If all goes to plan, then the house across the iconic 10, Janpath in New Delhi—home to Congress party president Sonia Gandhi—will soon be the second most sought after address in the Capital. It will once again house the National Advisory Council (NAC), which was reconstituted last week with Gandhi at the helm.
The reconstitution of NAC, albeit only in a consultative role, a little under two months before the Congress celebrates the first anniversary of its stunning win—ensuring a second term in office—in the 15th general election, suggests one thing: course correction.
Once we accept this, the obvious follow-up question is: Why do so?
While critics would say this is a vote of no confidence in Prime Minister Manmohan Singh, the person personally anointed by Gandhi, supporters would argue that this is just a means of getting in some fresh ideas in policymaking. The truth is somewhere in between.
It has been obvious for the last six months that the Congress-led United Progressive Alliance (UPA) was losing the momentum it had generated immediately after the election; the disarray in the principal opposition party, the Bharatiya Janata Party (BJP), only further enhanced the initial gains. The rebound of double-digit inflation, after at least 18 months of rampant food inflation, was threatening to erode whatever was left of the social capital that the UPA had earned in the election.
As Mint columnist Himanshu pointed out in Farm Truths on 1 April, food price inflation is a result of policy failure, in turn prompted by the urge to protect a narrow segment of rich farmers in the country. Already saddled with surplus food stocks, the government went ahead and procured an additional 25 million tonnes of wheat last year.
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It effectively reduced available supplies of foodgrain in the market by a similar amount, forcing prices up; it compounded the problem by not offloading the stocks even when food prices had begun to harden, triggering the current inflationary spiral. Here was a government of the so-called aam aadmi perceived to be carrying out anti-people policies.
At the same time, the global economic shock of 2008 and the attendant spin-off effects on employment in the high-growth service sector was actually a reminder that India has very little in play as social safety nets. It is one thing to worry about those—around 500 million people—who can’t articulate economic demand due to poverty, and entirely another when even those who can are so vulnerable to shocks induced by macroeconomic upheavals elsewhere in the world. Rampant inflation, focused on food, only disempowered this segment further.
Another Mint columnist, Sunil Khilnani, argued this brilliantly in Lounge on 13 February when he made out a case for an inclusive social contract that cuts across divisions. “Neither our political leaders nor our intelligentsia have worked out a convincing answer to the basic question of how to reconcile economic growth with worker and citizen security,” Khilnani wrote.
The Congress leadership, which has the luxury of having a view from the outside, having successfully disengaged political and administrative power, is probably seized of this disconnect in the new phase of growth.
It may not have the clarity spelt out by Khilnani, but has the political savvy to realize that there is an urgent need to carry people, particularly the disempowered, with them or at least be perceived to do so. Politics, at the cost of sounding repetitive, is not what you do but what you are perceived to be doing.
From the outside it is obvious that the branding UPA 2.0 was acquiring was one of a regime obsessed about finding a place for India on the global high table even while it continued to stumble in its efforts for peace in South Asia. The agenda was being hijacked by a class of self-appointed cheerleaders who continued to argue for the conventional brand of predictable economic reforms defined around lowering of import tariffs and liberalizing foreign direct investment norms in sectors such as insurance and so on. In fact, many continue to argue about how the just presented Union Budget was a “missed opportunity”.
This is ironic, because between the two budgets presented in the last nine months the government has moved the ball substantially on economic reforms—as defined outside the lexicon handed down by the economists ordained in the World Bank and the International Monetary Fund—that were sensitive to the social context. At the core it has sought to protect growth to ensure that monies continue to be generated for its big spending plans for the social sector.
NAC’s intervention should be seen in this context. It is no coincidence that the day after the announcement the Prime Minister created history by addressing the nation on the UPA’s new entitlement: right to education. And it is now poised to meet on Monday to revisit elements of the right to food security and probably restore those sections which would ensure that it does not fall short of an entitlement (the shortcoming was reported in Mint on 2 April).
This is just the beginning. Clearly, the rebranding of UPA 2.0 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 capitalcalculus @livemint.com