Column : New, communist-like manifestos

Written by Bibek Debroy | Updated: Apr 9 2009, 04:40am hrs
There is a swing of the pendulum to the Left. Thats global, what with de facto nationalisation across assorted sectors in developed countries. India is no different in terms of that mindset. If the pendulum was too far to the right, as in some developed countries, one could have understood the leftward swing in India. But even in post-reform India, the heavy hand of the State is more pervasive than the invisible hand of the market. The election manifestos of the two major political parties illustrates this leftward shift. Reforms are fundamentally about choice, competition and efficiency. Therefore, they are about private sector involvement and public production (or provision) only when there are demonstrated instances of market failure. This doesnt negate the need for regulation. Nor is this an argument against subsidies, provided subsidies are appropriately targeted. Given this, both the Congress and BJP manifestos are anti-reform, more so for the the Congress. Instead of choice and competition, the public sector is expected to do everything. There is one minor instance where some good may eventually emerge, especially after the census of 2011. Thats on multi-purpose national identity card (MNIC).

One came at MNIC from two different angles, security and delivery of public goods and services, with an implicit assumption about subsidisation for the latter. The two angles are merging and both parties are now agreed on MNIC. MNIC, when implemented, reduces compliance costs across multiple forms of identity and is presumably good for the security cause too, provided security and other agencies possess manpower and technological expertise to detect counterfeit MNICs and corruption and fraud are eliminated in issuing. Both the Congress and BJP agree on subsidies for BPL households. MNIC makes this easier to implement. Political parties are less forthcoming in stating subsidies wont be available for APL (above the poverty line) households and this brings one to BPL identification. MNIC or no MNIC, which political party will have the guts to eliminate subsidies for the non-deserving Whats the difference between the Congress and BJP on economic grounds, leaving aside issues of secularism versus fundamentalism There is a difference between precept and practice. Practice-wise, the NDAs track record on reforms is better than the UPAs.

If the economy is chugging along at 8.5%, why do we need reforms to rock the boat That may have been a tacit UPA view, now sanctified in the Congress manifesto. Lets leave demerits of that argument aside. Precept-wise, there was little to distinguish the two major political parties, more so since the Congress still retains the halo of having started liberalisation. That blurring of differences may also be partly deliberate, since it enables one to pick up electoral support from a broader base. There are pro-reform segments that have ascribed non-reform under the UPA to Left participation for a considerable part of the UPA tenure and hoped, naively, for a BJP-Congress coalition to drive reforms, as opposed to Leftist policies under Third Affront. How much one should read into the two manifestoes as implementable policy is a separate point. To the extent it captures implementation intent, Congress now occupies the Left space. Witness the intended State intervention and distortion of resource allocation decisions in capital and labour markets, to name but two. Had the BJP also not swung somewhat to the Left, more in manifesto and less in the IT vision document, we might have seen the beginnings of the emergence of two political parties, distinguished on economic spectrum by occupying left of centre and right of centre spaces.

Unfortunately, the spectrum of differentiation isnt on the socialism continuum alone, but also the secular. Had that not been the case, it is impossible to think of a better economic governance model than Gujarat. Nevertheless, had distinct identities emerged on the economic spectrum, it would have been welcome, with the BJP claiming its pre-1991 legacy. Ditto for the Congress, since 1991 to 1996 (1993, actually) was an aberration for the Congress. However, the BJP manifesto hasnt done that, it too has swung the populist way. What all manifestos (not just these two) gloss over is efficient allocation of resources and their opportunity costs, including funding of public intervention. Since Keynes was married to a ballerina who was exposed to the worst excesses of socialism in Russia, he would have probably shuddered at the free misuse of his name in India, all in the name of socialism, not to forget he worked in the India Office and wrote a book on Indian currency and finance. Had he been alive, he might have authored a tract on Economic Consequences of Populism. Keynes had no offspring. Presumably, free users of the Keynes name also pretend they have no offspring. Costs of populism are borne by future generations, not the present one. Thats the spectre that haunts the new communistlike manifestos.

The author is a noted economist