Of all the by-elections results, Rajasthan is the standout one. The Vasundhara Raje led Bharatiya Janata Party (BJP) won just one of the four seats in the by-elections while Congress staged a small comeback winning the other three. What puts the setback in perspective is that BJP had won all 25 Lok Sabha seats in May this year and close to 163 out of the 200 seats in the state assembly elections in December last year.

The result cannot be explained through the regular logic that incumbent parties generally win the by-polls. This reasoning has been offered by the many who appear, in essence, trying to shield Modi from any heat in the wake of a dip in political fortunes. Indeed, if there is one message from these results it is that people are increasingly becoming aware of the limitations of the Modi government. BJP even managed to lose the state assembly seat of Rohaniya in Narendra Modi’s parliamentary constituency of Varanasi in UP.

But beyond the results, Rajasthan and, indeed its chief minister, Vasundhara Raje standout for another reason that should interest policy observers.

In an interview to Mint on July 30 this year, Rajasthan chief minister, Vasundhara Raje declared that, a large section of the people in Rajasthan are interested in making the transition from entitlement to empowerment. If this is so, it is a a fairly important shift since it implies that the beneficiaries of entitlements, or in other words, the poor in Rajasthan have decided to give up on their rights and have elected ultra reformist Raje to lead them to an era of market reforms and empowerment.

On the face of it, Raje appears to be the real deal. Three events back this notion.

One, she instituted long pending labour reforms in Rajasthan before anywhere else in the country – not even Modi could touch labour reforms as yet.

Two, she suspended all schemes providing freebies like loan waivers to farmers, laptops to students, sarees to women and blankets to poor. She also stopped the free housing scheme and severely pared down schemes related to free medicines and diagnostic services and put a review on the state-wide pensions scheme.

Three, to back up her promise of letting economic growth provide answers, Raje has constituted an advisory board under the stewardship of noted economist Arvind Panagariya. The board involves experts like Manish Sabharwal, Mohandas Pai, Kiran Mazumdar Shaw and Ramesh Ramanathan. It appears to be a bit like the reverse of the NAC (National Advisory Council) during the Congress rule in the centre. In the near future, Raje is also expected to launch a new programme called SHREE focusing on some of her key concerns like sanitation, health, roads and education etc.

Writing in Business Standard, Arvind Panagariya said, “With the key reforms likely to be in place in the first two years of her term, the chief minister can count on harvesting a bumper crop by the time the next election comes around." It is crucial to note that the statement views political verdicts as the real proof.

It appears as if a decisive shift has happened – both in the minds of the poor and its leaders. Or has it?

For starters, the results of the by-poll present a quick snapshot of the political climate. However, beyond the results per se, I have three comments to make.

The first one is on the so-called change among the poor people not wanting entitlements and some short-term relief, however populist. N. Chandrababu Naidu has learnt this lesson the harsh way and his past is a cautionary tale in this regard.

As soon as he took oath of office as the new chief minister of (reduced) Andhra Pradesh he announced a loan waivers to farmers and women self-help organisations estimated at around 70,000 cr. To put the figure in perspective, the fledgling state’s revenue deficit was reported to be 15,000 cr. But the announcement was not shocking due to the magnitude of waiver but for the fact that it was made by a politician who used to be the poster boy of economic reforms and prudent policy making between 1995 and 2004.

In his previous stint as the two term chief minister of undivided Andhra Pradesh, Naidu had attracted global acclaim for his path breaking approach to governance. Naidu focused on e-governance and Information Technology to boost not just the citizen experience but also create an ecosystem where private sector enterprise could prosper and create jobs. While the rest of the country was struggling with coalition governments, lack of clear leadership and muddled thinking on governance, Naidu had blazed forth with his refreshing vision, which focused on economic growth and user charges, instead government dole outs, to create jobs and reduce poverty.

It was not a surprise that in 1998 the World Economic Forum named him as part of a dream cabinet of political leaders. In 1999, Time Asia named him the South Asian of the Year and in 2000, Bill Clinton went around the world, telling people how he received his driving license in just under 15 minutes while in Hyderabad.

