The new government's national agenda is clearly an attempt at being all things to all men. As a statement of pious intentions, it is unexceptionable; as a guide for economic action, it is practically useless. Policies such as the allocation of sixty per cent of resources for the rural sector while at the same time spending more on infrastructure and energy together with expanding social services such as health and drinking water, assume unlimited resources.They also reflect the contradictions within the alliance, where different and often conflicting interests have to be accommodated. In short, while the "national agenda of governance" may not make economic sense, it may politically be just what is needed at the moment. The immediate concern of the BJP lies wholly in staying in power, and bland, non-controversial statements appealing to all and sundry leave room for the compromises which must inevitably be made in such a motley coalition.
The BJP's upper caste base and small business supporters have tocompromise with the demands of the rich farmers of the Akali Dal or the Samata Party, or the reservations demanded by the AIADMK. Businessmen backing the BJP will have to contend with militant trade union supporters of George Fernandes. Regional conflicts have to be papered over, and special sops given to so-called "backward states." Small wonder that the national agenda lacks any sort of vision.
The problem of accommodating all the different interests will also spill over to the budget. Chidambaram tried to wish away the contradictions within the United Front by assuming a high rate of growth, and hindsight proves his Laffer-inspired budget to have been an exercise in vintage voodoo economics. There has been some talk of a sovereign bond issue, and there is a fear that the new government could see increased borrowing as a quick-fix solution.
Borrowing is the only way to generate enough resources, at least in the short-term, without raising taxes.
In the circumstances, the BJP would do well to keep twothings in mind. First, all government borrowing should be on the economic value added principle--borrowings should fund investment and not consumption, and the returns on investment should beat the cost of capital. Second, spreading resources too thin is not going to help.
Instead of a lowest common denominator of policies, aimed at satisfying all and sundry, the coalition government should formulate its policies based on the highest common factors between the various parties' programmes. This will give a focus to policy formation, while at the same time avoiding contentious issues. The new government's budget needs to be formulated in the light of this approach.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
