A Rahul-X or An Advani-Modi Government?

  This article appeared in TOI, 18/4/13.

 In an earlier note I had forecast that the 2014 election campaign would be fought between a Rahul led Congress and a Modi led BJP.  Rahul Gandhi’s speech has given us the first hint of the Rahul-Congress election platform and strategy. The election platform is basically the congress development strategy of “Inclusive growth” developed over the last 8 years, modified/tweaked by the need to restore growth to its 8% potential and leavened with Shri Rahul Gandhi’s personal experience of reaching out to the common people and reviving the Congress party. By leaving the issue of a post-election Congress PM open, the strategy is also designed to keep the election from becoming a Presidential style Rahul vs. Modi election.  Similarly, Narendra Modi’s speeches and the reaction of the JD(U) and other potential NDA partners to his rise is also giving us a picture of the election platform of the Modi led BJP: (i) Faster economic growth & job creation, (ii) Better Public Goods & Services, (iii) More focused and better governance, (iv) Public Security.  At the same time Hindutva issues are likely to be downplayed in an effort to pacify the JDU and other potential NDA partners, and more emphasis on the inclusive programs of BJP governments in M.P., Chhattisgarh etc.

      Consider a grading based on the each parties program (Cong/BJP) and the ability of the potential leader (Rahul/Modi) to achieve results (positive & negative).  Three dimensions are likely to figure in the election discourse: Social inclusion, Economic Growth & Development and Domestic & National security (plus a net/overall grade).  Putting oneself into the hypothetical persona of neutral analyst with a nationalist, liberal perspective, the tentative scores for the two national parties are, (i) Rahul led Congress: A, B+ and B on the three dimensions with a net score of  B+ and (ii) Modi led BJP: C+, A and A- with a net of B+.  Any ranking can be disputed by committed supporters, particularly as it relates to likely future performance. Our purpose is however the very limited one of analyzing potential election strategies.  Two points emerge from this exercise: One that on basis of net score it may be difficult for voters to choose between the two National parties, so traditional supporters of each are likely to vote for their historically favored party, even if they had drifted away in the last two elections. Two that new, independent, undecided voters are likely to vote for the party whose score is higher on the dimension that is more important to them.  Those who care very strongly about social liberalism are likely to gravitate to the Rahul Congress, while those who care strongly about liberal economic policy outcomes are likely to drift to the BJP.  Those who care more about caste and region, will likely vote for the State parties.  On balance the urban vote is likely to shift back from Congress to BJP, while the rural vote share of the Congress could increase to partially offset this.  The challenge for both parties will be to win back the younger, more mobile voters from among those whose families switched to the State parties during the last 10-15 years. 

        The National party which gets significantly higher number of seats along with its limited pre-election partners will have a better chance of forming the government. Analysts have said that an ambiguous result will favor the Congress, given that parties like JD(U), BJD and TDP may not join a government with Modi as PM.   At this point, analysis suggests four potential outcomes: (a) Clear win for Congress – Rahul Gandhi becomes PM, (b) Clear win for BJP – Narendra Modi becomes PM, (c) Uncertain win for Congress with UPA III the largest pre-pol group. Rahul takes over party president ship and names a non-political PM, (d) Uncertain win for BJP, with NDA- the largest pre-pol group.  L. K. Advani becomes PM, with Narendra Modi as DPM (Economy) and Nitish Kumar as DPM (social inclusion).  One may well question how L K Advani of Yath Yatra fame could be an acceptable compromise.  The most important reason is he was almost drummed out of the BJP by the RSS for his positive remarks about Jinnah while on a visit to Pakistan and has therefore in a sense paid his dues to the JD(U) secularists. Despite this he may be preferred by the RSS (to “dictatorial” NaMo), as also by the next-gen BJP leaders, who can keep their leadership hopes alive.

     Does this new post-election scenario, require new thinking on the part of the Rahul Congress?  For one it requires a complete extirpation of any residual complacency in the Congress with respect to economic reforms and economic growth.  The government, fully and whole heartedly supported by the party, must get down in the trenches to carry out every possible governance and economic reform that can revive economic growth within the next twelve months(this will benefit whoever comes to power). The achievements of Narendra Modi in sustaining growth in a relatively high per capita income State can only be countered by restoring national growth to reasonable levels.  It also requires some re-balancing of “social inclusiveness” away from Rawlsian abstractions, approved by Nobel prize winning philosophers towards more practical maximization of benefit-cost ratios and a greater focus on the issue of law and order and public safety & security.

