Congress Manifesto 2019: To fulfil job dreams for its citizens, party must brace for a fiscal deficit nightmare

The Congress Party manifesto for the 2019 Lok Sabha elections, makes all the right noises on the jobs front. Let’s take a look at a few points which the manifesto makes: 1) At the very beginning of the manifesto, the party says, “our pledge is jobs, jobs, jobs”. Of course, unlike the Modi government, the party being in Opposition does agree India has a jobs problem. 2) The manifesto promises to fill the four lakh vacancies in central government, public sector enterprises, judiciary and the Parliament, by March 2020. 3) It promises to request state governments to fill the estimated 20 lakh vacancies at their level. 4) Working with state governments, the manifesto promises to create 10 lakh seva mitra positions. These positions will be created in every gram panchayat and urban local bodies. 5) The manifesto promises to create lakhs of new jobs “for qualified teachers, doctors, nurses, paramedics, technicians, instructors and administrators through a massive expansion of the education and health sectors.” This is a part of a plan to increase expenditure on health to 3 percent of GDP and education to 6 percent of GDP, by 2023-24. 6) In any economy, a bulk of the jobs are created by the smaller firms, as they grow bigger, or as more smaller firms are started. The Congress manifesto promises a lot of help for small and medium enterprises. It specifically says that small and medium enterprises will be “exempt from all applicable laws and regulations (except the Minimum Wages Act and tax laws) for a period of 3 years from 1 April 2019 or, in the case of new businesses, the date of commencement of business”. In the process, the “Inspector Raj” will not be allowed to hit businesses as soon as they start. Small businesses have been defined as firms employing 11 to 100 individuals, whereas medium businesses have been defined as firms employing 101 and 500 individuals. If and when, this happens, indeed, it will be a welcome move.  The manifesto also says that “the Angel Tax imposed on Start-Ups will be withdrawn completely.” [caption id=“attachment_6380281” align=“alignleft” width=“380”] Rahul Gandhi and Sonia Gandhi display copies of Congress party’s election manifesto. Reuters[/caption] 7) One of the low hanging fruits that India hasn’t been able to cash in on when it comes to creating jobs, is tourism. In 2018, around 10.6 million foreign tourists came to India, a jump around 5.2 percent from 2017. While this sounds a lot, it isn’t. The small island of Bali in Indonesia, which is around one and a half times bigger than the state of Goa, got close to 6.5 million tourists during 2018. The Congress manifesto says: “Tourism creates jobs. Congress promises an adequately capitalised Tourism Development Bank to provide low-cost, long-term funds for investment in tourism-related businesses. We will also offer lower rates of corporate and personal income tax on tourism-related business income.” 8) The history of economic development shows that countries that have gone from being developed to becoming developed have done so by concentrating on exports. Indian exports as a percentage of the gross domestic product (GDP) have been falling over the years. In 2013-14, India’s export to GDP ratio peaked at 16.96 percent. By 2017-18, it had fallen to 11.44 percent. The Congress manifesto promises to “reexport-oriented industries through tax rebates and incentives”. 9) The manifesto also talks about the need to create low-skilled jobs. Low skilled-jobs are necessary to move people out of agriculture, a sector and a mode of employment, which isn’t as remunerative as it used to be. The Congress manifesto says: “Congress will launch two major programmes to be implemented through Gram Sabhas and urban local bodies that will create 1 crore jobs: a) Repair and restoration of water bodies (‘Water Bodies Restoration Mission’); and b) Regeneration and afforestation of wasteland and degraded land (‘Wasteland Regeneration Mission’).” Again, something that makes sense. On the whole, for anyone who has followed the debate around the lack of jobs in India, all these points which are a part of the Congress manifesto make immense sense. Having said that, there are a few things that the manifesto does not explain. Let’s take a look at these points. 1)  The manifesto talks about filling up jobs at the central government as well as the state government level. It talks about creating new jobs in the education and health sectors. It also talks about creating low-skilled jobs. First and foremost, where is the money for all this going to come from? The combined expenditure of the central and the state governments has only gone up from 2013-14 onwards. In 2017-18 it was at 28.42 percent of the GDP and is expected to fall to 28.14 percent of the GDP in 2018-19. 2) More importantly, the manifesto talks about creating one crore low skilled jobs. Does the Indian government(s) have the capacity to manage such a large programme? While we are great at launching programmes, we have always made a mess of implementing them, simply because the Indian state is like a funnel, it is very broad at the top and extremely narrow at the bottom, where all the implementation happens. 3) Having promised these jobs, the manifesto also promises to “to achieve the [fiscal deficit] target of 3 percent of GDP by 2020-21 and remain under that limit.” The fiscal deficit is the difference between what the government earns and what it spends. All the jobs promised by the Congress party are going to need a lot of money. In this scenario, how will the party control the fiscal deficit is a question well worth asking. 4) Of course, one way of financing expenditure is to raise revenue in different ways. One way is selling public sector enterprises. The manifesto promises “to disinvest from non-core, non-strategic central public sector enterprises”. Of course, there is no explanation for what exactly is non-core and non-strategic. This goes totally against what the party has done till date, whenever it has been in power. Selling public sector enterprises goes against the entire ethos of what the Congress party stands for. Even with these doubts, the Congress party manifesto makes the right noises on the jobs front. Also, all this becomes implantable if and when the party comes to power. To conclude, manifestos are like the user guides that come with electronic products. Nobody ever figures out how to use an electronic product by reading the user guide. Along similar lines, no voter decides which political party to vote for, after reading the manifesto. (Vivek Kaul is an economist and the author of the Easy Money trilogy.)