Two things stood out at the first meeting of the new-look National Advisory Council (NAC) held last week. In their own way, they capture the inherent tension between the Congress party and the Congress-led United Progressive Alliance (UPA) on what should be the government’s development priorities. The delicate balance, or imbalance, between these interests will most certainly dictate the agenda of the UPA in the next four years.
First was the signal note of caution by Prime Minister Manmohan Singh, who participated in the proceedings, that the only way to alleviate poverty was to ensure rapid economic growth (which will ensure buoyancy in tax revenue) and the need to ensure fiscal prudence (by limiting expenditure and thereby the fiscal deficit, or gross borrowings) to guarantee that this growth paradigm is preserved. The second was the priority list of NAC: the food security Bill (which tops the list of entitlements), communal violence Bill, tribal development and better implementation of social sector schemes, beginning with an evaluation of the flagship programmes of UPA-I; the latter is a comment on the inability of the government to ensure an adequate delivery mechanism for better targeting of the poor.
The elevation of the food security Bill to the top of the agenda is a clear signal that NAC is convinced about entitlements as a development strategy. On the other hand, Singh’s hints at fiscal prudence suggest that there is a need to define the limits on such spending because there is simply not enough money to go around.
At the moment the dice is loaded in favour of NAC. The government is on the backfoot, having failed to curb rampant food inflation for the last 18-20 months; and worse, sounding clueless about either its cause or the appropriate policy response. The image deficit of the UPA is apparent, while its political cost is not; at least as yet, since there are no elections due for a while. The party is obviously restless, especially with the government unable to seize the moment when the Opposition is largely disabled.
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By focusing on entitlements, or at least ensuring that the discussion about it dominates the airwaves, the Congress party is hoping to turn the tide. (In actual fact, even if all things go well, the food security Bill is unlikely to materialize before the end of next year; this is because it is presaged on the census of people living below the poverty line due to begin next March and conclude in September.)
The constituents of NAC—the 15-strong body, including its chairperson, Congress president Sonia Gandhi, is an interesting mix of activists, retired bureaucrats, economists and politicians—are broadly ideologically Left or liberal. It will be the first time that such a group will take charge after the Left formally deserted the UPA following differences over the civilian nuclear deal with the US. Unlike the organized Left, this grouping has eschewed an economic and political agenda and instead sought to focus on the social agenda. Instead of being the vanguard, it has positioned itself as the social conscience of the UPA—which could loosely be defined as the New Left.
In its last avatar, NAC had to its credit, among other achievements, the vote-catching theme of the now renamed Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) and the democracy-friendly Right to Information—recent attempts by the UPA to dilute the provisions are likely to be reversed with the return of NAC.
Going forward, the focus is clearly on entitlements of the right to food and right to education (which has already been made effective), both of which have the potential to grab the imagination of the masses. According to the government’s latest poverty estimates, the count of poor is around 500 million. The idea of providing the poor fundamental social security is one no one can quarrel about and something that could translate into votes; all the more because there is increasing evidence of growing income inequalities.
The problem—Singh alluded to it in his inferences about maintaining fiscal balance—is that the resources to spend without borrowing are limited. The let-up in growth in the last year hit tax revenue. At the same time, its efforts to provide economic stimulus forced the government to increase spending. The widening gap between income and expenditure forced the government to borrow more than ever before. The predicaments of not returning to fiscal prudence in such an uncertain global economic environment can be disastrous.
The outcome is difficult to predict and will depend entirely on Gandhi. At the least, the makeover of UPA-II has begun.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at email@example.com