Indians across seven states are going to polls in 2012. This time developmental issues are firmly on the political agenda. Yet, this was not always the case. India, many believed, was paying a “democracy tax”, that political pluralism was at the cost of economic well-being.
Are the elections of 2012 turning out to be a watershed? Could the intense political rivalries among various political parties create an environment conducive for economic development?
While India earned its political freedom in 1947, many believe that 1991 marked the beginning of the journey for economic freedom.
The balance of payment crisis did provide the impetus for the economic reforms undertaken in 1991. But what has not really been understood is the political context of the economic changes. The increased political competition can be seen from the fact that no political party has been able to win a clear majority in the Lok Sabha since 1989.
Conventional wisdom has it that coalition dharma will hinder economic progress. In reality, one could argue that increased political competition has, for the first time, made many leaders and parties aware of the political need to perform, improve governance and the economy. Otherwise, they would have to bear the wrath of the electorate.
While India was politically stable in the first 40 years, except for the 1975-1979 period, the economy stagnated at the so-called “Hindu rate of growth”. But as coalition politics became the norm after 1989, the economy began to pick up.
As political competition increased, both at the state and national level, the growth picked up even more after 2000. The accompanying graph shows this clearly: in the first five general elections, the incumbents returned to power while growth remained lackadaisical. In contrast, in the last six elections, incumbents have lost regularly even as growth has assumed an upward trajectory. If anything, the country’s electoral history can be seen clearly through this lens.
Please See | Growth And Electoral Politics In India (PDF)
It would seem that the economic context in India is changing, quite irrespective of any particular political outcome in the elections.
The graph plots political outcome against its economic growth rate. The annual growth rate is calculated on the basis of 1993-94 prices on the Y axis. And political path is measured not by the victory or defeat of any party or coalition, but whether the ruling combination is re-elected (+1) or defeated (-1), on the second Y axis on the right. Given prevalent coalition politics, two other categories are also used to depict electoral changes. If the ruling coalition is re-elected broadly with the same features, it is given +0.5, and if it is defeated, -0.5.
The Congress lost power in 1977 to the umbrella coalition that made up the Janata Party in the aftermath of the excesses committed during the emergency rule of the previous two years in which elections and civil liberties were suspended.
The leaders of the Janata Party, in their zeal to defeat the Congress, attempted to prove to the people that they were the true socialists, and the Congress was only a pretender.
By the end of the 1970s, the economy had tanked and showed that economic reality does not respect political ideology. While it is true that man does not live by bread alone, it is even truer that he cannot live by ideology alone.
The new Congress administration seemed to have learnt at least one lesson—that the economy needed more attention than politics.
Political fragmentation in the 1980s and 1990s was characterized by identity politics. With every party trying to consolidate its own social base, none was in a position to ensure victory based on any narrow identity, particularly at the national level.
Political pundits coined the term “anti-incumbency” to reflect the popular mood to bring about political change through the ballot. The alternatives did not necessarily perform any better, but the desire for change was almost irresistible.
In 1991, politics was in turmoil and the economy was facing its most serious crisis. The prevailing wisdom is that the economic crisis necessitated the reforms adopted by prime minister Narasimha Rao and finance minister Manmohan Singh.
While the 1990s was politically tumultuous, by the end of the decade it became clear that identity politics had run its course. This allowed for a degree of political consolidation.
As the credibility of political alternatives on offer increased, the agenda slowly shifted towards developmental issues as most major political parties realized that mere rhetoric would be insufficient to gain or hold power. It was during this phase that bijli, sadak, paani entered the political lexicon.
In 2012, there are no big emotive issues to colour these elections and all the major contestants are focusing on development.
With greater political competition, the need for economic policy that works becomes critical for retaining credibility with the voters. So it appears that this competition has created the condition for economic reforms that in turn encouraged competition and improved economic growth. This is clearly a key part of the political narrative in India since the 1990s, as illustrated by the upturn in the trend line in the graph.
Economic competition has been good for Indian consumers. Six decades after independence, perhaps the time has come to reap the economic dividend from a truly competitive political democracy.
Increasing political competition has opened new opportunities for the voters not only to demand performance, but drive economic changes as their aspirations rise. This is forcing politicians to explore new ideas that might meet these demands.