Voter's choice: Mediocrity or prosperity?

India’s economic future will be significantly impacted by the outcome of the general election, for political economy reasons. The economy is flailing, assailed by a triple whammy of inequality, declining prosperity, and structural weakness. Rural distress has been a feature of the economy, accentuated by Covid.

Agriculture, employing 45 per cent of the working population, grew by just 1.8 per cent per annum last year. As a result, 40 per cent of Indians receive subsidised free food. Urban employment languishes. Over 100 million young people are neither working nor in education or training. Hordes of youth waste the best years of their lives competing for a static pool of low-end government jobs or working in the informal sector for pitiful wages, as the share of manufacturing has declined to a low of 13 per cent of gross domestic product (GDP). Like the French Bourbon monarchs, the elites eat their cake inside gated communities, growing fat on capital gains and booming stock markets. Real wages are stagnant, even as crony capitalists spend lavishly and hedge options by transferring their wealth and children abroad.

There is no coherent long-term economic strategy or vision.  Sharply deepening inequality between the North and the South is giving rise to existential political economy questions, which remain largely unaddressed.

In the face of these challenges, the ruling party’s manifesto offers little except gloss and subsidies. It does not even speak of the unemployment challenge or acknowledge rural distress. Only the Home Ministry seems to have a clear strategy on the use of coercive power to implement things promised in the 2019 manifesto. In an interview yesterday, the Home Minister talked of stock market performance and rupee currency settlement as the key economic aims of the next administration, seemingly overlooking the core afflictions of the Indian economy.

On the above track record, no electorate that votes with long or short-term economic considerations in mind in 2024 would deliver the same (or an increased) mandate as it did in 2019.  Hence, if the present administration gets an absolute majority or better, it will be very clear that the economic fortunes of the country have little or no impact on electoral outcomes. Conversely, if a coalition government of any hue comes to power, then, for these very reasons, the opposite will be true: It will be “the economy, stupid”.

What happens then? In 2019, a senior Congress leader dismissed any ideas on structural transformation and asked me to suggest “small economic reforms”. This seems to have changed. The Congress manifesto presents both an acknowledgement and a diagnosis of the structural challenges facing the nation and the need for bold action to reduce inequality, harvest prosperity, and foster social justice. This is reinforced in public statements by elected party leaders.

The Congress and Bharatiya Janata Party manifestos both include the usual promises of subsidies and reservations for different socio-economic groups. While these measures are necessary, they are not sufficient to tackle the structural challenges. On agriculture, the Congress makes important proposals to reform agricultural finance, frame a sound agriculture import-export policy, and tackle the thorny minimum support price question. It particularly acknowledges the land question, and recognises the need to restore the balance between labour and capital amidst declining real wages and a rising share of profits. The best proposal is to provide a year of paid apprenticeship on demand to every diploma holder and college graduate to improve the quality, breadth and employability of the workforce.

The DMK is the other party that presents a coherent social justice manifesto, with specific proposals to improve manufacturing and high-value service jobs, building on past human development and growth achievements.

These are promising beginnings, but much more needs to be done. Financing is not the problem — to paraphrase Keynes, “If you can do it, you can afford it.” Even Rs 1 trillion spent on the apprenticeship proposal will yield massive returns if it creates skills for jobs. A stable, high-productivity agricultural sector has the potential to convert a perceived liability into a tangible asset for inclusive growth, as will social justice measures that remove barriers to human development and participation. The key lies in ensuring  that these measures are implemented substantially. Ragged progress, similar to what we saw with the National Rural Employment Guarantee Act (NREGA)  and the Sarva Shiksha Abhiyan, will neither be acceptable nor affordable going forward.

There is no shortage of other big-ticket policy ideas. My own proposal of “Jahaan ghar wahin naukri” (jobs where people live) will address both the migration problem and the North-South divide, and could form the basis for a renewed national political settlement. An urban NREGS coupled with the release of government land towards achieving a slum-free India, a renewed focus on manufacturing to meet home market demand, stopping import of Rs 200 shirts from Bangladesh and Vietnam, and a focus on pro-poor infrastructure (bus stations over airports, pavements over freeways) resonate with grassroots workers across political parties.

This election is key. The present day voting population is deciding whether economic transformation will determine its electoral choice. If it chooses otherwise, it will have chosen economic obscurity and mediocrity over prosperity and inclusive transformation. Its decision on June 4 will reflect the outcome of our collective vote. 

The writer is visiting senior fellow, ODI, London, and former member, Economic Advisory Council to the Prime Minister of India