Category: Blogs

In the 1860s, England was facing an acute shortage of coal. Some experts contended that improving technology would reduce coal consumption. But contrary to this, technological improvements that increased the efficiency of coal led to the increased consumption of coal in a wide range of industries. English Economist William Stanley Jevons argued that technological progress could not be relied upon to reduce resource consumption. Maharashtra is facing a similar issue in 2020 with water.

The Paradox of water

In 2014, the then Chief Minister, Devendra Fadnavis, launched a flagship project to make rural Maharashtra drought-free. The program aimed to make 5000 villages free of water scarcity every year. Nearly 52% of the state’s geographical area is prone to drought, either naturally or due to poor rainfall. The project targeted strengthening and streamlining existing water resources like canals, bunds, and ponds by arresting maximum run-off rainwater during the monsoon. The key aim of this project, Jalyukta Shivar Abhiyan, was to establish the belief in a farmer that “every drop of rainwater is owned by me and it should percolate on my land”. Despite the efforts made by the State Government and several NGOs working in the sector, the groundwater level has continued to decrease in 245 Talukas since 2014-15.

Despite a lot of work and spending more than 9000 crores on the supply-side of water, villages are still facing drought-like scenarios. This is mainly due to unprecedented rates of extraction, the sudden availability of abundant water leading to use of more water and erratic rainfall. 

This is a classic example of Jevon’s Paradox. The fault lies not with the farmers but with the policy’s design and implementation. Jevon’s paradox is a widespread phenomenon that most of us have experienced at some point or the other. For example, when we get a salary increment, we end up saving the same amount or sometimes even less than before.

Indian laws treat water as private property. It is often attached to the land. As a result, only a privileged few have access to groundwater. There is a limit to harvesting water in any location.  With only 23% irrigated land, Maharashtra is heavily dependent on the monsoon. Due to climate change, rainfall is also becoming erratic. Despite this, the areas under sugarcane plantations, a water-intensive crop, are increasing every year. If this continues, we will see a huge crop failure and mass migration in the coming years.

Farm pond after rains. Credits: Narendra Kulkarni

Understanding the Water Bank

To address this the focus needs to shift from the supply-side to the demand-side of water. Implementation of water budget plans can help to deal with this challenge. The preparation of village water charts, water budget, aquifer mapping and their management was proposed back in the Maharashtra Groundwater Act, 2009. 

Water budgeting is similar to balancing a bank account. In simple terms, the water budget is a process of calculating water requirements for overall different needs (domestic, irrigation, etc.) against the total water available from different sources (eg: rainfall, groundwater).

Managing water is similar to managing finances. First, similar to knowing how banks and money work, villagers need to know how aquifers and groundwater work. To understand this a 3D model of topography and aquifer map can be made available for all villages. This map can be used to convince villagers to look at groundwater as a common good.

Secondly, managing finances requires information about the inflow and outflow of money. In the same way, villagers need to measure rainfall, water level and its use. In order to achieve this, villagers should be trained in making rain gauges and measuring and maintaining the rainfall record. There is also a dire need to spread awareness about the water requirements of different crops. Water availability and water requirement of different crops will help villagers plan their crop cycles to maximise profits giving first preference to drinking water.

Finally, like a bank manager, we need to develop local leadership who will act as watershed managers. These managers need to be educated about the benefits of the water budgeting process and have the capacity to have systematic, well-planned discussions with all stakeholders to make water budgets implementable.

With climate change looming around the corner, the government needs to relook at the water crisis at the earliest. A good start would be implementing the Maharashtra Groundwater Act and incentivising water-efficient crops.  We need to realise that if this crisis continues and the water banks fail, no one will be able to bail us out, as in the 2008 financial crisis.


WoTR. (2020b, March). Water Stewardship and Water Budgeng: A Pathway to manage the water available in a me of growing water scarcity in rain fed Maharashtra. Retrieved March 31, 2022, from 

WoTR. (2019). Water Budgeting Tool for improving water governance at local level. Retrieved March 31, 2022, from 

Paani Foundation. (2016, June 1). Water Budgeting [Video]. YouTube. 

The Swachh Bharat Mission (SBM) was initiated in 2014 to achieve universal sanitation coverage. The cleanliness drive aimed to make citizens health-conscious by providing financial incentives for solid/liquid waste management (SLWM), toilet construction, technical assistance, and capacity building (Aijaz, 2017).

The Swachh Bharat Mission has successfully executed its target of toilet construction with about 99% of Indian cities declared Open Defecation Free (ODF) (Jadhav, 2021). However, toilet usage is still reported to be low. There are drawbacks to the policy that can only be mitigated when citizens and the government work in collaboration and co-design the policy. Behavioural interventions can come in handy to bring about this transformational shift. According to Sharma, by 2021 a very small percentage (about 3%) of the SBM Budget is allocated to behavioural change. 

The potential solution area to improve the policy’s adoption is to reframe the policy for better outcomes using the principles of behavioural science.

Administrative Problems

Apart from the behavioural challenges mentioned above, there are certain administrative issues in the implementation of the program. It is observed that toilets are not properly constructed, either they are left halfway or constructed at far-off places and not in close vicinity creating challenges, specifically for women. Problems concerned with lack of adequate water supply, small and dingy toilets, also hinders the use of the toilet. Many areas even struggle to maintain the Open Defecation Free (ODF) status owing to seasonal and technological challenges (Sharma, 2021). 

To address these challenges, consistent physical availability of functional toilets must be a critical first step to induce latrine-use habits. This can be done by ensuring that toilets are constructed in social contexts beyond the homes such as in schools, hospitals, market places, thereby maximizing the physical availability of enabling infrastructure. It is equally important to map the existing OD locations and reduce the physical availability by repurposing common OD sites for alternate use. 

By making the existing toilet infrastructure easily accessible and user-friendly and by reducing the availability of the products/infrastructure supporting OD, we can correct the barriers hindering toilet usage.

Challenges in the Swachh Bharat Mission (SBM)  

India, with its vast and diverse population, experiences a number of challenges in getting people to use toilets and stop defecating in open spaces. Some of these challenges are listed below: 

  • Status Quo Bias – 100% toilet coverage yet low toilet usage 

According to the IHHL (Individual Household Latrine), there has been an overall 100% household toilet coverage in India, as of 2nd October 2019 (Swachh Bharat Mission (Gramin), n.d.). However, the policymakers underestimated the amount of time it would take to bring in desired behavioural change among the people who largely defecate in the open. 

People have a status quo bias wherein due to the preference for the current state of affairs, individuals do not wish to exercise an active choice but simply stick to the age-old practices and therefore, individuals in India continue to defecate in the open. In the rural areas of 5 northern Indian states, Coffey et al. (2014) found that 21% of individuals continue to defecate in the open, despite owning a latrine. In rural Tamil Nadu, a study by Yogananth & Bhatnagar (2018) reported that 54% of respondents defecated in the open despite having a household latrine.

Individuals are also driven by present bias wherein the inclination towards a smaller present reward (gains from open defecation) dominates larger later reward (gains from toilet usage). This occurs due to a lack of knowledge about the future benefits of using toilets. 

  • Limited awareness:

Even in places where toilets are functioning, citizens lack awareness in terms of the importance of sanitation and hygiene. Construction of toilets is not enough, the government should stress on effective communication to induce behavioural changes as well as focus on the differential usage and access to these facilities (Sharma, 2021).


It can be noticed from the above discussion that individuals often stick to what is the default setting due to limited cognitive abilities and biased perceptions. In his book, Thinking Fast and Slow, Daniel Kahneman points out several biases and heuristics that limit our ability to make the best decisions for ourselves and others. Such decisions not only impact us but also those around us, leading to negative externalities. It is the need of the hour to change the behaviour of individuals through appropriate interventions to eliminate the negative outcomes. These interventions, by enabling reflective thinking, can nudge people to start using toilets and bring in desired changes.

Using the learning from behavioural science, some policy recommendations can be enacted for the effective implementation of SBM:

  1. Behavioural changes and nudges would be able to facilitate a shift that would build upon existing social norm bias and induce citizens to make rational choices. To encourage citizens to stop defecating in the open, individuals can be informed of how their neighbours are making the best use of toilets. Using messages such as ‘9 out of 10 households in your vicinity use toilets ’, ‘no toilet, no bride’ can induce people to positively change their behaviour.
  2. Linking the existing cues with desired changes can yield effective results. Open defecation (OD) is a part of the morning routine and ‘piggybacks’ on daily rituals of a time to walk and socialize. Measures can be taken to enable latrine use to piggyback on these established, daily behaviours. For example, shaded areas near community toilets can be constructed to provide space to socialize.
  3. Effective monitoring, surveillance, regular reminders, and ground-level checks can help in examining the use of toilets. Incentivization can be another measure to encourage people to make the best use of toilets. Households making use of toilets can be awarded as the “Best Household” and can be given badges as a token of appreciation for supporting the cause. This could be publicly visible and generate a badge effect, motivating others to participate in the drive. Moreover, techniques like campaigning, social messaging, priming, can be used to bring desired behavioural change.


