Punjab is staring at a major groundwater crisis. Access to free electricity and subsidized pump sets have over the past few decades led to indiscriminate pumping out of groundwater for irrigation, a lot of which is unchecked and goes to waste. Given the politically sensitive nature of the issue, there’s been no intervention aimed at bringing about a sustained change in behaviour so as to discourage this colossal wastage, but a recent attempt at inducing a behavioural change seems to be well-thought-out.
Instead of making electricity available for free, the government will ensure that farmers will be paid the same subsidy in cash, based on the cost of power for irrigating the crops as finalized by a panel of agricultural experts. The farmers would be issued electricity bills, and they will be allowed to retain the savings, i.e. subsidy minus the bill amount. This strongly incentivises mindful consumption of electricity and hence, water since now whatever one saves by using less of electricity to draw out groundwater will be a new source of earnings for the farmer. This is a relevant example of a behavioural intervention or a ‘nudge’ as it has been popularly known these days.
India is a welfare state and it is a large, complex one at that. For the ongoing Financial Year, the subsidies on just food, fertilizer and fuel alone have been pegged at around Rs. 2.64 Lakh crores and this figure excludes the welfare expenditure done by the state governments. Over the past couple of years, the leaky, inefficient, decades-old system of subsidy transfers has been fixed to a large extent in India with the Jan dhan, Adhaar and Mobile Numbers trinity. It is now important that we shift our focus to the issue of ensuring that these welfare measures have the maximum impact and bring about the desired change.
Let’s take the “Give It Up” campaign as a case in point. The Prime Minister launched the campaign in March 2015, in which he appealed to the better off citizens to forgo the gas subsidy they receive every month so that gas cylinders can be transferred to the less fortunate instead. To induce a behavioral change, the government ensured two conditions in this case –
- Emphasis on the ‘social aspect’, and turning into a movement.
- Facilitating the process of foregoing the subsidy by removing all friction points in the process, i.e. making it extremely easy to do so.
Speaking of the first point, a 2013 study conducted in the UK stated that an effective way of encouraging individuals to act in a desired way was to “focus on the social”. People are influenced by the actions of those around them and are more likely to give to charity if they perceive giving as the social norm. Focusing on the social, therefore, can include sending out social signals by having prominent individuals as spokespersons of campaigns and drawing on peer effects by making acts of giving more visible to others within one’s social group.
Just three days after the campaign was launched, Gautam Adani, chairman of the Adani group nudged his group’s nearly 8,000 employees to participate by sending a signed letter to all of them, asking them to opt out of their LPG subsidies. This letter also had the form for opting out attached. Similarly, the TATA Group’s Chairman endorsed the campaign. Plus the this wasn’t restricted to just large corporate houses, as demonstrated when 200 of the 1,500 LPG cylinder distributors in Maharashtra state chose to opt out of the subsidy as well, with many more following suit.
The second point is how easy the government made it for people to opt out, so that once they are motivated enough to do so, frictions in the process doesn’t make them change their minds and bring back the inertia towards not doing it. A consumer could log on to the websites of his/her distributor to register account details and select to decline the subsidy. Those with no Internet access could give up their subsidy by simply sending a text message. Consumers also have the option of downloading an app to give up their subsidy via their smartphones if they so wished to.
One prominent aspect of behavioral sciences is that it is low-cost and long-term. It thrives on making better, more scientific and better thought out interventions that work well and induce desired changes, and it certainly doesn’t need truckloads of money to be spent on driving the change. Previous experiences confirm so. Take e-commerce in India for example, wherein unsustainable amounts of discounting during periods of sales gets consumers on board. However, once prices rationalize, there’s little in terms of incentive left for consumers to continue transacting online as frequently as before, hence making the earlier change temporary and unsustained. There is thus a compulsion for these platforms to be in permanent sales mode, throughout the year.
What governments have been doing in order to get the citizens to behave in a certain manner is to regulate by running a host of programs and schemes. It has been experienced time and again that these have not been very effective, at least a majority of them haven’t been, given how poorly designed they are to begin with. To put it plainly, they do not incorporate elements that account for how human behavior works, and the conditions that drive a change.
Initial steps towards leveraging behavioral science can already be seen in India. The Indian Railways has, for example, been printing \”IR recovers only 57% of cost of travel on an average\” on the computerized printed tickets issued to passengers in addition to prominently displaying the same on its website as well since about June, 2016. This is in order to at least make people aware of the kind of cost the transporter has been bearing in subsidizing their travel. Taking a cue from the petroleum ministry, Indian Railways launched a ‘Give-It-Up’ campaign of its own, asking travelers for letting go of the train ticket subsidies in addition to displaying messages.
Indian government’s official think-tank, the NITI Aayog is setting up a ‘nudge unit’ that will “work towards bringing about behavioral changes and recommending policy corrections to help make the government’s welfare programs more effective.”
The case for well-designed, impactful behavioural interventions towards driving sustained socio-economic changes has never been stronger in India.
This essay was originally published by the author in May, 2018.
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