How can India prosper: Governance, Equity & Productivity

Abstract

The challenge statement for us was to explore India's journey to becoming an upper-middle economy by 2047. For our paper, we first created a long list of intervention areas, from which three core interventions were chosen: Governance, Equity, & Productivity. Our detailed recommendations include evaluation metrics of how we measured the impact of these intervention areas – such as importance to goal, state capacity & capability, society’s readiness for it, and external forces that could throw it off-course. Subsequently, we have done a data-driven and deep-dive into the policy solutions that will bring about the transformation through these three core areas of intervention.

The larger objective of the paper

What is the goal we are trying to achieve?

Our current per capita GDP is $2500, and to get to the upper-middle income status, our per capita number will have to be at least $9200.[1] In dollar terms, our GDP per capita will have to go up 3.66 times in the next 23 years for us to be an upper-middle-income country. Ceteris paribus equates to a rough increase of 5.8% per year! [2] Indeed, this is not a pipe dream. In fact, with the right plans in place, this is a very much achievable number.

How did we arrive at our top three areas of intervention?

We started our exercise of short-listing the top areas of potential intervention by looking into a laundry list of outcomes we intended to achieve and the inputs that will be required to make it happen. We bucketed these into five main intervention areas: equitable growth, structural economic factors, productivity-driven employment generation, governance ethos & capability, and other factors for stable & sustained growth. Appendix 1 has details of the same. We objectively rated each of these interventions on a bell curve to remove our subjective bias.

For the rest of this paper, we will focus on the top three that we ultimately went ahead with ->

1)     First area of intervention – Governance ethos and capability

2)     Second area of intervention – Equitable and structural economic growth

3)     Third area of intervention – Productivity-driven employment generation

The first area of intervention - Governance ethos and capability

For us, putting this first and dedicating a significant portion of our paper to the same is to highlight the lop-sided importance of this intervention area for the future prosperity of our country. Today, all developed and accountable countries have had an institutional spine on which the rest of the structures have been constructed. [3]

1. Transparency in govt actions - Transparency leads to accountability and higher civic engagement, which leads to effective and efficient implementation of policies. For more on the evaluation metrics on how we narrowed down and evaluated this intervention area, refer to Appendix 2.

The fundamental principle that makes this the most crucial action area for us is disclosure, which is the foundation on which transparency is built. In this, comprehensibility and accessibility are tenets on which the ethos of openness is built for the government in action. Importantly, information must be presented so that citizens want to examine it. This makes it “enticing” and completes the troika of accessible, comprehensive, and enticing transparency to drive civic engagement, reduce rent-seeking, and improve policy-makers credibility. [4]

It is essential to address both the external and internal aspects of accountability [5] –

-          External accountability deals with the answerability of elected and government officials to the public through a free press, free elections, and an active civil society.

-          Internal accountability is built into the institutional structures of government and is both vertical and horizontal checks and balances. Here, the bureaucracy being efficient is not enough, as the politicians being narrow-minded and criminal will only drag down the final output of this system.

Below are our suggested areas of specific interventions.

A)   Discussion of bills in parliament and not passage by stealth – Irrespective of whether a coalition government is at the center or not, the government must use routes like the “money bill” or “ordinances” only in exceptional cases. This will build confidence for domestic & international investors to believe in India's growth story, which is not interspersed with sudden policy decisions that do not appear democratic in their nature of creation or implementation. The ordinance journey is highlighted in the figures below for reference.

Figure 1: Number of ordinances promulgated (year-wise from 1950 to 2023) Source: Figure reproduced from Parvathi Benu, 2023, https://www.thehindubusinessline.com/data-stories/data-focus/govts-reliance-on-ordinances-on-a-decline-since-2019/article66964847.ece	Figure 2: Lok Sabha-wise number of ordinances promulgated (top 4 Lok Sabha govt. highlights above) Source: Figure reproduced from Parvathi Benu, 2023, https://www.thehindubusinessline.com/data-stories/data-focus/govts-reliance-on-ordinances-on-a-decline-since-2019/article66964847.ece

 

In addition, bills being referred to Parliamentary Committees have fallen from the highs of 60% and 71% in the UPA years to 27% and 12% in the recent NDA years. The reversal of this trend will be necessary for an unbiased look at all bills. [6]

B)    Reform of the national statistics and data-sharing process – The current data on the GDP and inflation is open to much debate in the economic and academic circles. Multiple decisions on corporate investments and individual savings are all connected to such critical data devoid of basic questions on its inherent honesty.