Experiments around the world have shown how behavioural principles can be used to design policies that address development and policy challenges. Good data and good analysis are thus very essential for being informed about issues and making good policy recommendations. Open Defecation (OD) is a deep-rooted socio-cultural concern. Thus, without intervention in behaviour, the use of toilets will not increase even where latrines are available. To transform India into a truly ODF society, it will call for significant interventions to design latrines amenable to sustained daily use and to induce significant behavioural change.

‘Open defecation is a battle with the mind and hence must be won mindfully’


 About Us | Swachh Bharat Mission—Gramin, Ministry of Drinking Water and Sanitation. (n.d.). Retrieved October 25, 2021, from

Aijaz, R. (2017, July 19). Swachh Bharat Mission: Achievements and challenges. ORF.

Coffey, D., Gupta, A., Hathi, P., Khurana, N., Spears, D., Srivastav, N., & Vyas, S. (2014). Revealed Preference for Open Defecation. 38, 13.

Jadhav, R. (2021, January 28). Flush with success, Swachh Bharat scheme on path to sustainability.

Kahneman, D. (2003). Maps of Bounded Rationality: Psychology for Behavioral Economics. The American Economic Review, 93(5), 1449–1475.

Sharma, A. (2021, October 28). Here’s Why India Is Struggling to Be Truly Open Defecation Free. The Wire.

The  Behavioural  Insights  Team  (2015),  ‘ FAST:  Four  simple  ways  to  apply  behavioural  insights ’, Publication-EAST_FA_WEB.pdf

Yogananth, N., & Bhatnagar, T. (2018). Prevalence of open defecation among households with toilets and associated factors in rural south India: An analytical cross-sectional study. Transactions of The Royal Society of Tropical Medicine and Hygiene, 112(7), 349–360.

India has successfully improved school enrolment in recent decades yet failed to deliver actual learning. The ASER Survey by NGO Pratham (2020) spotlights large learning deficits in students’ foundational learning. For instance, only 50% of Class V students can read texts of Class II level. More than half the students in Class VIII struggle to do simple division. The pandemic has deepened this crisis, especially because of the physical closure of 15.5 lakh schools that has affected more than 248 million students for over a year. These learning gaps are becoming critical with the emergence of the Fourth Industrial Revolution, which is emphasising digital technology, artificial intelligence and other allied technologies. Thus, it is integral to redefine education and structure it to suit the evolving technological transformation.

In response to this situation, the National Education Policy 2020 sounds like a clarion call to integrate technology at every level of education. It envisions the establishment of the National Education Technology Forum (NETF) to spearhead efforts towards the use of education technology. It recommended employing EdTech through app-based learning, online student communities, and lesson delivery beyond ‘chalk and talk’. By envisioning schools as nodal agencies, through which the underserved can access internet-powered devices, the NEP recognizes artificial intelligence (AI), virtual reality (VR), and blockchain as requisites in India’s education ecosystem. Thus, EdTech becomes a crucial link between enrolment and enhanced learning outcomes


The Indian EdTech ecosystem has a lot of potential for innovation. With over 4,500 start-ups and a current valuation of around $700 million, the market is geared for exponential growth — estimates project an astounding market size of $30 billion in the next 10 years. Eg. Byju’s, Unacademy. Despite the early implementation of technologies in the education system, India still faces teething problems.

Firstly, there are institutional obstacles. The lack of a dedicated unit to coordinate digital infrastructure, content and capacity building within the Education Ministry to look after the online learning needs of both school and higher education. Institutions need to be strengthened and made responsive to the evolving trends to ensure the dissemination of quality education.

Secondly, gender bias needs to be addressed as the gendered availability and access to technology and tools such as smartphones, laptops and internet connection is very common, especially in rural areas. Girls often face suspicion if they are demanding a phone. Education technology may not reach half of the population. A ‘Gender-Inclusion Fund’ should be set up to build the country’s capacity to provide equitable quality education to all girls and transgender students.

Thirdly, a wide digital divide. In India, the biggest obstacle to education technology integration is the prevalent digital divide and associated challenges of equity. Many view technology and associated opportunities as contradictory to equity and inclusion. Only 32% of the rural population are internet users. A national study carried out at the National Institute of Educational Planning and Administration showed the gaps in inclusive learning mediated by technology. A high level of urban-rural disparity in online classes was found. Not everyone who can afford to go to school can afford to have phones, computers, or even a quality internet connection for attending classes online. NSS data for 2017-18 showed that only 42% of urban and 15% of rural households had internet access. Thus, planning for education technology integration needs a broader lens of student diversity in contemporary campuses where a large share of students are from lower social strata (Scheduled Castes, Scheduled Tribes and Other Backward Classes and from poor households). Many are from government schools, under-developed regions, remote villages and urban margins. Bharat Net Project to connect all the 2,50,000 Gram panchayats in the country and provide 100 Mbps connectivity to all gram panchayats should be implemented. Opportunities provided by education technology can promote egalitarianism if access to technology is democratised and inclusion is institutionalised.

Fourthly, the pace of change & increasing cost makes it tough for marginalised communities to keep up with the rapidly changing technology. Even for private schools upgrading technology presents a major financial challenge, let alone government schools that are usually frequented by such groups. For harnessing full potential, the education curriculum and mode of instruction need to be aligned with technology tools. This requires increased governmental budgeting, planning, design thinking and improving teacher training.

Next, the resistance to change and low professional development hampering success. The lack of adequate professional development for teachers, who are required to integrate new technologies into their classrooms, are unprepared or unable to understand new technologies. Teachers and school leaders are comfortable with the status quo and often see technological experimentation as outside the scope of their job descriptions. School schedules often don’t have time for projects involving the use of technologies. Rigid learning and testing models are failing to challenge students to experiment and engage in informal learning. Integration of technology-based non-traditional classroom models, such as flipped classrooms and self-paced MOOC (massive open online course) are integral (suggested in NEP 2020).

Lastly, a very significant concern comes from the privacy risks associated with EdTechs. Since the pandemic hit, online education has replaced conventional classroom instruction. For learning customisation, apps collect large quantities of data from the learners (minor students). Private data collected can be misused or sold to other companies with no legal oversight or protection. It is necessary to formulate an ethics policy for EdTech companies. Issues of safety, confidentiality and anonymity of the user would be central to building a healthier learning ecosystem and ensuring the privacy of students.


The true potential of EdTech will require collaborative efforts between the government, private sector, and NGOs. There is a need to realise that public educational institutions play an important role in social cohesion and building relations. Therefore, technology cannot substitute schools or replace teachers. Thus, it should not be “teachers versus technology” rather “teachers and technology”. 

Thorough mapping of the EdTech arena (scale, reach, and impact) is needed to bridge the digital divide at two levels – access and skills – is required to effectively use EdTech. Moreover, EdTech policy formulation and planning must align with other schemes (education, skills, digital governance, and finance). Fostering integration through public-private partnerships, factoring in voices of all stakeholders, and bolstering cooperative federalism across all levels of government is integral. The NITI Aayog’s India Knowledge Hub, Digital India Program, Government of India’s Aspirational Districts Programme on tech-enabled monitoring and implementation and the Ministry of Education’s DIKSHA and ShaGun platforms are great steps in the promotion of EdTech to transform India into a digitally empowered society and knowledge economy.

Learning from successful models as a repository of the best-in-class technology solutions, good practices and lessons from successful implementation must be curated. Some examples are:

  1. Grassroots innovation in EdTech –
    1. The Hamara Vidhyalaya in Namsai district, Arunachal Pradesh, is fostering tech-based performance assessments;
    2. Assam’s online career guidance portal is strengthening school-to-work and higher-education transition for students in grades 9 to 12;
    3. Samarth in Gujarat is facilitating the online professional development of lakhs of teachers in collaboration with IIM-Ahmedabad;
  2. International Cases –
    1. Mindspark, a computer-assisted learning software, delivers lessons through videos, games and questions on computers and tablets. The software analyses each student’s learning level, pitches content suitable for their level and adjusts the difficulty according to the student’s progress.
    2. Kenya’s literacy program Tusome, uses coaches equipped with tablets who visit classrooms, evaluate student reading skills, provide tailored advice to teachers and upload assessment data to administrators.

