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Unfree to Sell: How Trade Restrictions Hurt Farmers
The Indian growth story of rising incomes, increased wealth, more freedoms, and higher aspirations has not been the reality for many citizens of Bharat. Sharad Joshi, an economist and former Rajya Sabha Member from Maharashtra, noted this dichotomy in the way the urban residents of India and the rural residents of Bharat were treated. At its core, while the government treats its urban, nonagricultural population as rational economic actors capable of making decisions about their economic lives, it treats its agricultural population as incapable of doing so. This approach has left farmers desperately poor and debt-ridden
This protective attitude is amplified when dealing with the international trade of agricultural produce. Because of India’s past as a food-insecure country, various laws that restricted trade and storage were adopted. These policies hurt India’s image as a reliable trade partner and limited investment in postharvest facilities. In addition, market interventions like Minimum Support Prices(MSP) that incentivise production of wheat and paddy mean that most of India’s produce is low-value. As a result, India’s agricultural supply chains are not well linked to international markets and the goods exported are not remunerative.
This policy brief studies the historical motivations for India’s trade policy, the current state of agricultural trade, and the legal hurdles to a more open trade environment. It then suggests a series of reforms that would have significant long term benefits to India’s farmers
National Education Policy 2020: A One-time Comprehensive Evaluation
The National Education Policy 2020 (NEP 2020) was launched in July, 34 years after the last National Education Policy in 1986. It aims to address the country's development imperatives and proposes to revamp the education structure, including education governance. This monograph examines the key reforms pertaining to school education under the NEP 2020. These include extension of the right to education, changes in the medium of instruction, learning assessments and outcomes, early childhood care and education, and strengthening foundational literacy and numeracy. The monograph also sheds light on the proposed regulatory framework for schools and the fee regulation norms. Some of our key insights are listed below.
Expanding the right to education: Though the NEP 2020 takes a progressive step by expanding the ambit of compulsory education, it does so without fully considering the reasons for current pitfalls in compulsory schooling. The policy offers solutions for dropouts without examining the reasons for high dropout rate. It offers to bring in social workers, without outlining a sustainable strategy for their recruitment. Finally, it remains silent on the implementation challenges of Section 12 of the Right to Education Act.
Three-language formula: NEP recommends a three-language formula and provides flexibility to the states. But, it fails to reconcile the need for regional medium instruction with the demand for English medium education. Further, it fails to outline how the needs of micro regions with considerable linguistic diversity within the state would be accomodated.
Education technology: Although the NEP sends a positive signal by acknowledging the need for strengthening education technology, it falls short in providing a concrete ed-tech policy to bridge the digital divide.
Foundational skills and Assessments: The NEP takes a holistic approach to testing and incorporates elements consistent with its vision. It proposes a formative, holistic report card and emphasises that the purpose of standardised tests is the improvement of the school and education system. However, it fails to address the pitfalls that earlier policies faced while implementing holistic report cards in the form of Continuous Comprehensive Evaluation. Further, though the NEP does well by aiming to achieve universal foundational skills at the earliest its reliance on informal ways, such as community volunteers and “each one, teach one”-approach, leave much to be desired.
Early childhood care: The policy hits the mark by including Early Childhood Care and Education (ECCE) under the ambit of free and compulsory education and emphasising on providing opportunities for early learning. However it ignores the Nurturing-care framework, fails to treat early childhood care as a set of goals that necessitate a separate program, and does not sufficiently engage with other dimensions of strong ECCE support (such as responsive caregiving, and safety and security).
Regulatory framework for schools: The policy has taken big steps towards a progressive regulatory regime. The decision to separate the regulatory and provisionary functions of the government is a welcome move. It will aid in creating a level playing field for the private sector and hold the system accountable to improve.
Fee regulation: The policy does not go far enough and abolish fee regulation mechanisms. Fee controls keep the prices artificially low and incentivise schools to seek regulation instead of competition, thereby discouraging innovation.
Overall, the NEP 2020 has made considerable strides with what it wants to achieve as well as governance reforms. However, the policy does not sufficiently outline specific challenges it would have to overcome to meet its target or how it would sustainably finance the interventions.
