19 November 2013, 02:24 PM IST
One reason many people advance for supporting Narendra Modi is their opposition to the Congress' pro-poor stance. This, they claim, ends up creating a vested interest in preserving rather than combating poverty.
In contrast, in Modi's championship of growth, they see the possibility of eliminating poverty. Stripped bare of sophistry, this pro-poor versus anti-poverty distinction, altogether less substantial than naked versus nude, turns out to be nothing more than the proverbial fig leaf.
Pro-poor is indeed pro-growth. Let us begin with Nehru's supposed socialism. Socialist is as socialist does. What did Nehru do? He banned most imports, slapped high tariffs on the rest, to present independent India's burgeoning industry with a domestic market completely free from foreign competition.
How red, Nehru's socialism?
He mobilised domestic savings and handed them over to industry — not just through a financial institution like Industrial Finance Corporation of India, set up in 1948, but also by repressing farm prices, turning the terms of trade against agriculture and transferring income from the vast rural mass to urban industry.
Nehruvian policy talked about reserving the commanding heights of the economy for the public sector, but used the Budget to transfer incomes from across society — indirect taxes that burden everyone used to account for more than 90% of tax revenue — to build steel plants, machine tools and infrastructure that Indian industry just was too small to build on its own.
In other words, Nehru used socialistic rhetoric to persuade people to go along with building up a strong capitalist class in the country.
Following pink footsteps
Indira Gandhi, of course, went overboard with both the rhetoric and the accompanying regulations. But then, she oversaw the development of food security and built upon Nehruvian foreign policy that secured for India the strategic space imperative for autonomous economic development by a non-client state.
Nehru and Indira Gandhi pursued policies that built up an educated, professional middle class in the country. Their children studied in the engineering institutions of excellence these leaders had the foresight to set up. They went on to migrate to the US and played a huge role in the growth of India's vaunted information technology industry. Not quite anti-growth, was this?
Rajiv Gandhi it was who talked of preparing India for the 21st century and promoted a domestic IT industry. India broke away from the Hindu rate of growth in the 1980s, when growth averaged 5.8%. Then, in 1991, PV Narasimha Rao initiated economic reforms, choosing Manmohan Singh as his man to do the job. That, too, was a pro-poor Congress government, and liberalisation and globalisation were carried out in the name of the poor.
Did that hurt growth or promote it? A section of domestic industry, organised as the Bombay Club, and "nationalist" offshoots of the Sangh Parivar, such as the Swadeshi Jagran Manch, were opposed to opening up and foreign capital. That very Sangh Parivar now hopes to ride on Modi's coat tails to national centre stage.
The Congress-backed United Front government carried the reform process forward and its finance minister P Chidambaram cut incometax rates to levels where they have stayed till now.
Helping growth helps the poor was the subtext when Chidambaram made dematerialisation of shares mandatory, allowed foreign institutional investors into debt, opened up insurance and announced the New Exploration and Licensing Policy to create a level playing field for public and private sector players in hydrocarbon sectors. Does this sound anti-growth?
UPA as growth launchpad
India achieved its fastest patch of growth, averaging 8.85% in the UPA's first four years, prior to the financial crisis of 2008. Even after that, growth has sustained till this year. Poverty fell at its fastest pace in Indian history, thanks to growth and redistributive policies. This is not just pro-poor but also anti-poverty and pro-growth.
At a time now, when urban India is caught in the thrall of a slowdown, sustained real wage growth over seven years has created a solid, growing mass of purchasing power in rural India. The latest figures show a 4% dip in motor car sales in October, alongside an 18% growth in two-wheelers.
Infant mortality rate has come down by a third, more women than ever give birth in a hospital, health insurance coverage has increased dramatically. Pro-poor policies have made for structural diversification of the economy.
In 2011, for the first time, the share of the workforce living off agriculture came down below 50%. This is a landmark. Aadhaar is paving the way for financial inclusion. Broadband is being rolled out to 2,50,000 panchayats.
Power lines have been drawn to 4.6 lakh villages. When power does finally start flowing on these lines, India's growth rate would witness a quantum leap. UPA hasn't just done redistribution, it has created conditions for fast growth, which will materialise whoever forms the next government.
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