India’s national election, which kicked off Monday, is a contest of old-fashioned socialism versus market liberalism, of handouts to the poor versus pro-growth reforms that will benefit all. Right?
Sort of. At least judging by the two main contenders’ official platforms.
The Bharatiya Janata Party — out of power for a decade — looks set to win big this year, helped by its popular prime ministerial candidate Narendra Modi, who promises to reboot India’s economy with a combination of smart policy and able administration.
But now that the BJP has at last released its election manifesto after multiple delays, it’s easier to see where exactly its economic policy ideas differ from the incumbent Congress party’s – and, perhaps more interestingly, where they don’t.
Both parties promise to revitalize India’s manufacturing sector, long a laggard amid the country’s economic rise. Both say they will implement a national goods and services tax, known elsewhere as a value-added tax. Both want to create a “single-window system” to expedite land, environmental, power and other approvals for investors. Both back the current system of food subsidies, though the BJP highlights that the program should be efficient and corruption-free.
And both parties want to build high-speed rail, stem inflation, modernize infrastructure, make housing affordable, create jobs, expand cities and make taxation more predictable. (Though the BJP wins style points for referring to retroactive taxes as “tax terrorism.”) The BJP even matches the splashiest item in Congress’s manifesto — a commitment to providing “universal and quality health care for all Indians” — with its own call for universal health care.
All of that said, the manifestos alone do give the BJP an edge in terms of structural reforms that many economists, businesses and investors have long craved from India’s government.
The party’s manifesto speaks of addressing “over-regulation” in business and “bottlenecks” in the delivery of public services. Its section on developing agriculture focuses more on investing in productivity-enhancing technology than on increasing government subsidies, which the Congress manifesto notes as a major achievement of its decade in office.
The BJP says it will “rationalize and simplify the tax regime,” which the party calls “currently repulsive for honest taxpayers.” The Congress manifesto merely reiterates its support for the Direct Tax Code, an earlier legislative effort to eliminate tax distortions and improve compliance that has stalled in Parliament’s lower house.
The BJP also says it will review India’s creaking labor laws, which it decries as “outdated, complicated and even contradictory.” The Congress manifesto, meanwhile, “recognizes the need for creating flexibilities in the labor market” while redoubling its commitment to “protecting the interests of labor through more progressive labor laws.” The World Bank said in a report last year that India’s “cumbersome and complex” labor policies “have unambiguously negative effects on economic efficiency.”
via Two Visions for India’s Economy, Sort Of – India Real Time – WSJ.
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