Ta(l)king Reforms To People

Updated: Apr 8 2002, 05:30am hrs
The recent defeats of BJP and its allies at the center in various assembly and municipal elections have brought into the fore once again the problem of prudent economic governance in a democratic polity. Much the same way during the previous Congress rule at the center, some sections of the ruling BJP-led NDA government have attributed the political upsets to the economic policies of the central government. Mr Yashwant Sinha, partially endorsing this view, has said that finance ministers need not be very popular even when they undertake policies that are in the interest of the economy.

It is of course not possible to clearly identify, even ex post, whether it is the political policies of the government or the local problems facing the concerned constituencies resulting from the sheer incompetence of the local leaders or the economic policies of the central government that determine the voter sentiment and hence poll results at the state and municipal level elections.

Assuming, however, that economic policies of the central government have indeed been responsible for the political reversals, one needs to ask if the economic policies of the government are in the interest of the economy, as is being claimed by the finance minister, why are people not seeing it that way The reason is simple. No economic policy can ever be classified as completely good or bad as it would involve trade offs across time and groups of population. For example, the proposed labor reform may hurt some sections of the organised labor in the immediate future, but by creating much needed flexibility in the industrial labor market it might pave the way for higher industrial growth and employment in the long run. Similarly with many other policies be they are privatisation, interest rates on small savings, or tax reforms.

The clear trade off between short-term losses and long-term gains need not be seen by the people in the same way the government sees either because the potential gains of the policies havent been communicated to people in a credible way by the government or because the opposition, which had proposed similar policies when it is in the government, chooses to oppose the same for other political reasons, in the process causing confusion among the minds of the people. It is instructive note in this context a statement made by Mr Jairam Ramesh in a recent TV program that as long as events like Gujarat violence happen, one cannot expect a consensus to emerge between the opposition and the government even on economic policies. While one can appreciate the rationale from a political angle, it, by making the need for building consensus on economic policies a matter of choice and not collective responsibility, spells doom for the success of the economic policies in a democratic set up particularly in an era of coalitional politics. If political parties take positions on economic policies based not on the merits of the later but on some other considerations, the economic well-being of the people will always be hurt.

The pertinent question, then, is, how to make economic policy reforms happen in a credible and sustainable manner within a democratic set up The government and the opposition, to begin with, must realise that they are collectively responsible to the economic well-being of the people and hence it is important to evolve consensus on economic policy matters some which are, fortunately, agreeable to a majority of political parties when viewed on their own merits. Political agendas and strategies in the ultimate analysis have no meaning if they end up harming the economic well-being of the people time and again. Even such lofty ideals as political freedom and secularism etc. have true value only when a minimum threshold level of economic prosperity is attained.

If such a thing does not happen, then the onus is on the government to communicate directly to people in a credible manner. The customary meetings that finance ministers have with industry associations and advisory councils may not be sufficient to communicate the governments standpoint to people as these meetings very often than not convey the image of a club of powerful lobby groups. An interesting case study in this context is that Mr. Chandrababu Naidu who used the TV media in an incredible way to explain as complicated matters as reforming land-record system, rational pricing of power directly to the people when faced with stiff opposition from own party colleagues and opposition parties. His victory in the last assembly elections highlights an important fact that sometimes it is much better to communicate to the people than to peoples representatives the costs and benefits of economic policies. The second important aspect of communicating to people is the credibility of the government, which is related to the consistency of different policies with the stated objective of the proposed reform program. A government which gives in, may be for political reasons, for an agricultural lobby and increases minimum support prices in an otherwise fiscal crisis will have very little credibility in its communication, what ever be the form of media it chooses.

Finally, the best way a government can ensure the sustainability of a policy reform is to build a constituency for reforms much the same way the political parties build constituencies for whatever cause they choose to by communicating to people in a far more direct manner. The bottom line is: Talk policies and take reforms to people.

The writer is a consultant with National Stock Exchange, Mumbai. His e-mail: gdarbha@nse.co.in