It took a couple of years of sluggish growth at Wipro for Azim Premji to realize that one company cannot have two chief executive officers. India is currently struggling with a similarly unstable leadership arrangement at the national level, as the government led by Manmohan Singh and the National Advisory Council (NAC) led by Sonia Gandhi tug in different directions.
There are now signs of tension between the government and NAC, as the latter wants to push ahead with its ambitious social agenda and the former worries about the true costs of these schemes. The government shot down an NAC suggestion that wages paid for work done under the Mahatma Gandhi National Rural Employment Guarantee Scheme should be linked to minimum wages. A committee headed by Manmohan Singh confidant C. Rangarajan has raised enough questions about the right to food plan to send it to the back burner for now. Individual ministries, too, have turned down NAC proposals.
These are good signs. The loose cannons within NAC are likely to see a huge neo-liberal conspiracy in all this or perhaps even proof that nobody other than them really cares if the poor live or die. That is complete rubbish. Moral bullying has worked so far because Manmohan Singh has allowed himself to be bullied. It is time to get the debate into more reasonable territory.
Every decent society needs a welfare system to help those who have fallen behind for various reasons. Such a welfare system can be sustainable only if there are enough taxes to fund social schemes. Tax collections to fund these schemes can grow only if the economy grows rapidly. No poor country has been able to sustain a welfare state in all of human history. Period.
In short, India needs to grow at close to double-digit rates for many more years. The economic boom of the last decade saw average Indian incomes more than double between 2001 and 2011, from around $460 to $1,200. A similar rise of average incomes in the next 20 years can transform the lives of millions of Indians and provide funds for various welfare schemes.
Does this mean that the quest for a social democracy has to be put off for two more decades? No. But we need to move one step at a time based on what is fiscally possible. We also need rational debate on the nature of intervention. So here’s a question. The government is due to spend an estimated $150 billion on its flagship employment scheme over the next 10 years. Can someone in NAC empirically prove to us that this is a better way to attack poverty than spending the same amount on rural roads or minor irrigation projects?
Is NAC championing welfare at the cost of growth? Tell us at firstname.lastname@example.org