Home Economy and Finance Choice for 2019: Between Modi's agenda of reform vs mahagathbandhan's incoherent economic policies

Choice for 2019: Between Modi’s agenda of reform vs mahagathbandhan’s incoherent economic policies

The choice in front of the voters is fairly simple as on one hand, it has Prime Minister Narendra Modi along with his agenda of reforms (4 reforms have been implemented during 2014-19 in the form of GST, RERA, Insolvency and Bankruptcy Code and the recent shift towards basic income) while on the other, we have an incoherent economic policy that has its own inherent contradictions

After the recent assembly elections, there has been a renewed discussion about the likelihood of a “mahagathbandhan” of regional political parties with the agenda of reducing the margin of victory for the NDA. Till date, most opinion polls continue to put the NDA at a 220-230 figure while the UPA is well within the 150 mark and the rest go to the others. Consequentially, everyone expects a BJP led government to be formed in 2019 and this implies that Prime Minister will comfortably get another term to carry on with the agenda of reforms. I do not expect the 2019 verdict to be a fractured verdict and the opinion polls in 2019 suggest exactly what they did in the January of 2014 so once the campaign starts, we should expect the BJP to gain and perhaps be very close to the half-way mark.

But this article is not about the elections or their likely outcome but it is about the “incoherent economic agenda” of the Opposition parties that is myriad in their political opportunism. Their economic agenda is so contradictory that it is disturbingly amusing to me as it displays a clear lack of understanding of the complex challenges that our country faces. This lack of understanding is perhaps, another reason why we must ensure that the process of reforms continue post-2019 for which it is imperative that the Prime Minister is given a full mandate in the 2019 elections.

One of the critical problems that India faces is in terms of its high dependence on agriculture for employment. Since 1991, the agricultural sector witnessed a rapid decline in its importance as a percentage of GDP while it continued as India’s primary source of employment. For all the talk about jobs, one must consider that the manufacturing sector is important from the point of view of the creation of jobs in the unskilled or semi-skilled sector. But, for the manufacturing sector to boom, one needs to provide adequate land to the industry. Now, let us refresh our memory and remind ourselves of those who opposed the “land reforms” that the government wanted to bring in its earlier days. Unfortunately, land reforms were one thing that the government could not see through due to stiff political opposition (or opportunism) but needless to say, it exposed the hypocrisy of those who keep on harping on the high dependence on agriculture for jobs. These individuals frequently oppose land acquisition for any project and incite the local farmers to protest development activities which would, in fact, be in the interests of the farmers themselves.

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In fact, the entire episode of jobs is hilarious as now, most opposition parties want jobs, but one must ask them, how will they generate these jobs as they want jobs but they’re hostile to industries. Recall the Singur episode when Tata had to completely shift its plant to Sanand, in Gujarat because Mamata Banerjee led a strong protest the company. The shift of the plant to Sanand resulted in rapid development of the region and it is moving towards becoming one of India’s biggest manufacturing hubs. The poor farmers of Singur were cheated by their political leader and her policies which resulted in them being deprived of development opportunities that could have improved their lives.

Over subsequent months, Rahul Gandhi’s policies have started to look a lot like Indira Gandhi’s policies during the 70s. He has the same contempt for private businesses as Indira did and he believes in inefficient state-run corporations as much as Nehru did. This is not just scary but potentially dangerous as it shows how the Congress is going back to the faulty economic policies that failed us in the past. Their idea of the creation of jobs while holding businessmen in contempt implies that they intend to expand the public sector at the cost of private businesses- an idea that was tried for decades and one that failed for decades. Besides, the public sector in itself cannot be extended to such an extent that it could accommodate India’s working age population thus the idea is in itself not plausible.

Another important common factor between most regional parties and the Congress is its faulty welfare programs that are aimed at using public resources to build political capital in the form of electoral success. This is perhaps an important factor that needs to be reiterated- most of these political parties want to spend, to ensure that they can win elections. Thus, they don’t have a long-term outlook towards promoting growth, but their only agenda is redistribution. But to ensure that you can redistribute and help the poor become non-poor is by promoting growth which requires encouraging investment and incentivizing innovation. Unless there is growth, mere redistribution will only result in an eventual collapse of growth leading to an economic crisis. This makes growth imperative for redistribution to take place, but sadly, for the Congress and its friends, redistribution has always come before growth and this is a major reason behind the modest growth India experienced till the 1980s and the collapse of growth in 2011.

The choice in front of the voters is fairly simple as on one hand, it has Prime Minister Narendra Modi along with his agenda of reforms (4 reforms have been implemented during 2014-19 in the form of GST, RERA, Insolvency and Bankruptcy Code and the recent shift towards basic income) while on the other, we have an incoherent economic policy that has its own inherent contradictions. Those born in the 21stcentury have to make an important choice that couldn’t be simpler, and I am certain that they will make the right choice!

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