However, Naidu’s reforms ignored some crucial elements of governance. In a 2003 paper published in the Economic and Political Weekly, C. H. Hanumantha Rao and S. Mahendra Dev summarise the Naidu rule thus: “Andhra Pradesh has earned for itself the reputation of being at the forefront of economic reforms in the country, thanks to its initiatives in fiscal correction and restructuring of institutions. However, there remain significant challenges in the economic and social sectors that the state needs to address if it is to derive the full benefits of the reforms already launched…"

The fact was that Naidu’s reforms did little to improve the education and health parameters of the population. In both the cases, the culprit was lack of investment.

As such, two consecutive terms of Naidu’s market oriented reforms could not convince his people of the benefits of such reforms and he was routed in the 2004 and the 2009 state assembly elections.

It is crucial to note that Naidu’s second term coincided with the reformist National Democratic Alliance (NDA) regime in New Delhi (under Atal Bihari Vajpayee), which he supported. Both governments were considered reformist, yet voters turned down both the leaders.

The decade long political oblivion appears to have changed Naidu’s approach to politics. While he focused on e-governance and improving markets, Y.S.R. Reddy led Congress had promised the moon to the rural voters of undivided Andhra Pradesh.

Reddy’s rule, almost co-terminus with Sonia Gandhi led United Progressive Alliance (UPA) rule at the centre, witnessed a period where the entitlement-based approach took roots. Beyond the entitlements, the governments were focused on alleviating short term distress esp in the rural poor. One populist measure, which was very popular among the electorate, was the farm loan waiver. The undivided Andhra Pradesh was the biggest ‘beneficiary’ of the 2008 farm loan waiver announced by the UPA. Enough research will show that the waiver was hugely detrimental to the credit culture and laid down a pernicious precedent. Yet it gets repeated and wins votes.

It looks like Naidu has learnt his lessons and decided to stick with waivers from now on. Perhaps he now believes that markets and reforms are all good but political realities should not be forgotten.

My second comment is directed towards the image of Raje being painted in the media as the evangelist reformer who is out there to rid her state of freebies.

Of course, Raje is pushing for reforms but not at the cost of freebies. She understands the political reality better than her media managers. That is why, tucked in quietly beneath the loud calls for reforms, is her move to give away 1,500 to each of the 50 lakh poor families under the Bhamashah card scheme. That is 750 crore of freebies. The Bhamashah card is the super integrated way to transfer individual as well as family benefits from the state government to the people. So instead of giving doles the old way, it will now be routed through the card. It will cut down inefficiencies for sure but that is not the same thing as cutting down freebies. It appears more an effort to replace Ashok Gehlot and Congress’s stamp from welfare schemes than the end of freebie culture.

The Naidu turnaround and the Bhamashah card scheme by Vasundhara Raje put into perspective ill conceived notions about the Indian poor and their leaders. Call it what you will — freebie, populism or entitlements — the poor want welfare schemes and reward politicians who provide it to them. And even the reformist politicians haven’t really shunned the so-called culture of freebies.

Lastly, I would like to flag the reason why the poor, or for that matter anyone else, clamours for freebies in India. The truth is that governments in India give out freebies — such as loan waivers to farmers or interest subventions to exporters — primarily because, to begin with, they did not invest in agriculture and infrastructure, respectively. Such investments would have reduced the cost of production and made enterprises more efficient.

Often reforms are limited to deregulating and promoting certain sectors while overlooking government investment in critical sectors like education and health. If they had done so then over time the poor would not have needed all this support.

In this regard, what might be a basic investment for Raje to empower people? Education, I suppose. However, when it comes to basic amenities in schools, Rajasthan is reported to be the worst. According to Planning Commission data, Rajasthan is well below the national average whether it is overall literacy or the ability of children to read or perform elementary arithmetic.

What has been Raje’s response? According to members of the Right to Education Forum, an NGO that tracks the matter, Raje’s government has ordered the closure of over 17,000 elementary public sector schools. In its bid to make ‘model’ schools, these have been ‘merged’ with another 13,000 secondary schools. Research show that distance to school matters whether students, especially the girls, get the education. The last we heard was that the state High Court put a stay and asked the government if it did any survey or study before deciding to close down those particular schools.

Policy Puddle runs each Thursday and comments on public policy developments.

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