The Sonia years: Is it welfare or farewell to India’s growth?

People have been blaming Sonia Gandhi for India’s decline.

Here is another column looking at Sonia’s role in decline of Indian economy.  Did she destroy the India story?

Am not too sure. We tend to  confuse economics with politics and believe good economics is good politics. But this is just an economist’s view of the ideal world.

The politicians simply believes in politics which helps them win elections. This is something which Public Choice theory (pioneered by Buchanan and Tullock) has so interestingly shown. If good economics comes in this way of winning elections citizens should consider themselves as blessed souls. How many governments think this way as econs often tell us? Even in US where most economic theories have come about, have been able to convince their political leaders to think economically? It is always politics first and not economics.

So Sonia Gandhi simply went by policies which help her win elections. And she has been pretty successful in her previous two attempts. Another attempt is being made by passing on Food Security Bill (and god knows what next) and time will show whether SG’s politics (or economics) will win again.

I think the real issue is why such poor-economics approach policies keep winning elections? Why despite many years of so-called economic reforms (which I think is a much abused and ambiguous term) , people continue to vote for populist policies. Some State governments have shown the way but are they sure of winning the next elections? How many politicians (yes there are exceptions but exceptions they are) have managed to win elections by using sound economic policies? The best example was NDA’s loss in 2004 which lost despite economy being in a much better shape. Yes there were other reasons for their loss as well but on economic grounds UPA won by showing their Indian Shining campaign was not a true story. As per UPA, India was actually faring poorly! And they did win the election surprising all the political experts..

So, no matter what people say on need to have sound economics politics, it  is something which neither politicians understand (or choose to ignore) nor does the public. And public only understands when we have a crisis on hand.

In India’s case though things are slightly different as they usually are. We not just had some sharp economists inkey advisory positions but a a Prime Minister who is an accomplished economist himself. Why did they not oppose these populist policies? Have we even seen any major dissents by any of the key advisers against the government policies? RBI officials tried but are shown the door. Now if these guys could not inculcate the economic logic  amidst their colleagues/politicians what do we really expect?

This crisis is not just about economic issues. It is a political one as well. We need to think collectively on role of governance and figure the populist policies from the sound economic ones.  India has been facing a political crisis and a vaccum on political leadership but was being sidelined because of the high growth we were getting. That time has gone and there is a need to rethink on many aspects of India story (if there is one).

Don’t get me wrong. I am not defending SG’s policies. Just that she is a politician who keeps winning elections and will not change her policies till she loses elections majorly.

So let’s see what 2014 has in order for us…