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Lasque Tiarc

We need consensus on growth and job creation

Vaseline 2 months ago

As usual, election fever has gripped the country. Perhaps no other country can match our noise, energy and party atmosphere during elections. If we ignore the noise and rhetoric, the two biggest challenges we face as a nation are maintaining high economic growth, generating employment, and ensuring that the fruits of growth reach most of the population.

We are a large, diverse, complex democracy with enormous poverty, ignorance and unemployment. In a centralized polity with poor service delivery, it is difficult for voters to recognize the connection between their vote and their future. In such an environment, short-term incentives and individual prosperity will be attractive to a large number of voters. John Maynard Keynes once said, “In the long run we are all dead.” Democratic politics cannot be viable if the focus is only on the long-term public interest; But if the focus is only on short-term individual benefits at the expense of the long term, then society will remain mired in poverty and backwardness.

“Wherever you have doubts…. Think of the face of the poorest and weakest man you may have seen. Ask yourself. …Will it (the step you are considering) give him back control over his life and destiny? In other words, will it lead to Swaraj for the hungry and spiritually starved millions? Then you will find that your doubts melt away and you melt away.” Gandhiji’s Talisman was a very demanding and unattainable standard in a flawed democracy where ‘power at any cost’ has become the mantra.

When many people are poor and disadvantaged, voters are likely to focus on short-term maximization. Time and time again, we have witnessed short-term individual prosperity (ISW) exceeding the promise of long-term economic growth and collective well-being. In 2004, most analysts and experts were confident that the NDA would return to power with Atal Bihari Vajpayee as Prime Minister. But Congress’s promise of ISW exceeded the prospect of infrastructure, public goods, and growth.

But ISWs that do not pursue growth are not sustainable and will be counterproductive by perpetuating poverty. Rapid growth not only frees large groups from poverty, but also generates additional income that makes more welfare measures possible. If there is no growth, prosperity will have to be financed through loans. Borrowing more leads to more interest charges, leaving fewer and fewer resources to spend on prosperity. Ultimately, we will enter a debt spiral, where we will borrow more and more to repay past debts. That is the crisis facing Sri Lanka, Pakistan, Zimbabwe, Venezuela and many other countries.

What’s the way out? We must find a balance between prosperity and rapid growth. We need individual welfare measures to ease the pain of poverty, maintain social stability and peace, and include all sections of society in our democratic polity. And we need fiscal prudence to save money and build infrastructure, and take whatever steps are necessary to boost entrepreneurship, investment, prosperity and jobs. Only then can we permanently lift people out of poverty and give every child the opportunity to realize her potential and enjoy freedom, dignity and a decent life, regardless of circumstances of birth or parental wealth.

From 1991 to 2014, there was broad consensus on economic growth. Although there were many other policy differences between successive governments, there was consensus on growth. As long as the main contenders for power agree on fiscal prudence, infrastructure and economic growth, we will be safe as a country regardless of who is elected.

In the post-2014 period, Congress, which announced economic reforms, appears to have given up on growth. There is an ever-increasing and exclusive dependence on ISWs, with fiscal prudence, infrastructure, entrepreneurship and growth largely ignored. This poses a great danger to our polity and our economy. Many people expect a third term for the NDA under the leadership of Mr. Narendra Modi. Regardless of the election outcome, we must realize that no party or individual will remain in power forever. In democratic politics, the main opposition is the government in waiting. If consensus on prudent fiscal policy and growth promotion eludes us, the country is in potential danger.

There is now a real opportunity for sustained high growth for an extended period. This will be undone if the two major political formations indulge in competitive populism and a race to the bottom. Unrealistic social spending without budgetary leeway, loan waivers, withdrawing from labor law reform and introducing legislation on compulsory purchase of grains at unsustainable prices are a recipe for budgetary disaster and stunted growth. To promote employment-related incentives, infrastructure, investments and the establishment of small towns as hubs of economic growth on the spot urbanization and absorbing low-skilled rural workers in the non-agricultural sector, quality healthcare and improving school education outcomes and skills are the way forward. Approximately 13 million young workers enter the labor market every year. We need to grow the economy and create jobs to ensure that the fruits of growth reach those who need them most. Poverty is eradicated by raising incomes, creating jobs, improving quality of life and helping people take control of their lives and destinies. Whatever combination is chosen, we need all mainstream parties committed to prudent fiscal policies, investments, economic growth and job creation. Only then will our future be safe.

The author is the founder of the Lok Satta Movement and the Foundation for Democratic Reforms. Email: [email protected] / Twitter@jp_loksatta

Published: Monday, April 22, 2024 06:00 IST