Equating BJP with Congress is disingenuous! BY MUTHURAMAN / IN ANALYSIS / MAY 6, 2013 A wake up call for the â€˜fence sittersâ€™ It is a common refrain by the â€œpolitically neutralâ€ fence sitters to equate BJP and Congress under the bracket â€œsab neta chor hainâ€! While we can definitely argue over the magnitude of corruption between the parties, there is no denying that there are rogue elements in both the parties who indulge in corruption that narrows the apparent credibility differential between the two parties. On the other hand, the difference between BJP and Congress, on the economic policy front has widened significantly in the last 9 years of UPA rule. The failure of the â€œfence sittersâ€ to recognize this difference is causing immense damage to the country depriving / delaying millions to emerge out of abject poverty. Post 1991 liberalisation era, there was a broad alignment between these two mainstream parties on the direction in which the country will move on the economic reforms front â€“ dismantling of the licence raj, free trade, lower and stable taxes, disinvestment, fiscal discipline, liberal access to capital, government spending in basic infrastructure, etc., all of which can be broadly classified as â€œright of centreâ€ economic policies. However, the Congress has made a complete U-turn on this reform process and its current economic policies are almost indistinguishable from that of CPI or CPM! If you think that is hyperbole, please read along to judge for yourself! Key achievements of both parties highlights the contrast Let us take a look at the Top 5 â€œachievementsâ€ of the NDA government (1998 â€“ 2004) and the UPA government (2004-2012). Top 5 achievements in Economic Policy issues â€“ NDA regime Golden Quadrilateral funded thru Re. 1 cess on Petrol Successful disinvestment of several PSUsâ€“ VSNL, Maruti, Balco etc. Dismantling Administrative Price Mechanism in Petroleum (all except LPG and Kerosene out of APM then) Power sector reforms â€“ Ahluwalia Committee recommendations implemented Maintained inflation & interest rates at healthy levels Top 5 achievements in Economic Policy issues â€“ UPA regime National Rural Employment Guarantee Act Farm Loan waiver Direct Cash Transfer of Subsidies Right to Education Food Security Act Before we analyse the difference in the policy framework between NDA and UPA, let us see the current status of the achievements of the NDA regime. Baby with the bath water! How UPA is dealing with NDAâ€™s flagship programmesâ€¦ NDA Achievements Current status under UPA regime Golden Quadrilateral funded through Re. 1 cess on Petrol The annual addition to National Highways averaged about 4500kms per year during the NDA regime; and it has crawled down to1400 kms per year during the UPA regime. (Refer Table 2 below). Lower budget allocation and lesser priority in infrastructure building can be the directly attributable reasons for this slowdown. Successful disinvestment of several PSUsâ€“ VSNL, Maruti, Balco, etc. by a dedicated ministry headed by an honest minister like Arun Shourie. The Disinvestment programme of the UPA regime is a complete sham â€“ asking ONGC to buy the Govt stake in IOC, or forcing LIC to buy shares of PSU to meet targets is not â€œdisinvestmentâ€ in any sense of its word! Dismantling Administrative Price Mechanism in petroleum (all except LPG and Kerosene out of APM then). While low crude price was an enabling factor, NDA had courage to let the Oil PSUs to decide on price increases autonomously when crude prices moved up. The Petroleum sector has been furiously back-pedalling from the reform days of NDA â€“ now, all the products are highly controlled, with Govt. deciding on prices rise at its own will to suit its political / electoral calendar! The result is lumping of price-hikes until it becomes inevitable, invariably causing significant angst among public, in contrast to small increments which can be reasonably well-managed. Power sector reforms â€“ Complete overhaul of power sector through implementation of Ahluwalia Committee recommendations. Sector witnessed buoyant private sector investment. The Power sector was fully reformed and was cruising along very well by the end of the NDA regime (from its catastrophic situation when NDA assumed power). And now the sector is seriously dithering â€“ investments drying up, coal availability is challenging, SEBs are bleeding, banksâ€™ exposure to this sector is turning significantly weaker, and power equipment manufacturers are dying a slow death! And adding insult to injury, whole of North India plunged into darkness due to huge gap between demand and supply! Maintained Inflation and Interest rates at healthy levels Refer Table 3 below for the inflation rates (WPI and CPI) during NDA and UPA regimes; NDA regime witnessed the lowest ever inflation rate in Indian history, thanks to its prudent fiscal policies. In contrast, UPA is throwing precious govt resources in vote bank politics of populism and â€œleft of centreâ€ policies, resulting in huge fiscal deficits and uncontrollable inflation. Table 2: India National Highway addition statistics since 1951 Year National Highway Addition Duration Annual Remarks Length KM KM Years Addition 1951 22200 NDA added 31000 KMs in its regime, 2.5x more than what was added during predominantly Congress ruled period of 46 years since independence. Sad part is the slowdown since 2004 despite realising its importance for economic growth 1961 23800 1971 24000 1981 31700 1991 33700 1997 34298 12098 46 years 263 2004 65600 31302 7 years 4,472 2012 76818 11218 8 years 1,402 Source: http://mospi.nic.in/Mospi_New/upload/Infra_stat_2010/1.ch_road.pdf Addition to NH system during different Plan periods - Ministry of Road Transport & Highways, Government of India Table 3: Inflation statistics during NDA and UPA regimes Source: http://planningcommission.gov.in/data/datatable/2504/databook_1.pdf Essentially, UPA has completely run aground the reform initiatives taken by the NDA regime, and even worse, has undone the reforms in some instances like Petroleum sector. Essential difference is â€œRight of Centreâ€ Vs. â€œLeft of Centreâ€ economics! Let us contrast the guiding policy framework behind the key achievements of the NDA and UPA: Every achievement of the UPA regime has a distinct â€œleftistâ€ flavour in contrast to the achievements of NDA regime that are more structurally reform-oriented. For e.g., the amount of money spent on MNREGA, for instance, could well have been used to create national infrastructure of very high calibre (such as Golden Quadrilateral), which could result in significant and sustainable economic progress. World Bank estimates that every Rupee spent to create a highway results in Rs. 7 of economic activity. In contrast, Jairam Rameshâ€™s statement â€œKitna Gaddha Khodoge?