Dogs catch frisbees through a loop of feedback and adjustments and not by making forecasts about its trajectory, said India's principal economic adviser Sanjeev Sanyal, taking a dig at economists who, according to him, often fail to adapt their forecasts to a changing economic backdrop.
He was speaking at FICCI's Capital Market Conference.
Frisbee Economics
This is not about some grand forecast created by some great planning commission wise man about where the frisbee will go, it is about watching what is happening, and flexibly adapting to it. All of you who run businesses, who are successful, will be doing this all the time. But economists are entirely surprised when their dog fails to catch the frisbee. And what they will do is a few months later they will issue a report, with a detailed description of charts and tables, telling you why they couldn't catch the frisbee.
Also Read: Bad Loan Clean-Up Taking A Toll On Bank Lending, Says Sanjeev Sanyal
Tale Of Two ‘Planned' Cities
Sanyal went on to illustrate with an example of Singapore, which is widely cited as one of the best planned cities in the world. He explained how Singapore lifted itself from poverty after freedom by first becoming a port hub, then a light manufacturing hub, making cheap apparel and electronics, and then finally by the late 90s, converting itself into a major financial hub.
He then contrasts it with the so-called best-planned city in India – Chandigarh.
What we have done with Chandigarh is, the bureaucrats who run Chandigarh are very proud that they have stuck with the original master plan of Le Corbusier. And so Chandigarh has remained essentially, a subsidy scheme for civil servants. What ever little zing it has, comes from a part of Chandigarh, which is Mohali, which is not incidentally a part of the plan.
Singapore's successful model, according to Sanyal, was based on “an approach of using continous adaptation and feedback loop in order to make policy and move forward”
This was also the philosophical framework behind major government reforms such as the introduction of a bankruptcy law and the implementation of the Goods and Services Tax, Sanyal said.
“When you're doing something as complicated as GST in as complicated a country like India, no amount of modelling was every going to tell you what would happen before you did it”, Sanyal said. "The only way to do it, was to do it and then fix it along the way", he added.
The Need For TORA
Extending this argument, Sanyal said that an economy like India which is in a state of flux and constantly adapting requires certain anchors to hold it together - rule of law and the enforcement of contracts as well as clarity of rule.
This is why the Economic Survey has proposed a reform called the Transparency of Rules Act, he added.
An average citizen doesn't know what rules to adhere to, and this leads to all kinds of inefficiency, litigation, not to mention corruption.
TORA will have three elements, Sanyal explained.
First, all citizen and businesses facing the rule of every department will be placed on the website in English and Hindi, and where required in regional language. Once the department is declared as TORA complaint, only those rules which are there on the website explicitly, will comply.
Second, all rules will be put forward as a whole and not as a series of circulars. Every rule has to present in its current form and there will be a history button for those interested.
Third, every time it is changed, the time and date will be clearly stated.
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