Give the economy more political heft or bite the dust

Hindustan Times, November 22, 2014

The economy is on the upswing. There is no doubt about that. But the quality of political debate and the mindset of the polity will have to change to take it to the next level, according to Arun Jaitley, the finance, corporate affairs and information and broadcasting minister. Mr Jaitley was speaking on the first day of the Hindustan Times Leadership Summit in New Delhi. The results of the 2014 elections have reiterated what has been evident for a few years ? sloganeering and the politics of giveaways are now subject to the law of diminishing returns. This was evident when the governments of Madhya Pradesh, Chhattisgarh and Bihar ? which had shunned populism and focused on providing good governance ? were re-elected in the last assembly elections. Conversely, the governments of Rajasthan and Haryana ? which played the politics of giveaways ? bit the dust.

This has upended an old truism of Indian politics: Good economics is not good politics. That?s because 60% of Indians are 35 years or younger. They were born after or came of age after 1991 after the Indian economy opened up. Many of them got the right to vote only in the last five years. And they?re voting with their feet to reward politicians who fulfil or promise to fulfil their aspirations. Recent empirical evidence suggests that this generation is not impressed by the politics of populism. This generation is practical, pragmatic, ambitious and highly aspirational. Politicians would do well to take note: Decisions that look attractive to politicians steeped in the mindsets of the 1970s and 1980s may not yield electoral dividends in an India that has changed beyond recognition. As Mr Jaitley said, ?Rights without resources will not deliver results.? The new land acquisition Act, which seeks to give farmers higher compensation for their land, is a case in point. By making the conditions so onerous, it became practically impossible for industry to buy land, blocking industrial progress. Not surprisingly, it did not yield political dividends. Of course, the government still needs to deliver public services ? in sectors such as education, healthcare, tribal welfare and rural infrastructure.

The government should desist from raising tax demands that aren?t sustainable. A coercive tax regime does not yield additional tax revenues and does not show the country as a business-friendly investment destination. Political parties that read the public mood correctly have prospered. Those that didn?t have paid the price. It will be good for public discourse if politicians across the spectrum realise this.

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