Our new political-economy consensus needs a rethink

The policies our parties agree upon are not reformist. The challenge is to chalk out an agenda that is

- PUJA MEHRA

Recent assembly polls have helped make clear a new political-economy consensus in India. Our politicians, who can't seem to agree on very much, have come to view cash transfers to women as a must-have policy. This congruence of positions is visible in the schemes instituted by BJP-ruled Maharashtra, India's richest state, and poor opposition-ruled Jharkhand.

Handouts have come to be a powerful economic lever to manage political discontent in times of persistently high food prices compounded by a nagging jobs crisis and a decade of stagnant rural wages. Economist Neelkanth Mishra has estimated that half the states are cumulatively spending ₹2 trillion a year, or 0.6% of national GDP, on these programmes. More may follow as pressure grows on policymakers to resolve food supply bottlenecks or see inflation harden.

The second big change is in the thinking on pensions. Cutting across party lines, governments are re-introducing assured pensions for employees. In many states, non-BJP governments have decided to revert to the pre-2004 old pension scheme. The unified pension scheme announced by the Centre ahead of voting in Haryana doesn't go that far, but it too assures employees of a pension that is half the average salary drawn in the last year before retirement.

The pension bill will rise only slightly, say officials defending the scheme. But once the principle of no assurance is done away with, pension schemes inevitably become unfriendly to taxpayers. A signal has gone out that the government is susceptible to pressure groups. The pension reform reversed was rolled out by the A.B. Vajpayee government and had held for 20 years.