The Hindu : Opinion / News Analysis : Will there be inclusive space and depth?

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Sunday, May 16, 2004

Opinion

Opinion - News Analysis

Will there be inclusive space and depth?

Economics explains why the Congress won handsomely and the BJP lost, says G. Ramachandran.

The Congress president, Sonia Gandhi, will look to Manmohan Singh to guide the economy.

EVERY ELECTION to the Lok Sabha and to the State Legislative Assemblies since 1952 has contributed to India's search for space and depth for its people. The election to the 14th Lok Sabha is part of this ceaseless search for space and depth in social engagement and in economic exchange. But elections are a relatively new method for this search. There have been merely 14 general elections since the time India became independent.

Other models of social and economic governance have facilitated the search for space and depth in the past when India was not a democratic republic. If they had not been effective, India could not have earned the distinction of being one of the oldest living civilisations of the world. The ancientness of its civilisation is indeed a formidable characteristic of this nation that is merely 57 years old.

Nationhood, the republican constitution, political parties, the intense rivalry among them and general elections are new to India. Nevertheless, it offers everything that a robust democratic republic should offer. Every woman and man above the age of 18 who is a citizen and who was fortunate not to have her or his name axed from the electoral rolls could have voted in the recent elections.

More than 350 million women and men did that. Egalitarianism and the equality of the sexes came easily to India's architects who drafted the Constitution. The winners and the losers of the 2004 elections have an opportunity to perpetuate these.

Assessing the 2004 elections

The elections held in April and May 2004 and their results could be evaluated in a manner that is consistent with India's formidable reputation as an old civilisation and a modern democratic republic. Old civilisations have an extraordinary advantage in carrying themselves into the future. Their experience in evolving and adapting models of social engagement and economic exchange is the sole resource they carry with them through many millennia.

The social codes provide the enabling environment for people to live amidst others without hurting them. If people will find the right reason to desist from hurting others, they would have found the right and rightful means to perpetuate themselves. Will Durant, the remarkably talented historian, wrote that no society can survive if it allows its members to behave towards one another in the same way that it encourages them to behave as a group toward other groups. Internal cooperation is the first law of external competition. Hence, live-and-let-live ideas are part of civilisation. They do not belong to showy pop cultures and to political coalitions.

The economic codes provide the incentives for people to specialise in useful skills and then exchange economic value among one another. People are seldom born or raised with a set of homogeneous skills and aptitudes. Homogeneity is a threat to a people that need the miller and the baker but will have to make do with an inexhaustible supply of millers or an inexhaustible supply of bakers. Heterogeneity is an enabling gift when people can find many millers and bakers.

The gift becomes invaluable when competing millers will choose to offer bakers the best flour at the lowest prices without jeopardising themselves. Heterogeneity's value surges further when competing bakers will choose to offer citizens the best bread at the lowest prices without running their business to the ground.

Live-and-let-live economic codes belong to modern supply chains. Political parties and coalitions will have to know how best to nurture their heterogeneity, volition to compete, volition to cooperate and, above all, their profitability.

Winning in the land of opportunity

The results of the 2004 elections have shocked the National Democratic Alliance (NDA) led by the Bharatiya Janata Party (BJP) and pleasantly surprised the Indian National Congress (Congress) and its electoral and ideological allies. The BJP has said it is stunned. The Congress has said that it had hoped to win but had not expected to win. Hope plays a big role in politics and economics.

Above all, the emergence of Sonia Gandhi as the most probable Prime Minister to succeed the BJP's leader, Atal Bihari Vajpayee, shows that India is a land of opportunity. The road to success may appear daunting but those that are determined would be rewarded.

India offers immense space for the demonstration of leadership qualities. Ms. Gandhi moved into this space when she was elected Leader of the Opposition.

India will certainly showcase its modernity if Ms. Gandhi were to become the Prime Minister of India and its Head of Government. It would show how cynically wrong racially prejudiced leaders such as Pauline Hanson of Australia are.

