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Approach

• Define behavioural economics
• Examine its role in bringing social change in India
• Mention how it helps to achieve the policy objectives of welfare programmes
• Give conclusions

Introduction

• Behavioural economics is a method of analysis that applies psychological insights into human behaviour to explain economic decision-making.
• It became more popular after the nobel prize for economics in 2017 was awarded to Richard Thaler for his works on behavioural economics.
• Businesses across the sectors use behavioural economics to attract customers. For example, Google Ads track online behaviour of consumers to know the likes and dislikes of person and float the ads accordingly.
• According to the Economic Survey 2018-19, the key principles of behavioural economics are ‘emphasizing the beneficial social norm’, ‘changing the default option’ and ‘repeated reinforcements’.
• Application of ‘behavioural economics’ can prove to be a valuable instrument of change in a country like India where social and religious norms play a dominant role in influencing behaviour.

Behavioural economics affecting social change in India

• Given India's rich cultural and spiritual heritage, social norms (that play a very important role in shaping the behaviour), can be utilized to effect behavioural change. Mahatma Gandhi proposed Seven Sins theory to influence people’s behaviour towards positive social change.
• Programmes such as Swachh Bharat Mission, Jan Dhan Yojana, GiveItUp Campaign for LPG subsidy, Beti Bachao Beti Padhao, Khelo India Campaign provide testimony to the potential for behavioural change in India.
• It can help in enhancing public participation in policies such as gender equality, reducing crime and corruption, waste management, environmental concerns, animal welfare, road safety, building human capital, enhancing health and education parameters, etc.

Achievements of behavioural economics to achieve policy objective of welfare programmes

• Swachh Bharat mission: Bringing behavioural change towards sanitation. The Open Defecation Free Campaign has led towards a desired outcome.
  
  • National Annual Rural Sanitation Survey (NARSS) 2018-19 found that 96.5% of the rural households that had access to a toilet, used them. The NARSS also re-confirmed the ODF status of 90.7% of villages.
• Beti Bachao Beti Padhao (BBBP) to raise awareness about increading Child sex ratio and educating Girl Child. BBBP have brought positive results leading to improvement in the child sex ratio in Haryana, a state known for skewed sex ratio.
  
  • It used ‘social norm’ in its ‘Selfie with Daughter’ initiative to celebrate the birth of girl child.
• GiveItUp Campaign lead to voluntarily giving up of LPG subsidy by the affluent class and thus large savings to the public money that could be utilised for providing free LPG connections to the poor under Ujjwala Yojana.
• Success of Jan Dhan Yojana (JDY) through dedicated government efforts and mass media campaign to increase financial inclusion and thus influencing people to increase their savings.
• Use of socially and culturally identifiable names for various recent schemes like Namami Gange, Ujjawala, Poshan Abhiyan among others has helped to build the affinity of the people for the scheme.

Limitations

• Lack of sustained efforts: The ultimate success of objectives such as gender equality, reducing corruption, honesty in tax compliance, waste management and prudent use of resources such as water for sustainable development needs sustained efforts for a long time period.
• Lack of careful targeting: Advertising campaigns such as the Beti Bachao Beti Padhao scheme did not target other specific states where child sex ratios were already skewed (although it was effective in Haryana, which also has a very poor sex ratio.)
• The applications of behavioural insights appeared to be a result of confirmation bias (to the extent that past policies were viewed with a behavioural lens).

Conclusion

• While several Indian programmes have applied the principles of behavioural economics, there is still ample scope for leveraging these insights to enhance the efficacy of programmes in India.
  
  • Accordingly, the Economic Survey recommends setting up of a behavioural economic unit in the NITI Aayog.
  • It also strongly recommends that every programme must go through a ‘behavioural economics audit’ before its implementation.
• Many incentive and mandate- based policies may be clubbed with a nudge effect to increase their efficacy. If it is implemented diligently then Indian policymaking will be transformed from BBBP to BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi), from Swachh Bharat to Sundar Bharat, from “GiveItUp” for the LPG subsidy to “Think about the Subsidy”, from tax evasion to tax compliance and the dream of New India can be realised.