Why Weaker Leaders Are Better for India

(Bloomberg Opinion) -- For three decades, until elections in 2014, India's voters refused to give any single political party a majority in Parliament. It was an age of coalitions — of dissonant and divided cabinets, prime ministers who ruled by consensus, and policy constructed after painstaking negotiation. It was also the era when the Indian economy came of age. The country opened up, reformed, achieved high growth rates and lifted hundreds of millions of people out of poverty.

Yet many proponents of reform seem to think coalition governments are inherently a bad idea. They argue that the best outcome of the current elections, for those hoping to see real structural changes to the Indian economy, would be for voters to deliver another large mandate to a single party. As it happens, this is also Prime Minister Narendra Modi's pitch — that he will provide strength and unity, as opposed to the hydra-headed opposition.

The facts argue otherwise. Modi's government hasn't been especially reformist — the opposite, if anything. The one “strong” policy decision he took — unthinkable in a coalition government — was the withdrawal of 86 percent of India's currency in November 2016. And that was, frankly, such a disaster that only his opponents are bringing it up on the campaign trail.

Compare that with the record of past coalition governments. Even the shakiest of them — the United Front, which governed India for a couple of years in the late 1990s and included neither Modi's Bharatiya Janata Party nor its main rival Congress — pushed forward reform. The income tax system we have now in India was introduced by that government, for example, replacing the convoluted mass of exemptions and exceptions left over from the pre-1991 socialist era.

Even the reforms of 1991 themselves were introduced by a government that lacked a majority in Parliament. They were carried forward by a weak prime minister and a technocratic finance minister — Manmohan Singh, later prime minister for a decade — while the government strove to maintain a tenuous hold on power.

And here's the really extraordinary thing: When, a few years later, the government managed to patch together a working majority, change didn't speed up. In fact, that's when efforts to reform shut down almost completely, only to be picked up again by the coalition that followed.

If coalition governments work just as well, if not better, than single-party majorities, why does India's pundit class dread them so much? Part of it seems to reflect an inferiority complex: Mature democracies are supposed to have stable two-party systems. (Ask the U.S. and U.K. how that's working out.) Part of it reflects fear that a confused coalition might never be able to agree on difficult reforms, or might launch badly planned economic interventions designed by cranks (which, arguably, is what India's only single-party government in three decades did with demonetization).

True reformists, in fact, should be rooting for divided rule in Delhi. That's when what one ex-official called India's “strong consensus for weak reform” can be allowed to play out. The leaders of coalitions tend to outsource policy to technocrats — people who, after all, have no political ax to grind and whom all the partners can agree to support. Coalitions also tend to have to hammer out compromises on policy in advance — which at least means those governments actually have a clear direction.

And, equally importantly, coalitions are inclusive. They reflect India's diversity. Thus they don't push forward policy that might lead to trouble later. For example, a coalition that includes the leaders of India's southern states would listen very carefully to their complaints about being over-taxed to subsidize India's north.

We won't know until May 23 what India's voters have decided. But most observers agree that, while Modi may return to power, his party will probably no longer have a majority in Parliament on its own. If so, we will be back in the coalition era.

You might well hear a lot of people bemoaning this result. They will decry the return of the age of compromise and weak consensus. But don't be fooled. The last quarter-century in India shows that might be the harbinger to real change.  

To contact the editor responsible for this story: Nisid Hajari at nhajari@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mihir Sharma is a Bloomberg Opinion columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of “Restart: The Last Chance for the Indian Economy.”

©2019 Bloomberg L.P.