 

C)   Policies in the expert & public domain before launch – This is a recurring theme of criticism of multiple initiatives like demonetization implementation or the RBI Monetary Policy group members formation, where experts in the field have called for such critical decisions to be put out in the public domain before their sudden announcements. This can help create more sound policies through the necessary process of feedback loops.

 

D)   Complete, accurate, and timely data on more considerable public concerns like political campaigns, election funding, census, GDP, education, and health will be critical to the continued belief in India's growth story. The opaque nature of political party funding can make the free market and the state susceptible to crony capitalism and rent-seeking, which can act like a structural termite that eats up the tower of our institutions of economic and political independence.

 

2. Institutional strength and effectivity - This helps build trust with the market forces not just domestically but also international investors looking to invest & grow within India. Institution strength and accountability increase the credibility and belief of individuals in approaching the state. Check Appendix 3 for further details on the evaluation metrics.     

A) Independent regulatory institutions and others that drive federal co-ordination & governance

·       Lack of fitment into the larger constitutional framework, with multiple bodies functioning as non-constitutional bodies – GST Council and Niti Ayog being two cases in point. There is a lack of clarity on the administrative law within the written constitution. Plus, there is no unifying legislative approach to various regulatory approaches. Addressing these issues of inter-connectedness and written mandates will go a long way in shortening the long arm of regulatory outreach.

·       There is often a lack of functional independence and strength, which is evident through the example of CCI and the number of its anti-trust orders that have gone up in appeal – nearing 60% in 2017-18. The CCI has collectively fined companies about Rs. 13000 crore between 2011-2012 and 2018-2019. But it has collected less than 1% of it so far. [7] [8] [9] The table below indicates the percentage of CCI’s anti-trust orders in appeals. Providing defined scope, authority, and independence to a body like CCI will be critical to maintaining the rule of law in working market forces.

 

Figure 3: Share of anti-competition orders appealed against (in %) Source: Figure reproduced from howindialives.com article in the Mint,2022, https://www.livemint.com/politics/policy/cci-india-s-competition-regulator-has-a-collection-issue-11666791916378.html

 

·       The connections and clear lines between the executive and the regulatory institution often do not exist – which is evident in the case of an RBI, where the independence of its Monetary Policy Committee is often up for debate. A more balanced representation within the MPC will be vital to building the committee's credibility and decisions by not making it accountable to the RBI Governor on all decisions. [10]

 

B) Judicial efficiency, independence, and integrity -

A 2022 update shows that more than 4.7 crores are pending in cases across India. [11]

Pending back-log of cases doesn’t just delay critical judgments of individual liberty and constitutional law interpretation – which puts the dynamic nature of our democracy open to question – but also hinders economic activity across the country. These delays are also replicated in the many pending tribunal cases – including in the National Company Law Tribunal, which has as many pending cases as it might take six years to clear the backlog. [12] Our consistently low rankings in contract enforcement in the World Bank Ease of Doing Business are classic cases in point. [13]

The solutions are multiple: having a cooling off period post-retirement for judges, administrative capacity gaps resolution, adjournment culture taken head-on, and plugging gaps in the lack of institutional coherence between multiple judgments passed by different panels of the same court—further details of the same in the Appendix 4.

Our original rendition of this paper had a 3^rd point on “Governance ethos and capability” of “Entrenching democratic values across the society. This is now shifted away from the paper's core and kept in Appendix 5 for those curious to read more about a vital third element that drives institutional & social ethos alike.

To close out this first area of intervention, we have borrowed from a government transparency methodology developed by Joseph Gordon for his book “Transparent Government.” Other than the points already highlighted above, this also includes intended transformation areas in the space of transparency in electoral bonds, shift from extractive to inclusive institutions to drive inclusive development, government sourcing code of conduct and open e-auction guidelines defined and implemented, data from the government available for citizens and experts, to work on and suggest better policy-options, etc. For further reference to this tabular format, you may refer to Appendix 6.

 

Second area of intervention – Equitable and structural economic growth

1. Domestic Financial stability - Unleashing the power of the market forces will be critical for prosperity, and a structurally sound domestic financial backbone will be its enabler. Since this will need to work in tandem with capital account convertibility and other elements of macroeconomic stability, it will require us to be hyper-aware of multiple global factors, which will also influence our intended transformation. Check Appendix 7 for further details.

