Saumyen's Pages
As the 2024 parliamentary election for the world's largest democracy approaches its conclusion, with an estimated expenditure of ₹100,000 Crores - a sum larger than the State Gross Domestic Product (SGDP) of all but the top ten states - it's crucial to understand the potential implications for the citizens who have cast their votes for the incoming government. It’s particularly intriguing to speculate on the changes that may occur if the BJP returns to power, or if the Congress, after a decade, regains control. These speculations, however, are based on the manifestoes of the contesting parties but lack a solid foundation in the absence of a specific framework for execution, policies, and funding, which will only become apparent over time. If history is any indicator, the repetition of certain promises in party manifestos simply reflects shifting priorities post-election, false promises pre-election and/or an inability to deliver.
Both BJP and Congress have released detailed manifestos, ranging from 48 to 76 pages, addressing social, sectoral, environmental and economic issues, in addition to other aspects like federal structure, secularism, diplomacy and democracy, which are largely influenced by political idealism or motivations. My focus today is economics.
India has experienced commendable growth over the years, achieving a 5.9 percent growth rate in the last decade - even with the impact of COVID-19 - and a higher rate of 6.7 percent in the previous decade. Currently ranked fifth in the world by GDP, India's economy stands at ₹173 lakh crores at current prices for the fiscal year 2023-24, indicating that the government economic policies in both the regimes have not been severely flawed.
The BJP government has spurred growth through significant investments in infrastructure, including 31,000 km of railway track or 95,000 km of national highways (NH) during their tenure, while maintaining a careful focus on controlling inflation. The Congress manifesto however, claims that nearly 60 percent of major central government projects have been stalled or delayed, with costs escalating by nearly 5 lakh crores.
The digital revolution, which began over a decade ago and is supported by expanding network connectivity and a strong start-up ecosystem, has thrived across industries over the last ten years, even altering the way citizen services are delivered. These positive changes are expected to continue unless there is a significant shift in priorities by the new government. However, despite this growth, the impact on employment has been relatively moderate, and unemployment remains a concern. According to CMIE data, unemployment is projected at 6.57% in January 2024, down from 8% in December 2023.
In this direction, the Congress manifesto highlights a plan to fill nearly 30 lakh vacancies in various levels of the central government - a daunting task given that the total central government workforce is estimated at 35.1 lakh in FY 2025 (Interim budget).
While the BJP manifesto projects India to achieve the third highest GDP in the world by 2027, this growth has also led to increased inequality. Today, the top 1 percent of the population holds 22.6 percent of the country’s income, while the bottom 50 percent holds just 15 percent. Clearly, there exists a significant percentage of population living in poverty.
Like in many Indian art films, poverty is a compelling theme in political campaigns as well. Over the 75 years since India's independence, poverty has been a central issue for all political parties, often giving the impression that without it, they would lack a clear election agenda.
So what is the extent of our poverty? According to Niti Aayog's 2022-23 multidirectional estimates, 11% of the population still lives in poverty; with current population figures, this equates to around 16 crore people. This represents a significant reduction from 24.85 percent in 2015-16, reflecting poorly on Congress's long tenure in power, which saw 32 crore people living in poverty by 2015. On the other hand, the BJP's claim of lifting 25 crore people out of poverty is exaggerated too.
The crucial question is how this reduction in poverty was achieved over the last decade. Was there a sectoral shift to enable more employment? Did industry growth absorb more labour? Was the measurement of poverty altered to enhance statistical outcomes? These and many more are vital considerations when assessing the economic landscape.
Broadly speaking, over the past decade, there have been minor changes in the sectoral contribution to GDP. For instance, the dominant services sector decreased its share from 57.03 percent to 54.86 percent between 2014 and 2024, while the industry sector's share slightly risen from 24.77 percent to 25.58 percent during the same period. Furthermore, in FY2023, the manufacturing sector employed approximately 35.6 million people, which is about 31 percent fewer than in 2017. Both now include a significant portion of the unorganized sector – where the data concerning is often incomplete or inaccurate and are generally discussed anecdotally. Regardless of which party is in power, manufacturing requires more attention as the sector fuels more blue-collar employment that in turn can help alleviate poverty permanently.
