The Bharatiya Janata Party has a prime ministerial candidate. He has made the 2014 election campaign into a one-man show. His party has not yet announced the full contours of its economic and social programmes. Narendra Modi has, in an election speech, stated important objectives, with no details. Nor has he said how he will go about implementing them. In its earlier tenure, the National Democratic Alliance saw good but uneven growth, privatization and disinvestment of public enterprises, removal of administered prices for petroleum products; it focused on infrastructure (roads and power), and limited social programmes, especially in education (Sarva Shiksha Abhiyan). These will no doubt again feature in the BJP’s programme if it forms the government in 2014.
The United Progressive Alliance, over its 10 years of office, has some major economic and social achievements. Growth on average has been at record levels. The poor have benefitted from many social programmes, as indicated by the improvements in India’s human development indicators. The UPA I had five years of macro-economic balance and growth and withstood the global financial crisis in its last year. Growth enabled higher tax revenues net of states’ shares (in rupee crores, 439,547 crores in 2007-08, 534,094 in 2010-11, 771,071 in 2012-13, and as percentage to GDP for the same years, 8.18, 7.70 and 7.59). At the same time, social expenditures rose sharply (on major subsidies — food, fertilizers and oil products — from rupee crores, 67,498 in 2007-08 to 135,508 in 2010-11 and 216,297 in 2012-13, or as percentage of GDP, 1.35, 2.21 and 1.87). In addition, there were massive farmer debt write-offs by the UPA I (around Rs 80,000 crores), and on fresh social schemes — rural employment guarantee, rural health mission, the new food security bill as well as old ones like the Sarva Shiksha Abhiyan. The UPA’s expenditures have soared. Fiscal deficits (Centre and states) as percentage GDP rose in these years from 4.09 to 7.88 and 8.09, and average inflation was at 4.8 per cent, 8.6 per cent and 9.0 per cent. Food prices have been rising more steeply since 2011. Savings (especially by households), as well as domestic and foreign investment, have also been weak. Portfolio investments have been erratic and helped to cause much volatility in the rupee’s foreign exchange value. The UPA neglected macro-economic balance in order to significantly increase social expenditures. These were poorly managed and implemented, leading to an estimated half of intended beneficiaries not getting the benefits, and the theft of funds by officials. A direct cash transfer of benefits has been mooted to improve their delivery, but the roll-out maybe years away.
In spite of good growth in three of the five years of the UPA II, high inflation has corroded the buying powers of the urban poor and middle classes. The rural poor have benefitted by the employment guarantee scheme (wherever it reached beneficiaries). Rising support prices for grains, sugar, cotton have made surplus producers better off. Industry has had poor growth in spite of the thrust into rural markets. Social programmes, leasing of natural resources, infrastructure expenditures have vastly increased corruption. The Jawaharlal Nehru National Urban Renewal Mission and innovative public-private projects with the government paying only “viability gap funding” in infrastructure resulted in a spate of projects in roads, metros, captive coal mines for power projects, as well as in new mega power projects. However, delays in government clearances (land acquisition, environment and forests), shortages of coal and gas led to the stranding of over Rs 500,000 crores worth of projects. This also weakened bank finances. The UPA has done little to curb black money, bring overseas illegal holdings back, and introduce methods to reduce corruption and investigate and punish the corrupt.
Do the BJP and Modi understand the issues and possible directions for dealing with them? Modi has so far only listed some of what he would do as prime minister. He has not put it in a framework of problems and policies to tackle them. Apart from the NDA’s earlier initiatives (fiscal balance, privatization and disinvestment, infrastructure investments, market determined petroleum product prices), he has said he will aim at improved economic efficiency and better implementation. Will he rationalize subsidies, expeditures on them, and better target them? The UPA’s social programmes, which have wasted huge funds and encouraged corruption, must be rationalized. All this requires more professional management. He must drastically reform the administrative services to improve individual accountability and punish malfeasance.
To accelerate direct benefits transfer to bank accounts, Modi must improve the Aadhaar delivery and millions of micro bank branches. He must improve public-private partnerships and ensure accountability of all concerned government departments for time-bound clearances. He must encourage private investment in agricultural infrastructure like warehouses, cold stores, refrigerated transport, rain water harvesting, water storage, canals and the like. He must get the government out of agricultural marketing. Price policies must not stimulate more grains production. To bring large increases in agricultural production, the BJP must accelerate clearances for genetic modification. Farm labour shortages in many states are attributed to the Mahatma Gandhi National Rural Employment Guarantee Act. While guaranteed employment and living for agricultural labour is good, it must not be allowed to affect farm production adversely. Some link between farm labour and the MGNREGA is required.
The NDA, in its six years in office, saw no attempt to restrict black money creation and the large holdings overseas by Indian citizens. Like the Congress and other political parties, the BJP is unlikely to close the routes (investments from Mauritius free of capital gains tax, participatory notes), that will enable its politicians to use them for laundering illegal earnings and holding money abroad. Corruption will certainly not cease. However, improved implementation, better systems and individual accountability with severe penalties for malfeasance, could reduce it. So will the flurry of anti-corruption legislation by the UPA help speedier investigation, prosecution and punishment?
The NDA must not allow its swadeshi hang-up, which led it to oppose foreign direct investment in retail to stall other FDIs. Modi has said that defence industries must be opened. FDI and foreign trade (imports as well as exports) must be encouraged.
In tackling deficit reduction, a NDA government must revamp direct and indirect taxation. Modi mentioned increased emphasis on states to implement programmes, and so fund transfers to states will increase. The NDA must spell out its administrative methods for tighter monitoring and evaluation. Introducing the direct tax code and the goods and services tax must be the priority. A clear enunciation of programmes for the poor to get more opportunities for advancement is essential while revamping existing social programmes.
Neither Modi nor the BJP has a structured approach as yet with regard either to its economic or social policies for the poor. For example, a NDA government should not bemoan rural-urban migration as going away from a mythical pastoral Ram rajya. Instead, it must invest in infrastructure for roads, public transport, housing, health and education, for both old and new migrant populations in cities and towns. Migration for better livelihoods must be encouraged. But migrants must be enabled to live in decent conditions.
The ‘demographic dividend’ from a growing young population must be polished to prevent it from becoming a ‘demographic disaster’. Modi must detail his plans. Universal education, more schools, colleges and technical institutions, with better teachers and other facilities; private schools, colleges and universities; education and subsistence allowances for poor students; no restrictions by community, caste or gender; all these must be part of his detailed plans. Modi flaunts the Gujarat model of institutions and budgets for training in skills. These must be vastly expanded nationally. So also must investments in public health (sanitation, safe drinking water).
India is much more complex than Gujarat. Modi is yet to show that he understands and can deal with this complexity.