â€ (How many ditches will you dig?) aptly describes the state of affairs of MNREGA. The unintended consequences of MNREGA, such as availability and cost of labour, have also created immeasurable damage to the industry and the agriculture sector! The achievements of UPA are all hinging on doles given by Central Govt to people directly (such as farm loan waiver, NREGA or DCT). In contrast, the policy initiatives of NDA regime were all designed to create a healthy economic environment in which various sectors can thrive and thereby generate employment as well as revenues to Government. The Bane of Left of Centre ideology Most of us do not fully appreciate the impact of this â€œleft of centreâ€ ideology on our day-to-day lives. Let me give a small example. In June 2003, after much negotiations and haggling with Airports Authority of India (AAI), the then NDA Govt. got into an understanding with AAI, that four metro airports viz. Bangalore, Hyderabad, Delhi and Bombay will be privatized, and two metro airports viz. Chennai and Kolkata would be expanded by AAI itself. Now, the stark difference is in front of us to see. All the 4 privatized airports are up and running for a few years now, while Chennai and Kolkata modernisation are yet to see the light of the day, with significant cost over-runs (on taxpayerâ€™s money) and time over-runs (economic cost of which is immeasurable!). The impact on our day-to-day lives will be similar to the airport story, when the time comes to foot the bill for the Food Security Act! Or when the Right to Education policy starts hurting when private schools become unviable and shut shop! (Please read Reality Check India | Your daily 5ml shot of RealityCheck I.V. for the countryâ€™s most comprehensive analysis on RTE and its disastrous impact on us!) And the impact is for everyone to seeâ€¦ The state of affairs of some of the key sectors then and now, given below, is a direct outcome of the wrong ideology and flawed implementation of the UPA regime! While some of it can be attributed to malfeasance such as corruption, most others are due to wrong priorities of the government in spending its precious resources on wasteful social expenditure programmes such as MNREGA. Contrast the way the Telecom sector has thrived during the NDA regime versus the telecom sectorâ€™s woes today! A shining example of India growth story that has been completely run aground. â€œThis has been the most destructive period of regulatory environment I have seen in 16 yearsâ€ â€“ the exasperated voice of Mr. Sunil Mittal of Airtel captures the essence of the UPA government. Contrast the way the Airline industry grew because of opening up of the sector during NDA regime, and the sorry state of affairs of the airline industry today! Back-crushing taxation levels, government apathy, a monstrous government airline that is run without any economic incentive for profits and an unhelpful policy environment has resulted in the sector reporting losses of over Rs. 10,000 crores! Read a separate column in CRI on how UPA ran aground Aviation Sector We have already seen the state of the Power Sector and Roads Sector then and now! Textile industry was touted to give a run for money to their Chinese counterparts then; the less said about the sector now, the better! Microfinance sector was thriving and was thought of as a panacea for the woes of the bottom half of the pyramid then! Strangulating regulations has brought this sector to a near grinding halt now! Over 7 lakh crore worth projects are stuck at various stages of implementation because of two key reasons: challenges in land acquisition and environmental clearances. The government has successfully brought back the licence raj in the form of environmental clearances. And the really sad part is that there is absolutely no sense of urgency by the Government to resolve these issues either way! This list can go on and on. Targeted Social Spending Lest someone accuse the â€œRightâ€ of being only â€œpro businessâ€ or unfair to poor, no one is grudging either targeted subsidies to the poor or investments in social infrastructure such as in water, sanitation, primary healthcare or education. In fact, the Antyodaya Anna Yojana, a programme that targets poorest of the poor (bottom 5% of the population) was launched by NDA regime, which has provided much needed succour to the most deserving segment of the population. Such targeted schemes are likely to yield much higher social dividends than one-size-fits-all schemes such as farm loan waiver! Conclusion The biggest contrast between the NDA and the UPA regime can be summarized thus: â€œgive a fish to eat today (UPA policies of doles for vote bank politics)â€ is disastrous for the country in the long run compared to â€œhelp them learn fishing (NDA policies of creating an enabling economic environment)â€! But some parts of the electorate may be tempted to take the fish today, than earn their livelihood in a sustainable manner. Taking this message to the masses is the greatest challenge in front of us! The fence sitters, many of whom can understand the difference and appreciate the long term consequences of such policies, are doing a great disservice to the country by equating BJP and Congress!