Context-

The debate on whether coalition governments slow down economic reforms is ongoing in India's political landscape. From 1993 to 2014, India had coalition governments until a single-party majority government emerged. Recently, the return to coalition governance has raised concerns about its impact on passing ambitious economic reforms.

Policy Concessions in Coalition Governments

Assumptions and Realities

Two primary assumptions underpin the debate on coalition governments: that single-party governments are the norm and multi-party governments are aberrations with negative consequences, and that single-party governments act as unitary entities.

These assumptions need reevaluation. Comparative studies indicate that single-party governments do not inherently function better than coalitions. Policy compromises and bargains occur in both forms of governance. The difference lies in the transparency of these compromises; coalition governments often conduct these discussions publicly, enhancing transparency.

Historically, coalition governments in India have not fared poorly; checks and balances have sometimes enabled better governance compared to single-party governments.

Economic Reform and Political Stability

Economic growth necessitates reform, which many believe requires decisive action typically associated with single-party majority governments. However, the form of government is only one factor among many influencing economic growth. The process of economic liberalization in India began under coalition governments and continued through various administrations, including minority and coalition governments. Although coalitions may involve more negotiation and compromise, this can lead to more stable and enduring policies. In contrast, single-party majority governments may enact rapid but less-consensual reforms, which can face significant opposition and potential reversals.

Performance of Coalition Governments on Economic Agenda

Continuity and Incremental Policy Changes

India has seen significant continuity in economic policies across different governments since the 1991 liberalization. Coalition governments have facilitated incremental policy changes, often institutionalizing mechanisms to accommodate diverse viewpoints. For example, the V.P. Singh government utilized multiple committees to address pressing issues, a practice that evolved into ‘Group of Ministers’ under subsequent administrations. Such mechanisms ensure broader consensus and stability in policy decisions. In contrast, single-party governments might bypass extensive consultations, leading to contentious decisions like the farm laws, which faced substantial backlash due to a lack of broader dialogue.

Centre-State Relations and Coalition Dynamics

Coalition governments often activate institutions that promote Centre-State relations, as allies are frequently regional parties. This dynamic can lead to more informed and inclusive policymaking processes, albeit sometimes turbulent. Dialogues within coalition governments can become acrimonious, potentially stalling reforms. Historical instances, such as the Janata Party government’s ideological commitments leading to economic challenges, highlight that coalition governments can face difficulties. However, these challenges are not unique to coalitions; single-party governments have also encountered internal checks and policy reversals, as seen during Rajiv Gandhi’s tenure.

Fiscal Policies and State’s Share in Revenue

Impact of Coalition Governments on State Revenues

The role of State governments in national coalitions is often higher, reflecting the need for inclusive decision-making. The concept of “cooperative federalism” initially embraced by the current administration aimed to strengthen Indian federalism. However, the centralization of revenue through special cesses and the abolition of the Planning Commission have shifted the balance of fiscal power. The replacement of the Planning Commission with Niti Aayog, a more technocratic institution, has reduced the institutional space for negotiation, leading to increased central control over social welfare benefits. This shift has fueled discontent among States, emphasizing the need for a more balanced and inclusive approach to fiscal policy.

GST and Revenue Sharing Challenges

The introduction of the Goods and Services Tax (GST) aimed to streamline taxation but also introduced complexities in revenue sharing between the Centre and States. The GST negotiations highlighted the difficulties in achieving consensus, with States experiencing revenue declines due to changes in tax brackets. The architecture of GST has been criticized for not adequately favoring the States, underscoring the need for better articulation of State interests in the decision-making process.

Current Coalition Government and Economic Vision

Distribution of Power and Decision-Making

The current coalition government, led by the BJP with key allies, reflects a continued dominance in important ministries by the BJP. The style of governance and decision-making seen in the past decade raises questions about potential changes under the coalition setup. The economic outlook of coalition partners varies, but there is a general consensus on economic reforms across the political spectrum. The pace of decision-making and the mechanisms employed will determine the effectiveness of economic reforms under the current coalition.

Stability and Inclusiveness in Policy Decisions

The involvement of multiple parties in decision-making processes is likely to result in more stable and enduring policies. While single-party governments might pursue rapid reforms, coalition governments’ inherent need for negotiation and compromise can lead to policies that enjoy broader support and longevity. The experience of past coalition governments in India demonstrates that inclusive decision-making processes can facilitate sustained economic growth and reform.

Conclusion

In conclusion, coalition governments do not inherently slow down the economic reforms agenda. While they require more negotiation and compromise, this can lead to more stable and inclusive policies. The historical performance of coalition governments in India shows that they can effectively drive economic reforms, ensuring continuity and incremental changes. The key to successful economic reform lies in transparent and inclusive decision-making processes, regardless of whether the government is a coalition or a single-party majority.

Source- The Hindu