The problem with Indian policymaking is the incentives established by rules and institutions
The year 2019 will most certainly bring us an election circus at an unprecedented scale. The Modi-Shah machine faltered in the state elections and is trying to regroup. A mahagathbandhan, or rather, a motley crew of strange bedfellows is being formed by the opposition to take advantage of disillusionment with the Modi government. The tide could be turning. But will the voters get what they hope for by merely punishing the incumbents? Or will 2019 bring more of the same, no matter who is in power?
Hopeful citizens and pundits on either side think of politics in two specific ways. The first is to focus on individuals. Modi was considered the “saviour" to rescue India from its socialism and free the economy. As Modi did not exactly specify the proposed reforms in his 2014 campaign, voters built their hopes on his personality. He was dubbed many things—the man who changed Gujarat, the incorruptible leader, the yogi who slept only four hours a night, etc. Yet, his performance as PM has been far from stellar. And so, four years later, they are not disappointed in the government as a whole as much as in Modi in particular.
This is the trap of the great man theory, made famous by the 19th century scholar Thomas Carlyle. Carlyle’s idea was that history can be largely explained by viewing the impact of great men, who through their personalities and influence steered the course of society to a particular outcome. Understanding this strand of voter as his primary support base, Modi has also turned the great man theory of history and politics on its head. Unable to live up to expectations, he spends most of his efforts targeting other great men and women in history. On a daily basis, we hear about Jawaharlal Nehru’s, Indira Gandhi’s and Rajiv Gandhi’s mistakes on national television. Even the opposition suffers from the same malady as they cautiously place their hope in a renewed Rahul Gandhi.
A second group of invested citizens tend to be more invested in partisan politics. Partisan politics plays out in India along linguistic and caste lines, and partisan alignments tend to become more obvious in regional politics. But the actual policies of the opposing regional parties could often have been written by the same hand. We recently witnessed this with the birth and rise of the Aam Aadmi Party; armed with a broomstick to clean up politics, but once again without any specific policy platforms or governance experience. And it seems similar in national level politics, with the two major political parties. BJPwallas and Congreswallas are hopelessly and forever divided, but are they really that different?
Unfortunately for the Indian voter, there is little difference between the two parties. Arun Shourie had famously said: the BJP= Congress+cow. Most of the policies since 2014 are a continuation of the UPA agenda. Welfare schemes and policies have been renamed, while GST has been co-opted and turned into a messier version. With the soft Hindutva turn by the Congress in the state elections in December 2018, perhaps we can amend Shourie’s statement to: the BJP=Congress+0.5 cow. For all the posturing against Nehru’s and Indira Gandhi’s version of socialism, there is little difference between the socialism of the two parties. Both are simply a continuation of centralization of power, with an unwillingness to break political gridlock, and the inability to pursue genuine reform.
If neither the great men nor the great parties will meet voters’ expectations, what is left? The answer lies in moving away from individuals and partisan politics, and understanding political institutions and incentives. The problem with Indian policymaking is the incentives established by rules and institutions, which don’t magically change with a change of guard.
A major roadblock for reforms and greater liberalization is that the Indian state concentrates and centralizes power, mostly in the Union and state executives. Most reforms will require some rollback of executive power.
This poses two problems. The first is that those who win need to pursue a reforms agenda that actually diminishes their own power—and politicians, like all individuals, are self-interested and unlikely to diminish their own position. Will India stand to benefit from a more independent judiciary, central bank, etc.? Absolutely. But is the executive, no matter who helms it, likely to share power or reduce its ability to manoeuvre politically? Probably not.
The second problem posed by new reforms is that even if there is political will at the top for reform measures that don’t directly reduce the union and state executive’s power, seven decades of mostly socialist policies have created a set of entrenched interests. And these interests will gridlock any possible change through reforms at the top. India is currently facing a jobs crisis, and the solution is extremely obvious—make it easier and cheaper for firms and entrepreneurs to hire workers. The problem is that there is an entrenched class of unions, labour inspectors and industrial inspectors, and contractors who stand to lose plenty by allowing employers and workers to contract directly. One can say the same for reforming the tax system, tariffs, urban regulation, agricultural restrictions, and the list goes on.
So, no matter what happens in 2019, there will be more of the same, unless there is a concerted effort to change political incentives. Perhaps it is time for voters to place their hope and attention outside individual and partisan politics.
Shruti Rajagopalan is an assistant professor of economics at Purchase College, State University of New York
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