Author Bio:

Himanshi Bahl is a Political Science Graduate from the University of Delhi. Her research interests include emerging technologies and foreign policy.


Kant, A. (2021, June 30). The future of learning in India is ed-tech. The Indian Express.

Malish, C. M. (2020, August 21). Technology as an enabler. The Hindu.

Mohammad Naciri & Atsuko Okuda. (2021, June 24). The gender technology gap has to end. The Hindu.

Vincent, V. (2021, May 13). EdTech needs an ethics policy. The Hindu.

The surge in the second wave of COVID-19 in several parts of the country in 2021 once again brought attention towards the significance of decentralization and the need for local governments in India to be financially and administratively empowered. 

The Brihanmumbai Municipal Corporation (BMC) model of proactively managing the pandemic emerged as a case study on how a fiscally buoyant urban local body (ULB) with an empowered leadership can deliver on crucial services and fulfill citizens’ expectations even amidst a major crisis. While empowered leadership across all levels of urban local bodies still remains a work-in-progress, an important milestone towards making municipal revenues robust and resilient was initiated by the Government of India under its COVID relief package – the Atmanirbhar Abhiyaan. 

Municipal Own Source Revenue in India

Own Source Revenue denotes the component of revenue which is levied and collected by the Urban Local Bodies on their own. The other two components of revenue for a ULB include Assigned Revenues i.e. share of taxes from state government and Grants i.e. scheme/development related grants by State and Central Governments.

The own source revenue of municipal bodies in India as a share of GDP has been on a declining trend since 2012-13 and accounted for only 0.43% in 2017-18, the lowest in eight years. There are two components of own source revenue of ULBs – tax revenue which includes taxes on property, professions, advertisement etc. and non-tax revenue which includes other levies like license fee, user charges etc. collected by the ULBs in return for performing certain public services like water supply, solid waste management, among other things. 

Property Tax remains the principal source of revenue for most ULBs and contributed about 60% of the total municipal tax revenue in India in 2017-18. However, it accounts for only 0.15% of GDP against the international benchmark of 1% due to the numerous legal, administrative and political bottlenecks associated with property taxation in India. The revenue raising potential of property tax in India will only be realized by reforming many lingering issues such as outdated property enumeration lists, low valuations, no increase in tax rates and an antiquated assessment framework. Correspondingly, user charges and fees for water supply accounted for more than 60% of non-tax revenue in four out of the five years up to 2017-18. However, even user charges can be leveraged further by ULBs in raising municipal revenues, especially given that the rate of recovery of operational and maintenance (O&M) cost from rendering of services stands at a paltry 20 percent.

Atmanirbhar Bharat: 2% Additional Borrowing Scheme

To fight the COVID pandemic, the union government in May 2020 had granted permission to state governments to borrow an additional 2% of Gross State Domestic Product (GSDP) from the open market for 2020-21 and 0.25% of that was linked to Urban Local Body (ULB) reforms. In view of the aforementioned challenges in raising own source revenues of municipal bodies, the ULB reforms stipulated that for States to qualify they need to notify a reforms framework wherein property tax rates are linked to the prevailing circle rates (i.e. guidance rates for property transactions) and to mandate a periodic increase in property tax in line with the rise in valuation. Correspondingly, the scheme stipulated that States notify a framework wherein rates of user charges for water supply, drainage and sewerage reflect O&M costs incurred for rendering the services and mandates a periodic increase in user charges in line with price increase.  

Till the cutoff date of 31 March 2021, 11 States managed to qualify for the scheme in order to become eligible for more than INR 16,500 crores of additional open market borrowings cumulatively. States have employed a number of approaches to undertake the relevant reforms pertaining to property taxation. For instance, at least four states have notified a framework wherein property tax will now be charged directly as a percentage of guideline values of properties, published annually by the respective Stamps Departments, alongside provisions for a fixed percentage increase, either annually or every few years. Further, few States even included clauses wherein property tax will be revised as and when guideline values are revised by the respective Stamps and Registration Departments. And, in order to offset the sudden jump in tax rates, states have introduced sensible transitional provisions to ease the burden on the taxpayers in their respective jurisdictions. 

The remaining states have deployed similar approaches of linking property tax to guidance values. For instance, either by mandating that the minimum increase in property tax should be the same as the percentage increase in the guideline values published annually by the Stamps Department or by fixing one component of the property valuation formula as a percentage of the guideline values published by the Stamps Departments. The states have similarly included clauses for periodic increases in property tax as well. 

Correspondingly, states have employed dynamic methods of undertaking reforms pertaining to user charges for water supply, drainage and sewerage. Few of the states have prescribed comprehensively detailed procedures for ULBs to achieve self-sufficiency/complete recovery in terms of O&M costs incurred in rendering the selected services. These States also prescribe an annual minimum percentage increase in the charges levied. Other states have all prescribed policy roadmaps to achieve complete recovery of O&M costs over a period of time by undertaking a combination of process improvement and policy reforms which include, among other things, expansion in service coverage, reduction in wastage quality control and most importantly, mandating an annual fixed percentage increase in user charges. 

Property Tax reforms in qualifying states will ensure that property valuations for the purpose of taxation reflect market rates and are updated periodically which is likely to lead to a measurable uptick in collections over time. Further, user charges reforms provide a pathway towards 100% recovery of O&M costs incurred, over a period of time. The remaining states will be well advised to undertake similar reforms given their potential in generating buoyancy into the two most potent sources of municipal revenue in India. 

Property tax reforms, in particular, are going to be crucial, given that one of the mandatory conditions for ULBs to avail the 15th Finance Commission (FC) Grants, will be to evidence an improvement in property tax collections in tandem with growth in GSDP from the financial year 2022-23.  

The Atmanirbhar Abhiyaan marked an important intervention in providing incentives to states in carrying out critical municipal finance reforms. Now, the onus for realizing the potential of these reforms lies with ULBs in qualifying states which are advised to uniformly adopt and seamlessly implement the reform mandate without any bureaucratic or political delay. As indicated, this should also serve as valuable guidance in preparing ULBs in the country to qualify for the 15th FC Grants, for which giant strides are demanded to be made in the sphere of municipal finance. If everything performs as intended, a golden era awaits Indian cities. 

Author Bio:

Taarush Kishore Jain is a Senior Associate at Janaagraha Centre for Citizenship and Democracy. He is a Chartered Certified Accountant from ACCA, United Kingdom and has completed his post-graduation from the Indian School of Public Policy. His interests lie in discovering the complexities of how laws, economics and politics in India inform, enrich and affect one another.


  1. The Indian Express. “Iqbal Singh Chahal: If Mumbai Has 6-7% Positivity Rate, Why Should We Suffer a National Lockdown? Decision Should Be Left to States,” May 10, 2021.
  2. Isher Judge Ahluwalia, P K Mohanty, Om Mathur, Debarpita Roy, Ayush Khare and Shreya Mangla | State of Municipal Finances in India (ICRIER-FFC), March 2019
  3. “Goa Becomes the 6th State to Complete Urban Local Bodies (ULB) Reforms.” Accessed May 14, 2021.
  4. Finance Commission, India, Accessed May 15, 2021.
  5.  Forbes India. “Financing India’s Cities: How The 15th Finance Commission Changed The Status Quo | Forbes India Blog.” Accessed May 15, 2021.

Despite a brutal second wave with cases peaking in April-May 2021, India’s Gross Domestic Product (GDP) grew at a record pace of 20.1 percent in the April-June 2021 quarter compared to the corresponding period last year. The GDP, in absolute terms, stood at Rs 32.38 lakh crore (constant prices). This was actually lower by 9.2 percent than the numbers seen in the April-June quarter of 2019-20. In fact, as the figure below shows, the April-June 2021 GDP numbers are closer to the levels seen during the January-March 2017 quarter.

Source: MOSPI (Annual and Quarterly Estimates of GDP at constant prices, 2011-12 series)

While growth in the April-June 2021 quarter is promising and reflects recovery from the deep plunge seen in April-June 2020, comparisons are being drawn with the pre-Covid levels. 

But what are these pre-covid levels? Should numbers of a single quarter, say April-June 2019-20 be used as the benchmark, or an average growth seen in the previous few quarters be considered as a benchmark for comparison? 

An alternate strategy

We propose an alternative way through which, we compare the present Gross Value Added (GVA) numbers (in level terms) with the numbers obtained using simple univariate time-series forecasts. These forecasts are obtained by exploring the time-series properties of the variable of interest. In particular, these forecasts are arrived at using the Autoregressive Integrated Moving Average models (ARIMA models). ARIMA is a statistical analysis model that uses time-series data to better understand the facts and to predict future trends. 

This comparison helps in assessing how distant are the current GVA numbers from the levels which would have been achieved had there been no shock in the form of the COVID-19 pandemic.   

