The Congress under Sonia Gandhi has gone populist with a vengeance. Its election manifesto, released on Tuesday, goes further down the road set five years ago—with the promise of massive food subsidies, a further enlargement of the national rural employment guarantee programme, the extension of job reservations to new categories (minorities) and in new segments (the private sector), new subsidies for education, and much else. There is also a stronger endorsement of the public sector than has been the case in recent years—the party’s true instincts becoming more visible perhaps because of the mess that financial markets have got into.
Rival parties have caught on to the attractions of populism and some have sought to out-Congress the Congress; and now the Congress is taking a leaf out of their book! The BJP governments in Madhya Pradesh and Chhattisgarh originated the extra subsidies on foodgrain, and the Telugu Desam in Andhra Pradesh is offering cash handouts, while the Dravida parties in Tamil Nadu have been the most imaginative (free TV sets in the last round). The BJP, when it comes out with its manifesto, can be expected to try and out-do the Congress in its own way. In such an environment, it is futile to point out that offering rice at Rs 3 to all families below the poverty line is a flawed promise because half the BPL cards issued are said to be bogus (as some government departments have found). But that is no deterrence, of course. Given the overwhelming likelihood that a coalition government will be sworn into office after the elections, populism can be expected to be on the march in every direction.
In this context, it is hard to draw any comfort from the Congress promise of adhering to fiscal discipline. The numbers simply will not add up this year, and there will have to be significant reining in of expenditure to bring the fisc back on track in subsequent years—a requirement that sits poorly with the promises of more spending in every direction imaginable. Nor is it clear how the party’s promise of rapid economic growth is to be delivered, since there is no focus at all on making markets more efficient and achieving productivity gains. To be sure, there is the promise of a greater spread of education and of better health care, better administration of cities, and other initiatives couched in the developmental context. All of these could and should lead to productivity gains, but the record of the past delivery on such promises does not offer much hope that these will lead to the kind of transformational change that the country requires. Simply put, there is far too much scepticism about the government’s—any government’s—ability to effectively deliver quality services.
The manifesto, riding high on verbal flourishes, bases its promises for the future on what it sees as the achievements of the past five years. On the economic front, the fact of the matter is that the rapid growth that was built on the foundations of a global liquidity surge masked the relative inaction on the domestic policy front, creating widespread disappointment in those who had placed high hopes on a government led by Manmohan Singh and featuring P Chidambaram and Montek Singh Ahluwalia. It is a safe bet that, in the changed global context, the growth record of the coming five years will be slower than for the last five. If the thrust of government intervention continues to be populist, then in the absence of any reformist impulse the chickens can be expected to come home to roost at some point down the road.