Congress must spell out macro vision on its new economic model
The Congress party must be clear where it stands on reform, redistribution and regulations.Updated: May 13, 2019 08:04 IST
The Congress president, Rahul Gandhi, in two recent interviews, has indicated that the economic model which worked well in the 1990s, then between 2004 and 2009, had broken down by 2012. He acknowledged that the United Progressive Alliance (UPA) government’s mistake was to continue with the model after that, and claimed that even former Prime Minister Manmohan Singh had told him in a private conversation that the model had run its course. Mr Gandhi believes that Prime Minister Narendra Modi’s mistake has been continuing with the same model, which explains what he considers the economic mismanagement of the last five years.
This is among the most significant, but also intriguing, statements Mr Gandhi has made in the course of the campaign and needs careful thought. When he speaks of the 1990s model, which he accepts led to great benefits too, one assumes he is talking about economic liberalisation, and lifting restrictions which allowed the Indian private sector to grow, India to get more economically integrated with the global economy and a middle class to flourish. When he speaks of the post-2004 model, one assumes he is referring to the addition of major social welfare initiatives like National Rural Employment Guarantee Act to the liberalisation mix in the spirit of creating inclusive growth. This was in response to the critique that the set of economic policies followed in the 1990s had exacerbated inequality and not taken care of the poorer segments of the population.
What part of this model does Mr Gandhi thing broke down? In 2012 - the break off point for him - India was reeling from allegations of crony capitalism. The government was accused of policy paralysis, investments began dipping, and economic parameters began stumbling. Does he believe that a relatively liberal economic regime created conditions for this kind of corruption and stasis? And if that is the case, is Mr Gandhi suggesting a return to the pre-1991 form of heavy regulation in the economy and a drastic increase in State intervention? If that is so, the Congress may end up throwing out the baby with the bathwater because even if Indian capitalism has major problems, there can be no doubt that India needs more reforms, not less. Or does Mr Gandhi merely mean that the country needs more welfare initiatives in the form of schemes such as Nyuntam Aay Yojana (Nyay), which the party has promised this time around? If this is the case, the Congress needs to think more carefully about how it plans to increase growth that will allow better redistribution. If the Congress does return to power, Mr Gandhi’s “new economic model” could well be its most significant departure. But the party needs to first be clear itself about what the components of this model are and explain to the electorate, in greater detail, its diagnosis of the ‘broken’ old model and road map for the future.
First Published: May 13, 2019 08:04 IST