Fiscal profligacy, farm-loan waivers, judicial reservation.
The Congress party’s manifesto makes for great election rhetoric, but if the proposals are rolled out, they could prove ruinous for the economy. Every proposal, starting with the Nyuntam Aay Yojana (NYAY), or increasing guaranteed employment under MGNREGA to 150 days a year, entails big expenses; the promise to waive outstanding farm loans across the country will worsen the credit culture once again and increasing ‘representation at all levels of the judiciary for women, SC, ST, OBC, minorities and other under-represented sections’ is fraught with danger. The party has rightly identified the vulnerable sections of the population—the poor, farmers, the sick, youth and the common man—and the poll promises are sure to resonate with all them. The ace in the pack, NYAY—`72,000 annually for 20% of the poorest households in the country—is more generous than the `6,000 for farmers being doled out by the NDA, but it will cost a staggering `3.6 lakh crore. Unfortunately, the Congress has not clearly spelled out how it intends to get the revenues for all the welfare schemes. If the Congress intends to raise taxes—there are hints of a high tax for the rich—it should say so upfront. While the spokepersons claim they will not give up on fiscal prudence and promise a fiscal deficit of 3% by 2021, the math simply doesn’t add up.
In fact, all the employment-creation schemes outlined will drive up government expenditure; four lakh vacancies in the government and judiciary are to be filled by March 2020, and 10 lakh seva mitras are to be recruited by gram panchayats and local urban bodies. The 10 million jobs to be created by employing people in repair and restoration of water bodies and regeneration and afforestation of wasteland—if at all this is feasible—are to be paid for by the gram sabhas and urban local bodies. There is little doubt the NDA has not been able to create as many jobs as are needed, but the Congress proposals cannot jumpstart the economy even if the multiplier effect, by some magic, works better under a Congress government. It is the private sector that needs to hire and, for that, the business environment needs to be made more friendly through easier labour laws, quicker environment clearances and clear-cut and irreversible regulations. Promising forbearance for small and micro units is all very well except that key laws that have always been a hindrance for employers—minimum wages and other labour legislation—will remain in effect.
Lowering the effective direct tax for one set of sectors, simply because they are employment-generating, is unlikely to do the trick. Also, typically, permissions are sought at the state level and so the Centre can’t really do too much; and there are very few Congress-ruled states. Given the distress in the farm sector, it comes as no surprise the Congress has gone all out to woo farmers; it will not stop at loan waivers, it says, but will ensure farmers earn a remunerative price for crops, get access to institutionalised credit and inputs at lower costs. The obvious thought that comes to mind is “show me the money”.