Economic Survey 2022 Cautions Against Predetermined, Rigid Planning; Advocates 'Agile' Approach

The Economic Surveys every year bring out new ideas with regards to governance, planning, strategy, goals as well as policy. This year's Economic Survey, released today, has taken a meta view of the concept of planning itself.

The Survey criticises the traditional approach of disproportionately focussing on ever more detailed plans/regulations, and elaborate forecasting models. It says that there is more than adequate evidence that this “Waterfall” approach of policy-making does not result in improved outcomes.

"The default mode of policy-making in India.. has traditionally been to rely on.. “Waterfall” approach – an upfront analysis of the issue, detailed planning and finally meticulous implementation. This is the framework that underpins five-year plans and rigid urban master-plans. The problem is that the real world is a complex and unpredictable place buffeted by all kinds of random shocks and unintended consequences," the Survey says.

"The response.. was to create ever more detailed plans/regulations.. despite more than adequate evidence that this did not improve outcomes. In his Nobel Prize acceptance speech, economist Friedrich Hayek dubbed this 'The Pretence of Knowledge'."

The Survey advocates an alternative “Agile” approach. It says that this approach of policy making is exemplified by India's response to the COVID-19 pandemic. The Survey, second one amidst the ongoing pandemic, makes this approach the central theme.

"This framework is based on feed-back loops, real-time monitoring of actual outcomes, flexible responses, safety-net buffers and so on. Planning matters in this framework but mostly for scenario analysis, identifying vulnerable sections, and understanding policy options rather than as a deterministic prediction of the flow of events."

The "Agile" approach is facilitated by the presence of Big Data. Today, we not only have real-time data that allows for constant monitoring but also innovative analytical tools that tap the data from unconventional sources. The Survey lists a few sources: GST collections, digital payments, satellite photographs, electricity production, cargo movements, internal/external trade, infrastructure roll-out, delivery of various schemes, mobility indicators, etc.

The Survey says that many innovative forms of data are now being generated by the private sector. "Short-term policy responses, therefore, can be tailored to an evolving situation rather than what a model may have predicted," it says.

On the supply side, the Survey advocates policies that encourage economic flexibility through innovation, entrepreneurship and risk-taking on one hand, and invest in resilient infrastructure, social safety-nets and macro-economic buffers on the other.

Underlying need for the "Agile" approach is an uncertain future. The Survey says that in the paradigm of this approach, protection from or taking advantage of an uncertain future is the link that connects seemingly unconnected policy measures like deregulation, process simplification, privatization, foreign exchange reserves accumulation, inflation-targeting, housing-for-all, green technology, the Insolvency and Bankruptcy Code, health insurance for the poor, financial inclusion, infrastructure spending, direct benefit transfers and so on.

The "Agile" framework moves from disproportionate focus on planning to equal focus on both planning and implementation. The approach recognises that flexibility and dynamism in planning is required for effective implementation of policies. The multiple feedback loops connecting various sectors and agencies means the government will be able to take a holistic approach.

The analysts are noting down what the future might write as the legacy of COVID-19 pandemic in terms of governance reform and public planning. The "Agile" approach is currently at the top of that list.