Budget 2018 Opinion

Where is the Nudge Unit?

The government had promised to use the insights of behavioural economics to shape public policy. This budget revealed no signs of it.

As some of us might remember, in September 2016, it was announced with much fanfare that the government think tank NITI Aayog was going to set up a “Nudge Unit” on the lines of the Behavioural Insights Team in the UK. It was reported that NITI Aayog had tied up with the Bill & Melinda Gates Foundation (BMGF) to go about changing behaviours of people. The policies that were supposedly going to benefit from this nudge unit were the flagship programmes of the current government — Swachh Bharat Mission, Jan Dhan Yojana, Digital India, etc.

In delivering his Union Budget speech today, the Finance Minister has laid out the priorities of the Union Government for the next year. However, Mr Jaitley did not mention anywhere that this Government will spend any money and effort on incorporating behavioural insights into public policy.

It’s impossible to know whether NITI Aayog’s Nudge Unit has been set up and what it is working on. Neither the NITI Aayog website nor the BMGF website has any information that hints at setting up of such a unit. What is more, in February 2017, the Government had cut its ties with BMGF on a health mission due to an apparent conflict of interest. We do not know how that incident affected BMGF’s promise to fund the nudge unit.

If this nudge unit was indeed set up and made operational, then there is a moral argument in making the work of this department public. By keeping the work of the nudge unit under covers, critics’ suspicions will only be fuelled, and otherwise well-meaning nudges aimed at behavioural change would invite unnecessary scrutiny.

One of the biggest critiques of the nudge theory is that it is paternalistic and it takes away people’s freedoms. Critics lament that nudges are just a euphemism for otherwise coercive policies. However, as Richard Thaler and Cass Sunstein, the fathers of nudge theory, point out nudges don’t infringe on people’s freedom of choice, but rather only modify the way choices are presented to people. For instance, I’ve written previously about how this choice architecture should be used in case India decides to go ahead with Universal Basic Income.

If, however, the nudge unit was only an idea on paper, then the time is opportune for the Government to now invest in and give teeth to their intention of using behavioural insights. Some public policy outcomes can be drastically improved by targeting a change in the behaviour of people. Take for instance, Swachh Bharat Mission (SBM). While the Prime Minister himself said that SBM requires behavioural change on a large scale, the efforts of the mission have been directed mostly towards construction of toilets. Another example is the case of increasing tax compliance in the country. India could draw a leaf out of UK’s experiment with using insights from behavioural economics to get more people to pay their taxes on time. Similarly, as I had written here, if financial inclusion is to be brought about in true spirit, mere opening of accounts, through the Jan Dhan Yojana, is not going to be enough. It is imperative that an important policy geared towards empowering the poor takes into account the psychology of the poor.

Unless policy interventions are designed to change behaviours, problems stemming from deep-rooted cultural and social norms will not be rooted out from our society. This is not to say that policies designed using behavioural insights will solve all problems or will even be effective in the Indian context. But, that is exactly what the Nudge Unit’s work would involve: identifying opportunities and implementing change in an Indian context.

As was clear from the budget speech today, India’s spending on social welfare programmes is not going to change significantly this year. To achieve maximum impact with the allocated spending, we must not fail to account for the biases and motivations of people.


Also hear: Episode 42 of The Seen and the Unseen, in which Nidhi Gupta speaks about behavioral economics and the importance of nudges.

About the author

Nidhi Gupta

Nidhi Gupta is Head, Post-Graduate Programmes at the Takshashila Institution. She is a graduate of the London School of Economics and Political Science. Her research interests lie in behavioural economics and in origins of public opinion.