Equating BJP with Congress is disingenuous!

A wake up call for the ‘fence sitters’

It is a common refrain by the “politically neutral” fence sitters to equate BJP and Congress under the bracket “sab neta chor hain”! While we can definitely argue over the magnitude of corruption between the parties, there is no denying that there are rogue elements in both the parties who indulge in corruption that narrows the apparent credibility differential between the two parties.

On the other hand, the difference between BJP and Congress, on the economic policy front has widened significantly in the last 9 years of UPA rule. The failure of the “fence sitters” to recognize this difference is causing immense damage to the country depriving / delaying millions to emerge out of abject poverty.

Post 1991 liberalisation era, there was a broad alignment between these two mainstream parties on the direction in which the country will move on the economic reforms front – dismantling of the licence raj, free trade, lower and stable taxes, disinvestment, fiscal discipline, liberal access to capital, government spending in basic infrastructure, etc., all of which can be broadly classified as “right of centre” economic policies. However, the Congress has made a complete U-turn on this reform process and its current economic policies are almost indistinguishable from that of CPI or CPM! If you think that is hyperbole, please read along to judge for yourself!

Key achievements of both parties highlights the contrast

Let us take a look at the Top 5 “achievements” of the NDA government (1998 – 2004) and the UPA government (2004-2012).

Top 5 achievements in Economic Policy issues – NDA regime

• Golden Quadrilateral funded thru Re. 1 cess on Petrol
• Successful disinvestment of several PSUs– VSNL, Maruti, Balco etc.
• Dismantling Administrative Price Mechanism in Petroleum (all except LPG and Kerosene out of APM then)
• Power sector reforms – Ahluwalia Committee recommendations implemented
• Maintained inflation & interest rates at healthy levels

Top 5 achievements in Economic Policy issues – UPA regime

• National Rural Employment Guarantee Act
• Farm Loan waiver
• Direct Cash Transfer of Subsidies
• Right to Education
• Food Security Act

Before we analyse the difference in the policy framework between NDA and UPA, let us see the current status of the achievements of the NDA regime.

Baby with the bath water! How UPA is dealing with NDA’s flagship programmes…

Table 2: India National Highway addition statistics since 1951

Table 3: Inflation statistics during NDA and UPA regimes

Source: http://planningcommission.gov.in/data/datatable/2504/databook_1.pdf

Essentially, UPA has completely run aground the reform initiatives taken by the NDA regime, and even worse, has undone the reforms in some instances like Petroleum sector.

Essential difference is “Right of Centre” Vs. “Left of Centre” economics!

Let us contrast the guiding policy framework behind the key achievements of the NDA and UPA:

• Every achievement of the UPA regime has a distinct “leftist” flavour in contrast to the achievements of NDA regime that are more structurally reform-oriented.
  • For e.g., the amount of money spent on MNREGA, for instance, could well have been used to create national infrastructure of very high calibre (such as Golden Quadrilateral), which could result in significant and sustainable economic progress. World Bank estimates that every Rupee spent to create a highway results in Rs. 7 of economic activity. In contrast, Jairam Ramesh’s statement “Kitna Gaddha Khodoge?” (How many ditches will you dig?) aptly describes the state of affairs of MNREGA. The unintended consequences of MNREGA, such as availability and cost of labour, have also created immeasurable damage to the industry and the agriculture sector!
• The achievements of UPA are all hinging on doles given by Central Govt to people directly (such as farm loan waiver, NREGA or DCT). In contrast, the policy initiatives of NDA regime were all designed to create a healthy economic environment in which various sectors can thrive and thereby generate employment as well as revenues to Government.
  

The Bane of Left of Centre ideology

Most of us do not fully appreciate the impact of this “left of centre” ideology on our day-to-day lives. Let me give a small example.

In June 2003, after much negotiations and haggling with Airports Authority of India (AAI), the then NDA Govt. got into an understanding with AAI, that four metro airports viz. Bangalore, Hyderabad, Delhi and Bombay will be privatized, and two metro airports viz. Chennai and Kolkata would be expanded by AAI itself. Now, the stark difference is in front of us to see. All the 4 privatized airports are up and running for a few years now, while Chennai and Kolkata modernisation are yet to see the light of the day, with significant cost over-runs (on taxpayer’s money) and time over-runs (economic cost of which is immeasurable!).

The impact on our day-to-day lives will be similar to the airport story, when the time comes to foot the bill for the Food Security Act! Or when the Right to Education policy starts hurting when private schools become unviable and shut shop! (Please read http://realitycheck.wordpress.com/ for the country’s most comprehensive analysis on RTE and its disastrous impact on us!)

And the impact is for everyone to see…

The state of affairs of some of the key sectors then and now, given below, is a direct outcome of the wrong ideology and flawed implementation of the UPA regime! While some of it can be attributed to malfeasance such as corruption, most others are due to wrong priorities of the government in spending its precious resources on wasteful social expenditure programmes such as MNREGA.

• Contrast the way the Telecom sector has thrived during the NDA regime versus the telecom sector’s woes today! A shining example of India growth story that has been completely run aground. “This has been the most destructive period of regulatory environment I have seen in 16 years” – the exasperated voice of Mr. Sunil Mittal of Airtel captures the essence of the UPA government.
• Contrast the way the Airline industry grew because of opening up of the sector during NDA regime, and the sorry state of affairs of the airline industry today! Back-crushing taxation levels, government apathy, a monstrous government airline that is run without any economic incentive for profits and an unhelpful policy environment has resulted in the sector reporting losses of over Rs. 10,000 crores! Read a separate column in CRI on how UPA ran aground Aviation Sector
• We have already seen the state of the Power Sector and Roads Sector then and now!
• Textile industry was touted to give a run for money to their Chinese counterparts then; the less said about the sector now, the better!
  
• Microfinance sector was thriving and was thought of as a panacea for the woes of the bottom half of the pyramid then! Strangulating regulations has brought this sector to a near grinding halt now!
  
• Over 7 lakh crore worth projects are stuck at various stages of implementation because of two key reasons: challenges in land acquisition and environmental clearances. The government has successfully brought back the licence raj in the form of environmental clearances. And the really sad part is that there is absolutely no sense of urgency by the Government to resolve these issues either way!
• This list can go on and on.

Targeted Social Spending

Lest someone accuse the “Right” of being only “pro business” or unfair to poor, no one is grudging either targeted subsidies to the poor or investments in social infrastructure such as in water, sanitation, primary healthcare or education. In fact, the Antyodaya Anna Yojana, a programme that targets poorest of the poor (bottom 5% of the population) was launched by NDA regime, which has provided much needed succour to the most deserving segment of the population. Such targeted schemes are likely to yield much higher social dividends than one-size-fits-all schemes such as farm loan waiver!

Conclusion

The biggest contrast between the NDA and the UPA regime can be summarized thus: “give a fish to eat today (UPA policies of doles for vote bank politics)” is disastrous for the country in the long run compared to “help them learn fishing (NDA policies of creating an enabling economic environment)”! But some parts of the electorate may be tempted to take the fish today, than earn their livelihood in a sustainable manner. Taking this message to the masses is the greatest challenge in front of us! The fence sitters, many of whom can understand the difference and appreciate the long term consequences of such policies, are doing a great disservice to the country by equating BJP and Congress!