From Problems to Policy: Sustaining Growth and Public Services after the Global Financial Crisis in India and Pakistan

Since the global financial crisis of 2008 commentators and activists have been worried about enduring economic recession and the impact of declining incomes on the welfare of the poorest, via both rising unemployment and reduced government spending on social services. This paper examines this debate within the context of contemporary India and Pakistan by reviewing two high-level policy papers; one for India that focuses on the problem of making growth more inclusive and one for Pakistan that focuses on raising the growth rate. The two sampled policy papers are “From poverty to empowerment: India’s imperatives for jobs, growth and effective basic services” published by McKinsey Global Institute (MGI) in 2014 and Pakistan: Framework for Economic Growth’ published by the Planning Commission (PC) of Pakistan in 2011. Both organisations in general and these two policy papers in particular are concerned with more that stimulating debate and discussion; they are not just academic pieces, rather they actively seek to shape policy. This paper finds that these two policy documents have little practical relevance for policy makers. The reports provide a bewildering list of policy recommendations with no guidance for policymakers on how to prioritise between them. The reports draw on the simple idea of urging policymakers to identify and emulate best practice but fail to draw on lessons and history to gauge what did and what didn’t work elsewhere and why. The reports completely ignore issues of political economy; those constraints from the wider social structure on the choice of and the impact of policy. While the reports call for massive, complex and transformative government reforms, they make no reference to the weak and declining capacities of government in both India and Pakistan. In light of these problems this paper argues that policy guidance requires creative thinking structured around a deep understanding of the constraints (and opportunities) of political economy, state capacity, appropriate lessons and history. The careful discussion drawn from detailed context sensitive research by scholars such as Abhijit Banerjee and Ester Duflo provides a good starting point for thinking about policy.