Quality of Laws Toolkit
Laws and regulations impact the social and economic wellbeing, and freedom of members of a society. They alter how individuals interact and trade with each other. While all laws and regulations alter behaviour and impact stakeholders, a good regulation maximises social welfare while minimising the cost and extent of intervention (CUTS Centre for Competition, Investment & Economic Regulation).
A cost-benefit analysis alone is insufficient to assess the quality of a law or regulation. Partly, this is because it is not possible to know all the costs and benefits associated with a specific law or regulation. While known costs and benefits can be calculated, there will be costs and benefits that are impossible to predict ex-ante (Frédéric Bastiat 1850). Added to this, is the knowledge problem. All the relevant information will never be available to any one individual since this knowledge and data is distributed among individual actors (Friedrich Hayek 1945).
The Quality of Laws toolkit attempts to address this gap. It draws from international literature on administrative law and various global indices of regulatory quality like the World Bank Global Indicators of Regulatory Governance (GIRG), OECD Indicators of Regulatory Policy and Governance, and the European Union’s Better Regulation Toolbox. Last year, Centre for Civil Society released a binary-style ‘Quality of Regulation’ checklist (Anand et.al 2019). It outlined the minimum set of benchmarks that a law must meet irrespective of the sector it governs.
This year, based on the checklist, we developed a scorecard to measure the quality of laws and rules (Forthcoming 2021). It constitutes three parts: Representation safeguards (i.e accessibility of laws and public consultation), Rights safeguards (i.e. checks on executive discretion) and Resource safeguards (i.e. administrative burden imposed and change in incentive structure using Epstein’s framework).
Improving Ease of Doing Business for MSMEs in Punjab: A Process Audit
India has jumped from 142 in 2014 to 63 in 2019 on the World Bank’s ease of doing business index. Even though this index is based only on Delhi and Mumbai, Government of India has encouraged all the states to implement reforms to improve the investment confidence. Department for Promotion of Industry and Internal Trade (DPIIT), under Ministry of Commerce and Industry of Government of India, ranks states based on reforms implemented as mentioned in Business Reform Action Plan (BRAP). This ranking incentivises states to compete for becoming favoured destinations for industries.
Unfortunately, micro, small, and medium enterprises (MSMEs) continue to bear the burden of complex regulatory compliance. Though MSMEs play a crucial role in the Indian economy, the impact of the current regulatory environment on their capacity to develop and scale-up remains unknown. In particular, there is limited information on what happens after an MSME applies for a licence or an approval.
In 2020, we at Centre for Civil Society conceptualised a project to ease the regulatory environment for MSMEs at the state-level. We wished to develop evidence-based policy reforms, and implement them in tandem with state governments in India to improve the overall working conditions for MSMEs. We partnered with Government of Punjab and Global Alliance for Mass Entrepreneurship and conducted a process audit of 26 services across five departments: Labour, Local Government, Industries and Commerce, Housing and Urban Development and Punjab Pollution Control Board. As a part of this audit, CCS analysed administrative logs and conducted interviews with departmental officers and applicants to determine the reasons for delays and prescribed recommendations.
Some of our major findings from the study include
Officers do not raise the objections related to the documents at one go. They raise objections in piecemeal fashion and not within the time limit. For instance, in one file of Change of Land Use under the Department of Housing and Urban Development, the official forwarded 12 objections to the applicant. But after the applicant rectified these problems, officials raised 3 new objections that were not mentioned in the original objection. This led to unnecessary slow down in the approval process.
Often, the objections are not directly communicated with the applicant. Take for instance, applications for Building Plan Approval under the Department of Local Government. In all the files we studied, each time an officer raises an objection, the objection is returned down the process ladder until it reaches the Building Inspector who communicates the issue to the applicant. In one application, an objection raised by the Assistant Town Planner reached the Building Inspector after 15 days after passing through two officers.
For some services in Department of Local Government, Department of Housing and Urban Development and Department of Industries and Commerce, officials ask for additional documents which are not part of the list of required documents mentioned on the website. For instance, in an application for Change of Land Use under Department of Housing and Urban Development, the applicant indicated that the concerned land did not fall under forest area and hence a No Objection Certificate(NOC) from the Department of Forests and Wildlife was not required. But the officer still insisted on submitting this document.
