Why at present the AAP offers the best hope for governance and policy

Dr Rahul Pandey, CNS Columnist
In a short period of time the Aam Aadmi Party (AAP) has shaken up India’s political landscape by offering an honest alternative to the mainstream national parties, specifically the Congress and the BJP.  This article is an attempt to understand AAP’s credibility on certain crucial dimensions, namely, the integrity of senior leadership; their policy agenda for the underprivileged sections of society; and for the economy and business sector.  While doing so, a brief comparison of AAP with BJP and Congress is also attempted. High personal integrity of senior leaders is a fundamental pre-requisite for good governance.  It is a starting condition for a party to collectively try to envision an India without vested self interests. 

Once this is assured, it is worth looking at a party’s agenda for governance and policy while keeping in mind the interests of various sections of the society and the country at large.

Integrity of senior leaders
This is the major basis of AAP’s positioning.  Most of its senior leaders including those whose candidature has been announced or is likely to be announced are persons with track record of integrity and honest intentions. Coming from diverse professional and socio-economic backgrounds, they have joined AAP as they view it as a platform for positive change.  Almost all of them wish to root out corruption and make the governance clean and transparent.  Some of them also strongly believe in decentralized governance structure which lends priority to the concerns of the ordinary people and communities.

In stark contrast, both the BJP and the Congress fall way short on this aspect.  Modi’s cabinet and close associates in Gujarat include several senior persons with serious corruption or criminal charges.  This small group has been running the administration without regard to transparency.  Even in other states and nationally, the BJP and the Congress have several senior leaders with dubious records and non-transparent ways of working.

Policy agenda for the socio-economically vulnerable sections
This is another dimension on which AAP’s agenda is probably the best of the three parties.  It professes to follow a combination of ‘decentralized governance structure’ and ‘centrally guaranteed social security on essential livelihood services’.

The decentralized and democratic governance approach which AAP is advocating has elements of Gandhi’s idea of ‘Swaraj’.  In this approach, citizens at every local granular level will participate and have a strong say in the decision-making process about the issues which concern them.

In addition, AAP promises to provide every citizen a ‘lifeline’ support of services like water, healthcare, schools, electricity and housing, which are essential inputs to livelihood and to accessing basic socio-economic opportunities in a society.  The genuineness of AAP’s commitment towards the vulnerable sections like the poor, minorities, workers, dalit and tribal people is also displayed in its choice of several senior social activists in its leadership and Lok Sabha candidates.

This decentralized, people-centric approach of AAP stands in contrast to the centralized, top-down and unilateral imposition based approach of the Congress and the BJP.  While the Congress talks about some of the similar issues of the people, like food security, land acquisition and employment, its utter corruption, inefficiency in implementing promises, and dynastic governance have damaged its credibility.  The BJP has probably been worse, with its inherently communal outlook in addition to Congress-like corruption and centralized governance approach, not to speak of the overtly autocratic governing style of its PM candidate.

Policy agenda for the economy and the business sector
An important contribution made by AAP in the recent debate on economic policy is to point out the distinction between ‘honest capitalism’ and ‘crony or dishonest capitalism’.  Kejriwal has clarified that AAP supports business activities and views the business sector as performing an important role, but is against crony capitalism.  Let us understand this difference by way of examples.

Wikipedia defines ‘crony capitalism’ as an economy in which success in business depends on close relationships between business people and government officials, or on collusion between market players.  Such practices are motivated by objectives of greed rather than interest of consumers or society.  It may be exhibited by favouritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state patronage.  Indian economy clearly needs to move away from such a regressive model towards a transparent and progressive one.

Practices followed by certain influential business groups in India – with active support of the central or state governments – could be straight away categorized as crony capitalism.  Both the Congress and the BJP governments have been consistently guilty on this count.  For instance, the latest K G Basin gas price revision by the UPA government and the earlier 2G scam, which were against the interest of industrial and end consumers, are examples of crony capitalist practice.  Another glaring example is the series of favours granted by the BJP to a particular business group in Gujarat which is known for its proximity to Modi, as a result of which it grabbed mega contracts despite its high prices.  The business group grew by fourteen times, to over INR 50,000 crore, in the past twelve years of the Gujarat BJP government.  Economic and industry policies followed by the Modi government in Gujarat, and the UPA and the erstwhile NDA at the national level, are littered with such blatant manifestations of crony capitalism.

