Three priorities for the govt: Defence, education, and climate adaptation

While many areas compete for resources, defence, education, and adaptation deserve focus for maximum impact

As I interact more with policymakers, it appears the question they are grappling with is not what to do, or even how to do it, but what to prioritise. I argue that defence, education, and adaptation should be the key expenditure priorities, with greater focus on deregulation in other areas so that the private sector can contribute more. 

In a geopolitical situation that shows no sign of abating, significantly higher defence spending is important for many reasons, not just to protect the country but to also have a greater say in matters where it is economically affected. The geoeconomic realities being what they are, greater defence preparedness requires India to invest in drones, other advanced pilotless attack platforms, recruit more engineers and technical personnel in the armed forces, and increase training budget across services. But security cannot be seen only in terms of armaments, it must also include energy, food, and economic security; arguably even macroeconomic stability is a core component of security. 

States across India unfortunately don’t invest adequately in primary and secondary education. A child entering the schooling system today will join the workforce in 2047 and, therefore, the education system needs to be improved now — not next year or later. In the absence of states doing what they need to do, the Centre needs to ramp up allocations and support the delivery of quality primary and secondary education, and, most critically, the skilling services available for children and youth. 

Another key domain has to do with the environment. Climate change is already eating up almost 10 to 20 per cent of major crop output in India, with far more serious impact yet to come. Beyond that, labour productivity is adversely impacted, incomes — especially of the poor — is affected, and these are based on studies conducted in India using Indian data, not using global parameters. At the same time, those that emit dangerous gases or release toxic effluents can easily game the system and escape punishment, while the lack of relevant clean options prevent even the well-intentioned from spending on cleaner products and technologies.  What role could the central government play in all of this? What have other countries done? 

And then there are the economic sectors. Modern agriculture is the most exciting economic opportunity for India, but no one — neither farmers nor industry nor governments — invest adequately in it. The manufacturing sector, too, needs public resources. Additionally, infrastructure investments will continue to have significant public components in them. 

To add to that the government also has to make welfare allocations. While such allocations need to be limited, it is also evident that some flow to the underprivileged is required as benefits of economic growth are not leading to a rapid enough trickle-down. The revdi versus necessity problem is real and India needs to find a mechanism to prevent wasteful welfare for short-sighted political ends. 

Note that the top three — security, education and climate adaptation — are all areas where there are powerful externalities and markets don’t work well. The biggest wins in all these three areas are consequently going to come from greater resource allocations by the government. 

For the other areas, including agriculture, industry, and many forms of infrastructure, there is an alternative in the form of markets. They may need limited support and correction, there may be concern of China there as well, but a viable alternative to the government resources exists in the form of the private sector. In these areas, the government must focus its efforts at regulatory and policy reforms that enable markets to work better — but use public investment or subsidies only in a very limited way. Of the three major allocation focus areas, the one on climate adaptation is the least well understood and least written about. Adaptation has many components, but three deserve the greatest attention. First is electrification and its various dimensions, the second is a focus on innovation, and the third is government enhancing its own expertise and capacity. 

First, consider electricity. Be it urban transport or mechanised agriculture, or green steel for export, or producing hydrogen, electricity lies at the core of a well-adapted economy. Electricity creates a far more efficient and flexible energy backend and, therefore, contributes highly to a well-adapted economy.  To enable this, we need to invest in improving India’s electricity grid, which requires transmission- and distribution-related investments and smart metering. 

It also requires critical reforms to improve the regulation and operations of largely state government-owned electricity utilities, which are currently running debts amounting to many trillions. Moreover, while large scale deployment of renewable energy (RE) has directly reduced India’s dependence on fossil fuels, it is increasingly being constrained by the need for greater storage capacity, where government support will be critical. Another corollary to the electricity story is improving the energy efficiency of industrial processes, buildings, transport and even households.  Since most of these are in private hands, the government needs to play a catalysing role in this space, but not necessarily one that requires large public resources. 

Second, a range of innovations are required in agriculture, industry, and even business models for adaptation purposes. No doubt, left to itself, the market mechanism will eventually innovate and find solutions. But government intervention is needed since adaptation is a time-sensitive objective and change needs to be accelerated.  In the case of agriculture, for instance, requirements include new seeds, new agro-processing technologies, and also different nutrients and additives. Industry needs to reduce energy costs while moving away from fossil fuels to clean fuels. In the case of transport, there is the challenge of speedy re-charging for electric vehicles. And, of course, the need to develop low-cost storage options is paramount.  The agenda before the government is, therefore, clear — it needs to accelerate the process of research and development in both the public and private sector. 

And third, undoubtedly the most important: The government has to invest in the capacity and expertise available to it. The government needs its rank and file to have the resources and capability to take quick action. Ideally, it should do so by investing in in-house expertise and capacity, but if it can’t, it needs to help create this capacity in academia, use the private sector, and even hire expertise from other countries.  Such capacity-related investments are required in many domains. Governments across the three tiers need to implement comprehensive climate adaptation action plans. Agriculture universities and departments need to develop advisory capacity and extension networks to enable changes in farming practices. Environment regulators need to ramp up their staff by many multiples, improve monitoring and enforcement capacity, regulators need to create global quality assessment and certification facilities, among other measures. 

There will be many priorities for the government. But the more it is able to narrow them down, the greater its ability to focus, and the more impactful it will be. 

The author heads CSEP Research Foundation. The views are personal