The taxi was stuck on the wrong side of the road on Howrah Bridge since the driver had impatiently crossed the mini separators to gain ‘an advantage’. Noxious fumes from large buses plying too many to the same route entered the taxi with the exhaust of one bus being perfectly lined with my window. The bus operator lobby had been resisting giving up on centrally subsidized diesel for years. I heard somebody cribbing in another car that it was all because of corruption. And then it struck me. The Aam Aadmi Party (AAP) was nothing new. My native state had actually seen AAP-style rule under a different name for 34 years. The recipe was the same—anger against a Congress government, fake promises about energy, food and water to a migrant population struggling to make ends meet in the big city and apparently an agenda to curb corruption. Take away the hoardings with candidate images on them, add some red flags here and there and let there be more shouting on the streets than in television studios and Delhi 2013 would suddenly become Calcutta 1978.
The nearly decade-long UPA government has overseen one of the worst inflationary phases in India’s history simultaneously coupled with jobless growth. Rather than see a whole lot of employment generating economic activity, UPA’s ‘reforms’ have only primed asset inflation as bank lending has been used more to bid up prices of existing estates than be deployed to generate productive jobs. At the same time, the infrastructure build-up hasn’t kept pace with the loud announcements made under various schemes leading to supply side bottlenecks fuelling further increases in input costs. The interplay of rising supply side costs and skewed income growth finally served to derail India’s investment cycle, the effects of which have now become apparent with even ‘jobless’ growth struggling to make it past the five per cent mark. After all, the Finance, Insurance and Real Estate or FIRE economy has to burn sometime.
So where has all this left the aam aadmi? Not in great shape obviously. The aam aadmi already living in some corner of the city finds that his basic living costs are rising while employment opportunities and real income growth remain stagnant. In fact, real income may have actually declined in the last three years for some segments of the aam aadmi. The migrant aam aadmi comes to the city to provide some cash balances for his rural household and finds that he is unable to save even by resorting to practices of questionable legality.
On the other hand, the aam aadmi sees the ‘khaas aadmi’ literally getting fatter in the core zone of the big city. Times have never been better for the asset owner spending on the ‘next world in luxury’ riding on the ‘wealth effect’. Unfortunately, however, inequality spawned by asset inflation doesn’t really do much for overall consumer demand and that in turn doesn’t do much for investment demand sensing weakness in the former. But the blow is naturally felt by the aam aadmi squeezed on both ends—inflation and joblessness.
So what can the aam aadmi do? Well he’ll certainly rail against the moral and actual corruption of the times. He would look to scrounge out ‘commissions’ from any real estate deals happening in his vicinity since that would seem to be the only game in town. He would also try to hold on to his existing shelter in the big city however humble it might be. But more than anything else he would be susceptible to the lure of a miracle ointment that can relieve his pain rapidly.
It is here that AAP, like the CPI(M) three decades before it, steps in. To the refugee from East Pakistan in the late seventies, the promise of ‘settle on public land’, ‘the municipality will get you free water’, ‘ration shops for food’ and ‘draw electricity when you can while we look the other way’ sounded too hard to resist. The AAP’s posture today is eerily similar to the CPI(M’s) as it literally exhorts voters not to pay their electricity bills, it demands regularisation and upgraded resettlement of squatters and it promises 700 litres per day of free water to households even if they are unauthorised. If this seems like ‘populism on steroids’ it is because that is precisely what it is. And it is not new, not even organically.
The architects of the AAP’s brilliantly populist manifesto for Delhi one suspects reside in the various advisory committees of the outfit. Some in these advisory committees have actually been members of the National Advisory Council (NAC) in the past while most others have been known to share (leftist) views similar to it. These views are well known. They emphasise distribution rather than generation, they emphasise immediacy rather than sustainability and they emphasise variety rather than frugality. Indeed, to an idle observer AAP pretty much seems like the NAC having managed to get a political party of its own sans the pulls and pressure of other constituencies within the Congress.
