• UGI USER
  • Jun 14, 2024
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DO COALITION GOVERNMENTS SLOW DOWN THE ECONOMIC REFORMS AGENDA?

Relevance: GS 2 – Parliament and State legislatures—structure, functioning, conduct of business, powers & privileges and issues arising out of these.

Why in the News?

  • Until the 2014 Lok Sabha elections, India had coalition governments for 21 years. As of 2024, the BJP holds 240 seats in the Lok Sabha. India currently has a coalition government.
  • Fitch Ratings noted that coalition politics and a weakened mandate for the National Democratic Alliance (NDA) might hinder the passage of ambitious reforms.
    • Chief Economic Advisor V Anantha Nageswaran’s View: He believes coalition dynamics facilitate incremental reforms.Dialogue is enhanced, making difficult reforms more feasible over time.

Policy Concessions in different Governments

  • Economic growth is influenced by many factors, not just government form.
  • Single-party rule is not the only option, and coalitions can function effectively.
  • Reforms can happen under coalitions, as seen in India’s economic liberalization in 1991.
  • Both single-party and coalition governments involve compromise and bargaining.
  • Coalitions can lead to “weak reform” but also more policy stability for long-term investment.
    • As Montek Singh Ahluwalia once said, “There is a strong consensus for weak reform”.
    • Social policy reforms might face delays due to coalition negotiations.
  • Coalitions make these compromises more transparent.
  • India’s experience with coalitions has been positive, with checks and balances leading to better governance. Whereas Single-party rule can lack checks and balances, potentially leading to bad decisions.

Coalition Governments

  • Continuity in Policies: Coalition governments haven’t drastically changed economic policies since 1991. Reforms are gradual and incremental.
  • Public Bargaining: Different viewpoints are considered and accommodated through public bargaining between parties.

  • Institutionalized Decision-Making: Coalition governments develop mechanisms like committees and “Group of Ministers” for inclusive decision-making.
    • The V.P. Singh’s government had 6 committees which evolved in the Atal Bihari Vajpayee government to examine the most pressing issues.
  • Better for Reforms: Coalitions encourage dialogue and may prevent unilateral decisions like the recent farm laws.
  • Stronger Centre-State Relations: Regional parties in coalitions activate institutions for better Centre-State communication.
  • More Informed Policy-Making: The process might be turbulent, but it considers diverse perspectives.

Challenges of Coalition Governments:

  • Acrimonious Dialogue: Disagreements between coalition partners can lead to tense discussions.
  • Stalled Reforms: Ideological differences can stall reforms, as seen with the Janata Party government.
  • Not All Single-Party Governments are Efficient: Even single-party majorities can struggle with internal disagreements
    • Despite having the largest seat majority in the history of independent India, Rajiv Gandhi’s government faced stalled liberalization reforms due to internal party checks within the Congress.
  • Fiscal Issues: Balancing demands can lead to higher deficits, as with the Janata Party.
  • Focus on Outcome vs. Process: Critics might only judge final policies and miss the benefit of a more inclusive decision-making process.

State Share in Divisible Tax Pool under Coalition Government:

  • Planning Commission Abolished: Planning Commission provided negotiation space for states, but the replacement, Niti Aayog, is less state-friendly.
  • States’ Role: The role of states is supposed to be bigger in coalitions, but this hasn’t translated to a larger share of taxes.
  • Centralized Decision-Making: Power is concentrated in the Prime Minister’s Office, reducing state influence.
  • Focus on Central Benefits: Central government takes credit for social programs, downplaying state contributions.
  • Complex Issues: Determining state share involves economic performance, regional disparity, and vertical imbalance between center and states.
  • GST Discontent: States feel shortchanged by the GST tax system, which reduced their revenue compared to the pre-GST regime.

NDA Government and its Vision

  • The NDA is just beginning its term.
    • Uncertainty remains about whether the decision-making and governance style of the last 10 years will change substantially.
  • Economic Vision Among Allies
    • Allies within the NDA may or may not share a similar economic vision.
    • The BJP needs its allies for a majority, but retains control of all important ministries.
      • Andhra Pradesh Chief Minister Naidu was an early liberalizer.
    • There is a general consensus on economic reforms across parties.
  • Power Distribution and Decision-Making Style
    • Differences lie in power distribution and the style of decision-making.
    • No major conflict in economic policies among allies.
    • Potential differences could arise in the pace of decision-making.
    • The mechanisms and processes used for decision-making will influence whether economic reforms are stalled or advanced.

Solutions in Navigating the Coalition Challenges

  • Communication and Transparency: Establish clear communication channels between coalition partners. Regularly brief each other on internal discussions and external developments.
  • Shared Policy Agenda: Ensure a common minimum program outlining key policy areas where all parties agree. This provides a foundation for decision-making and minimizes public disagreements.
  • Strong Leadership: The Prime Minister or coalition leader needs strong negotiation and communication skills to keep partners on board and mediate disagreements.
  • Internal Dispute Resolution: Set up a formal or informal process for resolving internal conflicts. This could involve a designated committee or regular meetings of party leaders.
  • Focus on Common Ground: Prioritize areas where parties have common ground and tackle divisive issues through compromise or delaying them.
  • Respect for Individual Parties: Acknowledge the individual identities and priorities of coalition partners. Allow them some freedom on non-core issues to maintain their own base.
  • Managing Expectations: Manage public expectations regarding the pace of decision-making, acknowledging the need for consensus building.
  • Openness to Compromise: All parties must be willing to compromise on some of their goals in the interest of maintaining the coalition.

Alternative articles

Source: https://www.thehindu.com/opinion/op-ed/do-coalition-governments-slow-down-the-economic-reforms-agenda/article68286644.ece

Mains question

Discuss the impact of coalition governments on economic reforms in India, considering the historical context and the challenges of decision-making and power distribution. (Answer in 250 words)