Since GDP includes taxes, we look at the activity-based variable after excluding the impact of taxes. The variable of interest, therefore, is the Gross Value Added (GVA). We use the GVA data available from June 2011 till December 2019 and extend it using the projections obtained from a univariate ARIMA model. As mentioned before, in this model previous observations are used to predict future values. Therefore, we have excluded the period post-December 2019 to ensure that the trend is not influenced by the COVID-19 shock. 

The figure below shows the raw data along with the projections for the subsequent six quarters (from March 2020 onwards) based on the ARIMA model. These projections present a picture of the GVA trends under normal circumstances, i.e. if the economy would not have been subjected to the COVID-19 shock.

Adjustment for seasonality 

An economy, over the long term, experiences a concept known as seasonality. These are seasonal fluctuations, movements, that recur with similar intensity in a given period (such as months) each year, thus showing a clear pattern of peaks or troughs over a sufficiently long time period. Broadly, seasonality arises from several calendar related events such as – weather-based factors: monsoon, winter or summer months, agricultural seasons: harvest or sowing season, administrative procedures: tax filings, financial year closure, working days, festivals: Diwali, Christmas, etc., institutional: Annual budgets or Fiscal year ending, social and cultural factors: Statutory holidays, etc.

Such seasonality needs to be adjusted to comprehend the underlying trend, cyclicality, and other movements for a better understanding (Pandey et. al, 2020). 

The quarterly GVA series shown above exhibits seasonality and therefore we seasonally adjust the extended GVA series (GVA values till December 2019 along with the forecasted values) and compare with the seasonally adjusted actual data post-December 2019.  

The difference between the series till December 2019 extended with time-series forecasts and actual series post-2019 (both adjusted for seasonality) would give an assessment of the shortfall in economic activity arising due to the COVID-19 shock. 

Shortfall due to COVID-19

The table below shows the differences between the estimates based on the time-series forecasting and the actual values. We present this exercise for the overall GVA as well as its components. The key highlights of the comparison exercise are as follows:

Table 1: Difference between the Actual values and Estimated values (Rs. Lakh Cr)

*Both Actual and Estimated Values are seasonally adjusted

1. In the January-March 2020 quarter, the difference between the forecasted (estimated) values and the actual values is small. This is due to the limited impact of the pandemic during this quarter. 

2. However, the difference widened to Rs 8.7 lakh crore in the April-June 2020 quarter. This was the period of the nationwide lockdown. As a result, the economic activity was adversely impacted. The major difference was seen in the contact-intensive trade, hotels, and transport sectors. Since agriculture was not impacted by the pandemic, the projected and the actual agricultural GVA is the same. 

3. With the gradual opening up from the July-September quarter, we see that the gap between our estimates and actual values is reduced. However, the financial sector continued to reel under the impact of the pandemic. While some improvement was seen in the GVA of the trade, hotels, and transport sectors in the July-September quarter, there still was a significant shortfall of Rs. 1.4 lakh crore.4. In the October-December 2020 and the January-March 2021 quarter, a distinct improvement is seen in the actual overall GVA numbers. The gap between the estimated and the actual values for the overall aggregate GVA narrowed to Rs 0.8 lakh crore and Rs. 0.3 lakh crore for Oct-Dec 2020 and Jan-Mar

2021 quarter respectively. Except for the trade, hotels, and transport sector, the gap was less than Rs 1 lakh crore for all the sub-sectors. 

5. But, the April-June 2021 quarter revealed that the gap has widened to the tune of Rs. 5.3 lakh crore. This shows that while the recovery was underway, the onset of the second wave and the consequent partial lockdowns pulled back the growth momentum to some extent. The sectoral variations are also worth noting. While agriculture, mining, and manufacturing showed stellar performance despite the second wave, the contact-based services sector (trade, hotels and transport) pulled down the growth. The construction sector also bore the brunt of the second wave.

The above exercise presents an alternative approach to assess the shortfall in GVA numbers due to the COVID-19 shock. There are sectoral variations: while agriculture posted a robust growth and the manufacturing sector was relatively less impacted, it is the contact-intensive sector that primarily got affected due to the shock. Our exercise shows that after the April-June 2020 quarter, the economic recovery was gaining momentum. However, the second wave led to a pause in the recovery process. 

Going forward, with a sustained pick-up in the pace of vaccinations, we should see economic recovery getting back on track. The high-frequency variables such as exports, PMI manufacturing and services, petroleum products consumption, electricity consumption, and GST collection, etc., also suggest a pick-up in economic activity since the beginning of the second quarter. 

The authors are Senior Fellow and Fellow respectively at the National Institute of Public Finance and Policy (NIPFP), New Delhi. Views are personal.

India’s healthcare system has been plagued by multiple issues for several decades. A lack of robust healthcare infrastructure, supply-demand inefficiencies, and poor healthcare delivery mechanisms are known to be common across broad swathes of the system. The picture has been starker since the arrival of Covid-19. Questions around quality, affordability and accessibility have become even more urgent and prominent. 

Tackling such issues demand significant financial investments. Yet, India’s health expenditure stood at a mere 3.5% of GDP in 2018, compared to a global average of 9.8%. Thus, any incremental investment in the area needs to go a long way. For policymakers, health-related technologies that use Artificial Intelligence (AI) can present transformational solutions. 

AI refers to the simulation of human intelligence in computers and machines. It does this by transforming data into insight using algorithms. AI can thus learn, reason, and resolve problems as humans do – but with speed, accuracy, and precision. As data and its infrastructure continue to see exponential growth, AI is well-placed to transform healthcare systems in real-time. It can create a cost-effective, resource-efficient, patient-oriented, and accessible healthcare system through its applications in clinical practice, healthcare services, hospital management, biomedical research, and decision making. 

Clinical Practice 

India’s healthcare system is understaffed and overburdened. This impacts patient safety due to increased scope for human error, lack of timely care, and poor quality of services. AI can help mitigate this. Information from electronic health records can be used to identify complex patterns across large datasets. Modelling can predict or forecast different outputs, classify groups of patients, and find hidden associations. For example, Google Health developed an AI algorithm for the early detection of breast cancer. The cascading efficiencies of the solution were studied in a paper in Nature. It found that the performance remained steady while workload reduced.  By encouraging the adoption of such AI use-cases, policymakers can enable clinicians to take timely and evidence-based decisions. Potential areas for encouragement include risk prediction, detection, diagnosis, treatment selection, automation, and monitoring.

Healthcare Services 

India’s rural population travels long distances to access even basic healthcare facilities. Their time to access services is also impacted by insufficient facilities and physician absenteeism. AI-driven smart clinics are a potential solution here. With minimal training, staff can also use AI to diagnose illnesses, monitor vitals, prescribe treatments, and initiate referrals. The insights generated by AI can be transferred to specialists using cloud capabilities and telecom infrastructure, thus, creating a system where specialists can provide medical services to rural areas remotely. A Brazilian start-up, Portal Telemedicine, demonstrates this in over 300 clinics across rural Africa and Brazil. Their AI platform integrates with medical devices, which transfer data to the Cloud. There, AI models diagnose issues without human intervention. Specialists then verify the diagnosis from a distance. Given that India’s rural population (% of the total population) was 65.5% in 2019, this model can be useful to improve access to healthcare services in India’s remote sub-centres and primary health centres, where specialists are often reluctant to provide services.  

Hospital Management 

There are chronic supply-chain inefficiencies in the delivery of medicines, equipment, and other health-related essentials in India. With inventory management often being a manual process, there are few robust mechanisms to enable supply-chain efficiencies. AI can be transformative here. Models can predict purchase behaviour, monitor compliance, optimize service delivery times, reduce stockouts or overstocking, and generally help make smarter decisions. Other use-cases also assist in administration, scheduling, fraud detection, and operations tracking. Lumiere32, for example, is a Singapore-based start-up with a product in the space. It launched an AI-based inventory management platform that could forecast demand, predict stockouts, and track expiration dates using past trends and other relevant information. It helped reduce costs, allocate resources efficiently, and transform patient care. Within India’s healthcare system, such a data-driven platform can improve supply chain management, especially since its pharmaceutical industry is highly fragmented and non-uniform across regions. 

