Communicating the economic agenda

There is a backlog of issues that need urgent attention

Many people saw the outcomes of the four state elections last December as a turning point in the Indian political process. For the first time, the hard facts of economic performance, and how it affected the quality of people's daily lives, seem to have had a significant role to play.

Religious sensibilities, caste loyalties and all the other factors that have dominated the political landscape for the last decade or more took a backseat this time around.

The ruling coalition has clearly taken this lesson to heart and is making the performance of the economy during its tenure (more particularly, the last year) the pivotal issue of its campaign.

While the formal campaign awaits the finalisation of polling dates, there is little doubt that it will be largely focused on the spread of the benefits from the positive macroeconomic scenario.

The fact that the economy will take centre-stage in this campaign is an unquestionably positive development. At the same time, however, there appear to be certain constraints to realising the full potential of this opportunity to pin down the rival coalitions' positions on economic priorities and strategies should they be in a position to govern the country.

The problem in the way that the campaign is shaping up so far is that the debate is confined to the merits or demerits of the India Shining slogan. Looking at economic performance purely in the light of the recent past is useful, but only in a limited way.

Elections, like stock market investments, are entirely about expectations of performance. Past performance may be a guide to this, but not necessarily.

If economic performance is indeed the central issue, the ruling coalition cannot remain content with its assertion of lustre; it must spell out what it intends doing in the early part of its next term to ensure that the shine endures.

Likewise, the contenders cannot simply go about denying that the lustre exists, they must also lay out their plan of action to bring it out.

The nature of political communication in this country makes it easy for parties to avoid being very explicit in their articulation of strategies. There is an underlying assumption that such articulation is unnecessary for mass communication.

Rather than specifics, what works is a credible assurance that various constituencies will be 'taken care of' by whatever means available.

But, while it may be true that the specifics of economic strategy do not make for good campaign speeches, it is also equally true that without an explicit strategy, the probability of conflicts and unanticipated constraints in living up to campaign promises is very high.

In other words, whether strategies are communicated or not, a campaign that is based on a reasonable set of internally consistent instruments is more amenable to delivery than one that is driven by whim and spontaneity.

There is, unquestionably, a general commitment to ' economic reforms' on both sides. But, beyond this, it is difficult to get a sense from leader-speak about what the most important of these reforms are; who they will benefit directly and indirectly; and, who they will adversely impact and how they propose to mitigate these impacts.

One should fully account for the possibility that the plan will not unfold as intended, but there is some assurance in knowing that there is a plan and a commitment to stay as close as possible to the course it lays out.

The stark fact is that, while India may be currently shining or not, there is a huge backlog of issues that no government has addressed with enough intensity and commitment.

Each of them has the potential to upset the macroeconomic apple cart if not dealt with. One can, of course, engage in a debate about the composition of the list, the degree of priority and so on, but that is exactly what a campaign supposedly based on economic issues should be doing.

It may be too much to hope for, but it would be a great contribution to the quality of political discourse if all interested parties were to put out a list of their top economic concerns and what they plan to do about them.

Most of us will have such a list; here are some highlights of mine. Agriculture, a key contributor to the growth resurgence this year, is in reality treading on some really thin ice, as last Saturday's editorial comment in this paper pointed out.

From a policy perspective, the combination of input subsidies and guaranteed output prices for some crops is leading to sub-optimal cropping patterns and, in turn, falling productivity.

A major threat emerges from the demand that the cropping pattern makes on water resources. Public investment is at a standstill, and completely constrained by the broader fiscal situation.

Does anybody have a plan? River basin linkages are certainly a part of one, but how effective will it be in the absence of any movement on the other distortions? Are there ecologically sounder solutions to the impending water crisis?

If there is one issue on which both sides are caught in traps of their own making, it is employment. Even in the best-case agricultural scenario, the movement of people to the other sectors is inevitable.

Despite the statistical claim that 8.4 million jobs have been created in two years, the lack of job opportunities is a widespread complaint.

Assuming that the claim is legitimate, what are the kinds of jobs that have been created? Do they offer people some prospect of income stability and mobility?

What needs to be done to scale up the process and spread its benefits beyond the current numbers? 8.4 million is impressive, but there a few hundred million more where they came from. Who has a plan to stimulate this kind of employment growth without completely bankrupting the government?

Services have been the saving grace, delivering growth while agriculture and industry have been alternatively taking dives. But, while not denying the inherent competitiveness of this sector as a whole, it must also be conceded that part of the reason for its growth is the low-tax regime it operates under.

It is a fiscal truism that, if you can't tax growth, you can't grow taxes. How does one collect more taxes from this sector, which would ease the fiscal situation considerably, without stifling it?

And, speaking about other sources of competitiveness, a huge contributor to its external strength is because of English language abilities. Does a willingness to spread these come in the way of a broader set of cultural objectives?

Bringing economics centre-stage is only one piece of the story. Effectively communicating the agenda is the far more important part.

(The writer is chief economist Crisil. The views expressed are personal)