The Aam Aadmi Party (AAP) has come to power in Delhi with a historic mandate but now faces the challenge of delivering on its election promises. In this article, V. Ramani flags three key concerns around their approach towards tackling corruption, public finance, and economic growth.
January 2015 has been a watershed month for the Indian political system. A David has single-handedly slain not one, but two Goliaths. Delhi witnessed scenes of exultation – probably last seen after the defeat of the Congress party in the 1977 general elections. As the new Chief Minister and his Council of Ministers seek to come to grips with governing a highly complex metropolis, a number of question marks will inevitably raise their heads. These arise after going through the party’s Manifesto for the 2014 general elections, as well as its 70-point Action Plan for Delhi. Though the former gives pointers to the overarching strategy of the Aam Aadmi Party (AAP) in its search for a national presence, it is the latter that assumes more immediate relevance, since the day has dawned when promises will have to be translated into performance. Without wanting to sound like a modern-day Cassandra, I see three areas where AAP will need to clarify its approach, if it is to meet the aspirations of the people of Delhi and emerge as a viable national party by 2019.
The first relates to what may be termed an ‘anti-institutional’ worldview. The AAP was born out of the ferment of the Jan Lokpal agitation of 2011. At that time itself, the effort of the agitators was to virtually coerce the government of the day and Parliament into passing the Jan Lokpal Bill as formulated by them, without debate and without taking other points of view into consideration. It is true that the speed of functioning of all public institutions in independent India is enough to drive any Indian to tears. Still, that does not justify an attempt to push through legislation which, if enacted in its proposed form, could impinge on the right to liberty of citizens. The AAP Manifesto and the Action Plan repose confidence in the very same unadulterated version of the Jan Lokpal bill, which vests enormous powers in an individual, virtually ushering in a fresh era of the Jacobin Terror with the Lokpal as Robespierre. Not only that, the Manifesto also talks of seizure of assets of corrupt judges. The very foundation of a democracy, based on separation of powers, would be shaken if the judiciary is sought to be regulated by an outside agency. In fact, the thrust of AAP seems to be on punishment of errant individuals rather than the reform of outdated laws and systems that, coupled with a judicious use of information technology (IT), could vastly circumscribe the scope for corruption.
A second area of concern is the apparent disregard for the principles of sound public finance. The Action Plan promises many concessions and substantial public expenditure on items ranging from concessional power and water to toilets, education, healthcare, housing and social security. The emphasis appears to be on the government as the sole provider, without any involvement of the private or non-profit sectors. Services are sought to be ramped up by increasing employment in the public sector, without analysing why existing staff (of which there are many) have not been able to deliver, especially in the crucial health and education sectors. There is no mention in the Manifesto of the large, often dysfunctional public sector that bleeds the financial resources of the country and what steps will be taken to make it more efficient. Also, while the poor implementation of social sector schemes has been mentioned in the Manifesto, there is no elaboration on whether these schemes will be redesigned to plug leakages and reach those really in need. The Action Plan also talks of introducing the lowest VAT (Value Added Tax) rates in Delhi. Put all these together and you are headed for a huge budget deficit. Delhi may still survive on handouts from the central government, but the picture will change for the worse if AAP seeks to run any other state government or, indeed, the central government, on the same financial principles.
The third area of unease relates to the likely impact of AAP’s economic policies on growth. In its Manifesto, AAP talks of placing India on “a sustainable, equitable, globally competitive and high-growth trajectory”. The Action Plan wants a “Delhi that is prosperous, modern and progressive”. But a number of points in the Action Plan are likely to make private investors wary. It opposes contractualisation of labour and supports permanency of employment in jobs that require round-the-year work. While this has been stated in the context of public sector employment, it is quite likely that the same will extend to employment in the private sector as well. This is going to dampen private investor sentiment; companies need to have the flexibility of ‘hiring and firing’ in a globalised economy (of course, with social security mechanisms and skill re-training opportunities). The Action Plan opposes Foreign Direct Investment (FDI) in retail; this is in line with what the party calls “trader-friendly policies”. The problem is that policies which meet trader interests often act against the interests of farmers and organised industry. The repeated references to “crony capitalism” and “encouraging honest businessmen and traders” seem to indicate a mistrust of large-size businesses. Again, one needs to stress that strong institutional mechanisms, including competent regulatory systems and simplified procedures, are crucial to checking corruption. India has an abysmal record in the speed and ease of setting up and doing business: one certainly looks forward to the end of the ‘Inspector Raj’, enunciated in the Action Plan. Finally, the budget deficits inherent in a populist economic approach and the consequent increase in government borrowing will have its adverse impact on the private sector’s access to low-cost capital.
This is not intended to be a critique of AAP’s policies, just a flagging of some concerns that are too often given short shrift by intellectuals and the media in the first heady flush of victory. The AAP has been given a historical mandate. “Aap ki Kasam” can be translated as “on my honour”. To honour its commitment to good governance, AAP needs to adopt a pragmatic and non-confrontational approach to issues, guided by economic realism and political and social realities. It’s progress in national politics will be determined by its success in managing its government in Delhi.
This article was originally posted on the author’s personal blog The Gadfly Column. It also appeared on Ideas for India.
Note: This article gives the views of the author, and not the position of the India at LSE blog, nor of the London School of Economics. Please read our comments policy before posting.
About the Author
V. Ramani is Partner at Access Advisory and former bureaucrat.
Thank you for the credit on the photograph.
There is almost no word on reducing revenue leakages in this analysis. Just leasing out Delhi Gymkhana Club and Delhi Golf Club and India International Centre at market rates would more than make up for any deficits in Delhi’s budgets for sure.
A well written article. One grew up hearing from horses that a good project gets ten percent of the allocation and an honest project gets twice that much; the rest goes to corruption. In principle (theoretical) the promises can be met but in practice the success will depend on how may converts are made. Corruption is an ugly anaconda that even the practitioners may now dislike but are straddled with it; perhaps that’s where the hope lies. We cannot rid corruption but can try to readjust it somehow.