One of the most piquant moments in independent India’s political history is the Communist Party of India (Marxist) or CPI (M) refusing the offer of the prime minister’s post for its leader Jyoti Basu in 1996. When this offer was made by the so-called United Front constituents, Basu had been the chief minister of West Bengal from 1977 onwards and was among the tallest leaders in the country. While many in the Polit Bureau (PB) of the CPI (M) including Basu himself were in favour of the idea, the Central Committee of the party – it is the highest decision making body between two party congresses – shot down the offer. Basu later described the decision as a historic blunder.
Why did the collective leadership of the CPI (M) refuse the offer? The logic given by the CPI (M) was that its limited parliamentary strength would not have allowed it to control the government’s policies. Accepting the prime ministership would have only diluted the party’s politics, the argument went. Lest people think it was a bizarre line, the CPI (M)’s original party programme of 1964 is categorical in saying that even forming a government within the “bourgeoisie landlord” framework of the state “would not solve the economic and political problems of the nation in any fundamental manner” and such (state) governments could at best “give limited relief to the people and strengthen the mass movement”.
Why is this column discussing historical (and perhaps now irrelevant) theoretical debates within the CPI (M) while claiming to discuss the growing problem of freebies? We will come back to answer this question later.
This column discussed the problem of freebies exactly a month ago. Since then, the subject has received much more attention, especially after N K Singh, the chairman of the 15th Finance Commission, spoke about it in his lecture at the Delhi School of Economics. Writing in these pages last week, Chanakya noted correctly that the problem of freebies cannot be solved without a new federal compact which prevents political competition from mutating into economic recklessness.
{{/usCountry}}This column discussed the problem of freebies exactly a month ago. Since then, the subject has received much more attention, especially after N K Singh, the chairman of the 15th Finance Commission, spoke about it in his lecture at the Delhi School of Economics. Writing in these pages last week, Chanakya noted correctly that the problem of freebies cannot be solved without a new federal compact which prevents political competition from mutating into economic recklessness.
{{/usCountry}}Let us ask one more question. Would the growing freebie culture be a problem if the Indian state, both at the level of union and the states, had infinite resources at its disposal?
While some philosophers can still scoff at the provision of such benefits thinking about the larger problems of incentives or morality, this should not bother those who are more concerned about the fiscal unsustainability of such populism. Policymakers and academics are concerned with a growing freebie culture because the Indian state does not have the material wherewithal to keep throwing money at voters to win their support.
What this column will argue today is that this problem is a reflection of a larger crisis in India’s political economy framework and is a reflection of the fact that India’s political contract has reached a critical threshold of sorts, where the task of achieving democratic sanctity (an electoral majority) cannot be completed without compromising the financial sanctity (fiscal prudence) of the state. The former is necessary because India continues to be a country of deep income inequality and an overwhelming majority of our voters have very little incomes.
Is offering freebies to the ‘have-nots’ the only game in town as far as this balancing act is concerned? Even a cursory history of India’s post-independence politics shows that this is not the case.
When India attained independence, the Congress was the national hegemon. The Congress’s political legitimacy rested on three pillars.
First was the co-option of the domestic capitalist class, which received a promise that the Indian state would protect it against competition from global firms and provide help in the development of a domestic capitalist base. The Bombay Plan document is the clearest articulation of this policy where India’s biggest capitalist houses asked that the state play a leadership role in the economy. Contrary to what is believed today, the choice of state-led economic model after independence had widespread acceptance among business leaders. The second was an olive branch to rural landed interests by nullifying all attempts to undertake any radical redistribution of land. These people were the actual boots on the ground when it came to vote mobilisation for the Congress. The third pillar was the popularity of the Congress leadership, most importantly Jawaharlal Nehru, whose progressive rhetoric often swayed the masses against the Congress’s material tilt in favour of the capitalists and landlords. It was largely the third pillar which prevented the communists from emerging as serious challengers to the Congress except in the state of Kerala and later West Bengal.
To be sure, the Congress was not successful in maintaining this fine balance to secure its political fortunes for very long. By the late 1960s, there was a serious challenge to the Congress’s political hegemony in many parts of the country. However, the challenge when it emerged, came from largely a caste perspective rather than purely class one. As Other Backward Classes (OBCs) gained a foothold in politics – it was only a matter of time in a universal suffrage system given the OBC dominance in population – the Congress started losing ground in key states.
The communists have always been blamed for failing to see this caste resurgence, and party rightly, for their class programme not being completely in sync with OBC resurgence, given the large land ownership the latter group enjoyed in villages. It is not surprising that the resurgence of OBCs and intermediate caste politics saw the rise of demands benefitting the rich peasantry (best characterised by leaders such as Charan Singh) and for reservations (which culminated in the Mandal Commission report). Both these demands were more about asking for a greater resource share from the state for relatively well-off sections among the subalterns rather than pushing for a completely egalitarian redistribution, which is what the communist variety of politics had been championing.
This kind of politics dominated the political economy scene until the effect of economic reforms fully set in a couple of decades ago. With agriculture getting mired in a deep-rooted crisis and losing its attraction as land holdings became fragmented, rich peasant politics lost its earlier traction. The state’s withdrawal from various economic activities led to a shrinkage in the overall employment benefits of which reservations were to guarantee a greater share. While the demand for reservations continues to proliferate, it is driven more by desperation than any conviction in the belief that it would lead to a fundamental transformation of the socio-economic hierarchy. The latter was the driving force behind the politics of leaders such as Kanshiram, who founded the Bahujan Samaj Party after leading a union of government employees belonging to the social deprived sections.