In contrast, the short-lived AAP government in Delhi had two levels of positive impact on the business world.  At the macro level, AAP’s FIR against Mukesh Ambani and two central cabinet ministers in connection with the rent-seeking decision of K G Basin sent out a clear message to the corporate world that unfair and manipulative business practices are not acceptable.  At the ground level, AAP’s actions and postures led to some drop in the corruption faced by businesses in routine transactional activities for which they interface with government departments.  For example, many transporters and logistics service providers of north India have come out in support of AAP as they experienced reduced harassment by the transport department and police personnel at entry/exit toll nakas in Delhi.  Likewise, several small and medium manufacturing and trading firms in Delhi reported reduced corruption.

While the AAP’s Delhi government was short-lived, its effect does point to the potential of impact on the business sector if such practices sustain for a longer period.  It is not only a big relief for the individual businesses but also for the economy as such.  As the routine corruption faced by the businesses goes down, the non-value adding time and costs are cut, and the productive operational activities can be carried out with greater efficiency and speed.  Thus the overall inventory turnovers and asset turnarounds in industrial supply chains will increase.  In addition, the time thus saved could be filled in by enhanced business activity.  These effects will release more money (both revenue and working capital) in the economy and at a faster rate than before.  Imagine the impact if the AAP effect continues for months and years!  A back-of-the-envelope calculation, assuming utilization of one-fourth of the asset-time saved for additional business generation and faster release of working capital, indicates a potential increase in the annual revenue of INR 5,000-10,000 crore for all manufacturing businesses who sell in Delhi on account of a couple of hours saving in every truck’s trip.  This is equivalent to 10-20 percent of Delhi’s industrial GDP.

This kind of bottom-up release of locked-up business time and money through cutting corruption and facilitating fair and transparent business practice is a robust economic strategy.  It not only saves time and cost for the individual businesses, but also adds to certain operating competence in those industries, like making their supply chains more agile and cost efficient.  This could enable the firms to satisfy their customers better, and eventually, improve business performance.

The cumulative money thus freed-up in the economy will provide a strong internal source for further business and other investments.  This reduces the need and dependence on external investments, including FDI, whose cost of capital is often higher than that of internal investment sources.

Therefore, by anti-corruption induced saving of business time and speeding up of supply chains and consequent release of latent capital and its use for further investment, the industrial economy as a whole will not only grow but also become more resilient.  Certainly more resilient than the existing economic scenario where the growth is triggered primarily by external investment sources.  An economy driven mainly by external investment is bound to become progressively vulnerable to various external events a lot of which are not in the control of our governments and businesses.

Therefore, among the three national parties, AAP offers the only hope to reform the business sector and the economy in the direction of honest and transparent business practice and greater internal generation of wealth for further investment.  The effect of this on employment generation is evident.  Once such a fundamental change in the value system of the economy is initiated, the specific policies like sector-wise priorities, taxation, subsidies, extent of competition, and estimation and pursuit of external investment will become matters of detail which could fall in place.

In Conclusion
In the final analysis, when one compares the mainstream parties on the integrity of senior leadership and the policy to address concerns of both the underprivileged and the business sections in an honest manner, AAP clearly stands out.  The only visible weakness so far has been the ad-hoc way of approaching certain specific problems, as seen in Delhi.  However this weakness is likely to go away as its senior leadership is expanding to include more persons from different backgrounds who come with significant credibility in their respective professional spheres as well as at the societal level in general.

Dr Rahul Pandey, CNS Columnist
February 2014
(The author is a former faculty member of IIT Bombay and IIM Lucknow.  At present he is an entrepreneur and an adjunct professor, with professional interests in operations strategy, supply chain management, mathematical modeling, energy and sustainable development)

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