Reproduced below is the chapter “Making growth inclusive and sustainable” in the recently-released “An Economic Strategy for India”, authored by well-known economists* led by former Reserve Bank of India governor Raghuram Rajan. The chapter has controversially said that the Right to Education’s (RTE’s) input-based approach undermines low cost private and government schools. Excerpt:
A good job is often the most important form of inclusion. In addition, we need to help individuals obtain the human capabilities that will enable them to secure and hold that job, as well as protect those who cannot get jobs. Let us now turn to proposals on inclusion.
The single greatest limitation of the Indian education system is its inability to deliver universal functional literacy and numeracy in primary school. Several studies show that students who fail to achieve basic skills by the end of class 3 learn very little in subsequent years even if they are enrolled in school. Our top education policy priority is therefore:
• A national mission to achieve universal functional literacy and numeracy by class 3. Key elements of delivering on this mission should include:
o Improve incentives of existing teachers to attend and teach well
o Providing districts/schools with resources to hire supplemental tutors/utilize new technologies that will provide small-group instruction to students so that they can be taught at the right level.
o Independent measurement of learning outcomes with rewards/recognition to states/districts/blocks/schools based on improvements in learning.
The Right to Education (RTE) Bill’s input-based approach to education quality was unlikely to succeed given the extensive evidence that most school inputs are neither necessary nor sufficient for improving learning outcomes. RTE has led to an unnecessary and disruptive closure of several low-cost private schools that parents were choosing of their own accord. In many cases, even government schools are in violation of these input-based norms. We therefore recommend:
• Repealing all input-based mandates for schools under the RTE (for both public and private schools) and changing the approach to regulation of private schools based on transparency and disclosure as opposed to input-based mandates.
o Such an approach will facilitate (as opposed to inhibit) the expansion of quality private-school providers.
o It would also facilitate localized cost-effective innovations by government schools, which may be made difficult by the RTE (such as hiring tutors without formal teaching credentials for providing supplemental instructional support).
• Finally, since school education is mainly in the domain of state governments, we recommend that the MHRD seriously implement the initiative established by the NITI Aayog under it’s “School Education Quality Index (SEQI)” initiative. Implementing the SEQI consistently, and tying some amounts of central funding to the extent of improvement in these indicators over time will help to:
o Shift the policy focus to outcomes rather than inputs and programs
o Encourage state-led innovation in cost-effective policies to improve outcomes
o Facilitate documentation and sharing of best practices across states
While improvement in schooling is a key building block to education, we cannot neglect either vocational training/skilling or college education. Both will be critical to providing our youth with the wherewithal for the jobs of the future. High quality research universities will be essential, both to train the teachers for our colleges as well as to fuel the innovation needed for the next stage of our growth.
Dealing with the skills shortage
There is wide recognition that the current models of publicly subsidized skilling are not performing very well even though skills are extremely scarce. What seems to work better is the skilling provided by private firms that are training their own labor force. However, under current laws, firms can employ workers for up to one year after which they either have to fire them or make them permanent.
Since there are significant costs and inflexibilities in making workers permanent, many firms keep workers on short contracts and terminate them before they can become permanent. This state of affairs serves neither the firm, which has to hire new workers frequently and has no incentive to train them, nor the worker, who has no security of employment, and who is not trained.
At the same time, since the government is often the only employer that offers secure jobs, young people spend their twenties applying for these jobs rather than working. However, these jobs are extremely expensive thanks partly to the munificence of the Pay Commissions and therefore there are too few of them. As a result, a cynic could argue that the government and the private sector lack manpower, while young people sit at home filling applications and preparing for tests. We propose that:
• The law be amended to allow for multi-year fixed term labor contracts, renewable when they end. Severance payments should increase steadily with duration of tenure. The intent would be to move more of contract labor into these fixed-term contracts. These will protect labor better, both initially and over time, and give business some flexibility, as well as greater incentives to invest in training labor.
• We study why public-private partnerships have in general not been a success in skilling and identifying and share best practices, since we cannot afford to give up on this vital issue. In particular, it is worth exploring whether it works better to get firms to expand their existing training programs to include trainees they will not necessarily hire, since these training programs clearly provide useful skills — rather than relying on stand-alone training firms.
• Governments could set up paid internships for those under twenty-six to work as support staff in government departments in field or staff positions. Performance on these could be an eligibility requirement for applying to government jobs. This will both help relieve the manpower problem in government and generate on the job skilling.
Women’s labor force participation
There are clearly both supply-side issues–families not allowing women to work, women feeling disempowered—and demand-side issues—lack of women-friendly jobs in the private sector as well as discrimination. Some useful first steps here:
• Greater representation of women in state and national parliament, as well as in public administration, the judiciary, and the police has been shown to reduce bias against women and encourage families to invest in women as earning members.
• Public safety is an important issue for women, and increasing women in the police is a way to make women feel safer.
• Going beyond quotas, increasing awareness of the costs of not having more women in the work force, as well as behavioral change interventions targeted at both women and their families to encourage women’s work are also needed.
• Women-friendly policies in the private sector need to be encouraged but legislating that they will need to pay for child care and maternity leaves may just discourage employing women. These need to be subsidized by public funds, at least until private firms start recognizing that they need women.
