Liberalisation is identified with the Congress government of PV Narasimha Rao, but the United Progressive Alliance (UPA) led by the party had failed to take forward that legacy. Instead of deepening reforms, the UPA, under Sonia Gandhi, had focussed on a rights-based welfare framework.
Apart from allowing for a well-intentioned insolvency and bankruptcy paradigm that is unfortunately already in danger of getting diluted, the Modi government contributed little to restart far-reaching reforms. A peculiarity of the right-wing Bharatiya Janata Party (BJP)-led government’s economic strategy is that rather than market forces and private enterprise, growth is dependent on state levers — public investments in infrastructure and a model of redistributive schemes such as those for houses, toilets and other handouts to the disadvantaged.
Today, therefore, the political consensus on growth-enhancing second-generation reforms has weakened considerably. The 1991 liberalisation, it was hoped, would see the policy framework graduate from being pro-business to pro-markets. But the task remains incomplete. While some progress has been made in those areas where the business class stands to gain, the reforms that would benefit the masses – such as labour and agrarian reforms – mostly remain pending.
This lopsidedness has meant that vast swathes of the Indian population — informal sector workers that constitute more than 90 per cent of the work force and rural Indians — continue to remain on the margins of the market economy. They can participate in its as consumers but as producers of goods and services they do not enjoy level playing field and have low bargaining power. The income-enhancing gains to them from the reforms process remain limited which is why both the Congress and the BJP are competing to woo them with vote-catching fiscal compensations such as PM-Kisan and Nyuntam Aay Yojana (NYAY).
In a democracy that still has a large number of poor people, poverty alleviation and social welfare are bound to figure in economic policy resolutions of parties whether on the left or the right. But leaving aside the headlines-grabbing NYAY, what does the Congress Party’s Manifesto for the 2019 Lok Sabha elections tell us about the party’s economic position?
The document suggests that the party wishes to signal its return to the centrist economic ideology, away from the Left philosophy, which had defined most economic policies of the two UPA governments.
The Congress economic philosophy, the document avers, is based on embracing the idea of an “open and liberal market” economy in which growth is driven by private enterprise that co-exists with a viable public sector.
The party reaffirms faith in the criticality of high and sustained economic growth measured by GDP. In the words of former Prime Minister Manmohan Singh, who spoke at its launch, the manifesto spells out a vision for a “purposeful modern market economy”.
Research shows high growth, especially in the farm sector, is usually the best poverty alleviation programme in an economy. The economic strategy promised gives centrality to high growth. The document makes the right noises on this front and backs it up with policy positions consistent with such thinking on taxation and regulation.
The manifesto’s key proposals are from centrists: Reform of the Goods and Services Tax (GST) and freedom from ‘Inspector Raj’ for micro and small enterprises for three years. The party is promising to exempt them from all applicable laws and regulations (except the Minimum Wages Act and tax laws) for a period of 3 years from 1 April 2019 or, in the case of new businesses, the date of commencement of business.
The promise includes stipulating filing of only one “simple, single quarterly return and an annual return” by a GST taxpayer. More importantly, it includes subjecting a tax payer to assessment by a single authority based upon turnover. This should be music to exporters, small companies and MSMEs. It speaks of a complete withdrawal of the Angel Tax imposed on Start-Ups.
The document recognises that the economy remains over-regulated and held back by structural problems. Government and bureaucrats have still not given up economic controls and discretion. Increasingly, there is interference in economic policy by courts. Regulators have begun behaving like controllers. “Unless we are vigilant, government has a tendency to interfere with markets as well as re-acquire control over trade, industry and business.” The party promises to correct these distortions so that a liberal market economy can be restored. This is not the language of the Left economic ideology.
The manifesto resolves to get government out of “gratuitous interventions” in the market and shift focus to building capacities for addressing market failures, regulation, taxation and delivery of public goods and services such as health and education.
In this, correction of failures in capital markets and banking are on its to-do list, but the party is silent on the freeing up of labour markets so that workers can gain bargaining power lost completely to employers. There is a hint of agrarian reforms to remove market distortions in prices of farm produce, but details are missing.