This article appeared on the editorial page of the Times of India, on April 18, 2013: Can be accessed at,

http://timesofindia.indiatimes.com/home/opinion/edit-page/Heres-the-electoral-math-to-predict-who-will-form-the-next-government/articleshow/19602360.cms

Will Political Uncertainty Gut Economic Reforms?

The withdrawal of the DMK from the UPA coalition government has raised questions in the public mind about the longevity of the government and the effect on the chances of passage of Economic reform legislation.   My tentative answer is possibly, but it could paradoxically also help in expediting some (real) reforms if managed skillfully.

Early Election?

The first question on everyone’s mind is whether the DMK withdrawal heralds an early election.  It does not appear to be in the interest of the DMK and the BSP to have an early election, because their opponents, the AIDMK and the Samajwadi Party (SP) respectively recently swept the State elections and are likely to win the corresponding Lok Sabha seats.  Thus an early National election increases likelihood of the DMK and BSP loosing many of the Lok Sabha seats they currently hold.  Given that the serious corruption charges against former Telecom minister A Raja(of DMK) and others in the DMK are still fresh, it is in their interest to give time for them to fade from public memory. 

The puzzle is, however, why the SP has not tried to pull down the UPA Govt. and why the TMC has become hesitant?  A few possible explanations come to mind.  One, that they need more time to recoup their State election costs and generate enough funds to fight the National election. Two, that this period of uncertainty could be used to extract concessions on legal cases and prosecutions. Three, that they need fiscal indulgence from the center and fear the next government may be less forthcoming.  The first two perhaps apply more to the SP and the last to the TMC.  On balance therefore, the DMK withdrawal, does not per se affect either the calculus of these parties or the probability of an early election.

End of Policy Reforms?

What about the effect on economic reform legislation?  The conventional wisdom on economic reforms is that political uncertainty slows down reforms, as opposition parties oppose any action that they can project to potential voters as “ant-people”. This argument, perhaps applies to expenditure (subsidy) policy reform but less to issues where old ideas or ideology play a role. If parties are looking to parley a positive vote on a bill, for favors for their leader, party or State, the government may also have greater opportunities for bargaining to pass reform bills. The current political uncertainty could be used to accelerate genuine economic reform (i.e. reform that restores growth and improves the efficiency of welfare delivery).  The likelihood of Narendra Modi becoming the BJP/NDAs candidate for PM has created uncertainty for its current and potential allies.  For instance Nitesh Kumar’s, JD(U)s public feelers to the Congress regarding ‘Special category status for Bihar,’ and Mulayam Singh’s hints that he could do business with an L. K. Advani led BJP (NDA PM) are indicators of this flux.  If handled skillfully, this could provide the Congress a counter opportunity to accelerate the reforms.

         The Congress led UPA government has repeatedly stated that it has a majority and will remain in power till the due date of the 2014 election.  Despite the optimistic GDP projections in the Economic Survey and in the 2013-14 budget, growth is likely to be around 6% (+/- 0.5%) in terms of GDPFC and between 5% and 6% in terms of GDPMP.  Thus it is critically important for the Congress to end its current term with an uptrend in growth that is visible and credible, and this is only possible if there is another spurt of reforms over the next six months.  The FMs recent statement about formulating and accelerating next generation reforms is an indication.  However, most of the financial sector reform legislation as well as the GST and perhaps even the DTC depends critically on BJP concurrence if not support.

Finding Convergence

        Why should the BJP support this legislation?    First, it gives the BJP an opportunity to redeem itself in the eyes of former and potential Urban BJP voters who were thoroughly disillusioned by the BJP’s unthinking opposition to economic reforms that support investment and growth.  A BJP spokesperson has stated that the country is now in an election mode.  Earlier BJP leaders have asserted that Congress would be thrown out of office during the next election. If the BJP truly believes in these two statements, then it is in its interest to expedite reform legislation in Parliament and vote to pass it.  There are two reasons for this.  Firstly, these reforms are critical to India growing at 8% during the tenure of the next government (whether it is Congress led or BJP led or a third front) and second that Congress is likely to oppose the same reforms if the BJP in power, just as the BJP in opposition has opposed reforms that it introduced when it was in power. 

