India's policy signalling problem

DURABLE REFORMS SUCCEEDED AS THEY'RE PRECEDED BY CONSULTATION; RECENT VOLATILITY STANDS IN CONTRAST

- AASHEERWAD DWIVEDI ADITYA SINHA

POLICY IS ALWAYS made in the shadow of uncertainty. No government, however well-intentioned or technically equipped, can fully anticipate ex ante how millions of dispersed agents, firms, households, states, and markets will interpret, adapt to, or strategically respond to a new rule.

Yet the difficulty of anticipation does not absolve governments of responsibility. It shifts the standard from omniscience to responsiveness. Governments fail not because outcomes diverge from intent, but because they mistake intent for impact. They often assume linear causality in a world governed by feedback loops, incentives, and secondorder effects. They model compliance where evasion is rational, predict behavioural change where institutional trust is weak, and expect uniform responses from heterogenous actors embedded in unequal capacities and information. Bureaucratic silos further distort anticipation. Policies are stress-tested against legal form rather than lived practice, against average agents rather than marginal ones. Above all, political systems privilege announcement over adaptation. Treating policy as a statement of resolve rather than a hypothesis to be tested. But this also leads to uncertainty in certain cases.

India's recent policy experience increasingly reflects this pattern of reversal. In isolation, each rollback may be defended as responsiveness. But in most cases, it also points towards the issue with how government fails in anticipating a fallout from a policy intervention.