A) A sound bankruptcy code implemented

The need to formalize the Insolvency and Bankruptcy Code and quicken its proactiveness is an essential need of the hour. An effective insolvency regime ensures proper treatment for failed entrepreneurs, prefers restructuring to liquidation, has provisions to distinguish an honest debtor from a fraudulent one, enables time-bound resolution, reduces value erosion, and maximizes value to all stakeholders. An evaluation of the effectiveness of IBC 2016 shows that the code has its strengths but is burdened due to inadequate infrastructural requirements, overburdened insolvency professionals, and undue judicial delays, resulting in deterioration in the value of assets. [14]

Figure 4: Break-up of Bankruptcy cases that end up in liquidation Source: IBBI June 2021

            

B) Prudent financial spending and debt management

Trends show us that higher capital expenditure leads to a proportionately higher rise in GDP, which is what is urgently required. (Dev and Sengupta 2022). The recent signs of the government increasing CAPEX spending in the 2024 interim budget are a step in the right direction and must be maintained for the foreseeable future. [15]

Our debt management must follow the principle of paying off debt during the good times of progress and incurring debt if required during crisis times – the deft balance between the two at the correct times will ensure our economy’s future prosperity. [16]

C) Tax rationalization and focus on revenue generation

For a rational approach to revenue generation through tax rationalization, we have created a ten-pointer Tax Manifesto, first presented in the individual assignment of one of the authors for the Public Finance course of this PGP-7 batch of Takshashila Institution. [17]

Figure 5: The Tax Manifesto: A 10 pointer spider-web for an efficient and effective tax regime Source: Author Self-Illustrated, based learnings from writing and lectures of Govind M. Rao

 

2. Inflation management - Rising prices of food, drinks, houses, and other items of essential consumption have a direct ripple effect on disposable income and, hence, the ability to save/invest. Check Appendix 8 for details on evaluation metrics.

Below is a snapshot of what challenges we face today on inflation and its future management, which will ensure more disposable income is in the pockets of our fellow citizens to spend and invest appropriately.

A)   Methodology & weightage issues

Food constitutes ~45% of the CPI in India. This weight is a challenge to flexible inflation-targeting, as food prices are highly volatile due to supply shocks of monsoon and additional layers of the Minimum Support Prices (MSP). Hence, food prices might “signal” high headline inflation to the market, which would not reflect other critical areas of the CPI basket. There is a need to correct this weightage mismatch. [18]

 

B)    Imported oil-linked inflation concerns
India has a high dependence on oil imports, and the increased contribution of energy to our inflation portfolio is a critical element of concern – and Russia, in its current form of cheap oil support, is only a temporary solution to our woes. Diversifying our energy portfolio will be critical – and the transition to renewable energy can be a vital enabler of this process.

C)   Reaction and response to inflation

Another big obstacle in achieving stable inflation rates is our over-reactions to rising inflations, like responding to supply-led price increases (with parallel non-increasing demand) with easing monetary policy, which only further strengthens the price rise cycle – as this only creates un-addressed demand, hence counter-intuitively further increases prices! Such knee-jerk reactions will have to be a thing of our past.

D)   The need for letting RBI “focus” on inflation
Multiple responsibilities and a lack of credibility continue to bog down the implementors of our Inflation-targeting regime. That is why many say that it is the need of the hour also to take the debt management responsibilities away from RBI and into the hands of SEBI. [19]

 

3. Poverty alleviation – This will be critical to having a mentally and physically healthy population to increase economic potential and reduce preventable expenses on health & recovery. Check Appendix 9 for details on evaluation metrics.

However, poverty reduction has slowed significantly during the post-COVID-19 pandemic in recent years but has since moderated in 2021-22. Today's challenges are multi-fold, ranging from child stunting hovering around 35% for children under five to the quality of jobs and real wage growth stagnation – especially among our largest states.

Figure 6: Poverty headcount ratio: Highest among the large states Source: www.worldbank.org

 

The negative impacts of the pandemic in dimensions such as education are significant and can have long-lasting consequences. We must intensify efforts to comprehend the dimensions most negatively affected, necessitating strengthened data collection and policy efforts to get poverty reduction back on track.

 

Figure 7:  Poverty estimates for India by Different authors Sources: NSSO Survey 2011-12, National Accounts, CMIE-CPHS and PLFS

Rural poverty alleviation has to be through a focus on income at the bottom of the pyramid, which creates an increased demand for low-skill and, hence, low-wage workers, along with the organized products and services being made by higher-skilled workers. This would enable a healthy bottom-up cycle of sustained growth, which the high expenditure-elasticity of rural residents would drive. [20]

 

4. Inequality minimization – Most downtrodden, under-served, and marginalized communities would benefit from interventions in this domain. In tandem with social cohesion and poverty alleviation, this can bring about a major human capital transformation for our society (more on that in the third area of intervention). Check Appendix 10 for details on evaluation metrics.

