Unintended consequences of good policies cannot be foreseen without systems thinking. Each policy operates in its own domain unconscious of its effects on other parts of the system. The severe air pollution Delhi is experiencing in the last decade is an example of good policies combining to produce bad effects. Ever since mechanization was introduced in the 1980s to improve farm productivity, farmers in Punjab have burned the paddy stubble the machines leave. Later, alarmed by the impact thirsty paddy growth was having on dwindling ground water resources, the government passed the Preservation of Subsoil Water Act in 2009. It stipulated that farmers postpone by one month the sowing and transplanting of paddy so that it was closer to the onset of the monsoon. This reduced the need for drawing water from underground for the transplanted paddy. However, the burning of the stubble post-harvest also got postponed by one month. It now coincided with the onset of winter in the North when wind movement is low and atmospheric moisture content is also high. Thus, two good things together: the improvement of productivity of agriculture with mechanization, and management of water resources, has produced the unintended consequence of Delhi becoming the most polluted city in the world!
Education of girls gives many benefits to society. Retention of girls in schools in Rajasthan’s poorer, water scarce districts has increased in the last ten years with concerted efforts by the government and NGOs to improve education. Also, water conservation programs reduced distances women have to carry water to their homes, thus pressures for adolescent girls to stay home to help their mothers reduced. Two good things together—better education and better water management—produced the desired outcome. However, it is noticed in the last two years that girls have begun to drop out of secondary school. Investigations reveal that the addition of another good program, Swatchh Bharat, to provide toilets in homes was the cause. The toilets required more water to be brought home, and so mothers needed their daughters at home again. A property of complex systems is that many good things, when they interact with each together, may unwittingly produce bad outcomes.
India’s complex, socio-economic-environmental system is under great stress. India must improve on many fronts simultaneously. It ranks very low in international comparisons of human development (education and health), even below its poorer, sub-continental neighbors. It is the most water-stressed large economy in the world; its cities the most polluted. India’s economic growth is not generating enough jobs for its burgeoning population of youth: the employment elasticity of India’s growth (numbers of jobs created with growth) is amongst the worst in the world.
The increasing numbers of youth who are educated and skilled, yet unemployed, is a tragic outcome of the absence of systems thinking in government policies. Fifteen years ago, industries claimed that a principal constraint on their growth was the unavailability of skilled people. Government responded by starting a massive drive to train 500 million persons. A separate skills ministry was also set up with high targets to be achieved. The most recent assessment of employment in India reveals that unemployment of persons with vocational education has gone up between 2011-12 and 2017-18, from 18.5% to 33.0%; of youth with technical degrees from 18.8% to 37.3%; and of graduates from 19.2% to 35.8%. Education and skills are only one part of a complex system that produces jobs. The growth of enterprises to provide employment has lagged far behind. Thus, a bold fix to one part of the system has back-fired, creating larger numbers of frustrated youth.
Bold actions without understanding the whole system can cause great harm. The bold move to demonetize the economy in 2016 is an egregious example. Now the government seems to have become enamored by the idea of ‘Nudging’ change, propagated by economists who have discovered that human beings are not purely rational. ‘Nudge’ economics provides tools for making citizens do what policy-makers want them to. The last Economic Survey was devoted to promotion of Nudge. It is reported that Nudge units are being set up in all ministries. Nudges to speed up policy implementation within silos could produce undesired outcomes, as the examples from Rajasthan and Punjab illustrate.
The Indian government has withstood the pressure from a rump of Washington Consensus economists who continue to advocate that more free trade is the solution to India’s economic problems, even when there is evidence that India has not benefitted from the agreements it has entered into. They say the problem is not with their ideology of free trade: the problem is in India’s inability to build the competitive capability of its own industries.
India’s challenge is to build an Indian ecosystem in which competitive enterprises will grow to create more opportunities for jobs for youth and for increasing citizens’ incomes. Growth of incomes in India will make India more attractive for investors. A stronger Indian industrial system will give India more headroom in trade negotiations too. India’s industrial and entrepreneurial ecosystem’s growth must be accompanied by an improvement in India’s environment. Policies must be managed with a whole systems view. Whereas, ‘Ease of doing Business’ gauges health from a business perspective, ‘Ease of Living’ should become the measure of health of the whole system.