Markets and Governance Processes

Ashank Desai Centre for Policy Studies, IIT Bombay > Research > Markets and Governance Processes

Can the delivery of public goods be improved by the state ceding to markets? Will the treatment of human beings and nature as commodities, as required by markets, improve societal well-being? In an era when market principles are being imposed in public administration as an alternative to perceived limitations of state bureaucracies, it is essential to find an answer to these and other relevant questions.
The Centre for Policy Studies is interested in developing theoretical frameworks on the right distribution of responsibilities between the state and market that can ensure equitable access to public goods. Without discounting the role of markets in contemporary societies, CPS believes practices that place undue trust in either states or markets should be critiqued with more vigour.

Research Topics

Anush Kapadia
Topic: Indian Industrial Policy in the IT sector
For PhD/MPP

Description: What set of policies have led, directly and/or indirectly, to the growth of the Indian IT sector since the 1970s? What combination of roles in terms of Evans’ Custodian, Demiurge, Midwifery, and Husbandry has the state played in this sector post-liberalisation? What role of the state is optimal for different subsectors of the IT industry? What is the political economy of these various roles in this sector? What set of roles can we think about to move the IT up the value chain in the near to medium term? How do we evaluate the Ministry for Electronics and Telecommuncation’s Production Linked incentive scheme?

Topic: Indian Industrial Policy in the Auto/Auto parts sector
For PhD/MPP

Description: What set of policies have led, directly and/or indirectly, to the growth of the Indian Auto sector since the 1980s? What combination of roles in terms of Evans’ Custodian, Demiurge, Midwifery, and Husbandry has the state played in this sector post-liberalisation? What role of the state is optimal for different subsectors of the Auto industry? What is the political economy of these various roles in this sector? How has the Indian auto sector fared vs the autopart sector? Is the auto sector an example of too much protectionism or too little industrial policy of the Midwife/Husbandry kind?

Topic: Indian Industrial Policy in the Pharma sector
For PhD/MPP

Description: What set of policies have led, directly and/or indirectly, to the growth of the Indian Pharma sector? What combination of roles in terms of Evans’ Custodian, Demiurge, Midwifery, and Husbandry has the state played in this sector post-liberalisation? What role of the state is optimal for different subsectors of the industry? What is the political economy of these various roles in this sector? Has the pharma sector got stuck at the low value-added end of the chain? Is this because of local factors, global factors, or some lacunae in industrial policy?

Rahul Sapkal
Topic C: Do Institutions Matter for Firm Performance? Empirical Evidence from India’s Organised Sector
For both PhD/MPP

Description: Recently, the Global Wage Report 2016-17 of International Labour Organization (ILO) has argued that the persistence of wage inequality within a firm is driving the total wage inequality in India. Among other factors, the rise in wage inequality has been largely attributed to the behavior of a firm and its responses towards various institutional challenges they face. However, the behavior of a firm, in terms of its ability to grow, its scalability and efficient utilization of resources are largely constrained by the level of financial market development and the complex institutional mechanism of labour and product market regulations. Earlier approaches, beginning with a seminal paper of Schumpeter‘s (1911), the relationship between the financial system and economic growth have been extensively analyzed. It was argued that financial development fosters economic growth both at the macroeconomic and microeconomic level. Recently, at the micro level, the impact of development in the financial system on the growth of firms has been studied widely. Although a large literature suggests that financial development fosters economic as well as firm growth, considerably less research has examined the cross- firm, cross-industry distributional effects of financial development combined with product and labour market regulations. The bulk of these studies analyze the financial development effects in an isolated way, not paying attention to product market competition and labor market flexibility are also considered to be key factors that affect economic performance as well as firm growth. For a period between 2010-16, the World Bank‘s Ease of Doing Index has observed that despite enjoying high GDP growth rate, the Indian economy performed slowly due to lack of incentives provided by the existing institutional framework. Similarly, the World Bank‘s Enterprise Survey (2014) finds that around 63 percent and 27 percent of Indian firms reported to have access to external finance and labour and product market regulation are major constraints respectively. Hence, the institutional environment affects the firm’s ability to perform.Existing literature identifies at least three channels through which the access to finance may affect firm growth. Firstly, it can restrict capital expenditure (Fazzari et al. 1988). Secondly, it can hinder technological innovations (Bottazzi et al. 2010). Finally, it may restrict acquisition of information important for risk management, resource mobilization, amelioration of transaction costs, etc. and thus influence growth of firms (Rajan and Zingales 1998). Empirically, since finance constraints are not directly observable, characterization of the relationship between finance constraints and firm growth is fraught with difficulties. Cabral and Mata (2003) argues that due to dynamic business cycles and tendency to have extreme growth in selective sectors, allows a disproportionate growth in the firm size. On contrary, in case of stable economic growth and fiscal policies, firms are able to grow more faster in developing and emerging market economies (Garnsey et.al. 2006).The goal of this paper is to assess the relationship between financial market developments, labor and product regulation on firm growth and to understand, which microeconomic channel either the financial effect or labour and product market regulation affect the growth of firm. The policy inference drawn will be of great importance to formulate financial development plans and credit policy for firms considering the intersecting and convoluted nature of product and labour market regulations in India. This will also add to understanding of behavior of firms in an emerging economy like India.

Sarthak Gaurav
Topic: Experts, Expertise, and Policy
Both PhD/MPP

Description: Policies and policymaking depend on experts as well as their expertise in myriad forms, and at different stages. As we grapple with uncertainty in policies ranging from the New Farm Laws to management of the COVID-19 pandemic, there is a need for examination of the following questions. What is the knowledge regime in Indian policy making? Who is an expert? What is the role of experts in policy making? How is expertise legitimised and delegitimised in the policy making process? How is expertise signalled? Can the expert and expertise be separated? How does knowledge weigh on the policy making process (historical as well as contemporary)? Can we develop appropriate and accountable ‘expert consultation’ criteria/mechanisms given specific policy questions?

Topic: Uncertainty and Policymaking
Both PhD/MPP

Description: Uncertainty is central to policy problems as well as policy making. However, policy makers and policy making often rely on knowledge based on models and frameworks that neither incorporate nor acknowledge uncertainty. What is the nature of uncertainty in policy making? How is uncertainty perceived and valued by policy makers vis-a-vis experts (e.g. scientists, experts, advisors)? Can a comprehensive typology of uncertainty in policy making be developed? How can uncertainty be effectively communicated to policy makers? Can we design frameworks to draw causal inference about addressing uncertainty in policy making?