Thomas Piketty has very appropriately bucketed inequality into the following buckets [21] ->

1)     Inequality in income from labor

2)     Inequality in the ownership of capital and the income to which it gives rise

3)     The interaction between these two types of inequality

Through multiple studies in the developed world, inequality in labor clearly shows that the best way to reduce inequality of labor and increase the labor force's average productivity is to invest in education.”

Hence, a continuous focus on improving education and skilling outcomes to make the workforce industry-ready brings about the necessary constant improvement required to initiate and sustain a developing economy.

Figure 8: Top 10% income shares worldwide, 1980-2016. Is world inequality moving towards the high-inequality frontier? Sources: WID.world (2017). See wir2018.wid.world for data series and notes. Extracted from the article on https://theconversation.com/inequality-is-on-the-rise-but-at-vastly-different-rates-around-the-world-88976

In the developing context, we would add two more layers to this bucketing

4)     Inequality in terms of access to information & knowledge and accessible technologies that support us

5)     Inequality in the societal standing in terms of caste, religion, and gender. Gender is an ongoing area of concern

Although #5 above is a beast we have been dealing with myriad successes, #4 is a new elephant in the room and would require active, inclusive policy-making to ensure no net neutrality kind of fiascos ever rise in the future. In the third section of our paper below, we cover specific solutions for these challenges of labor participation across sectors and their productivity.

A third area of intervention – Productivity-driven employment generation

1. TFP / Total Factor Productivity-driven human capital investment - Breaking out of the low-middle-income barrier will require transforming human and physical capital investments over the next generation. For this, “Total Factor Productivity (TFP)" or TFP is what we should focus on as an outcome. It measures the total growth in output beyond simply the increase in inputs into the system and the increase in efficiencies of how input is processed and output generated. [22] Check Appendix 11 for details on evaluation metrics.

A study has discovered a positive relationship between human capital and economic growth. This study tells us that secondary school enrolment has the most significant impact on India's GDP growth. This study highlights that to achieve long-term sustained economic growth, re-directing resources to building human capital is vital for sustained economic growth. This human capital will drive TFP improvement in the near future. [23]

A)   Doing away with traditional un-productive welfare schemes

For TFP increase, MNREGA schemes provide partial employment & affect productivity negatively, and they need to be phased out and kept only for the most under-served areas. One of the author's experiences implementing CSR projects across India showed how implementing a water harvesting or check dam project through lopsided MNREGA labor instead of appropriate capital equipment usage led to project timeline delays and, because of them, ironically, even cost escalations. For such welfare measures, we suggest shifting to cash benefit transfers instead and letting infrastructure be made through productive means.

B)    Reforms in the agriculture sector

The challenges in agriculture abound, ranging from the growth in agriculture being the lowest of all categories, a widening gap in productivity between agriculture and other sectors, landholding size which has fallen from 2 hectares to 1 hectare in the past five decades to the lack of access to micro-finance and heavy dependence on local money-lenders. [24] Reallocating labor from agriculture to other avenues will lead to the reallocation of land and labor from primary to other sectors of the economy to enhance productivity. [25]

C)    Labour law reforms

India's demographic dividend is an opportunity waiting to be tapped into, and creating a unified labor market through something as essential as contract templates for short-term workers to structural ones like reforming the nature of labor law itself is long overdue now. [26]

D)   School outcomes

Fixing the poor learning outcomes in our school education system will be vital to developing the human capital to improve productivity in their post-schooling years. For a Sarva Shiksha Abhiyan to be genuinely transformative, moving away from education inputs (dropouts) to quality outcomes will be essential.

E)    Enabling infrastructure

Infrastructure for schools, skilling, local industrial hubs, safety for women workers, etc, are all vital elements to ensure that the nation's human capital is developed and sustained to be productive in the medium to long term. Investments in physical infrastructure such as logistics hubs, highways towards our hinterlands, and dedicated freight corridors through multi-modal means create enabling infrastructure to drive TFP improvement.

 

2. Manufacturing-driven (including high-tech industries) - All modern economies have progressed due to manufacturing-led growth, which removes the workforce from the unproductive agriculture sector. Manufacturing growth must be complemented with proper urbanization, infrastructure & connectivity development, further encouraging migration into better-paying, more productive jobs.  Check Appendix 12 for details on evaluation metrics.

      A) High-skills manufacturing and High-tech focus –

De-industrialization peaked in Europe only at income levels of around $14,000 (in 1990 dollars), while India sees it at about $700. Technologies like advanced robotics, industrial automation, and 3D printing- have changed the industrial landscape. This leads to companies focusing on such regions where modern technologies are available. [27]

Although continued employment generation in the near term would be visible in the traditional manufacturing sectors of automotive, clothing, food, etc., true transformation of the domestic industrial infrastructure can only come about when there is a dedicated focus on encouraging investments, innovations, and entrepreneurs, in the technology of the future, which includes but is not limited to areas such as space resources, AI, Genome editing, semi-conductor, oceanography, robotics, 3D printing, etc.

