Why AAP’s policies may be good for our economy.

Much has been said about AAP’s bold and surprising entry into politics. Also, much has been said about their socialist leanings and how their good intentions may be the classic ‘road to hell’ journey. Unlike the experts, I think AAP will end up being good for our economy.

The first principle to establish is that growth is about relatively good policies. In this regard I think AAP is on par with BJP or Congress in terms of its economic outlook. There is merely a shade of difference in the approach of Indian parties and all parties in India are left of centre. AAP agrees with BJP in opposing FDI in retail. BJP wants food security extended beyond what Congress has proposed. Everyone wants to give free water. Hence, subsidies or give aways that AAP will propose is just confirming to the broad welfare state status quo consensus. Nothing new here and nothing worse. People only expect more transparency and less leakage under AAP. It won’t increase growth but perhaps restore some public confidence. The point to underscore here is that this is neutral prognosis economically, neither good nor worse.

The second principle is that economic impact of supposedly non-economic policies should not be underestimated. If I may even be bold enough to suggest that some of them have more far reaching economic impact than monetary, trade or tax related policies. I would point to rule of law for instance. It is the rock-bed on which all market economics depends on. In India, rule of law is weak. Going to court for recourse in business dealings is unthinkable for small businesses. Contracts can hardly be enforced. India ranks 186th in 189 countries in this regard, average time for recourse of nearly 3 years and costs of 40% of claims (link). Number 17 on the 18 point agenda list by AAP is a promise to get cases settled in 6 months. How much of this goal they would achieve is to be seen but I am happy to see this priority in someone’s agenda in India.

Although not directly mentioned as such, I think some of the other agenda items point to police reforms and urban reforms. A better, non-political police will increase the rule of law quotient and urban reforms could unlock the kind of growth Rahul Gandhi can’t imagine. AAP could well be a party that could make the property market more transparent or break the inefficient monopoly of the mandi old money. All good for growth and lower inflation.

It is at times depressing that we are still talking of such basics missing in our country but this is what we need: Courts that work, police that can do its job, transparent and decentralised spending towards public goods (like roads and sewage). This is what economic growth needs too. AAP could deliver on these. We can get to the more sophisticated economic arguments once these basics are in place.

Saurabh Chandra is a Bangalore based tech entrepreneur with an interest in public policy. You can follow his tweets on @saurabhchandra

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.