A file photo of Delhi chief minister Arvind Kejriwal. Photo: Rituparna Banerjee/Mint
Ask a central banker about the importance of managing
expectations in an economy and he will tell you that perhaps it is the
most important task he has to face. The trade-off between the rate of
inflation and the rate of unemployment, the Phillips Curve—with a lower
rate of unemployment leading to a higher rate of inflation—is a textbook
example of how expectations affect economic outcomes. An increase in
expected inflation in one period leads to an increase in actual
inflation in the next period. Managing expectations is vital to keeping
prices in check.
Something similar is afoot in Indian politics.
In a matter of less than a year, the Aam Aadmi Party
(AAP), now in power in Delhi under Arvind Kejriwal as chief minister,
has raised expectations of citizens to a high not seen in a long time in
Indian politics. He has promised to root out corruption, provide cheap
electricity and free water—to a certain limit—to the residents of
India’s capital.
This is an extreme elevation of expectations. Its effects
on the confidence of citizens will also be extreme. The AAP’s
promises—in three key areas, namely corruption, electricity and
water—are way out of line of what it can deliver. And the first signs of
disillusionment are not far. For example, in recent days, AAP leaders
have been noticeably silent about providing cheaper electricity and free
water. Perhaps the realities of running a government are sinking in.
But what will hit the AAP hard is its promise of providing a
“corruption-free” government. This is too deep a problem to be addressed
by mere telephone helplines and vigilante action. Sure these things
will help. A meaningful dent in corruption, however, will require a
careful rethink about how laws are designed in India and how laws affect
the use and abuse of discretionary power by officials and ministers.
This is way beyond what the AAP is capable of doing. So it is not
surprising that what ministers in Delhi are doing has the air of a
tamasha.
It is tempting to export the Phillips Curve to the
political arena. The variables are, of course, different. In democracy,
too, there is a clear link between expectations of citizens on various
matters—a variable controlled by parties that come to power—and the
confidence of citizens in government. The play is between expectations
and confidence. Just as in an expectations-adapted Phillips Curve,
expectations and confidence in the political system, too, pan out in
lags. For example, at the start of a period—say just before elections—a
political party can raise expectations to a very high pitch, totally out
of line with what it can deliver when it is in government. If it is
unable to meet them, citizens lose confidence by the end of that
electoral cycle. This interplay is the normal stuff of politics at
moderate levels of expectations. That’s how democracy works in India.
If this sounds too speculative, one should turn back to
India’s political history for some illustrations. There are at least
three instances when a similar interplay between heightened expectations
and their fallout has led to poor economic and political outcomes. They
are worth recalling. The first instance was in 1967 when a number of
Congress-party led state governments were voted out of power. The second
instance dates to 1977 when the Janata Party experiment led to the
first non-Congress government at the Centre. In 1989, a Congress
government tainted by allegations of corruption was booted out and
another Janata experiment, led by V.P. Singh this time, began. One can
leave out 1967 as an outlier—as that rejection of the Congress had
deeper reasons: the party’s inability to accommodate middle castes in
power- sharing. The remaining two—1977 and 1989—are in the same class as
the AAP experiment: the leaders of those coalitions promised too much
and they could not deliver. During their rule, high inflation, low
growth and a general sense of cynicism towards politics ensued.
Is there no room for political change in India? That can
be one cynical answer. There is, however, a more meaningful conclusion:
Experienced political leaders never raise expectations beyond what they
can deliver. And this does not mean that politicians who don’t make such
promises are corrupt and cynical. For example, good
administrators—Naveen Patnaik and Raman Singh come to mind—never make
promises to deliver cheap electricity and root out corruption. It is not
that they don’t want to get rid of these problems but they realize the
limits of what can be done. There is also a class of leaders who make
big promises without realizing what their fulfilment requires. One is
forced to conclude that chief minister Kejriwal belongs to this class.
He needs to borrow a leaf out of Reserve Bank of India governor Raghuram
Rajan’s book in managing expectations.