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Thursday, May 13, 2004

India's elections 

Most people in India are still coming to terms with the shock of the election results. Everyone knew the ruling alliance was in trouble, but noone suspected the amount of trouble they were in. Not even after the horrific defeat of Naidu's government did I suspect this was coming. I will admit I am not overly pleased with the results. For the sake of economic reforms, I would have preferred the NDA to return to power. Ever since the Gujarat riots, I wanted the NDA's cockiness to be dented a bit, but not this badly. I have to wonder how much the Left parties will be a spanner in the works for reforms the Congress has promised to undertake. Then again, the same questions were asked when the BJP alliance came to power in 1999 -- how much the reforms process would be affected by swadeshi elements within the BJP family. Turns out they did creditably well. Let's hope the same is true with the Congress alliance.

The Economist captures some of the confusion surrounding the election results, including the ambivalence a lot of Indians feel right now.

BAD for the credibility of almost every pundit and pollster; bad for political stability; even perhaps bad for economic reform. But the outcome of India's election has been a triumph for democracy, and the ordinary voter's refusal, after being subjected to months of self-congratulatory government propaganda about “India Shining”, to accept rhetoric over results.

Some of these potential partners may balk at supporting Mrs Gandhi as prime minister. One rumoured alternative from within Congress is Manmohan Singh, a respected former finance minister. An unstable coalition government, relying on the support of the Communists, is unlikely to prove radical, and may be short-lived. But the presence of Mr Singh in Congress—as a senior policymaker, at any rate, if not in the top job—is one reason for guarded optimism that the election result will not mean the stalling of economic reform. It was Mr Singh who launched the opening up and liberalisation of the economy in 1991. Congress's manifesto commits it to a policy of sustaining and even accelerating current rates of economic growth. That will not be possible without more reform: cutting the fiscal deficit; continuing to foster competition; privatising more state-run enterprises.

There are other reasons for cheer. First, one of Mr Vajpayee's dreams commands consensus support and will surely still be followed: building a lasting peace with Pakistan, a project dear to Congress the last time it was in power. Second, the electoral rebuke for the BJP from rural India might intensify efforts to spread some of the alleged shine to the gloomier parts of the countryside. Properly interpreted, it should not thwart reform, but spur it.


The last point is crucial in my opinion. The popular way of looking at Naidu's defeat had been to blame him for not taking the fruits of economic reform to the masses. The optimistic way to look at it might be that people's expecatations may itself have increased along the way and perhaps the problem was that Naidu wasn't meeting heightened expectations quickly enough. Perhaps the need of the hour is accelerating reform, not deccelerating it, but accelerating it in a way that the benefits are spread more evenly.

In anycase, I think this election result makes it imperative for policy makers to pay more attention to our RISC model. We have been carping for the longest time about taking the benefits of technology/infrastructure to rural areas if rapid economic growth is to be maintained. Restricting the benefits of IT/Tech to big cities will result in a rural backlash. In a country where 70% of the people live in rural areas, that would be political suicide, as the NDA just discovered.