Writing in this space some months ago (“Congress heads back to the centre on economics", 26 March), I suggested that the economic policy resolution of the Congress augured a move back towards the centre, or centre-left, and away from the (far) left, when it came to economic policy.
Since the time of that writing, the ruling Bharatiya Janata Party (BJP) under Prime Minister Narendra Modi has moved away from its putative centre-right position and affirmed a centre to centre-left commitment to building a welfare state. Noteworthy by its absence in Modi’s Independence Day speech was any reference to further economic reforms. Much was made of the proposed new national health insurance scheme known colloquially as “Modicare". As Rajiv Lall and I argued in these pages recently (“Modicare is not enough to reform healthcare", 27 August), the new scheme may be seen as one plank of Modi’s attempt to engineer a modern welfare state for India. Indeed, one could add that the “suit boot ki sarkar" gibe by Congress president Rahul Gandhi, which seems to have stung and stuck, can only be effaced by the BJP appearing to be, or positioning itself to be, even more welfarist than the Congress.
Paradoxically, Modi having moved the BJP to a more welfarist position opens up the political space for Gandhi to stake out a more reformist terrain. Indeed, I would argue that the time is ripe for Gandhi to reclaim the mantle of economic reformer for his party, something that, under the leadership of Sonia Gandhi, the Congress had abandoned. The 10-year rule of the Congress-led United Progressive Alliance (UPA ), whose record on the economy looks a lot better in retrospect than was thought by many at the time, was noteworthy for its emphasis on entitlement-based welfare schemes and its notable absence of economic reforms.
Sound macroeconomic management, the absence of backtracking on past reforms, and avoiding unorthodox economic policies such as demonetization ensured steady growth, except towards the very end, but the Achilles heel of the UPA’s strong track record on growth was that it failed to create enough jobs—the proverbial “jobless growth" moniker that has haunted the current government as well.
The Modi government, which deserves credit for several major reforms, in particular, the monetary policy framework agreement, the goods and services tax, and the Insolvency and Bankruptcy Code, has now signalled that the era of reforms on their watch has run its course, and the order of the day will be a push on social welfare, assuming that they are re-elected next year. This, I would argue, creates the opening for Gandhi to position the Congress as having rediscovered its mojo as economic reformers—such reforms, as noted, having languished during their most recent decade in power.
Unlike the BJP, which, rightly or wrongly, is seen as a pro-big business political party, especially under Modi, and which faces taunts of fostering crony capitalism, fairly or not, the Congress’ welfarist credentials, over its long history and in its most recent innings in power, are unimpeachable. Somewhat the opposite of the old saying that only Nixon could go to China, Gandhi can afford to make the case for a renewed push on reforms without being accused of being anti-poor or in hock to big business.
The advantage of such positioning would be that it would provide a natural corollary to Gandhi’s criticisms of Modi’s handling of the economy, in particular his recent blistering attack on demonetization and his accusations that the Modi government has failed to create jobs and improve living standards for average Indians.
Yet, it is one thing for Gandhi to criticize Modi on the economy. That is negative messaging. It is another matter to convey a positive message of what he would do better, and how he would remedy Modi’s alleged policy failures, were the Congress under his leadership to come back to power.
Gandhi has been, in my judgement, effective on the former but, as yet, not especially mordant on the latter. A commitment to renewed economic reforms, with a maintained commitment to social justice, in keeping with the Congress’ legacy going back to Jawaharlal Nehru, might just be the ticket. Rather than merely lambasting the Modi government on job creation, Gandhi could sharpen his attack and be more precise on what he would do were he to become prime minister, such as labour market reforms coupled with unemployment insurance, and a renewed push to reform the creaky welfare architecture, especially when it comes to primary health and education.
Further, he could lay stress on a renewed push to modernize and upgrade infrastructure, which not only boosts economic productivity but potentially has a large multiplier effect in terms of job creation, both direct and indirect. There is little doubt that jobs are going to be central to the next election, and, if he is astute, Gandhi is well poised not only to critique Modi’s record but to suggest how an intelligent use of public funds could reap large dividends in terms of durable and good jobs—not pakora selling.
Congress was the party that brought us the “licence raj", but then also produced the antidote, the 1991 economic reforms. In their UPA avatar, they seemed to forget this latter part of their legacy. Now that Modi and the BJP appear to have relinquished the mantle of economic reformers, this is Gandhi’s opportunity to reclaim it decisively for the INC. If he does, the upcoming election campaign will be very interesting indeed.
Vivek Dehejia is a Mint columnist and resident senior fellow at the IDFC Institute, Mumbai. Read Vivek’s Mint columns at livemint.com/vivekdehejia.