Page 347 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 27: Governance of the Economy—Implementation of Economic Policies

In the ultimate analysis, this kind of State failure is essentially related to State character, State capacity Notes
and State-society relationship in a historical perspective is pretty obvious but is often lost right of.
The Implications of Failures of Policy Implementation

There is an implicit assumption in most policy studies that once a policy has been formulated the
policy will be implemented. This assumption is invalid for policies formulated in many Third World
nations and for types of policies in Western societies. Third World Governments tend to formulate
broad, sweeping policies, and Governmental bureaucracies often lack the capacity for implementation.
Interest groups, opposition parties, and affected individuals and groups often attempt to influence
the implementation of policy rather than the formulation of policy. Policymakers can attempt to
minimize disruptive tensions faced during implementation which can result in the failure of policy
outcomes to match policy expectations. It may be noted that the policy implementation failures make
the State stray from the chosen declared path of policy.
An Illustration : Tax Policy Implementation : For our purpose of discussion on implementation, we
can take the case of tax policy. This policy tried to raise, resources by a combination of direct and
indirect taxes to finance a large part of increasing public expenditure. In India, the tax administration
could not prove itself equal to the task to prevent widespread and regular leakages of revenue. There
appears to be inadequate recognition of the limitations and built-in defects in the design and law of
the taxes. Moreover, their frequent changes made its success problematic. Apart from this, avenue of
tax avoidance was sought to be plugged by imposing gift tax. Gradually, poor and indifferent
implementation of tax laws forced the Government to place greater reliance on indirect taxes and
Non-tax revenue like internal and external public borrowing and deficit financing (i.e., printing money)
to finance public expenditure. It may be observed that a tax policy is not just a matter of tax base and
tax rates or even the tax law. Thus, non-realisation of its wide ramifications and deep roots in the
social reality, particularly the power of the sections called upon to pay a better part of the taxes,
became a major element of many-sided policy failures in India. The fiscal crunch arising from inept
and weak implementation of tax laws made the Indian State reduce its normal responsibilities, leaving
large gaps in the provision of minimum essential services in areas like socio-economic infrastructure,
education, health services and move in the direction of either abdicating many pressing social tasks
or hope to achieve them by privatisation.
Factors Responsible for Policy Failures
There are several factors ranging from population pressure, political, bureaucratic and business elite
values and modes of behaviour, legacy of colonialism and the domineering policies of the rich
countries, national character, etc. we may also include transparency, accountability, widespread
corruption, lack of popular peoples’ organisation for active participation in democratic State processes
and the adverse, improper policy advice, kibitsing and interference by the rich countries by means of
peripatetic advisers, to lack of technical expertise and proper appreciation of the narrow, vested
interests hidden as international ‘development’ expertise, as responsible for the policy failures in our
country. Moreover, there are general factors, for every specific policy, a set of particular factors have
often been identified. It may be noted that even a major policy shift like the one towards globalisation
liberalisation and privatisation in the early 1990s appears to have become stuck in the deep-seated
morass of cozy, crony relationships and partial, unrealistic analysis of the underlying reality. Apart
from the neglect of popular concerns, at least some of the factors are still crying for attention. Such as
tax reforms, public debt management, public expenditure and fiscal stabilisation etc.
Lack of Integration in Policy Formulation and Policy Implementation : The main problems for lack
of integration are related to the implementation procedures, the agencies, the bureaucracy, politicians,
business ethics, archaic methods of financial controls, legal and administrative framework wanting
in transparency, accountability, etc. which impede effective implementation of policies. In short,
while the theoretical framework and the mechanism of the interaction between the policy variables
and the economy are usually declared appropriate and/or easily correctible, a rather sticky and
difficult terrain is encountered in the sphere of implementation.

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