Policy making happening at state level: Takeaways from the latest PRmoment Weber Shandwick Chai Talk

What is India's policy environment like today? What are the key policy and business trends that will matter to communicators in 2020 and beyond?  Are the states and not the centre at the heart of real policymaking? The latest edition of the 'PRmoment India Weber Shandwick Chai Talk NCR was held in Gurgaon this month to answer some of these questions. 

Economy Trends in India 

Kicking off the discussion MK Venu, founding editor, 'The Wire' flagged off demand, GST, tax and policy stability and core sector growth as key issues that will impact businesses in 2020.

He said the latest core sector data, that makes up 40% of industrial production, shows that the core sector has shrunk by 5.2% in September 2019. 

MK Venu said, "In 14 years that hasn't happened. The core sector is the backbone of your economy. Unemployment rates are also high, this is also something I haven't seen before, even after the 2008 global crisis. This is not something that has necessarily happened post-Modi, although the government came and deepened some of the crisis with their demonetisation and GST moves. The optimists are of a view that there will be a V-shaped recovery. I don't think there will be a V-shaped recovery, I think it will take a year and a half for the economy to recover."

Apart from the GST and demonetisation, which MK Venu believes are running issues that still impact the economy, the third issue is that taxmen are treating capital as income and trying to tax that. This is a development that could impact startups, believes MK Venu.

MK Venu also pointed out in order to allay the fears of the startup community the finance minister, Nirmala Seetharaman actually stated during her budget speech this year that the taxman will not have a physical interface with you.

Legislative Trends 

Shedding light on how policy formulations are taking place at the Centre and the regional state level, Chakshu Roy, head of legislative initiatives, 'PRS Legislative Research' pointed out that states in India are increasingly stepping up in the policymaking process. 

Explaining the nature of legislation at the centre and the state, Roy said that policymaking requires trade-offs and that the Centre does not like to burn its' political capital and would rather leave policy development to the states.

Policy decisions shifted from Delhi to states 

A key policy development that policy advocacy specialists say has happened is the shift of decision making from New Delhi to state capitals.

Chakshu Roy elaborated, "The shift has happened slowly but it has happened. Policy decisions are getting made at the state level. A lot of the states have become islands of regulatory arbitrage. States are streamlining regulation to incentivise businesses to attract investment instead of its neighbours."

Giving examples of such policy-making, Roy said Telangana allows firms to self certify buildings for fire safety compliance, which allows businesses to get off the ground quickly.

Big bang state policy reforms

One of the main asks by businesses is labour reforms. According to Roy, labour reforms are being driven by states. States are actually dictating what is the kind of labour environment needed that will, in turn, create a better environment for the industry.

Roy quoted Prime Minister Modi as saying, "We used to be a federal nation with state cooperation, now we are a federal nation with state competition."

Roy shared that Niti Aayog has been driving states on a mission mode basis to fix policy for businesses so that their rankings can improve. Roy highlighted that while the states are working to improve their ease of doing business ranking, they are also trying to understand obstacles to work."

One of the big reasons this has happened is that states now have greater percentage of discretionary funds from the centre than they did before. About 42% of central funds are now untied and states can use them as they wish.

Roy also said that with the coming of GST, states have limited space for raising taxes on their own as most taxes are now subsumed under GST.

The third aspect of policy led reforms that are making doing business in states easier, as per Roy, is the message from the centre to states to decide on the applicability of land acquisition norms in their region.

This freedom, says Roy, has led state after state to ease land acquisition laws. This includes states from across the country. For example states such as Tamil Nadu, Gujarat and Madhya Pradesh have made the exact the same land policy amendment that the centre was unable to do. 

Roy says, "And this was not the only area of change. They also made changes in contract labour. Therefore, while a lot of the legislation you see in the Parliament is top-down, a lot of the operational legal changes are happening at the state level."

Challenges of demand stimulation

MK Venu commented that the recent slashing of taxes to 15% on new investments should have a huge impact on states.

However, Venu cautioned that it is also important to look at the challenges of stimulating demand in the middle of a global slow down as well as stability of policy in key sectors such as telecom. 

Judicial activism 

The audience raised the question of judicial activism when courts can order a complete ban on emerging technology services rather than take a policy approach.

Chakshu Roy said that "There are times there are regulatory gaps and times where there is judicial overreach and times when there is regulatory innocence and the response is let's ban it."

MK Venu said governments should empower independent regulators to understand the issues at hand, "We need enlightened regulators who can come up with prescriptions that balance the requirements of all the stakeholders."

Build bridges with legislators

Chakshu Roy emphasised the importance of building bridges with legislators. He said, "The reason why there is not enough evidence-based policy research in India because there is a very transactional relationship between corporates and the government when it comes to regulation of policy."

Roy said candidly, "We have all been a little selfish. We only engage when something in the policy touched our nerve. Therefore our interaction has always been at the executive level. We have never helped build capacity for those coming in from the states. We have never built capacity to say "I have zero interest in this but can I help to create understanding for why this issue is important". 

Nikhil Dey, vice-chair, Weber Shandwick agreed with this statement commenting that in today's highly integrated business world, communicators require a thorough understanding of the policy issues at hand.

"As PR professionals of industry 4.0, we have to be able to align a brand's communciation goals with helping to shape narratives around the policy environment. This calls for a research-based approach for our professionals that is mindful of the impact of policies in their sector."

Roy urged the audience to understand that in India executive actions can be very reactive, "The Government usually reacts to an outside pressure to take action."

Taking the discussion forward, MK Venu suggested that it might be useful for an organisation to do what this year's Nobel laureate for Economics Abhijit Banerjee did for welfare with a randomised control field trial. 

Venu added that "You can do similar randomised field trials for policy issues to find out how people are being impacted and share a distilled version of that with policy researchers or ministers who are willing to listen."

Carson Dalton, senior director, Ola Mobility Institute indicated that policy research is taking place and asked if and how are the new breed of policy professionals who work with legislators and MP's ensuring discussions during the policymaking process are backed by empirical evidence.

Roy responded by saying that young policy researchers are able to bring the nuances of a subject to legislators. But he also cautioned that legislators do not have the time to bring the same nuances to the decision-making process. 

Thank you Weber Shandwick India for supporting and enabling the quarterly 'Chai Talk' platform. Chai Talk is a platform that brings together business leaders and communicators on issues that will shape their work.

The Chai Talk NCR Expert Panel comprised:

Thank you CoWrks for supporting this event. To attend the launch of CoWrks CyberCity Gurgaon centre on November 15th, 2019 please contact: hkaustav.chakraborty@cowrks.com