Ms. Hanson protested against the assimilation of foreigners — especially non-whites — into Australian society and wanted constitutional action against their inclusion. Ms. Hanson contested an election but failed. How fortunate the world is because Ms. Hanson failed and because Ms. Gandhi is on the pinnacle of a significant and inclusive success!

`India Shining' was not a gimmick

Most elections in the past have been characterised by the dominance of the social dimension. The elections in 2004 were different because the NDA chose to highlight its economic achievements. The inclusion of the economic emphasis has softened but not suppressed the social emphasis. This explains why the Congress has won handsomely. This explains why the BJP that had been assumed to have contributed the most to the growth impetus fell far below expectations.

Between 1999 and 2003, 16 States and Pondicherry governed by the Congress or by its allies outperformed those governed by the BJP and its allies. The 16 States were Arunachal Pradesh, Bihar, Chhattisgarh, Delhi, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Nagaland, Punjab, Rajasthan, Tripura, Uttaranchal and West Bengal.

The list excludes Assam, Haryana, Tamil Nadu and Uttar Pradesh. It also excludes Andhra Pradesh, Goa, Gujarat, Himachal Pradesh, Jharkhand, Mizoram, Orissa and Sikkim. These have either been governed by the BJP and its allies; by the Congress and its allies but not throughout the 1999-2003 period; or by parties that were not the Congress's allies while in power or are no longer regarded as allies. Tamil Nadu is an example of the third category. When the Dravida Munnetra Kazhagam (DMK) was in power between 1999 and 2001, it was an ally of the BJP. The All-India Anna Dravida Munnetra Kazhagam (AIADMK) has been in power since 2001, but is now an ally of the BJP.

Though the Congress disassociated itself from the `India Shining' campaign launched by the NDA, there is empirical proof that the Congress has worked as much and perhaps better to make the shine happen. Per capita purchasing power of States in the Congress portfolio increased by Rs.7,651 while that in the `other than Congress' portfolio increased by Rs.6,264. The average per capita purchasing power for India increased by Rs.7,024. If the Congress had done as poorly as the NDA, India may not have been shining!

The victory of the Congress and its allies in Bihar, Delhi, Kerala, Maharashtra (almost 50 per cent of the constituencies), Pondicherry, Tripura and West Bengal is not surprising. The defeat inflicted by the Congress and its allies on their opponents in Assam, Haryana, Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Gujarat, Himachal Pradesh, Jharkhand, is not surprising either. The Congress has the opportunity to show how better it can do and what timeframe it requires to push purchasing power higher and across India.

National poll, local plots

The electorate of States such as Andhra Pradesh and Tamil Nadu had much to gain by voting for the Congress, for its empirically proven economic emphasis and social emphasis. The Congress got 33 of its 145 seats — a whopping 22 per cent — from Tamil Nadu and Andhra Pradesh by scoring wins over the AIADMK and the Telugu Desam Party, both local parties.

The significant victory of the Congress over its local party rivals and some national parties that are its potential allies raises important questions pertinent to the vulnerability of the coalition government that would be soon formed by the Congress.

Consider the following. The BJP has won 109 or 79 per cent of its 138 seats in head-to-head contests against the Congress. By contrast, the Congress has won 76 or 52 per cent of its 145 seats in head-to-head contests against the BJP. The Congress has won almost half its seats in contests with local parties and current and potential allies.

Both the BJP and the Congress are national parties that constitute India's two-party system — the two-party system is supposed to offer many advantages — into which other parties can channel their rivalries or cooperation. Though the Congress is the older of the two, it is more vulnerable to divergent opinions in the context of national and local issues.

At the same time, the Congress is vulnerable to conflicts of interest with the Left parties in Kerala and West Bengal and other local parties such as the Samajwadi Party and the Bahujan Samaj Party in Uttar Pradesh. The Congress appears to have won a national mandate. But the mandate is in effect a series of local mandates. Local plots that may include some conflicts of interests with some of its allies and potential allies could curtail its degrees of freedom. The BJP, by contrast, can exercise all degrees of freedom.

