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Sop-onomics beats economics

April 26, 2019

Image result for Sop-onomics beats economics FirstpostNoted economist Arvind Panagariya, then the manifesto adviser of the BJP, wanted the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme to be junked or at least overhauled. When asked by this writer if Narendra Modi would heed his advice, Panagariya said, “As an economist, I would like him to do so, but I know no politician would actually do that.”

But, Panagariya was sure that if elected prime minister, Modi would be best positioned to deliver economic growth. To a question on why economic policy wasn’t a campaign issue, the former chief economist at the Asian Development Bank said, during the UPA era, political discourse had moved far away from the growth imperative. “Sadly, discourse has moved to the left and politics of entitlement and sops, with no focus on the core policy reform issue,” he said.

That was two months before India voted for a new Lok Sabha in 2014. Modi was sworn as prime minister on May 26 that year and Panagariya later took over as the first vice-chairman of the Niti Aayog, the government think tank that replaced the Planning Commission.

So, how have the last five years been?

While May 24 will tell us if voters accept Modi’s claims of growth, what is certain is that the election discourse today is even more dominated by entitlement politics than it was in 2014.

‘Soponomics’ defines the narrative, as there is a fierce competition to distribute patronage. Talk of vikas has been drowned in the din of freebies.

To borrow from the economics, the narrative has shifted from reform-led growth to politics of entitlement.

Neither the BJP nor the Congress is talking economy – good, bad and ugly. If national security is the talking point of the ruling establishment with dynasty jibes thrown in between, the Congress has gone to town with its NYAY (Nyunatam Aay Yojana) pitch, while accusing the BJP of presiding over a job crisis.

With the universal basic income scheme promise, the Congress wants to take on Modi and his muscular politics. It believes that the size of GDP and total expenditure will allow India to transfer cash to the poorest sections without disturbing the goal of fiscal prudence.

This is a tall claim, given that the Congress intends to implement NYAY as a joint central and state government scheme. There is no clarity in its manifesto if the existing subsidies will be subsumed under NYAY.

Given the federal structure and the regional satraps’ desire to make it big in New Delhi, states’ buy-in for any proposed central scheme makes it a non-starter. Resistance to PM KISAN scheme and Ayushman Bharat in non-BJP states are two such examples.

All politicians offer sops to the poor to gain their votes. In the absence of a credible audit, it is hard to assess the outcome of the much-proclaimed welfare schemes.

A case in point is MGNREGA, which the Modi government has not only continued with but also expanded it. The rural job plan, which costs about `61,000 crore annually, doesn’t not create assets but might fetch votes, the fiscal deficit be damned.

That bring ups the question: are Indian politicians pro poor or pro poverty?

The promise of poverty alleviation perhaps is the most enduring feature of Indian elections. The slogan that plays in the loop every poll season shows the moral bankruptcy of the political class. Parties claiming to be different, backed by landslide mandate, too, have fallen into the vote trap to abandon their reform agenda.

Unsurprisingly, talk of the rise of the key economic indices such as Sensex, rupee, FDI and growing global confidence in ease of doing business is on mute.

The Congress, naturally, has steered clear of indicators that look good. Surprising, the BJP, too, is coy. From a low of 23, 815 on May 14, 2014, Sensex is within a kissing distance of 40,000. But, the BJP won’t say a word—remember the “suit-boot ki sarkar” jibe? Early 2018 the Congress was unsparing. When the Sensex tanked 800 points after the budget, party chief Rahul Gandhi said it was the stock market’s “no confidence motion” against the government.

Same for the currency market. The rupee’s performance — good, bad and ugly — isn’t election talk. The opposition that hammered the government every time the rupee weakened has gone all quiet.  For the BJP, too, rupee isn’t a poll asset: it is the welfare economics that makes the grade.

Inflation, a perennial election issue, too, isn’t cutting it this season. The BJP has done well to keep the prices in check but talking about it could be risky — low food prices are being blamed for the farm crisis.

The NDA is keen to present an easily digestible score card. The pattern is visible in its welfare-state strategy — trot out numbers to in support of claims of having improved the quality of life for millions of disadvantaged citizens.

That is the reason BJP’s manifesto gives economy in general and reforms in particular a miss. “We aspire to make India the third largest economy of the world by 2030…,” says the manifesto. But how? The Congress, too, is strong on macro-economy intent but, again, no plans. There is a mention of a “Make for the World” policy for export-only products. A change of name from “Make in India” to “Make for the World” does not do away with the challenges facing manufacturing sector.

Politicians are a smart lot. They know they won’t be held to account for the promises they make. In their quest for power, sops rank on top, never mind if they weaken the ‘beneficiaries’.

[“source=firstpost”]


Categories: Economics