Raghuram Rajan, former Reserve Bank of India (RBI) governor, has said that Indian economy may slow down if a coalition government is formed in the country. In an interview to India Today at the World Economic Forum in Davos, Raghuram Rajan praised the economic performance of India in the last 5 years of Modi government. “We have had a reasonable growth rate in the past five years,” said Rajan. The statement by Raghuram Rajan is blowback for the ‘Mahagathbandhan’ idea proposed by the left-liberal establishment. In the last few months, many media organizations published articles in support of coalition governments and argued that in previous decades coalitions had managed the economy of the country is a better way.
Raghuram Rajan is one of the most respected economists in the country and the blow to coalition idea by him will definitely discourage the voters of the country to vote for any party which is a stockholder in ‘Mahaghathbandhan’ idea. In the current political realities of the country, BJP seems the only party capable of winning the 2019 general election with a majority of its own. Congress party seems nowhere near to winning the 2019 general election on its own. If the party forms ‘Mahagathbandhan’ with many regional parties and won the general election, it will be a typical coalition government. The economy, domestic security and foreign relations of the country will be vulnerable if a coalition government comes to power.
The regional parties in India are dominant in only one state. There is not a single regional party whose influence spreads in more than one state, therefore, Congress party would have to ally with many parties for any coalition. The leaders across the country like Mamata Banerjee from West Bengal, Naveen Patnaik from Odisha, Chandrababu Naidu from Andhra Pradesh, KCR from Telangana, Arvind Kejriwal from Delhi, Akhilesh Yadav and Mayawati from Uttar Pradesh, Lalu Yadav from Bihar will be stakeholders in it. The idea of a coalition government did not work for full term even back in 1977 after the Emergency when the Janata Party government fell in less than three years despite having two prime ministers. Even the anger against the Emergency could not sustain a coalition government for a full term.
The economy of the country is vulnerable in any coalition government and economic reforms are seldom. The idea of GST was firmly mooted in the late 1980s but it could not be implemented until Modi formed the first majority government after almost three decades.
The GDP growth figures under coalition governments are depressing. The GDP growth fell to 4.6 percent in 1991-92 when V. P. Singh and Chandra Shekhar governments’ fell and 2.8 percent in 1996-97 when the Deve Gowda regime fell. The V P Singh government and later Chandra Shekhar government made the public finances of the country so bad that the country faced the Balance of Payments (BoP) crisis. The country faced the BoP crisis due to various reasons including the rise in oil prices in the international market but the main reason behind this was the sharp dip in foreign investment in the country. The Indian economy posts Net Export deficit every year so our BoP depends on the foreign investment to a large extent. Economist Kirit S Parikh who had been a member of EAC of Prime Minister V.P.Singh and Chandra Shekhar writes that “A three-month postponement of half of the total investment means a 16 percent fall in investment. This could easily result in lowering of growth rate by one percentage point.”
So any coalition government in 2019 will put the government in the same position as in 1989 and 1996. The foreign investment will fall to a new low, the GDP growth will fall down and the country could face a BoP crisis. In our country where net export is negative, the BoP cannot be sustained without foreign investment. These are the immediate effects of a coalition government; the larger implications will be the policy paralysis and slow implementation of the ongoing projects. The advances made by the government in the field of foreign relations, welfare programs, national security, economic reforms, administrative and judicial reforms will be halted. So with a coalition government in power, we could expect only the worst for the country.