Biomedical and Translational Research 

India faces a dual challenge of high disease burden and poor resource availability. Being a developing country, there is a constant need for new treatments to handle diverse epidemiological challenges. However, drug development is slow, expensive, and labour intensive. It takes between 10−15 years and costs over US$ 2.6 billion, on average, for a new drug. AI can reduce time and costs here, by automating data collection, conducting experiments, synthesising literature, classifying genes, predicting chemical toxicity, etc. Use-cases include biomarker and drug discovery, drug repurposing, and target prioritization. A South Korean start-up, Standigm, is an example in this area. Their AI-driven product eliminates false starts in drug development processes. It has created noteworthy preclinical opportunities for conditions like autism and Parkinson’s disease. This function can also significantly speed up the process of vaccine development in the ongoing Covid-19 pandemic, especially within the context of emerging variants of the coronavirus. It can reduce guesswork by detecting biological patterns, identifying potentially useful vaccine compounds, eliminating unsuitable compounds, predicting vaccine efficacy, etc.

Decision Making 

The Covid-19 pandemic has shown the salience of foresight, planning, and management. AI can assist in data-driven planning and decision making. It can predict disease outbreaks, probable sites of infection, inform lockdown policies, and control the spread of misinformation. For example, the Canadian company, BlueDot, developed an AI algorithm to signal outbreaks of infectious diseases. The model’s results were published in Lancet, predicting an outbreak of the Zika virus in Florida six months before it happened. The same model also flagged a cluster of “unusual pneumonia” cases in Wuhan on Dec 30th, 2019. 

To conclude, the potential benefits of AI are enormous. Successful adoption can make health systems efficient, and create the foundation for inclusive, cost-effective, and high-quality healthcare delivery. But certain issues across domains remain open for resolution. Such domains include regulation, adoption, implementation, and ethics. Some barriers that may impact its translation in practice include incomplete health and medical data, lack of transparency in its decision process, poor user acceptability, slow workflow integration, unclear accountability and liability. However, by investing, studying, and adopting emerging global best practices, policymakers can induce more trust in these technologies and engineer a transformative healthcare system. One that is not resource-intensive, is accessible, cost-effective, accurate, provides scientifically testable results, and is easy to deploy and manage at scale.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy.Images via open source.

On January 30, 2020, India reported its first COVID-19 case – a medical student in Kerala who had been evacuated from Wuhan. Exactly a year later, the country has recorded more than 1.5 lakh deaths and 1.07 crore positive cases. As of January 29, 2021, 33 lakh healthcare workers have been vaccinated against the virus. With the daily mass vaccination programme set to cover other frontline workers and people with co-morbidities in its upcoming phases, the beginning of the end of the pandemic seems to be in sight. 

Public health officials warn that besides vaccinating vulnerable populations, contact tracing and tracking remain crucial steps in avoiding future outbreaks as reports of new variants of the virus emerge. Until sufficient herd immunity is achieved in the population, testing, tracing and treatment of infected persons, along with mask-wearing and physical distancing measures, are required to break the chain of transmission of the virus. 

Digital Technology Tools for Contact Tracing

Contact tracing refers to a range of methods used to identify, alert and monitor those who may have been exposed to the disease through close contact with an infected person. Contact tracing has been used in the past to manage epidemics such as AIDS, MERS and Ebola, among others. It involves three basic steps of identifying, listing and following up with those who have come in contact with an infected person. Contact tracing efforts were traditionally carried out manually through door-to-door surveillance and in-person interviews. Besides being manpower-intensive, physical contact tracing efforts also rely heavily on human memory and are hence prone to error and omissions. 

The COVID-19 pandemic witnessed the adoption of digital technology tools for disease management at an unprecedented scale globally. Several countries around the world, including India, launched mobile phone applications and other digital tools to aid disease surveillance and contact tracing. Such applications make use of mobility reports, real-time monitoring of wearables and devices, bluetooth proximity tracking, GPS location data and cellular network data, among others, to alert people to possible exposure, track the spread of the disease, and predict future hotspots. 

The use of digital technology promotes optimal usage of time and manpower in contact tracing. However, these apps in their current forms are not capable of capturing all possible scenarios under which a person can contract the disease. With about 41% of the world currently lacking access to the internet, digital technology tools cannot entirely replace the need for manual contact tracing. Such technology also carries an inherent risk of excluding already underserved populations, and furthering other existing prejudices. In the absence of proper data protection safeguards, they also pose a serious threat to individual privacy. Several countries such as Singapore, China, Taiwan and South Korea used advanced digital contact tracing tools. 

How India Fared in Contact Tracing

India’s tracing policy remained consistently comprehensive from March 2020 with the Ministry of Health and Family Welfare recommending contact tracing for all confirmed cases. Detailed guidelines for the same have been issued by the Integrated Disease Surveillance Programme, National Centre for Disease Control. The protocol emphasises the need to trace all contacts as early as possible, besides clearly defining the ‘low risk’ and ‘high risk’ contact categories. In July 2020, the Union health ministry directed states to ensure that at least 80% of new cases are traced and quarantined within 72 hours of testing positive. However, several news reports suggest, state health authorities failed to keep pace with the burgeoning caseload and scaled back on contact tracing over time. Indian Council for Medical Research (ICMR) and several state authorities stopped putting out contact tracing data after the first few months. 

State and district authorities implemented different models to carry out contact tracing in the initial days of the pandemic. For instance, as many as 2000 contact tracing teams were put together in Bhilwara district in Rajasthan to screen almost 92% of its 24 lakh-strong population within nine days. A team of 16,000 screened Himachal Pradesh’s population of 68 lakhs. Several states such as Delhi, Punjab, Uttar Pradesh and Maharashtra failed to keep track of domestic and international travellers. The large-scale movement of migrant workers to their home states during and after the nationwide lockdown further hampered these efforts. 

Cities such as Pune, Agra and Bengaluru with high population densities put together ‘war room’ teams comprising healthcare department, police department and collectorate officials to trace suspected cases and track the disease spread. Karnataka’s contact tracing capacity dropped from 47 per patient in June to less than six primary contacts per patient in July. The Government of Karnataka developed eight in-house apps to manage tracing and tracking during the pandemic. 

Once the pandemic entered the community transmission stage, a large share of the responsibility of contact tracing and isolating on exposure shifted to individuals and communities. However, the social stigma attached to testing positive for COVID-19 along with an enforcement-oriented approach (lockdowns, demarcation of containment zones, putting up banners outside the homes of those testing positive, mandatory use of Aarogya Setu, etc) adopted by authorities to fight the disease failed to encourage self-assessment and self-reporting by the average citizen. With reports emerging of discrimination against marginalised communities, public trust in contact tracing efforts eroded in the absence of congruent public messaging across political and social divides. 

A Review of Aarogya Setu App 

India launched its Aarogya Setu app in April 2020 to aid its ongoing contact tracing efforts. The app uses a combination of GPS (Global Positioning System) and Bluetooth to track other Aarogya Setu-enabled phones in close proximity of a user, and alerts them about possible exposure to an infected person. It can be used to self-report suspected symptoms for risk assessment before availing various services such as entry to public places and travel, and for public messaging on quarantine and treatment guidelines as well.

As of October 2020, the app had recorded over 15 crore individual downloads. In May 2020, government officials said 1.4 lakh Aarogya Setu app users had been alerted via Bluetooth contact tracing about possible risk of infection due to proximity to infected patients. The app had also helped narrow down on 697 potential hotspots. In June 2020, the government said one in every four to five positive cases were using the app with a total of 13.5 crore downloads. As many as 1.33 lakh of those users had tested positive. For each positive case, the app was able to trace an average of 28 possible contacts, resulting in tracing of over 28 lakh suspected cases. More than 11,000 potential hotspots were also reportedly identified between three to fourteen days before the disease began spreading in those areas in this period. 

However, as public fatigue set in and various legal challenges related to the app’s usage emerged, its uptake remained an issue. For such an app to be successful in contact tracing, at least 50% of the total population must be using it. The existing digital divide and lack of enough digital literacy posed major hurdles to the app’s uptake and affected the quality of data being fed into it. Moreover, concerns over privacy of the captured data and fears of it being repurposed for commercial or other surveillance measures also emerged. With the use of the app being made mandatory for work and travel, it failed to encourage user behaviour or incentivise self-reporting of symptoms. As cases began to peak in densely-populated areas, the app failed to provide accurate results on possible exposure. 

What Lies Ahead

The way forward for contact tracing in India lies in a hybrid model. Digital contact tracing measures must be complemented with manual contact tracing efforts in rural and socio-economically weaker communities. Care must be taken so as to ensure that manual contact tracing duties do not overburden Accredited Social Health Activists (ASHAs) and other healthcare providers, affecting the non-COVID-19 work they perform. 

An effective contact-tracing model must be built on the principles of public benefit and trust, scientific validity and ensured efficacy with enough safeguards in place to avoid discrimination. Personal privacy and individual autonomy in the use of the digital technology tools must also be preserved. Data captured through such apps or tools must not be repurposed in any manner. 

