Analysis: We Need Consensus On Growth And Job Creation

Analysis: We Need Consensus On Growth And Job Creation

Rapid growth not only lifts large sections out of poverty, it also generates additional revenues enabling more welfare measures. In the absence of growth, welfare will have to be funded by borrowing

Dr Jayaprakash NarayanUpdated: Sunday, April 21, 2024, 10:34 PM IST
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Representative Pic | Janno Nivergall/Pixabay

As usual, election fever has gripped the nation. Perhaps no other country matches our noise, energy and festive mood during elections. If we ignore the noise and rhetoric, the two greatest challenges we face as a nation are sustaining a high economic growth rate, and generating employment and ensuring that the fruits of growth reach the bulk of the people.

We are a large, diverse, complex democracy with vast poverty, ignorance and unemployment. In a centralised polity with poor delivery of services it is hard for the voters to recognise the link between their vote and their future. In such a climate, short-term inducements and individual welfare will be attractive for a large number of voters. John Maynard Keynes famously said, “In the long run we are all dead”. Democratic politics cannot be viable if the focus is only on the long-term public good; But if the focus is only on the short-term individual benefits at the cost of long-term, then the society will continue to be mired in poverty and backwardness.

“Wherever you are in doubt …. Recall the face of the poorest and the weakest man whom you may have seen. Ask yourself. … Will it (the step you contemplate) restore him to a control over his life and destiny? In other words, will it lead to Swaraj for the hungry and spiritually starving millions? Then you will find your doubts, and yourself melting away.” Gandhiji’s Talisman was a very exacting and unattainable standard in a flawed democracy in which ‘power at any cost’ has become the mantra.

When many people are poor and deprived, voters are likely to focus on short-term maximisation. Time and again we witnessed individual short-term welfare (ISW) trumping promise of economic growth and long-term collective good. In 2004, most analysts and pundits were confident that the NDA would be returned to power with Atal Bihari Vajpayee as Prime Minister. But the promise of ISW by Congress trumped the prospect of infrastructure, public goods and growth.

But ISWs without pursuing growth are not sustainable, and will be counterproductive by perpetuating poverty. Rapid growth not only lifts large sections out of poverty, it also generates additional revenues enabling more welfare measures. In the absence of growth, welfare will have to be funded by borrowing. More borrowing leads to more interest burden, leaving fewer and fewer resources to spend on welfare. Eventually we will end up in a debt spiral, borrowing more and more to repay past debts. That is the crisis Sri Lanka, Pakistan, Zimbabwe, Venezuela and many other countries face.

What is the way out? We have to balance welfare and rapid growth. We need individual welfare measures to ease the pain of poverty, to maintain social stability and peace, and to include all sections of society in our democratic polity. And we need fiscal prudence to save money and build infrastructure, and take all steps necessary to encourage entrepreneurship, investment and wealth and job creation. Only then can we lift people permanently out of poverty, and give every child the opportunity to fulfill her potential and enjoy liberty, dignity and a decent life, irrespective of the circumstances of birth or parental wealth.

From 1991 to 2014, there was a broad consensus on economic growth. While there were many other policy differences between successive governments, there was consensus on growth. As long as the leading contenders for power agree on fiscal prudence, infrastructure and economic growth, we are safe as a country irrespective of who is voted to office.

In the post-2014 period, Congress, which heralded economic reforms, seems to have given up on growth. There is an ever-increasing and exclusive reliance on ISWs largely ignoring fiscal prudence, infrastructure, entrepreneurship and growth. This poses great danger to our polity and economy. Many people are anticipating a third term of office for NDA led by Mr Narendra Modi. Irrespective of the electoral outcome, we should realise that no party or individual will remain in power forever. In democratic politics, the main Opposition is government-in-waiting. If the consensus on fiscal prudence and growth promotion eludes us, the country is in potential danger.

There is now a genuine opportunity for sustained high growth for a prolonged period of time. This will be negated if the two major political formations indulge in competitive populism and a race to the bottom. Unrealistic welfare expenditure with no fiscal elbow room, loan waivers, retreating from reform of labour laws and legislating mandatory procurement of food grains at unsustainable prices are a recipe for fiscal disaster and stunting growth. Employment-linked incentives, infrastructure, investment, creation of small towns as hubs of economic growth to promote in situ urbanisation and absorb low-skilled rural workers in non-farm sector, quality healthcare and improving school education outcomes and skills are the way forward. Every year, about 13 million young workers are joining the job market. We need to grow the economy and create jobs to ensure that the fruits of growth reach those who need them most. Poverty is eradicated by increasing incomes, creating jobs, improving quality of life and helping people gain control over their lives and destiny. No matter which combine is elected to office, we need all mainstream parties to be committed to fiscal prudence, investment, economic growth and job creation. Only then will our future be safe.

The author is the founder of Lok Satta movement and Foundation for Democratic Reforms. Email:drjploksatta@gmail.com / Twitter@jp_loksatta

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