AAP's economic agenda: Is it schizophrenia or nuance?

Tucked away on page 13 under item 12 of the Aam Aadmi Party’s (AAP) manifesto for the coming elections is a line which will have India Inc and small entrepreneurs collectively breathe a huge sigh of relief. “AAP believes that government should not be in the business of running businesses.” And then there’s this: “Active participation of private sector is required for enterprises to thrive and create jobs.” And this: “AAP’s policies will aim to foster healthy competition in the market economy and curb monopolistic and anti-competitive practices.”

That’s sounds like the party, which had raised the spectre of an interventionist government and earned itself the label of neo-left, has an ideological leap of faith. But has it?

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So hostile and alarmist had been the reaction to many of AAP’s actions and statements in the brief period it was in government in Delhi, that the party was quick to set up a committee to draft an economic agenda. The influx of ideological opposites into the party - pro-free marketers like Captain Gopinath, V. Balakrishanan and Meera Sanyal as well as known critics of `neo-liberal economics’ like Medha Patkar and Kamal Mitra Chenoy - also had observers wondering how confused the party’s economic world view would be.

As it turns out, there’s a fair bit of economic schizophrenia in evidence in the manifesto.

There are parts which give the impression that the party has shed much of its anti-markets baggage and that it is actually understanding that the scourge of crony capitalism - which it blames for everything, including price rise - can best be ended by a focus on “clean, open and transparent governance which will create a level playing field for honest businesses to thrive and succeed on their own merits.”

There is talk about simplifying rules and regulations. There is lament that businesses are hobbled by licence-raj, lack of transparency and unwarranted delays.

And yet there are reasons to worry. The manifesto insists that the party’s economic vision “is not limited by ideological orthodoxies”. But a nuanced approach is different from merely bunging in conflicting approaches.

How can a more open and transparent governance system reconcile with laws to check fees charged by private schools? The best way to counter this will be to reduce entry barriers to competition. Education is still subject to the licence raj. This is not to say that there be no regulations at all, but current regulations encourage monopolies and cartels.

Take also the promise to curb price rise through raids on black marketers. Sure, hoarding cannot be encouraged and needs to be tackled, but why not consider measures that will make hoarding less remunerative? Fortunately, the party seems to have dumped the idea of price control of essential commodities that it had mooted in its very initial vision document.

There are other disquieting promises.

AAP is not only in favour of the current land acquisition law, it also wants all land acquisitions done after September 2011 - when the Bill was tabled in Parliament - to be brought under the Act’s ambit. That will mean giving the Act a retrospective effect covering a little over two years.

The party also promises “remunerative” minimum support prices (MSP) for diverse crops which would be 50 per cent more than the real input cost. No one is grudging farmers their right to get remunerative prices or make profits, but is guaranteeing MSP the right way of going about it? There is enough evidence that MSPs are fuelling food inflation, without doing anything to help small and marginal farmers. It is the large farmers in some states who benefit, and, in fact, this encourages cronyism of a different kind.

Though the manifesto talks about commercial exploitation of natural resources being done on a royalty and revenue sharing agreement with local communities, there is no mention of whether allocation of mining rights would be through the more transparent system of auctions or continuing with a system that encourages sweetheart deals.

There’s also the typical antipathy to contractualisation of jobs, though it recognises that this cannot be avoided in some sectors like construction. Saying that it will not allow contractual employment in some areas - doctors, teachers, nurses - may not mean much because these professions, by their very nature, are less prone to temps, but insisting that those on contract will be regularised is certainly not a sensible idea. It’s not possible to end contract employment through laws or wielding the big stick. Contract employment increases and decreases in response to market conditions, regardless of laws. Laws on contract labour eased post 1991 and this did see an increase in casualisation initially. But the Employment and Unemployment in India survey for 2011-12 shows a decline in casualisation.

AAP’s single-minded focus on crony capitalism in the manifesto is welcome. The level of cronyism that has set in over the last ten years is probably unmatched even by pre-1991 standards when a closed and over-regulated economy encouraged crony capitalism. Unfortunately, AAP does not seem to have understood one basic point - crony capitalism is not so much the problem itself as the symptom of a problem. Its various solutions to ending cronyism is like applying an anti-pimple cream instead of eating right to ensure pimples don’t erupt in the first place.

Though it says it will present an alternative economic model to that of the mainstream parties, nothing of the sort emerges from the manifesto. But the fact that it has ended its hostility to market forces - at least for now - is a good step forward. Will it continue down that path or will it revert to the old socialist road? Will the schizophrenia give way to nuance? We’ll have to wait and see.