Moreover, contact tracing efforts must evolve at the community level such that citizens feel individually responsible and safe to report symptoms and seek treatment in case of suspected exposure. Going ahead, an interrelated digital eco-system that combines the internet of things (IoT), big data analytics, artificial intelligence (AI), and blockchain technology can help create a technology-aided model for effective tracing and tracking of other communicable diseases even after the COVID-19 pandemic ends.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

The Union Budget for FY 2021-22 presented on February 1, 2021 has the distinction of being the first budget after Covid-19 devastated much of the world, including India. India registered a historic contraction of nearly 24% in its Gross Domestic Product (GDP) in the first quarter of the current financial year, unemployment surged, small enterprises suffered acutely and vulnerable households slipped into poverty. During the course of the year, the government announced a series of measures to alleviate the Covid-19 induced stress. Since then, there have been signs of a nascent recovery in the economy. In this context, there has been tremendous anticipation around this budget to put India firmly back on the growth path. 

Towards this end, the budget has made many noteworthy announcements. Two key announcements stand out viz., a push to the privatisation agenda by announcing the privatisation of two public sector banks and an insurance company, and the establishment of an asset reconstruction company to take over the Non-Performing Assets (NPAs) of banks. 

Privatisation of public sector banks

Signalling a clear and key policy shift, the government has announced an ambitious and strategic privatisation policy by proposing to disinvest/strategically sell public sector entities (PSEs). Towards this end, the government has approved four sectors as strategic, where it will retain a minimum number of entities. It will pare down its presence above this minimum in strategic sectors, and completely in non-strategic sectors. Notably, banking, insurance and financial services have been identified as  strategic sectors.  

A number of central PSEs (including Air India, Shipping Corporation of India and the Container Corporation of India) have also been identified by the budget for divestment this fiscal year. Further, the NITI Aayog has been tasked with identifying the next pipeline of central PSEs for disinvestment.  Within this overall context, the current budget has also proposed to privatise two public sector banks (PSBs) in addition to Industrial Development Bank of India (IDBI), and a general insurance company.  

Privatisation of PSBs is not a new idea. It was attempted earlier as well.  The former Finance Minister, Yashwant Sinha, proposed to bring government stake below 51% in PSBs in early 2000s. However, this did not garner enough support. Given the burgeoning requirement of capital by PSBs and the limited fiscal space with the government, it has now become imperative to find other avenues to bridge the gap.  The proceeds of the disinvestment could help release government resources to more productive uses, particularly as government finances too have come under tremendous pressure in the wake of the pandemic.  

Moreover, with the approval of banking as a strategic sector, and the maintenance of public sector presence, the government should be able to avoid any compromise on its social agenda – a key concern that has been flagged earlier on privatisation of banks. 

Resolution of bad assets

Flow of credit is an imperative to meet the needs of a growing economy. A surge in bad or non-performing assets impedes the flow of credit. This is because banks must make higher provisioning to cover their bad assets, reducing the overall credit available to firms and households. It also makes banks risk averse. 

Measures to provide relief to borrowers such as the moratorium on loans – could exacerbate the problem of bad loans. An improvement in the NPA ratio of the banks was visible before the pandemic but the policy support extended to borrowers could impact the asset quality of banks through postponement in recognition of bad assets. 

The Financial Stability Report released by the Reserve Bank of India (RBI) in January this year estimates a sharp rise in the stressed assets on the banks’ books, particularly in the case of public sector banks. A number of measures were taken by RBI to improve the flow of credit by banks; however, the offtake of credit is still slow. The need of the hour therefore is to resolve these bad assets and clean up banks’ balance sheets so they can begin to lend more freely. 

The budget tries to address the problem of bad loans by announcing an asset reconstruction company (ARC) and an asset management company (AMC). This mechanism is expected to take over the stressed assets from banks, manage and eventually dispose them for value. The assets may be disposed of to potential buyers which include alternative investment funds (AIFs).  

The idea of a “bad bank” has apparently been inspired by the experience of countries such as the US and Malaysia. The Malaysian government, for instance, set up “Pengurusan Danaharta Nasional Burhad” – a government-backed AMC – that successfully bought and resolved bad assets in the Malaysian financial system in the aftermath of the Asian Financial Crisis in late 90s. 

While details on the Indian initiative are sparse at this point, the proposed mechanism is understood to not be a government owned entity. Instead, this mechanism would be primarily led by banks, with the government offering some support – perhaps in the form of a guarantee. The success of this proposal would depend on how well the proposed entity is managed. It will also depend on the capital allocation strategy by banks and how much money the government sets aside for this entity.

The reference to Alternate Investment Funds (AIFs) and other entities as potential buyers perhaps hints at measures for improving the efficiency of the stressed assets market – an important step that must go hand in hand with the creation of a “bad bank”.  However, a pitfall that the proposed mechanism must guard against is the potential “moral hazard”. It must disincentivise, rather than incentivise, poor decision making by the banks that led to the bad assets in the first place. 

Both the above announcements mark important interventions in the banking sector. Their success will however depend on the actual details – of the institutional structures and enabling frameworks put in place. Implementation will also be key, given the competing interests when it comes to privatisation and the government’s own poor track record on divestment.  This will, therefore, be a keenly watched space in the coming year.  

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

On February 01, 2021, Finance Minister Nirmala Sitharaman introduced the Budget for FY 2021-22 in the Parliament. Budget announcements are always a highly anticipated event in India; this time the expectations were even higher for the government to provide a credible roadmap for recovery. However, ahead of the Budget, another bill rumored to be proposed during the session was making news. The to-be-proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 has taken the nascent crypto-industry in India by surprise. The Bill has dual objectives of (i) banning ‘private’ cryptocurrencies in India and (ii) creating a framework for the Reserve Bank of India to issue official digital currency. While further details on the Bill are awaited, now is an opportune time to look at the current status of digital currencies in India and around the world.

The Reserve Bank of India (RBI) has viewed cryptocurrencies with a jaundiced eye. In April 2018, the RBI issued a circular, “prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.” The circular was subsequently overturned by the Supreme Court on grounds of being a “disproportionate” response by the RBI. It further asserted that there was no evidence that any regulated entities had indeed incurred losses or instability on account of virtual currencies. 

Understanding Digital Currency

For a preliminary understanding of digital currency, one can look towards its most popular example – BitCoin. It was launched against the backdrop of the 2008 global financial crisis (GFC) as a bulwark against excessive printing of currency by central banks. The mystery surrounding the inventor, the legendary Mr. Satoshi Nakamoto, only added to the allure of the new digital currency. Here was a currency that was decentralized and maintained user anonymity while ensuring complete transparency for all transactions. BitCoin is limited to 21 million units, which are mined by solving complex mathematical problems (a.k.a. proof of work) and can then be traded on BitCoin exchanges. Blockchain technology, upon which BitCoin is built, has a certain democratic appeal; blockchain ledgers are immutable and can be changed only when such a change is validated by a given number of participants. Despite these advantages, there has been criticism against BitCoin or any of the non-fiat digital currencies to be used as a reserve currency, especially on account of limitations to being used as a medium of exchange

Opportunity for a Central Bank Digital Currency

In recent years, and perhaps consequentially, central banks around the world have begun to evaluate the possibility of a sovereign-backed digital currency also known as a central bank digital currency or a CBDC. This begets an obvious question – what indeed is a CBDC? Traditionally, money comprises cash, deposits maintained by commercial banks with the central bank and deposits with commercial banks. A CBDC introduces a new form of digital money which is a liability of the central bank. In theory, even retail participants could hold a CBDC in the future. Secondly, one might wonder, what are the motivations for issuing such a form of money? A report published by the Bank for International Settlements (BIS) in 2020 broadly categorizes the merits and risks of a CBDC as follows:

a. Payment systems – motivations and challenges

This category includes a multitude of motivations such as ensuring continued access to risk-free money in societies where cash is going out of fashion, improving financial inclusion, enhancing efficiency of cross-border payments, etc. Key risks in this category include ensuring cyber resilience and balancing public privacy needs with anti-money laundering requirements.

b. Monetary policy – motivations and challenges

If CBDCs are designed as interest-bearing instruments, then monetary policy transmission would, in theory, be immediate. This could incentivize commercial banks to accelerate passing on the effects of changes in policy rates. Whether CBDCs should indeed be interest-bearing instruments is a design challenge requiring further study.

c. Financial stability – motivations and challenges

A key motivation for central banks to evaluate issuance of CDBCs is to pre-empt the risk of loss of monetary sovereignty on account of displacement by privately issued digital currencies such as Diem (previously called Libra) by Facebook. However, introducing a CBDC introduces the possibility of a bank run in times of crisis from commercial deposits to central bank money.

