Why India’s economy needs Eco-normics – not Left vs Right debate

A bronze bull statue at the entrance to Bombay Stock Exchange | Dhiraj Singh/Bloomberg

How do we integrate an ecological horizon with state regulations and market mechanisms?

Recently, I came across a document that points to something I have been looking for. Let us call it Eco-normics. Simply put, Eco-normics is smart, normatively oriented and ecologically conscious economic reasoning. It is an attempt to reconcile three elementary facts of our existence: we are to live on this earth; state regulation is here to stay and so are the markets.

In the last few years, ever since joining politics full-time, I have scouted for good advice on economic policy. Initially, I put my failure down to being a poor student. Gradually, I came to see something deeper: economic policy is perhaps the most ideologised field in our public life.

As I looked to friends, colleagues and experts for guidance, I recognised three camps. First, there are ‘economic reformers’ who dominate the pink press: they worship growth and believe in the magic of the hidden hand of market forces. ‘Licence quota raj’ is the cuss word here. The second camp is the traditional left, still very powerful in the activist world: they are wedded not just to the ideal of equality but also to the pre-eminent role of the state in bringing it about. LPG (liberalisation-privatisation-globalisation) is the real enemy here. The third camp of the ecologists has gained respectability in academia and peoples’ movements: they value sustainability, want people’s control over resources and view law as a key instrument. Growth is a red-rag here. These three camps don’t speak to one another.

Reformers go ahead as if the market is an end in itself, while the Leftists and ecologists plan the economy as if markets are dispensable.

I asked myself: How do we integrate a long-term ecological horizon with equality oriented state regulations and the power of market mechanisms? This concern led me to a quest for ‘Eco-normics’.

While I was still searching for an outline of this new perspective, a short article by Abhijit Banerjee and Raghuram Rajan on New Year’s Day gave a glimpse of what such thinking could mean for today’s India.

The duo spells out eight key action points that should be the focus of our economic policy in the medium term. This article draws upon a longer document, “An Economic Strategy for India”, by thirteen Indian economists, mostly based abroad. Besides these two, the group also includes well-known economists such as Gita Gopinath, Rohini Pande, Maitreesh Ghatak and Neelkanth Mishra. This document proposes a policy perspective and action points for some key areas in economic policy. This consensus document is, in turn, backed by sectoral reports authored by each of these economists on one or more areas.

The stated objective of this strategy is “Strong, Equitable, and Sustainable growth”. It underlines macro-economic stability, infrastructural investment and trade liberalisation for accelerating India’s robust growth.  It brings in the equity dimension by recognising the need for progressive taxation, support to farmers’ income, retention and strengthening of MNREGS, enhancing social security payments and improving the quality of education and health at the bottom of the pyramid. And it advocates sustainability via a strong and centralised statutory regulatory authority and penalties. Thus, this strategy emphasises all three components of ‘Eco-normics’.

The document includes many new or unorthodox proposals to achieve these objectives.

Here are some of the key proposals. One, fiscal discipline should be ensured by a Centre-state council.

Two, farmers should be given direct income support rather than price support or loan waivers.

Three, new kind of Special Economic Zones should be created to experiment with new ways of promoting business environment, besides export promotion.

Four, sustainability should be promoted through effective centralisation of environmental regulation and decentralisation of funds and functions, especially to municipalities.

Five, better targeting of subsidies can be achieved by shifting to direct cash transfers or to an option between cash or kind in the case of food subsidy. Six, greater and more secure employment may be generated by large scale recruitment of ‘interns’ in the government offices and by allowing multi-year secure contracts in the private sector.

Seven, we should shift from input-oriented approach in education towards an approach focused on educational outcomes, especially in ensuring literacy and numeracy skills by standard three.

Eight, in order to meet the coming challenge of non-communicable diseases, we should recognise and train local RMPs (Registered Medical Practitioners or ‘quacks’) who fill the deficit in the number of medical practitioners.

I know many of these proposals are going to be denounced by my political friends. Fiscal discipline, labour reform, direct cash transfer, opposition to loan waivers, outcome-driven education policy and exploration of GM seeds etc. are all anathema to red and green politics. I have argued against some of these proposals and continue to have my reservations. Yet I believe it is a mistake not to engage with these proposals. Not just because they come from well-meaning and non-partisan economists with solid credentials, but because these proposals are backed by evidence and logic. In my books, willingness to learn is a sign of dynamic politics.

Besides, we know that traditional left-wing economics is badly in need of repair. Its objectives are more relevant today than before, but its methods are often ineffective, if not counter-productive. Green economics is still in search of effective economic strategy. The egalitarian and environmentalist critique of capitalism is astute, but the alternatives proposed by them are wobbly at this stage. That is why ecologists and egalitarians can only wish away markets at their own peril.

I am aware that this document does not balance all three dimensions of Eco-normics. Activists like me would put more weight reducing if not eliminating inequalities. It seems that the ecological dimension is more of an add-on here rather than intrinsic to the design. Also, this document is neither comprehensive nor a ready-for-action blueprint of the kind we need, let alone a long-term vision for Indian economy.

I would have liked to see more concrete ideas on manufacturing, rural infrastructure, technological choices, employment generation in the unorganised sector and trade policy. I would also like to see more comprehensive proposals for health sector reforms and those for higher education.

Nevertheless, this document is a good starting point for short to medium-range thinking about India’s economic policy.  Its real value goes beyond its concrete proposals. Above all, it indicates a strategy, a way of navigating and thinking about India’s economic policy.

It remains agnostic vis-à-vis the traditional ideological divides of Left and Right. It refuses to get bogged down into the doctrinaire debates on private sector versus public sector. Above all, the authors are robustly empirical and evidence-based in their recommendations. Released a few months before the elections with the objective of influencing the political agenda, the document deserves a careful look by manifesto writers from across the political spectrum.

Meanwhile, I continue to wait for a theoretical treatise on Eco-normics.

The author is one of the founders of Jai Kisan Andolan, farmer wing of Swaraj Abhiyan, a constituent of AIKSCC.