B)    Focus on high employment number-driven industries -

More than 56% of all workers in industry and services were employed in enterprises with just five or fewer workers. The high 62% of workers explains this low productivity in the “own account enterprises,” which also contribute to less than 33% of gross value added (GVA), which drives down the average productivity of industries in general. The comparison with China, in particular, shows us the stark difference. [28]

Figure 9: Low wages in small and medium firms as compared to large firms (India-China comparison) Source: Author calculations by Arvind Panagariya in the book “India Unlimited: reclaiming the lost glory.”

 

Figure 10: Concentration of manufacturing employment in small firms Source: Author calculations by Arvind Panagariya in the book “India Unlimited: reclaiming the lost glory.”

Arvind Panagariya explains this very well when he talks about the twin problem of Indian manufacturing of the decent paying jobs being in industries that are capital-intensive or high skill labor intensive or the second problem of the proportion of labor employed in middle and big enterprises being low comparable to other countries on a similar growth path. The following two tables explain this very well.

Hence, any manufacturing solution for India must factor in these productivity-based challenges and encourage more chronically small or perpetually medium enterprises to also turn into productivity-guzzling larger enterprises.

Table 1: Employment in OAE and Establishment Enterprises Source: Author calculations by Arvind Panagariya in the book “India Unlimited: reclaiming the Lost Glory” using NSO 2017 estimates

 

Table 2: Gross Value Added (GVA) in OAE and Establishment Enterprises Source: Author calculations by Arvind Panagariya in the book “India Unlimited: reclaiming the lost glory."

 

Experts point towards a possibility of “servicification” of manufacturing to focus beyond just production but also look into the conceptual design, product strategy, after-sales services, marketing, etc. – our lead in the services sector already gives us an advantage. [29]

C)   The balancing act of industry, services, and industry-based services –

Raghuram Rajan and Rohit Lamba argue in their latest book, “Breaking the Mould,” that the heavy inter-connectedness of manufacturing into the global supply chains and India’s reluctance to get into regional and international trade deals de-leverages heavily our ability to maximize the impact of manufacturing-led growth. [30]
Arvind Panagariya argues[31], on the other hand, that India has not missed the manufacturing bus and that certain factors continue to favor manufacturing in India – these range from clear indications of low-skill manufacturing now shifting away from China, the US-China trade war, which is shifting further trade away from China as it rises as a belligerent power.

We agree with the assessment that industry and services must be leveraged as a group. Still, we propose the core view that manufacturing, like those of yesteryears, cannot continue the as-it-is growth models of tomorrow. This requires us to re-look at industries through the lens of high-tech manufacturing and manufacturing services and incentivize existing manufacturing at the small and medium levels to grow into scalable larger organizations. [32]

Our original rendition of the paper also had a third point on “agriculture transformation” at the core of this productivity-led employment generation. This is now shifted into Appendix 13 as an additional area to sustain while these transformative changes occur through our suggested solutions.

CONCLUSION

In conclusion, we believe that our three core areas of intervention – Governance, Equity, & Productivity – will help India achieve its goal of becoming an upper-middle economy by 2047. We have shortlisted the three we felt needed the most transformation, had the most transformative impact, and were the most impactful to bring about a sea-change in the outlook of our economy in the next half a century.

With the passage of time and the maturity of our economy, we also predict the suggested specific solutions will be further modified for the next intervention step. The most significant success of this paper will lie not in being relevant even a decade down the line but in becoming redundant by the nature of the execution of solutions suggested herein. 

 

APPENDIX

Appendix 1: The long list of the areas of interventions for future prosperity into an upper-middle income economy by 2047

Appendix 2: Transparency in government actions

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	High	Transparency leads to accountability, which leads to effective and efficient implementation of policies.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Medium	Recent trends point in the opposite direction of transparency – we will need to double down & reverse this trend.
3	The society or individuals’ readiness to accept this route of focus	High	Transparency encourages higher civic engagement
4	The probability of an external India factor throwing this course	Low	This has to be a vital inside-out transformation of the government’s work, disclosures, and debates.