What many of these British-educated advisors are looking to do, is give a veneer of sophistication to the blatantly unsustainable promises being made by AAP to the electorate. The jargon certainly is borrowed from Western left-leaning and pseudo-green outfits. Take the ‘20 per cent electricity generated for Delhi from solar’ promise for instance. Now solar photovoltaics (PVs) require 6-8 acres of land per MW and concentrated solar power (CSP) requires about 12 acres of land per MW for installation. The latter also results in fresh water withdrawals of twice the amount required by thermal generating sources per unit of electricity generated. Where in Delhi will AAP find all this? And if the idea is to get the acreage from rooftops alone then we are only talking about solar PV and not CSP. And even if you cover every conceivable inch of rooftops in Delhi with solar PV, you would still not be able to generate anywhere close to 20 per cent of Delhi’s electricity requirements by the time you get there. Because do remember we are talking about actual electrical energy generated and not merely installed capacity. Solar PV is even more intermittent than wind power with the actual output varying from 0-90 per cent of capacity in the course of a single day! Such intermittency is a huge issue for grid integration and only serves to increase total electricity costs driven by the need for conventional back-up and other grid management expenses. This would actually defeat the very notion of slashing ‘electricity costs by half’!
But that won’t stop AAP from making other feel good but in reality dangerous promises. The ‘700 litres per day’ promise is predicated on running the Delhi Jal Board (DJB) on a no-profit no-loss basis, which is as good as saying that you would literally run it into the ground. Incidentally, the DJB currently makes a profit of around 450 crore. Kejriwal and his ilk want this distributed ‘amongst’ the people. Somehow, nobody seems to point out that Delhi does not really tap its own sources for all the water it consumes. It uses its influence as a capital city to draw water from neighbouring states. Gandhi used to say that anybody who took more from nature than what he absolutely needed was actually stealing. The 700 litre per household per day falls in that realm as it only promotes an arbitrary water use standard for Delhi whose withdrawal of water is actually depriving somebody else of it.
Indeed, the promises of AAP are not sophisticated but sophistry. And they are patently unsustainable. Piped water systems in Europe are finding it difficult to carry on since populations are reluctant to pay for water in over urbanised river basins. Whatever profit the DJB is currently making should be directed at fostering sustainability to Delhi’s water situation rather than used up to fulfil unsustainable promises about ‘piped water’ which as the European experience shows ultimately becomes too expensive and only bloats the subsidy bill. The larger point is that AAP is full of the ‘first world’ nanny state promises that have only led to debilitating fiscal crises in the West.
Europe is, of course, the prime example. Rising energy, food, water costs after years of populism and an ageing demographic have left its economy with very weak demand and high consumer indebtedness. In this scenario, populations feeling the pain agitate for even greater freebies and the political economy obliges by accepting ever greater amounts of public debt. Naturally the investor class is not impressed and unemployment rates soar on account of a lack of new employment augmenting activity. The politics of the bottom where the rich want austerity and the poor want freebies lays itself bare.
But India will not go down that path. We have the world’s most superior demographic and our country hasn’t urbanised as rapidly as East Asia has. This is a huge opportunity for those looking to build the world’s first sustainable major economy. Our youth want jobs, not freebies. For the electorate the coming general election is about income and not about freebies that they know won’t last, as the people of Calcutta have found out. It is this sentiment that Narendra Modi has been tapping into and it is this hope that he must continue to provide concrete shape too. The challenge is not just to spawn new jobs but to add value sustainably. All economies today after all pursue a ‘leveraged growth model’ wherein the government takes on debt to spawn value creating activity and keeps public debt under control through an increase in the tax base. The challenge is to make investments into technology and infrastructure that can hold down energy, food, water costs through productivity and frugality while facilitating an environment where enduring economic activities are encouraged. This is precisely why Gandhi used to emphasise cottage textiles since it was one industry that had endured through 5000 years of India’s civilization story. Of course, today’s economy is much more complex and the population is much larger but that is exactly why the core of Gandhian beliefs become even more relevant given resource limits. AAP does not have an indigenous vision for India as it doesn’t support sustainability at all. Au contraire it pretty much has a post-decline European outlook to the political economy and that is not surprising given the antecedents of the advisors anchored to it. It is time that AAP’s economic manifesto was exposed for what it is—An unsustainable vestige of the past.
By Saurav Jha
(The writer is a commentator on energy and geopolitics)