How fresh is the local mandate?

The significant success of the Congress in Delhi and that of the BJP in Chhattisgarh, Madhya Pradesh and Rajasthan offer interesting insights into tenure and reputation effects. The Congress was voted back to power to govern Delhi in December 2003. The BJP was voted into power in Chhattisgarh, Madhya Pradesh and Rajasthan in December 2003 when it unseated the Congress. Quite unsurprisingly, the Congress has bagged almost all the seats in Delhi. So have the candidates of the BJP in Chhattisgarh, Madhya Pradesh and Rajasthan.

The mandates to govern Delhi, Chhattisgarh, Madhya Pradesh and Rajasthan are fresh. From the point of conditional probability, parties that have moved into governance or have renewed their mandate to govern in the recent past win big mandates for representation in the Lok Sabha. Parties remain in good form for a while after a big, local win. They then win nationally.

The mandate of the AIADMK to govern Tamil Nadu, by contrast, is three years old. Its form had been in doubt for almost a year, and it had systematically distanced itself from its allies — including the Congress — that facilitated its return to power in 2001.

The joint mandate of the Congress and the Nationalist Congress Party is older, and their losses to the BJP and the Shiv Sena are the results of the ageing of the mandate. The loss of the TDP to the Congress in Andhra Pradesh and that of the Congress to the BJP and the Janata Dal (Secular) in Karnataka are the results of expired mandates and poor economic performance.

Underdogs and poster-boys

The emphatic success of the Biju Janata Dal in Orissa in both the local polls and the Lok Sabha polls is the result of its good form and performance. The BJD has offered hope to the historically poor people of Orissa that their future would be better than their past. Empirical analysis by the Business Intelligence Unit of the economic momentum of Orissa in agriculture, industry, transportation, professional services, housing, trade and finance shows that the State has outperformed India.

Orissa has turned into a star and has amassed momentum in all the seven key components of economic activity. By contrast, Andhra Pradesh has missed the momentum. The return to power by the Congress in Andhra Pradesh after two five-year terms in the Opposition is not surprising (see The Hindu Business Line, May 12, 2004).

The poor performance of the Congress in Karnataka is the result of the shrinking economic space that the party has given to agriculture. Quite unsurprisingly, Karnataka has the momentum in professional services. But that has been insufficient to give the Congress party a significant majority. The Congress, therefore, has lost ground to the BJP and the Janata Dal (Secular) in contests to the Assembly and to the Lok Sabha.

Will Tamil Nadu lose its stardom?

Tamil Nadu has demonstrated a significant gathering and maintenance of its total economic momentum. However, it has lost momentum in agriculture and transportation, and the two key activities are related. There is a shrinking of the economic space pertinent to agriculture. In the other five key activities, it remains a leader. The momentum in industry, professional services, housing, trade and finance is significant.

The electoral blank drawn by the AIADMK leads to a key question: can Tamil Nadu maintain its economic momentum? There are three hypotheses for the AIADMK's electoral debacle. They are not necessarily competing hypotheses. First, the AIADMK has curtailed the social space offered to the State's citizens. Second, its rivals have alloyed themselves by finding a viable pattern of alliances that can offer both social and economic emphasis. Third, the AIADMK Government has estranged itself from its bureaucracy. The bureaucracy may not support the ethos of vazhga valamudan. Vazhga valamudan truly reflects the maturity of Tamil Nadu's culture that has evolved over 6000 years.

Vazhga valamudan is an expression of the desire that the target of the greeting should live prosperously and live resourcefully. Such a greeting is uncommon among other peoples and cultures of the world (see The Hindu Business Line, April 16, 2002).

It may be the electorate's apprehension that the estrangement could have an adverse impact on the quality of administration in the State. Hence, both the social and the economic emphases could have been perceived to be very weak.

