Is stability essential for the economy?

Between now and May 2024, there will be several political options for Indian voters in state assemblies and Lok Sabha elections. Our concern should be that we do not elect politicians who harm the economy. Perhaps it is better for our economy that the status quo remains at the center.

Opposition parties have given their alliance the name “I.N.D.I.A.” The real reason for concern is that the full name of this India is the “Indian National Developmental Inclusive Alliance.” The use of the words “developmental” and “inclusive” here indicates that the money of taxpayers will be used to give free gifts to all citizens, regardless of their eligibility.

We have seen that the non Bharatiya Janata Party (BJP) are choosing the old pension scheme, which provides a fixed pension to retired government employees, while the new pension scheme requires employees to make a defined contribution. In the new pension scheme, the pension is based on a lump sum accumulated during one’s working life, rather than being provided by the state government.

We have seen how the Congress in Karnataka, in its quest to come to power, has promised voters five guarantees. Due to these guarantees, taxpayers may have to bear the burden of going from 50,000 crores to 60,000 crores annually. In summary, providing freebies to some people will come at the expense of public welfare.

Now, Congress along with BJP and other parties will implement them in other states as well! The most worrisome thing is that no party in the INDIA alliance has made any comment on economic issues.

“The decade from 2014-24 was the only one where the government made continuous efforts towards reforms without succumbing to any internal or external pressures. This happened despite two droughts in 2014 and 2015 and the COVID-19 crisis in 2020-22. However, demonetization did cause damage to the part of the economy that relied on cash transactions. Nevertheless, it gave a significant boost to the digital economy.

Whether it’s the bankruptcy code, or goods and service tax or eliminating leakages in the system of subsidies for the poor, corporate tax cuts, emphasis on domestic defense procurement, or boosting manufacturing through production-linked incentives, we haven’t seen this much reforms in any government’s tenure.

In total, this new alliance, and the core parties within it, mostly. Regional parties which will determine what will happen at the center. The result of this will be several challenges on the fiscal and reform fronts. So far, India’s economic performance has been better, but a bad election result can change that. We’ve seen this happen after 2010.

For India’s economy, as of now, NDA may prove to be better than India alliance. It should be hoped that in 2024, the political situation will remain unchanged. Without progress on the reform front, we might face some adverse situations instead.

There can be endless debate on whether Modi’s leadership has harmed democracy or not, but without economic growth and progress, democracy cannot thrive.