There is much to be done to reform the healthcare system in India. Increasingly, non-communicable diseases (NCDs) like heart disease, diabetes, and cancer play a much bigger role, so healthcare needs to be reoriented to address these.
• Expand the public health outreach efforts to private sector providers including those without a medical degree. Given that they provide most of the primary healthcare, they have the reach to transmit our public health interventions (immunization, exercise, testing).
Studies in West Bengal suggest that training the private sector health providers improves their performance (measured by sending them “fake” patients) by a very significant amount. Based on that West Bengal has already begun to train many thousands of private sector health providers. Overall, it might make sense to
o develop a series of simple training interventions that help these practitioners improve the quality of the care they provide
o develop a set of cell-phone based check-lists for treatment protocols (along the lines that Atul Gawande has proposed for the US but much more basic) for these practitioners to use to react to the common symptoms they face
o develop a simple test that allows the government to certify these practitioners to be health extension workers, delivering various public health interventions.
o enforce existing laws that make it impossible for these practitioners to dispense high potency antibiotics and steroids, and encourage referrals for cases where these may be warranted.
• Carry out public health campaigns to raise the awareness of NCDs, immunization, and the dangers of over-medication. Recent evidence suggest that edutainment may be a very powerful device in this regard and should be used extensively
• Build a second district hospital in every district head-quarter outside the state capital. Once it is built and is operational, refurbish and modernize the existing district hospital and bring it to acceptable standards. The current district hospital is typically over-crowded in part because it is the only part of the public system that works somewhat better and private alternatives are expensive. The second hospital will provide much-needed back up for the Ayushman Bharat Scheme if the private hospitals do not cooperate. They can also serve as centers for diagnosis and treatment of NCDs.
Even while business complains about the difficulty of getting environmental approvals, the quality of our environment leaves much to be desired and with climate change looming we should be thinking in terms of reaching peak emissions within the next decade or so and then sharply reducing them. For all of this
• A new environmental protection law should be enacted under which pollution regulation is delegated to a fully independent regulator who is appointed for a five-year term and removable only by impeachment. The regulatory agency must be funded automatically through a charge of a fraction of industry revenue. The regulator must be required to use the best available scientific and economic evidence to set pollution fees for pollutants (or inputs closely linked to pollutants) equal to the estimated monetary value of the harm that they cause, and to levy fines for non-compliance.
In addition, the regulator may limit or ban some pollutants, and shut down industries that fail to comply. Revenue from fees and fines should go to the government to be used to compensate losers, finance pollution control and clean alternatives, or for the general budget, and should not go to the regulator.
• Policies that would improve energy pricing in the short term pricing can include:
o Setting Coal India prices at international parity
o Price electricity at social marginal cost and then use revenues for fairer energy access through, for instance, funding connections under Saubhagya (free of fixed costs) and giving fixed transfers to agricultural users.
o A separate policy is needed for pollution from cooking and heating fires that is responsible for 25% of Indian air pollution. In order to enable cooking and heating with electricity, electricity bills for low-income households should be refunded up to a limit of 100 KWh/month (300 KWh/month in winter) and a public information campaign conducted via TV and radio to explain the dangers of air pollution from cooking and heating fires. Incentive schemes to prevent burning of crop residue could also be worked out.
o Adopt EURO fuel standards faster than at present.
• Long term planning changes includes city design that seek to increase public transport, micro electrical vehicles and cycling. India should invest in rail that is easier to electrify (relative to roads). Building regulations should minimize artificial heating and cooling
• Congestion pricing of city traffic by on-board GPS tracking should be mandatory, with revenues used to improve pavements and public transport. The municipality could compensate existing vehicle owners and drivers through a temporary refund of automobile use taxes.
India has more than 400 separate social protection schemes. A vast majority of them are funded at very low levels and do very little. However, they absorb some amount of bureaucratic capacity. And despite the wide variety of schemes available on paper, as the many protests make clear, people do not feel protected.
In particular while MGNREGA provides some support for the rural landless, most other relatively poor people have only the PDS to fall back on. This is one reason that it is so difficult to remove any government scheme, however inefficient. There is a clear need to create a reliable pipeline for providing compensation for losers, as we move towards a more rational system of social protection. The Direct Benefits Transfer is a good starting point and building on it by being credible in compensating losers will be key. Specifically we suggest
• Going through the hundreds of schemes and getting rid of most of them, to leave us with a small number that are targeted towards important forms of risk that people face.
• Moving beyond the cash vs kind debate by adopting a choice-based approach on an experimental basis. For example, we could give beneficiaries the choice of opting for a cash transfer instead of subsidized food through the PDS — instead of policymakers opting for one or the other. With mobile banking and the PDS being digitised with e-PoS machines to enable portability of benefits such a choice-based approach is feasible.
• Automatically indexing social protection programs (such as pensions) to inflation to ensure that their value is not eroded over time. This is especially important since recipients of social welfare pensions are among the most vulnerable.
*Abhijit Banerjee, Pranjul Bhandari, Sajjid Chinoy, Maitreesh Ghatak, Gita
Gopinath, Amartya Lahiri, Neelkanth Mishra, Prachi Mishra, Karthik Muralidharan, Rohini Pande, Eswar Prasad, Raghuram Rajan, and E. Somanathan
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