Shifting the Debate

The last one month has been interesting, to put it mildly. We have seen major political upheaval in the country just when most people thought we were about to drift aimlessly through the rest of the UPA government's second term. And I would say it was about time that these events transpired - the way things were going, something had to give. For a country that was touted to be an economic superpower by the end of the decade, economic stultification loomed large, potentially dashing the hopes and dreams of millions who had dared to expect more than subsistence in a country that was used to defeatism and poverty-mongering.

There are those who have looked at the course of events over the last month (and to put the last month in perspective, over the last 2-3 years), through the prism of an ongoing politics vs. economics debate. The rationale of their argument goes something like - Indian politicians need votes and are obsessed with staying in power, so choosing to take reform-oriented, economically sound decisions must necessarily mean going against conventional political wisdom. Well, interestingly enough, those that have been making this argument seem to have missed the shift in the debate.

If some recent accounts of major national commentators are to be believed, the politics vs. economics debate has been already been consigned to the dustbin of modern Indian history. Through anecdotal accounts as well as intensive data collection and analysis, many are now saying that the dichotomy between good economics and good politics seems to be blurring away into oblivion. In a phase shift of historic socio-political proportions (and implications), the divergence between the two is about to be decimated forever in this country. Indian people, cutting across economic and social strata have perhaps discarded the 'dole' mentality where they voted into power the political party that gave away freebies and subsidies to a narrowly defined electorate that was often defined by lines of caste or religion. That age, good morning, is over.

Instead, what seems to be emerging is an epoch in Indian political history where reforms constitute the mainstream in the electoral agenda. In spite of what some political dinosaurs like Mamata Banerjee would like to believe, the people of this country have already moved on to a growth and development based debate. Her brand of 'povertarian' politics is obsolete. Consider this - in a thought provoking article wittily titled 'The Meena Kumari Politics', Indian Express editor Shekhar Gupta claims, "An important and powerful Congress MP.... made a confession that....the party made a suicidal blunder by brainwashing itself that the 2009 victory had come because of NREGA when it had, in fact, come from growth." Even discounting for any personal biases that Mr. Gupta may have, this is an important claim, coming ostensibly from people who are grassroot politicians, not opinion-wielding intellectuals.

In yet another account published in the New York Times, called 'Reformers Do Win Elections in India', hard evidence is cited, based on the work done by economists Jagdish Bhagwati and Arvind Panagariya, "from the 2009 national elections to bust a standing myth in India’s power corridors – that pro-growth economic reforms equals to political suicide." On the NDA's loss in 2004, which is often incorrectly attributed to the rejection by India's poor masses of the reform agenda, the article substantiates how "the 2004 mandate was not for anti-growth, socialist policies of the past.... In fact, it was the opposite: Voters wanted more meaningful, high-growth reforms, not fewer."

There seems to be an increasingly stark realisation among the avant garde Indian intelligentsia that the argumentative transformation on the Indian political stage is now complete - voters have now begun expecting more than just the consistently disingenuous electoral promises of 'bijli, sadak aur paani'. Inspired by cases of model governance in states like Bihar, Gujarat, Delhi and Uttaranchal, they have begun to expect local leaders to actually deliver on these promises in substantial measure. In fact, they have gone further and have now begun to expect private-sector employment generation as a result of government policy. As someone recently pointed out, the difference between 5% and 8% growth is a difference between comfort and more comfort for someone who belongs to the middle-class or the affluent class, but for the economically weak, it constitutes the difference between unemployment and subsistence (or even aspirational upward mobility).

In a timely move, the Economist has published a special cover edition on India this week, aptly called, "India, In Search of a Dream". The publication comments, with typical trenchant criticism, that India's leaders have done a shoddy job of convincing the masses on the need for reform. They have been guilty of perpetuating a regressive pseudo-socialist regime of quotas, subsidies and inefficient government control on the 'commanding heights' of the economy. But perhaps for the first time, voters seem to be taking the initiative to bypass the politicians' restrictive agenda - matters have come to a head and the electorate has suo motu decided that growth and reform is non-negotiable and in doing so has shifted the course of this debate forever. Old fogy politicians and tantrum-throwing dinosaurs will ignore this at their own peril.

The long arm of the welfare state

In a country that has been stung by experiments with race-to-the-bottom socialism for decades, advocating a greater presence for the state can be a lonely cause. Yet, in my view, perhaps in a country like India that is making the transition from socialist poverty to capitalist nouveau riche prosperity (for a few), the role of the state becomes ever more important. Not least because the state then becomes the only benefactor of those disenfranchised by the process of development (which, even in the most benign, inclusive of models can often be skewed). Ironically, then, socialist welfare policies must be perpetuated, even expanded, not culled in the name of 'less government is good government'.

First, the rise in individual wealth in a nation also often comes with a concomitant bulge in state coffers. Even with a 5% fiscal deficit, the Indian government today is far richer in both absolute and relative terms than it was as in its socialist heyday. This gives the government a far greater ability (and responsibility) to spend more and to spend on more causes. Agreed that this model has gone horribly wrong in Europe and America - but that is only the other extreme. The 'reform-minded' economists and right-leaning policy hawks will cry foul and say that the profligate Indian state already spends far too much. Wrong. The Indian state wastes too much. Subsidies are large, not because they are unnecessary, but because they are targeted ineffectively. The poor still need cheap kerosene and rice. It is electoral calculations that hold the government back from targeted subsidies. It is often said that a 'benefit' once doled out in India, can never be revoked - be that a subsidy, a reservation or an entitlement. However, it is easier to refine a benefit by targeting it correctly than to rescind it completely.

The vastness and sheer socio-cultural diversity of India necessitates a state that reaches out to parts of the country and to people that corporations would never find economical to serve. There is either no money to be made in these transactions, or the wait for returns can be longer than a for-profit entity can be answerable to shareholders for. In all such cases and more, the state must step in and provide. It has a moral duty and responsibility to, irrespective of the economic policies that it espouses. In the farthest corners of the Himalaya mountains in Kashmir, the remotest villages of the North-Eastern states and in the densest jungles of central India, the state must extend its arms and reach out - build schools, roads, provide medicines for free and transport services for cheap. Because someone has to, and no one else will. What every newspaper in the country will tell you is the story of mainstream India. Either the India that is in the thick of the action on growth, or the India that is poor but has a political voice to matter enough. There are hundreds of untold stories from another India that a welfare state does reach out to, but one that is never heard by the rest of its fellow-countrymen for the simple reason that it does not pay anyone to hear it. This is where the state must step in and hand-hold the development process to mainstream entire populations. Even if there is no economic or electoral reward to be reaped.