Way Ahead

Money is an economic, social, and political phenomenon. Introduction of CBDCs requires careful planning, analysis, and balancing risks with efficiency motivations. Design choices abound in terms of technological architecture as well as features embedded in the instrument. In the Indian context, a well-designed pilot project aligned with social and economic realities is paramount. Internationally too, interest in CBDCs has increased, partially on account of the COVID-19 pandemic. A survey conducted by the BIS in 2020 revealed that 86% of central banks (out of a total of 65 respondents) were actively engaged with CBDC research, evaluation, and/or development (see figures below). China famously leads the pack in digital currency development adding a currency dimension to its competition with the United States.

Figure 1 Source: BIS Central bank survey on CBDCs. 1 Share of respondents conducting work on CBDCs.

Adoption of new technology is often scary, and rightly so, especially in cases where it has the power to improve or destroy entire systems. India’s financial system has been revolutionized by fintech, especially in the digital payments space. It is indeed time we re-visited the idea of money in light of the technology now available at our disposal. The to-be-proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 signals India’s willingness in this regard.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

In one of the most significant behavioural changes in modern times, the COVID-19 experience brought several challenges to the field of behavioural economics. From the uneasy debate of behavioural fatigue to creating successful norms for restricting the spread of the virus. However, practitioners have a long way to go vis-a-vis making the field more robust in its understanding and in its attempts to contribute effectively to policy making.

Over the years, behavioural economists have caught many governments’ attention in developing behavioural change frameworks to influence citizen behaviour. It started with the UK and USA governments in the 2010s, which established their respective nudge units to help in policy making. The Indian government has also seen some of the benefits in recent years and have started working with behavioural units in the country to deliver some of their services. One of the main reasons that this science has interested governments is the low-cost nature of nudges. 

When the COVID-19 pandemic hit, governments rushed to develop policies with some of their behavioural experts, altering citizen behaviour to restrict communicability. This was the time to test behavioural economics’ competency and see whether it can be a potent tool in policy making as argued by its supporters for many years. 

Governments worldwide adopted varied restrictions. Where the U.K. was taking a more lax response, India adopted one of the strictest lockdowns in the world. In the former, a controversy started when some experts recommended herd immunity based on almost 70% of the population getting affected by the virus. This was based on and complemented by some controversial remarks by behavioural experts, who used “behavioural fatigue” as a reason not to enforce a lockdown early as people will get fed up with it. Immediately, almost 600 behavioural economists wrote a letter questioning the evidence of the behavioural fatigue argument. In the end, the U.K. government enforced a lockdown. 

The episode of “behavioural fatigue” brought controversy to the field, which has frequently been looked at as over-generalising and over-claiming and often faced replication problems. This can be attributed to a false perception about what behavioural economics is and what it offers to public policy. 

Behavioural Economics is the study of humans, organisations, and governments’ behaviour employing disciplines of psychology and economics. It critiques the dominant position of the rational model of the economic agent. Even though the field has been around for decades, it was made popular with the application of “Nudge” — a cost-effective tool to modify human behaviour. 

During COVID-19, various countries adopted nudges in their policy decisions. One of the widely used ones was the 2m distancing signs in public spaces that visually prompts citizens to distance themselves and avoid overcrowding. Another was focusing on creating a clear message to the public on how to behave during a pandemic. As overload of information could be confusing, a salient messaging like ‘Stay Home; Protect the NHS, Save Lives’ helped the public adhere to a particular behaviour. But the most popular was singing the Happy Birthday song for the recommended 20 seconds hand wash, which gave people a reference point. The development of these nudges was by identifying the heuristics and traits of human behaviour. 

Some of these nudges were fruitful in the pandemic as many people changed their behaviour which helped restrict the spread of the virus. However, many of them failed in different environments — a point on how it is difficult to generalise nudges. Therefore, a nudge’s efficacy should be tested extensively across different contexts to make them robust. But often, we fail to focus on the testing part and accept a general theory of nudges, which leads to unintended consequences. For example, the famous nudge discussed by Richard Thaler of auto-enrolment savings program, which leads to higher savings for people, is discussed as a general way to use nudges. In many areas, it has led to that conclusion. However, when a set of US Army civilians were auto-enrolled for a similar savings plan, the research found that it left people with higher mortgage and car debt, and the long-term savings result was inconclusive. 

Nudge as a tool is one part of behavioural economics; however, it has become synonymous with it, leading to problems of misinterpretation. Many behavioural economists argue that sometimes nudges or behavioural intervention are not the best fixes for behavioural problems. This is attuned with the lockdown during the pandemic where governments had to resort to strict intervention due to difficulty in changing human behaviour through nudges. 

Nevertheless, behavioural economics is an efficient tool when assessing behavioural changes in people. For instance, with a new set of social norms and stigma during lockdown, non-compliant individuals could be behaviourally intervened by making these new norms salient. Another point is to understand the pandemic fatigue through evidence and develop behavioural solutions that are contextualised. But a big problem faced by governments is the infodemic of misinformation with the pandemic, particularly by the anti-vaccination movement which can jeopardise the effort to combat the virus. This is the next challenge for behavioural economists, to understand anti-vaxxers’ behaviour and try to modify it. Other challenges lie in making citizens comply with the vaccination drives and continue to adhere to safety guidelines. 

The experience of COVID-19 has been a testing ground for the theories of behavioural economics. Some of them have responded well when it comes to norms, slight behavioural changes, saliency, etc. However, other theories brought controversies like the untested evidence of behavioural fatigue. These limitations should be discussed more and referred to when designing behavioural interventions, particularly nudges, which might not always be the best response for behavioural problems. 

The future of behavioural economics lies in collaboration among diverse teams with local knowledge and a multidisciplinary approach to understanding behavioural problems and avoiding over-generalised theories. More importantly, there is a need for epistemic humility among behavioural economists to lead a more robust and evidence-based behavioural approach. 

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

Paspalum scrobiculatum and Panicum sumatrense may seem like strange names. However, they are stark reminders of the failure of the Indian state in safeguarding the interests of the disadvantaged. Paspalum scrobiculatum and Panicum sumatrense, locally known as kodo and kutki respectively, reflect the shift in traditional dietary habits due to superficial concepts of development.

Kodo and kutki are millet varieties that belong to the same family of crops. These millets are drought-tolerant crops and can even survive in conditions where the soil is of marginal quality. Dehusking kodo millet is a tough task as they contain seven inedible layers that need to be removed prior to consumption.  The nutritional content of the millet, however, exceeds that of both rice and wheat. They are a rich source of protein and fibre. With 66.6% carbohydrates and 353 kcal per 100g, these millets have the potential to efficiently tackle malnutrition and stunting among children. But why are they important from a policy perspective?

Let us meet Tulasha Bai, from Ghata village of Dindori district in Madhya Pradesh, who is an 85-year-old tribal woman. She belongs to the Baiga tribe, one of the most prominent tribes in Madhya Pradesh. She says, “We used kodo-kutki to treat fever and build immunity. It kept all Baiga fit, healthy and warm”. She remembers kodo and kutki cultivation as a glorious thing of the past, one that holds little value for the younger generation. Bai says, “Ab ke bache chawal aur gehu khate hai, kodu nahi, na khate hai na ugate hai‘ (Today’s generation only eats rice and wheat, they do not consume Kodu nor cultivate it).” According to Neglected and Underutilized Species Communities data, the production of these millets in the districts of Dindori and Mandla has declined by more than 50% in the last 20 years.

Kodo-kutki millets are an important part of culture for both Baiga and Gond tribes, which are spread across Dindori and Mandla districts of Madhya Pradesh. This article will take you through the complex web of administrational approaches to the development of kodo-kutki; and the impact the cultivation of these crops has on the lives of the concerned tribes through anecdotal evidence. This evidence is an outcome of on-ground experience.

Web of MSP

A decrease in locally grown millets in Dindori and Mandla is directly related to the Public Distribution System (PDS). In order to understand this relationship between public procurement of rice and wheat and the production of kodo and kutki, we must first take a more comprehensive look at local experience. Harilal Kushram, a resident of Mungela village, mentions, “After PDS has become accessible and Minimum Support Price (MSP) is provided, we have shifted our cropping patterns to grow paddy and wheat. These crops have a readily available market which does not exist for kodo-kutki.” The problem that arises in incentivizing farmers to produce traditional crops are two-fold and often correlated. One, the introduction of higher MSP for rice and wheat has decreased the incentive of farmers to seek risk by growing other crops. Two, due to an underdeveloped market for kodo and kutki millets, rice and wheat production exploits additional resources like water in an already scarce belt. Lack of adequate evaluation of the topography of the area and incentivization of foreign crops unfit for the region has disrupted the natural chain of traditional agriculture in the area.