As a relatively easy alternative and also to connect with the poor electorate (many of them undereducated), political parties frequently resort to short-term electoral tactics by promising freebies - transfers rather than creating income opportunities. By utilizing government resources, the ruling party can claim credit, and the extent of poverty can be adjusted to align with political objectives. Both BJP and Congress have adopted this easy-to-execute approach to garner votes and purportedly demonstrate their plan in reducing poverty.
For example, BJP manifestohighlights freebies in various forms:
- Free ration to continue for 5 years … started in 2020
- Annual financial assistance of ₹6,000 under PM Kisan Samman Nidhi Yojana
- Free health treatment of up to ₹5 lakh to poor families under Ayushman Bharat. That will now cover Senior Citizens for them to access to free and quality healthcare
- Expanding the PM Awas Yojana for every garib parivar to have quality housing
- Free electricity to poor households under PM Surya Ghar Muft Bijli Yojana
A few of these can be justified for social welfare purposes, but they are generally short-term solutions rather than long-term income-generating programs or strategies to attract productive investments.
So are the agenda in Congress manifesto:
- Raising the central government’s contribution to pensions for senior citizens, widows and persons with disabilities under the National Social Assistance Programme from 200 - 500 per month to 1,000 per month
- Guarantee of a new Right to Apprenticeship Act to provide a one-year apprenticeship with a private or a public sector company to every diploma holder or college graduate below the age of 25. Apprentices will get 1 lakh a year and for a year
- Launching of a Mahalakshmi scheme to provide 1 lakh per year to every poor Indian family as an unconditional cash transfer
- Adoption of the Rajasthan Model of cashless insurance up to 25 lakhs for universal healthcare
- Increasing the wage under MGNREGA to 400 per day (this is a better model of payment against work – though there are multiple reports of manipulation even after introduction of direct bank transfer to beneficiary)
Over and above, all the political parties (regional or national) in power in the States add more - sometimes alternative or overlapping - freebies to this list. For example, All India Trinamool Congress in West Bengal declares the following in their manifesto:
- Providing 10 LPG cylinders, free-of-cost, every year to all BPL families
- Support all women a monthly financial assistance (Lakshmir Bhandar) of Rs 1000
- Supply of 5 KG of free ration (rice, wheat, grains) every month to every ration card holder
- Increase in existing old age pension for the elderly people above 60 years to ₹1,000 per month
- Guaranteeing housing for all poor families, providing safe and secure homes
- Student Credit Cards of up to ₹10 Lakh to students pursuing higher education
- Providing an ₹1,000 annually and a onetime grant of ₹25,000 for education Girls aged 13-18
- Increased health insurance cover of ₹10 Lakh (Swasthya Sathi)
- Providing 1-year apprenticeships and monthly stipend to all graduates and diploma holders upto the age of 25 to enhance their skills & employability. (This can be treated as an investment for future income generation – and may not be considered as freebies)
As multiple studies have pointed out, such benevolent transfers only cost the public exchequer without making any fundamental change in the economic structure or supporting long term planned growth.
Interestingly, the political campaigns so far have highlighted these freebies and mostly on non-economic (social, religious, diplomatic relations and political) agenda. While the manifestos of both major parties offer plans and promises, the real challenge for the next government will be to sustain economic growth and address inequality effectively, ensuring that short-term electoral strategies do not overshadow long-term developmental needs.
The country needs to witness a growing economy tomorrow that is stable (e.g. in terms of consistency over time, controlled inflation and ability to deliver in case of potential global volatile situations), sustainable (e.g. beyond supported by public investment in infrastructure) and employment friendly (e.g. in case of threat of new technologies in service sector dampening employment). How this will be addressed is the bigger question that “the Nation wants to know” from the new administration!
4th of June is just another beginning – we are looking far beyond.
(The views are personal)
Rethink
Beyond the 4th of June…
(May 2024)