Political party

No political party is. And millions of people will not be economically self-sufficient as a result

Congress’s chintan shivir push for a ‘reset’ policy after 30 years of liberalization is part of a worrying trend of political parties refusing to step on the pedal and accelerate the next round of urgent economic reforms. Each party takes credit for the economic growth and job creation and systemic improvements that resulted after 1991, a series of changes that have so far lifted millions out of poverty. But the initial reforms have lost their impact and India needs further liberalisation. Instead, political discourse is largely about welfarism, handouts, and caste politics in the name of social justice.

Economic inequality is certainly a big problem, but focusing only on redistribution will only subdivide the existing pie. What the parties are talking about today will not improve productivity, promote market competition or generate new jobs. And these “progressive” policies can even take pernicious turns: Indira Gandhi’s desi-socialist slogan “Garibi Hatao” facilitated protectionism and rent seeking, not poverty alleviation. Even the BJP, which enjoys the kind of political dominance today that Congress enjoyed three decades ago, is a wavering reformer. He lost his mojo after Rahul Gandhi’s ‘suit boot ki sarkar’ jibe over major land acquisition amendments. And he lost it again after anti-agricultural reform protests from a vocal minority of farmers.

The perception that economic reforms are deeply unpopular stems from this fear of vested interests. But as every country has seen, being afraid of small vocal groups means that a large majority are denied better prospects. Current political timidity also extends to whetting voters’ appetites for bad policies like freebies. And that spending actually hurts citizens when cash-strapped finances cut spending on schools, hospitals, and other public works that improve human capital. Take Rajasthan’s return to defined pension benefits for government employees, sparking imitators in other states. Recall that states overcame resistance to contributory pensions after defined benefits began to prove unsustainable. Domicile and caste quotas in the private sector are no less self-defeating.

The political consensus that allowed the GST to see the light of day is once again necessary. The cross-party deliberations to ensure that the states, in tandem with the Indian government, pursue land, labor and agricultural law reforms are crucial. Without reformed land and labor markets, the manufacturing sector will remain stuck in a few LIP projects. It will not fuel steady 8% growth, which India needs for about 10 years if it is to come close to the Chinese miracle. It is doable if the backsliding to populism is stopped now.


This article appeared as an editorial opinion in the print edition of the Times of India.