It is in this backdrop that the demand for widening of the state’s welfare – there is a thin line between welfare and freebies –needs to be seen. This trend enjoyed the biggest legitimacy during the term of the United Progressive Alliance (UPA) government in India, which brought legislations such as the MGNREGS and the National Food Security Act that significantly increased welfare commitments of the central government. The reason the UPA did not run into a crisis while doing this was that the Indian economy was having a dream run under the first UPA government. Manmohan Singh described this policy framework as “capitalism with a human face” in a 2009 interview to the Financial Times.
UPA’s 2009 electoral victory was perhaps the biggest vindication of the fact that a mix of healthy growth and welfare benefits can win elections in India. This was music to the ears of Indian capital as well, as it did not have to fear a proliferation in class actions like the old times. As long as the state was taking care of the class angst – by then inequality was a big issue in India – rather than allowing it to be directed against big business, capitalists were fine. The other advantage of this kind of framework was that it allowed political parties, both in the Centre and states, to make compromises with the local elite in terms of fielding candidates etc. A political party could field a moneyed candidate (and only because he was moneyed), yet be seen as pro-poor as long as it was delivering on welfare.
In many ways, the post-2014 phase of Indian politics, where the Bharatiya Janata Party (BJP) emerged as the clear national hegemon, has tried to keep this political economy strategy of offering welfare benefits for the poor and placating big business interests going. BJP’s large gap in terms of political funding vis-à-vis other parties is just one manifestation of its support among India’s big business.
If anything, the BJP has only expanded the realm of welfare benefits which now includes everything from toilets to tap water. The renewed rush among non-BJP parties to offer more freebies in states is nothing but a desperate ploy to survive the political squeeze the BJP has created through its new kind of welfare politics, which works under the rhetoric of ‘double-engine’ government.
What has complicated matters, however is the fact that India’s growth performance is significantly worse today. The Indian economy grew at just 3.7% in 2019-20, the pre-pandemic year. There is no credible projection which sees a double-digit growth for India in the medium term.
With a slowdown in growth amidst growing pressure to keep welfare schemes going, both the centre and the states are feeling the heat. While states are running the risk of going belly up on the fiscal sustainability front, the Centre is finding it increasingly difficult to adequately finance its primary commitments such as national defence with leftover resources after meeting its welfare commitments. The report of the 15th Finance Commission offers a useful insight into these growing federal tensions.
While the BJP would like to claim a high moral ground on the freebie front, it is equally prone to using them when needed. The fact that the Modi government announced the PM-KISAN scheme with retrospective effect after its loss in the 2018 election cycle in Madhya Pradesh, Chhattisgarh and Rajasthan is just one example in favour of this argument.
Will India ever reach a state of economic development where these freebies stop appealing to the population at large? The only way it can happen is when the domestic economy experiences high and egalitarian growth. Even if high growth were to materialise, chances of it being egalitarian are extremely unlikely, given the rapid increase in capital intensity in manufacturing and the growing use of automation even in services, replacing not just unskilled but even semi-skilled labour. The weaker the growth recovery and more unequal the growth, the greater will be the pressure on freebies. This is bound to put a growing squeeze on the fiscal health of the state.
The growing demand for freebies and the danger this poses to our fiscal sustainability is the second major failure -- the first being subaltern politics of the caste variety -- of Indian polity in bypassing the inherent class contradiction in Indian democracy where a handful of elite have been ruling with widespread democratic support from the overwhelming majority of poor without any serious threat of a class conflict breaking out. Just as demand for reservations mutated into everyone demanding it for themselves without any conviction about its transformational benefits, the freebie culture is bound to mutate into a vulgar race to throw money at voters without solving what is a fundamental problem of inequality.
In a utopian world, political parties would emulate what the CPI (M) did in 1996: refuse to join or lead governments citing a fundamental inability to provide relief to the people rather than bear the ignominy of vitiating the political culture and hollowing the state by encouraging the freebie culture. However, politics is rarely practiced in an ideal world and even those who seek high moral ground rarely come out as winners in realpolitik. The CPI (M) is the best example for this argument. While it did justice to its stated principles by not accepting the Prime Minister’s post in 1996, its inability to navigate the difficult terrain of India’s post-reform class contradictions has made it an almost extinct political force outside the southern state of Kerala.
India never had the risk of a communist revolution and the state of the communist left today makes even talk of a revolution sound preposterous. However, the mere absence of the communists does not negate class-contradictions in a democracy which has massive economic inequality along with universal franchise.
The problem of freebies is yet another reflection of this contradiction. To be sure, our founding fathers were wise enough to see this problem. B R Ambedkar’s last speech to the Constituent Assembly is worth quoting to end this column.
“On the 26th of January 1950, we are going to enter into a life of contradictions. In politics, we will have equality and in social and economic life we will have inequality. In politics, we will be recognising the principle of one man one vote and one vote one value. In our social and economic life, we shall, by reason of our social and economic structure, continue to deny the principle of one man one value. How long shall we continue to live this life of contradictions? How long shall we continue to deny equality in our social and economic life? If we continue to deny it for long, we will do so only by putting our political democracy in peril. We must remove this contradiction at the earliest possible moment or else those who suffer from inequality will blow up the structure of political democracy which is Assembly has to laboriously built up.”
Every Friday, HT’s data and political economy editor, Roshan Kishore, combines his commitment to data and passion for qualitative analysis in a column for HT Premium, Terms of Trade. With a focus on one big number and one big issue, he will go behind the headlines to ask a question and address political economy issues and social puzzles facing contemporary India.
The views expressed are personal