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IMPLEMENTATION OF ECONOMIC POLICIES AND PARALLELECONOMY

INTRODUCTIONIndependent India has made many far-reaching and notable achievements. Still

the cold fact is that we are very far from achieving the objectives of our freedomstruggle, Constitution and plans. In the pursuit of these objectives, independent Indiadecided to combine continuity with change. Hence, the private enterprise-marketeconomy was allowed to continue and expand with enabling and active assistance of the state for overcoming our age-old problems of poverty and stagnation in ademocratic polity. Thus, India went in for a non-laissez faire, active role of the state

beyond the conventional, and universal functions of the state (like maintenance of lawand order, external security, dispensation of justice, provision of public, quasi-publicgoods and services like roads, bridges, education, medical facilities, largeinfrastructure facilities, etc.). It assumed active role of socio-economic regulation and development in order to do away with the rigidities, distortions, imbalances and dys-functionalities in various walks of life. Naturally, the state and the political sphere

became important, large and decisive, facilitated and legitimised by the adoption of plural democracy. It is a tragedy of disturbing proportions that this mode, based onvery sound insights, could not deliver the desired positive results. It is in this sensethat one can speak of policy or state failure in India. It is a failure basically not fromthe narrow point of view of the really better-off sections, but on the criteria of broad,general agenda and aspirations of the common citizens. It is manifested in the

persistent and/or worsening poverty, unemployment, inequalities, depletion and deterioration of natural resources, ascendancy of excessively individualisticconsumerism and hedonism, fiscal crunch, gigantic external debt and policyinterference by the rich countries.

Innumerable studies are available to document these failures of policy and planning. However, there are vast differences of opinion concerning whether or whatkind of policy or state failure it is. No doubt, in a democracy, as a nation we have not

been able to translate the national ideals into reality. It may be mentioned that the better-off sections often misleadingly hold the population explosion and persistence of illiteracy as the culprits for our failures. It does not seem to be understood that thisview amounts to blaming the victims of these failures and absolving the beneficiariesof this situation, who, moreover, are in the commanding position. Inability to

popularise planned-parenthood and extension of elementary education to all, areamong the major manifestations and results of our policy and state failure, rather than

their causes.

POLICY FAILURE: CONCEPTPolicy failure refers to situations:

(i) When the objectives of public policy are attained partially or inadequately or in a distorted manner especially in relation to cost or desired outcomes;

(ii) Produce counter-productive outcomes;(iii) Impose costs disproportionate to positive outcomes or in a manner contrary

to the policy objectives;(iv) When policy outcomes are associated with or generate heavy present and

future negative externalities (i.e. originally unintended or unanticipated

negative effects on society as a whole or certain sections of it); and

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(v) Weaken the states capacity to initiate course-correction measures and giverise to domestic or external forces inhibiting/blocking the pursuit of theoriginal, inclusive social agenda effectively.

These situations, whether appearing severally in isolation or jointly, may betermed policy failures. In so far as the state is the prime or may be even the sole

agency for these policies (including their implementations), the policy failures are anelement, a large one at that, of state failure . It may possibly be suggested that it wasunlikely that an inclusive, egalitarian agenda of development, as contrasted with anarrow, status-quost economic growth, was adopted in India as the initial givensituation was marked by vast multi-dimensional inequalities, differentiations and stratifications (as noted in the First Five Year Plan). However, the Indian State wasequipped with the legitimacy and authority of a democratic State as the prime,empowered agency for policy interventions and social change. It is worth wonderingwhat are the conditions for the adoption of such an agenda and further, for itssuccessful implementation. Moreover, the availability of a set of policies establishinga one-to-one relationship between the objectives, actors/agencies, resources and

policy instrument commanding a broad national consensus cannot easily be taken for granted. Even the availability of the required knowledge base and expertise may be

problematic. Be it as it may, the uncomfortable fact remains that the experience of post-independence India is marked by very large and painful policy features, givingcredence to the hypothesis of state failure. This kind of judgement is reflected incalling the Indian experience so far as one of muddling through, or describing India asa functioning anarchy. Of course, it is not case that every single policy failed. Far from so as many of our policies, like the one of introducing green revolution, wasclearly a success. The point simply is that the successes overall get overshadowed byfailures. That this kind of state failure is essentially related to state character, statecapacity and state-society relationship in a historical perspective is pretty obvious butis often lost right of.

THE IMPLICATIONS OF FAILURES OF POLICY IMPLEMENTATIONGiven the phenomenon of policy failures, as indicated above, one often comes

across the view that places the blame for these at the door of policy implementation.This may take the form of faulty, inadequate, high cost, slow and even counter-

productive implementation. This leads to non-realisation of the ends of policy with allthe costs it entails. Meanwhile, the underlying situation demanding policyintervention may deteriorate. Related to this view is a widespread belief, according towhich, while policy formulation, in its intellectual-theoretical base and design, is

good, things go sour and haywire at the state of implementation. It seems to implythat the Indian policy-makers are clever policy formulators, but lack matchingimplementation capabilities as doers. These create a chain reaction, affect many other related policies negatively and, make overtime the policy processes in generalineffective. Poor implementation erodes the credibility of both the policies and policy-makers. Of course, the social and economic costs and costs in terms of politicallegitimacy of frequent policy break-down are simply incalculable.

This is as much correct for the plans which are in the mixed economy of India,essentially a set of interconnected, naturally consistent and mutually reinforcing

policies and programmes. A plan covers in a comprehensive framework many specific policies of varying sweep, like fiscal, monetary, foreign trade, exchange rate, regional

balance, social services, employment, industries, agricultural policies, etc. The policy

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implementation failures, it is clear, make the state stray from the chosen declared path.

An Illustration: Tax Policy ImplementationTake, for example, the case of tax policy. It attempted to raise resources by a

combination of direct and indirect taxes to finance a large part of increasing publicexpenditure (for the growing role of the state of maintaining law and order, nationalsecurity, regulation, welfare and development). It is widely admitted that the taxadministration could not prove itself equal to the task to prevent widespread and regular leakages of revenue. However, there seems to be inadequate recognition of thelimitations and built-in defects in the design and law of the taxes, including their frequent changes which made its success problematic. The scheme of taxation,adopted at the suggestion of Professor Kaldor envisaged high marginal rates of income tax. Any evasion of the income tax, finding its way into either expenditure or

buying of assets and was sought to be captured by means