 

Appendix 3: Institutional strength and effectivity

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	High	This helps build trust with the market forces domestically and with international investors looking to invest & grow within India – The rule of law is paramount.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Medium	Recent trends point in the opposite direction of transparency – we will need to double down & reverse this trend.
3	The society or individuals’ readiness to accept this route of focus	High	Institution strength and accountability increase the credibility and belief of individuals in approaching the state machinery & regulatory mechanism.
4	The probability of an external India factor throwing this off-course	Low	This has to be a vital inside-out transformation of the government’s work, disclosures, and debates.

 

Appendix 4: Judicial resources to ensure timely clearance of case backlogs while maintaining judicial independence and integrity

A few clear areas of interventions to ensure judicial effectivity and independence increase by leaps and bounds provided the following –

·       Ensure that senior high and supreme court judges do not take up political postings immediately after retiring from their duties. Putting in a 5-year cooling off period for such postings will help build strong credibility of judges and the judiciary overall, especially the ones who are nearing the end of their tenure and will be open to question on their judgments. Justice Gogoi getting a Rajya Sabha MP post immediately after retirement after a spate of controversies didn’t show the judiciary in a positive light, and such cases must be avoided in the future. The RBI and CVC have their cooling-off period concepts, and this would not be a novel introduction for the judiciary as an institution. [33]

·       An agency to work on the administrative functioning of the judiciary and tribunals is required. The same has been done successfully in Canada, the USA, and the UK.

·       Co-operation and coordination between the judiciary and the rest of the government – Not just for building administrative capacity but also for reducing delays in judicial appointments and building bridges across the fence to ensure a hands-off yet seamless working between the two pillars.[34]

·       Public awareness of various aspects of making the judiciary and judges accountable for their actions is vital to ensure a fair process and implementing the rule of law. [35]

·       Although the number of cases pending in our courts is a big issue. But, once we break it down into parts, we realize that the “adjournment culture” itself, where cases can as well be adjourned 15 times beyond the suggested three adjournments upper limit in the Civil Procedures Court of 1908. The current CJI, Justice Chandrachud, has called openly to keep this under check.

·       The culture of court vacations has been called a “colonial legacy,” which creates unnecessary breaks and logjams in the ongoing judicial process. [36]

·       Plugging the gaps in “institutional coherence” of the judgments passed by the court is essential. Because of the multiple judicial panels of different sizes, we have the apex court, in particular, dis-agreeing with itself, leading to a lack of institutional coherence. This leads to many judgments being constantly open to interpretation or question. Gautam Bhatia suggested that the final panel with more judges should ideally not overlap with previous judicial panels – removing any conflict regarding passing a judgment on their last order. [37]

 

Appendix 5: An extended note on the first intervention of “Governance ethos & capability”

Entrenching democratic values across the society - Many other points about poverty alleviation, inequality reduction, and inflation management have democratic values entrenchment as the backbone of this mechanism.

A) Freedom to dissent or to criticize without being subjected to the long arm of the law

The classic case for this is the Sedition law in India, which Chitranshul Sinha, in his book “The Great Repression,” talks about how Section 124a, which came into existence as a response to Wahabi extremism, still flourishes. The fact that the Britishers, from whom we borrowed the tenants of this law, have now done away with the law is a classic case to ponder.  [38]

Although Chitranshul Sinha talks about relying only on the UAPA (Unlawful Activities Prevention Act), the authors of this piece believe that even the UAPA has now been invoked in multiple cases in the form of making this “process of being an undertrial as a punishment” in itself. How many who were put in jail for Bhima-Koregaon, the Covid reporting and disclosures, the Hathras gang-rape, and the student university protests continued to languish in prisons without hearings and eventually were released after years, has been an uncomfortable blot in our journey of progress. We call for repealing such draconian legislation, and the recently introduced reformed criminal and civil law bills are a missed opportunity.

B) Societal harmony and inclusion in more considerable economic progress –

Social cohesion drives a sense of fairness and justice. The growth pattern eventually ends up being as important as the quantum of growth. [39]

If we go by what Montek Singh Ahluwalia says, social cohesion ends up being not just a good-to-have but a must-have for the sound economic progress of a nation. [40]

We explain this in further detail by talking about poverty alleviation and income inequality, which are addressed in our second area of intervention below. However, the more significant theme of democratic values here signifies that an equitable and flourishing capitalist society can not be sustained without liberal and democratic values. Some countries have embraced capitalism at a macro-level but continue to embrace autocracy in higher level decision making – these countries might see an increase in wealth overall but not the removal of poverty or income disparities (the stark differences in living standard of workers and the white colors in the middle-eastern countries, is a recent case in the point). [41]

C) A civil society and free press that can play the role of an overseer or an unbiased reporter of the truth–

Recently, many media houses, NGOs, and transnational non-government bodies working in India have imposed a series of FEMA regulation violations. This has led to their funding sources drying out and, in the worst cases, their organizing licenses being revoked after a series of raids and overhauls of their employees involved in their functioning – Amnesty International, Greenpeace, BBC World, and many other domestic media houses have been on the receiving end of these raids and overhauls. Often, such organizations also come out with research, investigation, and narratives that do not fit the narrative of the establishment currently in power. Suppose we have to progress into an upper-middle economy. In that case, it will not happen through closed-door ordinances but open public criticism, which is then taken on its factual merits and utilized to our progress.