Farm electorate

The decline in the economic momentum pertinent to agriculture in Andhra Pradesh, Karnataka and Tamil Nadu has had an adverse impact on the electoral fortunes of the incumbent governments. The loss in momentum in agriculture typically affects 20 per cent or less of a State's total output and income. But the shrinking of agricultural incomes usually affects more than 50 per cent of the electorate in many States. That spells trouble to incumbent Governments that pay more attention to the bigger and easier sources of total output and revenue.

The turnout in elections at the time of stress in local farm economies is about a tenth more than in the absence of stress. Parties that offer to redress the situation faced by local farm economies tend to reap a very large part of the surge in turnout. The Congress and the Telengana Rashtra Samithi gained a significant share of the vote in rural Andhra Pradesh and a much bigger share of the seats. Similarly, the DMK and its allies gained in Tamil Nadu.

The Left parties in West Bengal understand the importance of the farm electorate and have a record of paying close attention to the early warning signals of stress. There are no suicide deaths in West Bengal's farm electorate. The farm electorate's vote in West Bengal stays with the Left. The Rashtriya Janata Dal (RJD) in Bihar has emulated the Left parties and has been able to stave off competition from the BJP and the Janata Dal (United). The RJD has performed spectacularly in Bihar.

Discernment in Gujarat

The principal advantage of the multiparty system is that it offers the electorate a chance to express its views to the electorate's advantage. The Congress and the BJP in Gujarat have played a critical role in such expression. The BJP had shut out the Congress in Gujarat and retained power after the gory incident that began in Godhra. The electorate reaffirmed its faith in the BJP. Having done that to serve its purpose at that time, the electorate has voted in candidates of the Congress in 12 of 26 seats to the Lok Sabha. The BJP had expected to win almost all 26 seats. All 26 contests were head-to-head contests between the BJP and the Congress.

By voting in the Congress in almost 50 per cent of the seats, the electorate in Gujarat has signalled its intent to move on. There is a restoration of local sanity, and the discernment helps in the rejuvenation of local businesses and their faith in the rule of law. The reaffirmation of faith in the Congress also underlines the electorate's view that events need not be `encashed' more than once to make a point. The BJP Government in Gujarat would have to earn its mandate in future elections by returning to issues that make a favourable impact on the key components of economic activity.

How to deal with the Left

The seven key indices of economic activity are oriented to consumption with little explicit dependence on who owns the nation's economic assets and who operates them. If a locale or region loses momentum in one or more of the key components, citizens of that locale would most likely lose incomes, spend less on consumption and, therefore, allocate less to investments in assets related to the key activities.

It does not really matter whether citizens directly undertake the investments or first pay taxes and user charges to the Government, which in turn makes the investments.

What really matters is if the Government and the citizens can together gather and maintain the right economic momentum. The general assumption is that citizens are better at this function.

But a fact that goes beyond assumption is that citizens will have to pay the right magnitude of taxes or user charges or both in order to create public assets. The chicken-or-the-egg question is if they would have the right governance environment that allows them to gather and then maintain momentum in the key components of economic activity, or would they first have to create the momentum that pays for the governance. The key issue that emerges is governance.

The Left is most likely to be a part of the coalition government headed by the Congress and the first question that it has to answer is whether its interest lies in comprehensive governance or merely in modifying the programme for disinvestment.

The second question is if it has useful approaches towards solving the problem of poverty that affects 42 per cent of the nearly 21 crore households that earn less than Rs. 37,500 per annum in the big States.

The third question is if the stalling or the modification of the disinvestment programme would have a favourable and widespread effect on these households or whether it would merely make it possible for a few lakh households to earn steady and high incomes.

There is much elitist ado over disinvestment that could be resolved by posing these questions to the Left. Disinvestment makes no difference at all to the economic incomes of ordinary people (see The Hindu Business Line, October 17, 2002).

Nationwide good governance that has the right emphasis on social engagement and economic exchange will boost the economic incomes of ordinary people. Will the elections of 2004 lead to such governance that makes India the land of opportunity to all?

(The writer is a financial analyst. Feedback may be sent to indiagrow@sify.com)

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