Through this study, we offer targeted suggestions and policy recommendations to improve the efficiency of bureaucratic processes in the service delivery by Government of Punjab and improve the business environment in the state.
RegData India: A quantitative analysis of national laws in India
RegData, an initiative of the RegData, an initiative of the Mercatus Center, is an effort to quantify various aspects of regulation. The Mercatus Center created RegData in 2012 with an aim to “introduce an objective, replicable, and transparent methodology for measuring regulation.” It uses custom-made text analysis and a machine-learning algorithm to measure the different features of law. These features include volume, restrictiveness and linguistic complexity. Together, these metrics indicate the regulatory burden a particular law, department or ministry imposes. Some variables, like the restrictive terms or ‘binding words’, demonstrate associations with economic growth and productivity (Mercatus Center 2019).
In collaboration with the Mercatus Center, we obtained quantitative metrics for all 876 national laws of India. For this purpose, we used the list of laws made available on the official portal of the Government of India. This empirical analysis, along with our categorisation of laws by the Ministry and Department, will help open way for further research on the burden imposed by laws.
We study laws on the following three metrics:
- Volume: This metric quantifies the number of words in a law. We also use this metric to study the average number of words per law in a particular year, and the average number of words per law in each Ministry.
- Binding words: RegData uses a text analysis program to count the number of binding words or “restrictions”in a law—that create an obligation to comply or limit choice sets. Restrictive terms are likely to be higher in laws that are lengthy. To get an estimate of the density of restrictiveness, we also calculate the ‘normalised binding words’ for each law. This metric refers to the average number of words after which a ‘binding’ word appears. For instance, if the normalised binding words for a law is 300, it means that on average a restrictive term appears after every 300 words in the law. Lower normalised binding words would imply that a law is more restrictive.
Linguistic complexity: This metric measures the complexity of a given law. Complexity is understood by how a law fares on the following four sub-categories: Shannon entropy, sentence length, conditional count and Flesch Reading Ease score. These four metrics provide an understanding of how easy or difficult it is to comprehend a law. A law that is tough to comprehend may also increase the compliance costs for regulated entities (in terms of effort, time and money) (Mercatus Center 2020).
Our interactive dashboards provide details of all three quantitative metrics across all national laws.
Governance challenges in K-12 education in India
Significant work has been done on de facto operations of state functionaries (World Bank 2004; Posani and Aiyar 2009; Aiyar, Chaudhuri and Wallack 2010; Pritchett 2018; Centre for Civil Society 2019). But there is limited research on the de jure framework for K-12 education in India, especially for private schools. Information on roles of state education functionaries for public and private schools is scattered. Clarity on these roles is necessary to establish sharp lines of accountability. This is crucial, especially since private schools have to compete with the government that sets the rules for all schools and operates its own schools.
We dive in and examine the rule-sets for Maharashtra, Delhi, Haryana, Jharkhand, and Uttar Pradesh. In particular, we analyse the language of the legislation and identify responsibilities of functionaries. Alongside the Right of Children to Free and Compulsory Education (RTE) Act 2009, we study 26 state Acts, corresponding rules, and School Codes wherever applicable. School Codes contain subordinate legislation (executive orders, notifications, circulars, and court judgements) that pertain to school education. We also study the implementation framework for the Samagra Shiksha Abhiyan as it allocates responsibilities to state education functionaries.
What do we find in common across states? The government regulates private schools at multiple touch-points. Schools need to obtain recognition in order to operate. They can only hire employees with minimum qualifications as prescribed by the government or after obtaining permission from the state Department. Private schools need to operate “in public interest” to avoid losing control over their management. They are also subject to caps on fees that often do not account for investment in new facilities or expansion of schools. The regulatory framework also lacks a systematic dispute resolution system with clear distinction between the disputants (parents, schools, and government).
States also fare poorly on frameworks that examine the regulatory environment for private schools, including the Systems Approach for Better Education Results - Engaging the Private Sector (SABER-EPS) of the World Bank (2014) and that of Vidhi Centre for Legal Policy (2017).
