Economic policy sans economics
Wealth Insight|December 2021
Sound economic policymaking demands healthy regard for technical expertise
PUJA MEHRA

November 8 was the fifth anniversary of demonetisation. Prime Minister Narendra Modi had announced it in 2018 as an assault on the black economy, going against the official advice of the economists in the Reserve Bank of India (RBI). The government has not produced any evidence of corruption having reduced even five years after the controversial decision was taken. New research (https://bit.ly/3kYxL4Z) out in October 2021, though, gives fresh insights in the rent-seeking behaviours of the bureaucracy.

Amit Chaudhary and Song Yuan of the University of Warwick looked at the economic returns for bureaucrats, specifically the Indian Administrative Service (IAS) - the elite civil service in India - after their reassignment to important ministries. They found that the increase in individual officials' assets is higher after reassignment to important ministries that are more prone to corruption. Positions in some economic ministries or departments such as Finance and Urban Development are known to provide opportunities to make influential policy decisions. Other such departments include those in charge of excise and sales tax, food and civil supplies, health, home, industries, irrigation and public works. Chaudhary and Yuan found that the increases in assets were higher in more corruption-prone states. The researchers found that bureaucrats working in their home states, as against in the central government, accumulated more immovable assets after such transfers. Previous experience in important ministries continued to contribute to the asset accumulation of bureaucrats in these state postings.

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