What the next government needs to do

Feb 13 2014, 02:26 IST
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SummaryThe two leading national parties, and their two top leaders, are yet to announce a clear policy framework; there has to be a plan for rationalising subsidies and social expenditures while spurring investments

At last, both Rahul Gandhi and Narendra Modi have outlined, the former in his first-ever full television interview, and the latter in an election speech in Delhi, some of their ideas on economic and social policies. Gandhi says India can become a superpower by empowering youth, bringing them into political governance, involving and liberating women, increasing employment, expanding the manufacturing sector so that it rivals China, ensuring democratic decentralisation, moving away from dynastic successions, and introducing the systems and processes to achieve all this.

Modi, in an election speech in Delhi, stated his important objectives. He has, in his earlier speeches, given development the highest priority, and his actions in Gujarat show that he is more interested in urban development than rural, and in manufacturing than agriculture. Indeed, his focus on rural population is mainly to make their migration to urban areas more comfortable and rewarding, not centred on improving the state of agriculture (poor productivity, government interference in marketing, price policies that distort the product mix from what the market wants, better farming methods, drive to expand infrastructure of canals, water storage, cold stores, warehouses, reduce the role of the middleman, etc). He will doubtless continue the earlier NDA government policies of privatisation and disinvestment of public enterprises, removing administered prices for petroleum products, focus on infrastructure (roads and power), and limited social programmes, especially in the education sector (Sarva Shiksha Abhiyan), and a massive programme for skills development.

The UPA, in its ten years of office, has had major economic and social achievements. Growth, on average, has been at record levels. The poor have benefited from many social programmes as indicated by the improvements in India’s human development indicators. UPA-1 had five years of macroeconomic balance and growth and withstood the global financial crisis in its last year. Growth enabled higher tax revenues net of states’ shares (as percentage to GDP in 2007-08, 8.18; in 2010-11, 7.70 and in 2012-13, 7.59). Buoyant tax revenues allowed social expenditures to rise sharply (major subsidies—food, fertilisers and petroleum products—figure at R67,498 crore in 2007-08, R1,35,508 crore in 2010-11 and R2,16,297 in 2012-13; as percentage of GDP these stood at 1.35, 2.21 and 1.87). This was not the only non-asset producing expenditure. Farmer debt write-offs by UPA-1 was around R80,000 crore. The UPA has additionally spent massively on the rural employment guarantee, rural health mission, the

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