Appendix 6: a framework for evaluating government transparency

#	Measuring Transparency – Parameters	Example in the Indian context
1	Access to information	National statistics data, including GDP figures
2	Open meetings	Recurring public meetings of elected officials and bureaucrats
3	Campaign finance	Transparency in electoral bonds
4	Executive accountability	Implementation devoid of base biases and delays
5	Legislative accountability	Fewer ordinances and more debates & deliberations on bills in parliament
6	Judicial accountability	No conflict of interest or closeness in dealings with elected officials
7	State budgeting	Healthy functional federal economy, with the appropriate devolutions of funds and power to the state & local governments
8	Civil-service management	Accountability to citizens and not elected officials is the primary responsibility.
9	Procurement	Sourcing code of conduct and open e-auction guidelines defined and implemented
10	Internal auditing	CAG has the necessary independence to always remain hands-off from the daily operational workings of the remaining government
11	Lobbying disclosure	Quid-pro-quo CSR spending would also fall here
12	Social welfare purpose and delivery (combined from Pension-fund management and Insurance commissions of the original framework)	A national pension system that looks out for the well-being of citizens. In the Indian context, the larger welfare schemes must focus on poverty alleviation and inequality reduction, not just look at stop-gap solutions of price-based subsidies or market-distorting benefits.
13	Ethics enforcement	Corruption and rent-seeking are reduced at all government layers – as it is enough for just the top layers to avoid indulgence.
14	Re-districting	Delimitation in India must be transparent and done promptly without penalizing criteria for better socio-economic performing states.
15	Usability and presentation	Data from the government is available for citizens and experts to work on and suggest better policy options.

 

 

Appendix 7: Domestic Financial Stability -

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	High	Unleashing the power of the market forces will be critical for prosperity, and a structurally sound domestic financial backbone will be its enabler.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Medium	The slow implementation of codes around bankruptcy, banking sector reforms, and GST devolution – all point towards the right intent but not a policy framework that is dynamic & robust enough for error-free execution.
3	The society or individuals’ readiness to accept this route of focus	Low	Such reforms would never yield immediate results – the GST process, the continued challenges on crop insurance, and micro-finance do not have a ready base of optimistic populace willing to accept disruptions.
4	The probability of an external India factor throwing this off-course	Medium	Since this will need to work in tandem with capital account convertibility and other elements of macroeconomic stability, it will require us to be hyper-aware of multiple global factors, which will also influence our intended transformation.

 

Appendix 8: Inflation management -

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	High	Rising prices of food, drinks, houses, and other items of essential consumption have a direct ripple effect on disposable income and, hence, the ability to save/invest.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Medium	Steps have been taken in the right direction. The only remaining element is for the RBI to be allowed to take up its Inflation-Targeting agenda with complete dedication and focus.
3	The society or individuals’ readiness to accept this route of focus	High	From a political economy perspective, this is one of the most important factors to keep under control.
4	The probability of an external India factor throwing this off-course	Medium	The high contribution of imported oil contributes to a risk element to controlling this element entirely in the domestic environment.

 

Appendix 9: Poverty alleviation -

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	High	It will be highly critical to have a mentally and physically healthy population to increase the economic potential and reduce preventable expenses on health & recovery.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Low	Although extreme poverty is being addressed appropriately, the general outlook for overall poverty alleviation is suspect due to the persistent lack of sustainable economic opportunities.
3	The society or individuals’ readiness to accept this route of focus	High	Intervention in poverty alleviation has a direct, tangible, and immediate impact on the population.
4	The probability of an external India factor throwing this off-course	Medium	External headwinds of economic deceleration can affect the larger corpus of funds available for poverty alleviation – Covid times, for example, were stressful.

 

Appendix 10: Inequality minimization -

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	Medium	In tandem with social cohesion and poverty alleviation, this can bring about a major structural transformation for our society.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Low	Our establishments are not exceptionally equipped to solve deep-rooted caste dynamics or the incoming new-age technologies creating their power centers. Poverty alleviation also often takes precedence over inequality minimization.
3	The society or individuals’ readiness to accept this route of focus	High	Most downtrodden, under-served, and marginalized communities would benefit from interventions in this domain.
4	The probability of an external India factor throwing this off-course	Medium	External headwinds of economic deceleration can affect the larger corpus of funds available for inequality minimization.