After comparing the language of the legislation for private schools with that for government schools, we find a striking absence of accountability mechanisms for the latter. While private schools are subject to clauses such as “shall cease to function” or “may take over”, government schools do not face any such enforcement actions. We also find that state functionaries are vested with multiple and overlapping functions, including regulatory, service delivery, financing, and assessment.
When the rule-writer is also the service provider, day-to-day pressures of management compromise its attention to on-ground outcomes. The administration tends to become insular and conceal mistakes (World Bank 2004). We need to implement thoughtful separation of powers in K-12 education administration. Uncoupling roles of functionaries and determining who should be accountable to whom and for what, makes for efficient outcomes and clear lines of accountability (World Bank 2004; Posani and Aiyar 2009).
Regulation for New Realities- A Cross-Sectoral Analysis during COVID-19
Regulation for New Realities: A cross-sectional analysis during COVID-19
COVID-19 took the world by shock. What started as a small infection has spread across several countries, inflicting harm to millions of people and setting the global economy back by decades. As of September 2020, India adds close to 100,000 COVID-19 cases per day. Economists estimate the real Gross Domestic Product (GDP) growth to contract by at least 10.5% for 2021.
COVID-19 has made apparent the need for changes in the way the government regulates various sectors. Crises have frequently provided opportunities for reforms. The liberalisation of 1991, for instance, was motivated by a balance of payments crisis.
During the summer of 2020, we at Centre for Civil Society documented how some critically affected sectors are trying to adapt to the changing circumstances, but are fettered by the regulatory framework. We examined seven areas: health, education, labour, agriculture, technology enterprises, philanthropy and professional certification.
We used a common lens to examine the regulations in each of the areas of study and discovered that at the heart of it our regulations are not fit for purpose. In some areas, the regulatory framework is absent or muddled; in other areas overwrought. and in yet other areas, they are ambitious, but out of sync with state capacity. They are outmoded for the new reality across the board.
Our regulations across sectors favour incumbents over disruptors. The regulations create strong barriers to innovation and adaptability. For instance, e-pharmacies have been operating in a vacuum, absent clarity on their obligations and liabilities. This stasis is partly a result of the pressure campaigns from brick-and-mortar pharmacies.
Regulations are also susceptible to capture and monopoly. Professional certification requirements for lawyers do not recognise distance-learning. This has hurt the ability of law schools to use new modes of teaching. The Bar Council, in a bid to restrict entry and increase wage premiums, have made it hard to imagine new ways of bringing legal professionals into service.
The regulatory architecture often favours a one-size-fits-all approach. For example, where democratising education may allow non-traditional learners to prosper, the regulations encourage standardisation and uniformity. Options for school exit-certification make it hard to exercise choice and to experiment with what works for parents and their children.
Regulators in India also capitulate to public perceptions over empirical data, sometimes even making it hard to generate evidence critical for decision-making. The regulatory framework for seeds does not make it easy for technology developers to conduct field trials before making biosafety determinations. Even though farmers across the country are slowly being freed from the license-permit-subsidy raj, they remain hostage to an aversion to modern science.
A regulatory framework that is ambitious but fettered by State capacity constraints can do more harm than good. We have watched our neighbours take advantage of their periods of demographic dividend, we have remained a prisoner of overwrought rules on every aspect of employing workers. During COVID-19, many states have tried to quickly tinker with labour regulations to make them flexible enough to generate mass employment. Yet, as states try to break free, the Centre’s laws hold them back.
Contrastingly, where State capacity to regulate may be limited, the market has shown us new ways to set standards and enforce rules. Door-step delivery of food via aggregator platforms have brought us market-led regulation of hygiene and safety. Food aggregators were steps ahead of the country’s food regulator in setting standards and using technology to enforce those standards. They were able to quickly deploy systems to monitor standards, and build feedback loops for improving performance: something the food regulator has struggled to do.
Regulations that hamper innovation and create incentives for incumbents to stagnate, hurt the creative destruction process that is at the heart of generating growth and value. Through this compendium, we hope to make the case for first-principles thinking in writing the rules of the game. In each paper, we have tried to identify the challenges of the current regulations, and in some cases suggested models for reform.