The change in growth patterns along the Madhya Pradesh tribal belt has directly impacted the lives of all its residents. The shift in diet patterns, from high protein-fibre millets to rice and wheat, has had an adverse health impact. Voicing his concerns, Ramesh Kumar from Mohti village says, “Kodo and kutki helped us in increasing our life expectancy. My grandmother lived up to the age of 93.” However, in the past decade, there has been a shift in crop growing pattern. The 80-year-old Samro Bai, from Mungela village, claims that her “children and grandchildren have become weak. They fall sick frequently.” She says, “We used to work 10-12 hours in the field but now people are unable to work even for 8 hours. They have become lazy. No one eats kodo and kutki which keep our body healthy. Everyone is eating rice.”

An interesting question here is that if rapid changes are causing harm to the community and the environment by exposing arid soil to fertilizers and extensive extraction of groundwater, how has this issue been addressed?

Interventions disguised in the cloak of development

In a bid to promote kodo and kutki as cash crops due to their high nutritional value, state governments and social development organizations devised an intervention to empower rural women. The intervention was proposed by the Mid-Day Meal (MDM) department of Madhya Pradesh government in 2013. It was interlinked with the Mid-Day Meal (MDM) Scheme and aimed at improving child nutrition in the area by using kodo-kutki to make sweet bars as breakfast for school children. Although the intentions leading up to the scheme were noble, it led to huge losses to the tribals that grew kodo and kutki.

Since there was no regulatory support provided to the tribal community, removing the seven layers of each grain was simply left to the villagers. Seed cleaning machines, which generally cost around two to three lakhs, can also be used for dehusking kodo and kutki. Hence, the district administration placed one seed cleaning machine for the purpose. Self-Help Groups (SHGs) in the area were given the responsibility of processing kodo into sweet bars and supplying them to the Anganwadis. So far so good. New incentives were introduced with support from the government. However,  it is essential to understand that the Mid Day Meal scheme’s supply chain was running under the state government. Whereas the maintenance and functioning of the seed cleaning machines were placed under the National Rural Livelihoods Mission for the production of sweet bars. This created problems in terms of implementation, coordination, and accountability.

With the increase in demand and access to only one machine, some women began dehusking manually, leading to incomplete removal of layers from the food grains. This resulted in food poisoning among the children of one of the Anganwadi centres. Post this incident, the entire order for sweet bars was cancelled in the middle of the crop cultivation season. The tribe suffered a huge loss as the entire process was bifurcated among departments leading to dilution of accountability.

Since words like ‘local employment generation’ and ‘rural empowerment’ find repeated mentions in policy documents, different departments kept introducing new policies to bring about development. Another district specific intervention was introduced under the Aajeevika scheme. The tribal community was asked to collect as many quintals of kodo and kutki as they could. The district office for Aajeevika promised to develop secure markets and connect the supply chain with the wholesale procurement company. However, this target remained unachieved, leaving 48 quintals of kodo, 52 quintals of kutki, and a huge burden to the farmers. The food grains were left in the village organization’s office for five to six months without any official visit to the storage facility or conveyance of any information to the tribes. Due to the lack of clean and sufficient storage facilities, adequate support from the government, and additional cost of guarding the crop against animals; the tribe lost crop bargaining power and sold large chunks of their produce at steep prices to private middlemen. Knowing that the Baiga tribe have undergone significant change in their eating habits, the private contractors made the most of the situation. The tribals were exploited as one kilogram of kodu or kutki was exchanged with one kilogram of rice or wheat. The middlemen procured rice and wheat at a cheap price from ration shops and sold kodo and kutki grains at Rs. 120 per kg in the market. The tribal community failed to understand the lopsided negotiation which led to a loss of Rs. 87,000.

Upon inquiring, it was noticed that the department responsible for liasoning did not have sufficient capacity to formalize the contract and had to give up the intervention. This exploitation could have been avoided if government departments maintained coordination. Even though the agricultural department and local administration met their targets of distributing seeds and fertilizers to farmers and bringing about policy change to improve farmer’s income respectively, their activities opened new doors of exploitation. The example of kodo and kutki illustrates the nature of development that often comes at the expense of disadvantaged communities who do not possess political agency.

The seeds were not enough. The Mid-day Meal Scheme was not enough. The subsidised water and electricity were not enough. Promising words like ‘local employment’ and ‘empowerment’ were not enough. But all these interventions together were enough to damage the trust and expectations of an entire tribe to invest in the cultivation of  kodo and kutki.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

Public administration is a socially embedded process of relationships, dialogue, and action. The field of public administration straddles an academic component and action component, with each one significantly influencing the other. Both components seek to promote the welfare of the people in the larger context of a welfare state. Public administration, as the action arm, is situated firmly in the context of the state and therefore, strongly influenced by its nature and priorities. This has led to various re-inventions of public administration against the backdrop of social ferment and the nature of the state. For example, the new public administration movement rose in the 1960s in the face of American societal turmoil (John F. Kennedy was assassinated in 1962, the USA lost the Vietnam war, Martin Luther King, Jr. was assassinated in 1968). Another example is that of the new public management movement in the 1980s in the face of an inefficient state and creation of global interlinkages. This gives reason for one to believe that the ongoing Covid-19 crisis, being labelled the worst economic crisis since the Great Depression of 1929, will cause major shifts in the nature of the state and by extension the nature of public administration.

Public administration as an academic discipline has traditionally responded to problems in Anglo-American societies. With the USA and Europe, being ravaged due to Covid-19, one can probably expect the following changes in the academic discipline of public administration.

Public Administration to Fix the Broken State

The financial stress being felt by most European countries, such as Italy, and the United States points to the bloated structures that are running huge deficits. The world’s largest economy, America’s budget deficit hit $3.1 trillion because of the coronavirus spending surge. The American state’s inability to rein in the crisis leading to massive costs to human lives points to a broken public administration system. The re-emergence of Neo-Taylorism in this context seems inevitable. The issue is to figure out how to ensure maximum governance with  minimum government expenditure.

Re-emergence of the State

The re-emergence of the state or dependence on the state was visible in most democracies, including India. The arrival of Covid-19 saw many private hospitals being ordered to operate and provide Covid-19 tests and treatment at affordable prices by the state. State control, however, was not limited to providing services; it also imposed strict restrictions on movement in order to curb the spread of the virus. On the other hand, the failure of the American state to control the spread of Covid-19 has exposed the hollowness of a minimal, corporate state. Ronald Reagan’s dictum, “Government is not the solution. Government is the problem,” has been challenged by Covid-19. The administration has since intervened to enforce social distancing norms and provide financial support to vulnerable citizens. Distributing Stimulus checks is one such attempt of the State. America’s Internal Revenue Service distributed stimulus checks up to $1200 to millions of Americans. This was an attempt to bring the economy back to life. The results of this experiment could very well herald the next big paradigm of the discipline. Success could lead to an intellectual consensus towards a proactive state that is reminiscent of the New Public Service of yore, with a focus on democratic governance. Failure could lead to a re-emergence of demand for a state that is more efficient and less fiscally profligate. Either way, the consensus would favour a state that has significant responsibility towards serving its citizens rather than trying to satisfy them as consumers.

Re-assertion of Sovereignty and the Associated Role of Bureaucracy

The de-globalization movement has been picking up steam since the mid-2010s. Covid-19 could be the final nail in the coffin for the globalization frenzy that began in the 1990s. This could lead to stronger national boundaries for people as well as the flow of data, Internet Protocol, etc. Global Governance Institutions like the World Trade Organization, World Health Organization, G20, etc. seem to have been rendered ineffective due to the de-globalization rhetoric and evolving geopolitical rivalries. The significance of WTO will further reduce with declining trends in global trade and the US-China trade war. The World Health Organization helped in evolving guidelines at the beginning of the pandemic, however, as time passed countries enacted their own operating procedures. The European experiment is also facing stress as member states choose to assert sovereignty rather than pooling their resources. As per European Council on Foreign Relations data, 29 percent of the respondents (grouped as “Do-It-Yourself”) believed that after the crisis, geopolitics will see greater self-dependence across nations.

This has major implications for the bureaucracy that would have to adapt to new situations. There would include – limits on bureaucratic power in negotiating with other countries; emergence of newer methods of negotiation and diplomacy at global platforms; and restructuring of processes that have so far been outsourced. The result would be a public administration which is greatly influenced by its domestic ecology and an altered politics-administration balance. It must then build capacity across institutions within this fundamentally altered ecology. How would the corridors of power change and the players inhabiting them respond? This will be an interesting development to observe during the approaching distribution of Covid-19 vaccines. The time ahead is truly interesting and one that will put the efficiency of public administration to test.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

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