 

Appendix 11: TFP / Total Factor Productivity driven human capital investment –

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	High	Breaking out of the low-middle-income barrier will require human and physical capital investments to be transformed over the next generation.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Medium	The capability will need to be developed parallelly –like learning to fly a plane while it has already taken off.
3	The society or individuals’ readiness to accept this route of focus	Medium	This will result in outcome changes visible to the general public – ranging from labor laws, market opportunities, skilling connections with industry, etc.
4	The probability of an external India factor throwing this off-course	Medium	We must factor in multiple other countries competing to gain this productivity advantage.

 

Appendix 12: Manufacturing-driven (including high-tech industries) -

#	Evaluation metric	Levels (Low, Med, High)	Reasons for the levels (low-med-high) attributed to each evaluation metric (which helped us narrow this down to this being one of our top 3 intervention areas)
1	Level of importance for our vision of intended prosperity	Medium	All modern economies have progressed on the back of manufacturing-led growth, which also takes the workforce away from the unproductive agriculture sector.
2	The nation-state's capacity & capability to bring this change in the next 15 years	Low	Multiple initiatives around the National Manufacturing Policy of 2011 by the UPA govt and the subsequent “Make in India” initiative by the current NDA government have kept prioritizing manufacturing as a sector.
3	The society or individuals’ readiness to accept this route of focus	Medium	Manufacturing growth must be complemented with proper urbanization, infrastructure & connectivity development, further encouraging migration into better-paying and higher-productive jobs.
4	The probability of an external India factor throwing this off-course	High	The challenges that a manufacturing-led growth is intense from other countries also taking this path and competing with us for the global market’s share of the pie

 

Appendix 13: Agriculture transformation - Agriculture has a high level of disguised unemployment, and with the low agriculture productivity, this becomes an important metric that will also enable a rise in TFP. The acceptance level for reforms in agriculture is high, but when it comes without any immediate replacement employment in other non-farm avenues, it becomes a roadblock.

40% of the Indian population is engaged in agriculture, contributing 15% of the GDP. 50% of these are not farm landowners but laborers. The Lewis model predicts that rural wages will stagnate until surplus labor has been absorbed into non-farm occupations – but this has not yet materialized in India. [42]

The challenges in agriculture abound, ranging from the growth in agriculture being the lowest of all categories over the past five decades, the widening gap in productivity between agriculture and other sectors, landholding size which has fallen from 2 hectares to 1 hectare in the past five decades to the lack of access to micro-finance and heavy dependence on local money-lenders. [43]

A few clear areas of intervention for the transformation of agriculture productivity, to also help free up resources for other non-agriculture domains, would include the following areas of structural interventions –

A)   Price discovery and financial instruments –

a.      Financing for challenges of climate change and resource-extracted agricultural land through measures such as crop insurance and uninterrupted (not subsidized) power supply.

b.     We need to change our approach from a heavy focus on loan waivers, which currently amounts to 14,500 crs spent per year – the same amount re-directed towards crop insurance and power supply available at the market prices, can increase adoption of crop insurance by 33% in the first three years itself. (33% number from authors' calculation from the Policy Bardach workshop at Goa for the PGP-7 batch)[44][45]

c.      Price discovery mechanisms must move from an MSP to a price deficiency system.

d.     There is an urgent need for a transparent land-leasing law in each state. 68% of landholding today is smaller than 1 hectare, and it is here that clustered leasing of land is used to get maximum productivity from the available land. This law, which records tenancy, will also help in the transparent availability of direct cash benefit transfers to the actual tenant of the land.

 

B)    Climate mitigation resilience –

a.      Providing service provisioning for farmers for drought-resistant seed varieties and other input materials enabling farm-land productivity.

b.     Ocean surface modeling investment for El Nino-La Nina affects mitigation will be critical– our plan for an observatory in the Indian Ocean is already in place.[46]

 

C)   Water-guzzlers and agriculture productivity –

a.      This agriculture contributes to 15% of the GDP and uses up 80% of the available water. [47]

b.     At the cost of intermittent challenges, there is a need to shift cropping patterns from water-guzzling crops like paddy and sugarcane into more drought-resistant varieties. Leaving aside cash crops, food grains urgently need a shift.

c.      This shift will also ensure that the production of paddy and wheat can shift to other states, help spread the benefits, and reduce chances of resource-extractive crops all narrowing down in just one region. [48]

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