The election is only months away. All sorts of issues are generating noise. It is not clear, however, what would the economic issues be at the next election. There are the ‘talking issues’ such as farmers’ distress, jobs, Rafale, triple-talaq (TT), etc. I have already written earlier in this column my concern about the jobs data and my total opposition to loan waivers for farmers. Rafale is a fake issue in my view and I do believe the Central government is right on TT.
That said, ask yourself how would the economic programmes of the current ruling government and the ‘Grand Coalition’ differ. There is a virtual consensus in Indian politics on economic ideas. All parties are statist, prone to giving away consumption subsidies no questions asked, granting reservations to any group which can burn a few buses and are anti-business. They are not-market friendly and have to be made to avoid being fiscally irresponsible which they would love to be. All governments have bullied RBI at all times, preferring low interest to low
The ‘Grand Coalition’ will no doubt form itself and issue a ‘common minimum programme’. We can take it that it will be similar to what the UPA did. The UPA had a good first four years while the global economy was booming. But after 2008, its efforts at stimulating the economy resulted in cyclical fluctuations in the GDP growth rate and rampant inflation. Inflation was not an accident. It was the result of a deliberate policy of skewing the terms-of-trade between rural and urban regions in favour of the rural sector. (I wrote about this as and when it was happening). NREGA was one plank of this policy as was generous MSPs and PDS. In addition, the Land Acquisition Act 2013 made acquiring land almost impossible for any projects except for the government ones.
There was also active credit creation via the PSU banks for infrastructure builders for which land acquisition was difficult. There was also a stringent Green policy and investors did not get permission to proceed without a long delay. These policies led to the NPA crisis. UPA-II was genuinely conflicted about growth vs environment (remember Rahul Gandhi at Nayamgiri promising the tribes that he would prevent growth from disrupting their lives) and subsidy vs efficiency. There is no need to remind readers about the corruption scams.
We have no reason to think that the ‘Grand Coalition’ will have a policy distinctly different from what UPA-II had. Rahul Gandhi has already promised a minimum income for the lowest 20% and unlimited loan waivers for farmers. The behaviour of the major allies, many of whom have been chief ministers of states, does not inspire confidence about fiscal responsibility. Even so, if the ‘Grand Coalition’ were to come to power (a low probability outcome in my view), the only serious fear is inflation. GDP growth in India has now reached the 7% plateau. It is mainly the services sector and MSMEs which deliver this growth and, unless economic policy is seriously bad, they should continue to grow.
As far as the incumbent party is concerned, the remarkable thing is that its economic ideology was not different but the scale of the initiatives launched and the speed of execution were unlike anything seen since the first ten years after independence, when Nehru was in charge. Modi has also paid more attention to productivity-enhancing policies which are also human development friendly. Thus, Swachh Bharat with its implications for health, the toilets built, the outdoor defecation removed, the completion of rural electrification and housing which were pending from earlier decades, and the vast rail, road and port infrastructure projects, will be the calling card of the current government.
The difference between the two sides is not so much in economic ideology but in execution of programmes. Modi has been criticised for over-promising but he has not underachieved relative to the UPA-II. While the UPA concentrated on consumption subsidies for the rural sector and the poor, Modi has done more for human development areas such as health, digitisation and education, electrification and housing, which denotes a production-based approach.