In Rahul's name: For Congress, it's back to big-spend projects

It’s been only a little over a week since the government bit the bullet and unveiled a series ofunpopular, but necessary, measures to begin to tackle the bloated fiscal deficit. But already, the diehard populists within the Congress are beginning to lose their nerve about how all this will play out with voters in the next election.

Prime Minister Manmohan Singh may have, in his address to the nation on Friday, set the tone for yet more “hard decisions” to come to fix the macroeconomic frailties, but some of his own partymen are rather more inclined towards taking the easy way out to winning popular approval.So singularly lacking are they in imagination that their only response is to pile on yet more of the same unfunded populism that landed the economy in this god-awful mess.

So, we are already hearing a cacophony of voices from the government and from the Congress, which point to a curious dissonance in the policy objective. On the one hand, as commentator Arvind Subramanian notes in the Financial Times , Manmohan Singh’s recent public pronouncements point to a change in the operating assumptions of Indian politics in favour or growth. The UPA government, which was asleep at the wheel for much of the past 18 months, when India’s economic growth tapered off, has suddenly woken up to the need to rekindle growth.

[caption id=“attachment_464285” align=“alignleft” width=“380”] Prime Minister Manmohan Singh.[/caption]

But it is cramped by the fact that over the past decade (for much of which the UPA has been in power), real government expenditure per capita has doubled, owing to an unchecked spending binge on its flagship rural employment guarantee programmes, farm loan waivers, and subsidies on fuel, fertiliser and power. The government has been just as profligate in pandering to corporate special interests with tax giveaways and duty waivers. The binge went unnoticed so long as the economy was growing at 8 percent plus, but the slowdown means that the government is being bitten at both ends - on the growth and expenditure fronts.

On the other hand, anxiousCongress leaders reckon that even if Manmohan Singh is able to convince the people of the economic compulsions that underlie the “tough measures” he unveiled to cut government expenditure, it will prove politically disastrous. Which is why they’re already making plans.

Last fortnight’s ‘big bang’ announcements to cap subsidies have barely taken effect - and it’s still far from clear whether the proposal for FDI in multi-brand retail will take off, given that even the Samajwadi Party, which is bailing out the UPA government after the Trinamool Congress pulled out, will oppose it. But already, before the fiscal consolidation efforts have even gained traction, plans are being made for yet more big-spend welfare projects.

The blatantly political nature of this big-spend welfarism project comes across in the manner in which Congress leaders are framing it.. The Telegraph, for instance, quotes an unidentified Cabinet Minister as saying that Rahul Gandhi would soon “take over the reins of the party and reiterate its commitment to the welfare of the weaker sections, farmers and the working class.” The draft of the Food Security Bill is being finalised, and will be the showpiece project (without any mention of where the funds for that will come from). And as the Minister points out, Rahul Gandhi will also be given credit for the upcoming appointment of 12 lakh teachers under the Right to Education Act.

Welfare measures are, of course, necessary in a country that still witnesses widespread mass deprivation. But those projects can be better funded only if growth is sustained. It is in this department that the UPA government failed most glaringly.

It says something about our political culture, which thrives on unfunded populism, that it takes a government that is at risk of collapsing anyway to do what it ought to have done in the past three years and more. Any policy action that actually means well can only be taken by stealth.

But there’s also a lesson in this for both the UPA - and the BJP, whose former leader Arun Shourie has broken ranks with the party to welcome the diesel price hike and the other measures as necessary for the economy.

The lesson is this:When leaders lack the courage to make the right policy decisions in good times, they will be compelled to take them under duress in bad times. And thelonger you put off talking to people like they were adults, the more entrenched the vested interests become, and the more difficult it is to change the ’entitlement mindset’.

Shourie, who served in Prime Minister Atal Behari Vajpayee’’s government, is fond of recalling how Vajpayee used to persuade his NDA colleagues when difficult, andpolitically unpopular, policy decisions had to be taken. In a lecture in 2008 on the politics of reforms in India, Shourie recalled:

“During the Government of Mr Atal Behari Vajpayee, I witnessed first-hand how everything in the end turned on what the Prime Minister would decide. Time and again, Mr Vajpayee had to, and did risk, opposition, time and again he staked the continuance of the government on a proposal.

“Again and again, colleagues in the Cabinet would argue, ‘But this will cost us votes… It will alienate such and thus section… People don’t understand the reasons for our pressing ahead with this…,’ and he would respond, ‘To unhe samjhaanaa chaahiye… Desh ke prati bhi hamara kuch daayitva hai’(Then, we should explain things to them… We have a duty towards the country also).

"‘But let us postpone this for two months,’ the critics would persist. ‘The elections in Gujarat are just round the corner… This will have a bad effect…’

"‘Some election or the other is always round the corner…,’ Atalji would say.”

The pity of our political culture is that there aren’t enough leaders - in both the ruling alliance as well as in the Opposition - who will speak up for what is right by the country, even if it means risking short-term unpopularity.