Photo: Bloomberg
Photo: Bloomberg

Opinion | There is much to commend in the Congress poll manifesto

Voters disenchanted with BJP’s leftward drift and its return to communal politics have a national alternative to vote for

Writing in this space on 26 March 2018 (Congress heads back to the centre on economics), I had argued then that the economic policy resolution of the Congress telegraphed a move back toward the political centre and away from the leftist ideological orientation of its innings during the decade-long rule of the United Progressive Alliance (UPA) in 2004-14. Following up on the hints in that document, I argued, further, on 10 September 2018 (Rahul Gandhi should reclaim the mantle of reforms), that the Congress should rediscover its liberalizing mojo and remind Indians that, after all, they were the party of economic reforms back in 1991, the year that ushered India into the global economy and onto the path of economic growth and rapid reduction in poverty.

What could be more gratifying, then, to read in the recently launched Congress manifesto a statement such as: “Congress launched liberalisation and economic reforms. It is the Congress that created India’s successful middle class and the new entrepreneurial class." One would have searched in vain for such a statement in recent Congress manifestos, certainly those in 2004 and 2009, which heralded the party’s turn toward entitlement-based welfare and away from growth-enhancing economic reforms. The statement above is followed by this one: “It is the Congress that passed rights-based legislation and created a social safety net for the very poor," referring to the UPA period. This interesting paragraph then concludes with the observation: “It is the Congress-led UPA government that lifted an unprecedented 14 crore Indians out of poverty between 2004 and 2014."

What is left unsaid, but implied, is what ties these evidently three disparate sentences together: that it is the combination of pro-market and pro-business reforms, emanating from the 1991 economic reforms, allied with a concern for social justice as exemplified by entitlement-based welfare, that led to a sharp reduction in poverty during the UPA’s time in power. What is further left unsaid is what is most crucial: the causal mechanism linking these three apparently different facts together, which is the combination of rapid economic growth and redistribution through the rudiments of a welfare state as the twin engines of economic development and poverty alleviation. It is as if one can mix the recipes of a Jagdish Bhagwati and an Amartya Sen, the resulting concoction being not a deadly poison but a life-enhancing elixir.

The resulting nostrum appears to be: we need to press ahead with economic reforms, but we must keep an eye on social justice as well. Without the former, we will not have growth, and there will be nothing to redistribute. Without the latter, any growth we generate is likely to be jobless and inequitable. Neither situation is acceptable and neither is politically viable in a vibrant democracy with many poor voters. Sensible economic policy requires both growth and welfare enhancing measures. That is the political economy rationale for why even the ostensibly centre-right Bharatiya Janata Party (BJP) has tilted left in the latter part of its term and belatedly launched one welfare scheme after another, having given up the ghost of economic reforms after being knocked sideways with the 2016 demonetization debacle.

Seen through this lens, there is much to commend in the Congress manifesto. What has garnered the most media attention, of course, is the Nyuntam Aay Yojana (NYAY), or the payment of 6,000 per month to the 50 million poorest households in the country, representing approximately the bottom 20% of India’s income distribution pyramid. This, according to Congress data analytics chief, Praveen Chakravarty, will bring the average household in this group to an average monthly income of 12,000 (the assumption being that the average such household currently earns 6,000 through the market or other means).

The NYAY is a much improved version of the scheme that was first announced a few months ago, when it appeared that it would function as a progressive minimum income guarantee, with every household below a threshold (such as 12,000) being topped up. The extreme moral hazard created in such a situation is, perhaps, one reason for the party’s rethink, and the fixed transfer per household alleviates the worst of this problem. On a lighter note, the Congress seems to have nicked one of BJP’s niftier tricks, the art of the clever acronym.

If NYAY represents the social welfare side of the coin, then on the obverse side, that of pro-market and pro-business economic policies, we find, inter alia, a very sensible proposal to rationalize the byzantine Goods and Services Tax (GST) into a single, revenue-neutral rate with a small number of exemptions on essential items, which would have a zero-rate.

Equally commendable is the manifesto’s promise of “regulatory forbearance" for micro and small enterprises, which will exempt such firms from most of the onerous laws and regulations that govern such enterprises for a three-year period from 1 April 2019. Such a scheme could certainly give a jumpstart to the creation of new micro and small firms, simultaneously creating employment and boosting economic activity, as well as giving a fillip to the animal spirits of the entrepreneurial class more generally.

The manifesto clearly signals a shift of the Congress party back to the economic centre. Voters disenchanted with the BJP’s leftward drift and its atavistic return to communal politics now have a viable national alternative to vote for.

Vivek Dehejia is resident senior fellow at the IDFC Institute, Mumbai. Read Vivek’s Mint columns

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