Time to delink political risk management from economic reforms

Representative image (Source: ShutterStock)

An overriding issue in policymaking is about navigating through the high waters of interests of different constituents and striking an equilibrium on mutual economic benefits.

To say that politics is a hand-maiden of policy-making would be an understatement. This is more so in a country like India where a diverse polity makes policymaking a complex process.

The recently-concluded assembly elections, where the Bharatiya Janata Party-led National Democratic Alliance (NDA) rode to comfortable victories in four out of the five states, has brought economic reforms back in focus.

There was a fear that the BJP’s defeat, particularly in the political-most-important state of Uttar Pradesh, could have a bearing on the Union government’s planned reforms agenda. This apprehension finds its origins in India’s recent history, where Union governments have tended to lean towards political risk management rather than biting the bullet on critical reforms.

The recently-rolled-back farm laws, barely three months before the elections in Punjab and Uttar Pradesh where farmers were seen as a mobilised political constituency, left several questions unanswered. What is the alternative to the laws? Is the status quo-driven archaic, inefficient, and distortionary Agriculture Produce Market Committees (APMC) model the best option to serve farmers’ interests? What would it require to make farming a rewarding vocation in India?

Farmers need access to markets that fetch them the best price in efficiently-driven systems. In an ideal world, markets function as the best intermediaries.

For too long, however, the story of Indian agriculture has been a tale of market distortions. These seemingly insurmountable hurdles frustrated successive policymakers whose repeated counsel to dismantle these barriers often ran into political resistance, like now.

In a country such as India, complex pieces of policy-making and reforms, need to be looked at not just from the immediate context, but looking decades into the future. This is particularly true in the context of reforms of the factor markets.

Since 1991, successive governments have attempted to reform India’s complex factor markets. The second-generation reforms, as these are sometimes broadly clubbed as, are distinct from the overriding policy matrix of 1991, which primarily concentrated on product markets. It was relatively easier to turn the clock back on the text-book infant industry protection that the State had created for more than four decades, just in the hope the local business would eventually mature into adults capable of standing shoulder-to-shoulder with global peers.

This, however, was the easier part. What mostly went unreformed, were factor markets: particularly land and labour. Reforms in factor markets in India, given the pace at which these have moved, is akin to the hour hand of a clock that you rarely see moving. Each piece of structural adjustment faces its own dynamic of resistance, pacing out its passage through strategic and economic stakeholders of each country.

Growth models, redistribution, development paradigms, and food entitlements — the phraseology of primetime television discussions has seen a significant metamorphosis over the last few years. This is clear sign of mainstreaming of economic reforms. Dialogues expand the scope of discussion, ushers in contrarian views, and adds to the body of thought that various stakeholders — rulers, governments and policymakers, and academicians — can draw upon.

Over time, many such dialogues evolve into influential schools of thought that define the contours of public policy. From ‘Roti, Kapda aur Makaan’ to ‘Bijli, Sadak, Paani’ to ‘Aachen Din’, poverty, growth, and jobs have become centre-pieces of India's current political discourse — a welcome, and progressive, departure from the shrillness of the divisive caste-religion discussions usually heard in an election year in India in an earlier era.

The moot point, however, is whether the results in the assembly elections will be able to delink electoral politics from policy-making that are of national interest. Short-termism is a bad goal to follow in economic reforms. India cannot afford to stop the reforms clock. It is time to delink political risk management from policy-making and left reforms follow a continuous process rather than being dictated by a start-stop-start electoral calendar. The Centre would do well by beginning a structured consultative process to reform the farm sector. Besides, setting the ball rolling, it will also signal the government’s intent to walk the talk on its reforms agenda.