Bold 

     As both parties need some time to consolidate their support base and organize their aprties (under the leadership of Narendra Modi and Rahul Gandhi respectively), they have enough time to co-operatively pass such legislation before getting into a full-fledged election fighting mode. The Parliamentary affairs minister therefore has two important tasks before him: Get the budget and the finance bill approved and work out with the BJP leadership the changes in reform legislation needed to get their immediate approval.

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A version of this article appeared as Op Ed in the Times of India on March 26, 2013.

Let the Party Begin: Election 2014

News reports suggest that the entry of Rahul Gandhi and Narendra Modi into the mainstream of the Congress Party and the National BJP respectively is galvanizing their respective party members and traditional supporters.  Most BJP supporters were extremely upset, if not disgusted, by the performance of their party in the last six years as an opposition party.  Many Congress party supporters were in despair at the attack on its integrity and the collapse in economic growth.  Developments in both parties over the past six months or so, have begun to lift the gloom that descended on them, though a certain element of confusion still remains.

     About three months ago, one predicted that the next general election would be a contest between a Rahul Gandhi led Left of Center (LoC) Congress and a Narendra Modi led Right of Center (RoC) BJP.  Analysis in the media has since written about a contest between Rahul Gandhi and Narendra Modi, while others have pointed to various reasons why this cannot happen. Note the subtle distinction between what we are saying and what the media is focusing on.  Our main point is about the clash of ideologies (left of center, right of center), where the protagonists (Rahul Gandhi and Narendra Modi) are merely symbols of this ideology.  In contrast most writers and commentators (pro and against) are focusing on the personalities and their strengths and weakness.  Though both aspects are likely to come up during the election campaign, the former is likely to be more important in the rural areas and the latter in the urban areas.  Political skill in framing the overall message and focusing it on different parts of the electorate will be an important factor in the final outcome.

This prospect has set off a flurry of rethinking and activity among current and former allies of the two parties.  The Akali Dal and the Anna DMK were the only NDA partners of the BJP who indicated support for Modi as a potential NDA PM, suggesting that they saw his entry into National politics as increasing the prospects of a NDA government at the center.  In contrast, other former or potential members of the NDA clearly feel that their party’s election prospects would be hurt if they were part of a Modi led NDA (pre-pol alliance).  Nitish Kumar has showed discomfort with supporting Modi as PM and has gradually distanced himself from a potential Modi led BJP and towards the middle ground between it and the Congress.  His recent statement of a National coalition of backward States (Bihar, Odisha, West Bengal), neatly brings together parties that feel uncomfortable with a Modi led BJP but have to fight the Congress in their home State.  Post poll, however, they may have difficulty choosing between a Rajiv led congress or a Modi led BJP central government!

     Among non-NDA, non-UPA parties, Shri Mulayam Singh Yadav was quick of the mark with a statement that a BJP, not led by Modi, would be a party he could work with. This statement sounds puzzling, coming from the architect of the MY coalition in UP and an outside supporter of the UPA government.  It suggests an astute analysis of the potential negative effect on the support base of the Smajwadi Party of an election defined by Modi.  A contest between a Rahul led LoC Congress and Modi led RoC BJP, is likely to benefit these two parties collectively at the expense of third parties.  In other words the declining trend in the joint vote share of the two parties will be halted and likely reversed. Which party will gain more, from the polarization that this contest suggests, is not clear at this point.   

    Survey data indicates that the Congress has the widest and most diffuse support base among the electorate.  In other words no cast, community, language or religion predominates among its voters, when compared to the distribution of these in the national population.  Interpreted in a positive light it is the closest we have to a “liberal” party.  Thus it is best positioned to attract the new, emerging middle class supporters from the narrow, caste, community, state-regional based parties, if it can fine tune its populist, “think from the heart” policies to their aspirations.  In contrast, the BJP support base is still religiously biased and weighted towards the more educated and somewhat better off .  However, the new aspiring middle class may also be susceptible to the economic message of growth, development and jobs that the so called “Modi model” projects.  Thus, besides the effect on votes of any implicit religious polarization, which party is able to convey a credible commitment to creating a strong, fast growing, job producing nation with equal opportunities for the new /aspiring middle class from every caste, creed and religion, may have an edge.

    Compared to the past, the relative seat shares of the Congress and the BJP will matter as much as if not more than the relative seat shares of the new UPA and NDA pre- poll alliances.  The 2014 election is therefore likely to be followed by hectic post-pol alliance formation, to  form the government.   In fact the far-sighted power brokers are probably already maneuvering to position the different parties for perspective alliances between parties that will fight the elections as opponents.