - location • Water • Tea • Served at 11 am sharp • Maximum 15 minutes • Lunch break 12:30 pm for 1 hour

15. For any assistance please contact IPI/ Freedom Team of India volunteers • Dipinder Sekhon • KK Verma • Sureshan P • Akshay Shah • Vidyut Jain • Abhijeet Sinha • Rajan Mehta • etc

16. Language at the Conference • We’ll use only English at the Conference • You can discuss in Hindi with me/ FTI/IPI members after the conference

17. Following will be uploaded on IPI website • These final slides • Key recommendations/ strategic plans • Papers that are presented/ shared at the Conference

18. Inaugural address Gurcharan Das

19. Inaugural Address: Gurcharan Das World renowned author India Unbound and India Grows at Night

20. How we - too – CAN get world class governance Sanjeev Sabhlok, former IAS (1982 batch)

21. Questions later • Questions/answers will not be possible in introductory session • Please note your questions for discussion in the afternoon session.

22. A bit about me • IAS 1982 batch, PhD Economics from USA • Taught at Lal Bahadur Shastri National Academy • Resigned in January 2001 to reform India – from outside • 15 years of reform work • Preliminary work in February 1998 (India Policy Institute) • December 2000: Moved to Australia after finding unresponsive bureaucracy/politicians/ citizens • Joined National Executive of Swatantra Bharat Party (2004) • Started Freedom Team of India (December 2007) • Wrote Breaking Free of Nehru (2008) • Organised National Reform Summit at Haridwar on 5-8 April 2013

24. This talk is: A distillation of key learnings from over 30 years of experience in the IAS and Victorian Public Service Given limitations of time I will focus only on key frameworks (systems): • Public administration system • Economic policy system • Regulatory policy system

25. Plan of my presentation • Part 1 1) Theory of good governance 2) India’s system compared with Australia’s 3) Public administration reforms for India • Part 2 4) Economic policy reforms for India 5) Regulatory policy reforms for India 6) Transition from India’s system to world-best system

26. 1) Theory of governance

27. What’s our policy about policy? • Think from the highest level first: what is policy and what should it consider? • We need a policy about policy • Frameworks and systems • Without good frameworks, bad policy is inevitable

28. Two main questions to ask • What should a government do? • Are there limits to what a government can do? • How do we arrive at these limits (eg. net benefit test) • How should it do it? • How can a government comprising self-interested politicians and bureaucrats do what we want it to do? (public choice theory) Policy that doesn’t consider both these issues will be fundamentally flawed

29. Good policy necessarily considers implementation issues The “What” must be well thought out • “Bad administration, to be sure, can destroy good policy, but good administration can never save bad policy.” • Adlai E Stevenson Jr The “How” must also be well thought out • Policy that is unable to pierce the veil of incentives during implementation is bad policy

30. This is what we want Goal

31. Bureaucrat’s goal This is what we get OurGoal Bureaucrat (black box) …. by failing to think about the politician’s and bureaucrat’s incentives

32. Sequencing of my talk • I will discuss the “How” first • Public administration (delivery) reforms • Then I will discuss the “What” • Policy framework and gatekeeping • Economic policy

33. A word re: Arthashastra

34. Arthashastraunderpinned India’s past success • For 12 out of the past 20 centuries India was the world’s wealthiest, and 2nd wealthiest in six out of the remaining eight centuries • Due to the public policy stance outlined in Arthashastra

35. Let’s put Arthashastrasquarely into the centre of public policy discourse • Most analysts of Arthashastrahave missed its point • its insights are extremely modern • we should read between the lines to understand what Chanakya is trying to tell us • All about INCENTIVES (including disincentives)

36. Chanakya wanted a strong, minimal state, with control over incentives

37. Two axes: liberty, incentives Reminder: incentives include disincentives! Incentives Liberty

38. Key dimension #1: Liberty • Liberty is an end in itself. But also necessary for people to do their best • Lao-Tse’s advice to the king: “Win the world by doing nothing. How do I know it is so? Through this: The more prohibitions there are, the poorer the people become… The greater the number of statutes, the greater the number of thieves and brigands.” • “I love quietude and the people are righteous of themselves. I deal in no business and the people grow rich by themselves.”

39. India was much wiser in ancient times कहावत • जहाँकाराजाहोव्यापारीवहाँकीप्रजाहोभिखारी • Government should not engage in business • Free markets • Free enterprise

40. The natural effort of every individual to better his own conditionis so powerful, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations. - Adam Smith 1776

41. “Anyrestriction on liberty reduces the number of things triedand so reduces the rate of progress” - H.B. Phillips (mathematician)

42. People create ideas, and wealthGrowth = f (freedom, opportunity) Two obstacles to freedom • 1) Government • Nanny, paternalistic state: • interfering policies and laws • “Food police” • Injustice • contracts not enforced People innovate better if the government gets out of their way 1 Opportunity (technical frontier) 2 Innovation pushes out the frontier • 2) Social control • interfering religious beliefs • science and critical thinking • insufficiently valued Ideas don’t come from governments 3 n Governance must enable liberty (social reform is not a government’s job)

43. Key dimension #2: Correct incentives • Chanakya thoroughly understood incentives: • Best talent in government • High salaries for top officials and Ministers • Butvigorous checks/ audits (even spying) • Instantaneous dismissal and severe punishment for non-performance/corruption • Today we have the OPPOSITE incentives in India! • The results achieved today are inevitable Singapore follows Chanakya’s principles and succeeds

44. The problem of government failure • Policy makers typically focus on market failure • But the real elephant in the room is government failure • “Power corrupts, absolute power corrupts absolutely” • Politicians lavishly spend taxpayers’ money • Bureaucrats maximise their empire

45. Understanding incentives } Institutions (rules) System Created by policy maker Incentives Response Endowment Local circumstances (beyond the control of the policy maker)

46. Examples: Incentives explain behaviour Disposing personal rubbish • The same Indians don’t throw rubbish on the roadside in Singapore Tenure • Without job tenure an IAS/IPS officer will focus on delivery,for fear of losing the job Corruption • Indians were incorruptible when British merchants first came to India. (They were astonished at such integrity!) • But today Indians are world-famous for corruption. Why?!

47. Incentives are at work 24-7 We ask our politicians to lose crores of rupees during elections. Then we pay them very low salaries. Question: Will such people serve us or loot us? => Conclusion: our system guarantees corruption. • Chanakya would have understood • But we don’t care to see the world scientifcally

48. Burying our head in sand won’t make incentives disappear Incentives are at work even in our dreams!

49. Incentives are as powerful as a physical force Gravitypulls downwards, hence water flows downhill Incentivesdrive human behaviourand almost entirely determinewhat someone will do But incentives are difficult to analyse • Invisible, complex, layered, and conditional Despite this difficulty, we ignore incentives at our peril

50. Example of the power of incentives • I offer you Rs. 100 or Rs.200. Which will you pick? • Rs.200 • Always. • Incentives may be invisible but have REAL, PREDICTABLE EFFECTS • Incentives need not only be economic • But economic incentives usually overwhelm others