The $1 Trillion-Plus Question: Can Congress Party’s Vow To Provide Free Health Care, Jobs, Gain Votes In India And Approval From Western Investors?

Facing an uphill climb in next month's national general elections, India's incumbent Congress Party unveiled on Wednesday an extraordinarily ambitious “pro-poor” manifesto that, among other things, promises universal health care, pension improvements, tens of millions of new jobs for youth, infrastructure upgrades, and free housing for all, among other nuggets. On the whole, the total cost of the social welfare spending spree is unknown, while the infrastructure upgrade would cost at least $1 trillion, according to Congress scion Rahul Gandhi (or more than half of India’s annual GDP). The huge program -- which the manifesto did not explain how it would be paid for --likely reflects desperation on the part of Congress, which has been dogged by corruption scandals and blamed for sluggish economic growth.

For Western governments and businessmen, the Indian election raises some troubling questions – do they support a so-called “pro-business” candidate in opposition leader Narendra Modi of the right-wing Bharatiya Janata Party (BJP), who has some questionable views toward minorities and Muslims, or do they side with Congress, a party that has pushed the Indian economy into the ground and has been marred by endless corruption scandals?

Congress promised even more economic gifts: Rahul Gandhi vowed that India would return to 8 percent annual GDP growth within three years, up from the current 4 percent to 5 percent range. “We believe for this country to grow, there has to be a strong partnership between business, economic sectors and the poor. … This country cannot grow by neglecting either,” he said Wednesday.

With polls indicating that the opposition BJP will win the election, the heavy-hitters of Congress, including party boss Sonia Gandhi, her son Rahul (the party's likely Prime Ministerial candidate) and outgoing Prime Minister Manmohan Singh, pledged also to nearly triple spending on health care to 3 percent of GDP, emboldened by the eradication of polio in recent years under Congress's watch, as well as a 57 percent drop in HIV infections over that period.

The ruling United Progressive Alliance (UPA) coalition, which includes Congress as the senior partner, has governed for two straight terms, and championed such populist programs as free meals for all schoolchildren. But such policies have been diluted by the ever rising cost of food and a sluggish economy in recent years. India’s consumer-price inflation of 8.1 percent is the highest among 18 Asian economies that Bloomberg tracks, and has averaged about 9 percent over the past two years. Meanwhile, the nation’s GDP is expected to climb by 4.9 percent for the fiscal year ending March 31, slightly better than the decade-low expansion of 4.5 percent recorded last year, reported the Indian government’s, Statistics Ministry.

Still, Rahul Gandhi has declared that Congress will confound polls and return to power for a third straight term. "We are going to construct a manufacturing backbone that will give millions of millions of people jobs," Gandhi told a rally in New Delhi. But an opinion survey released earlier this month by NDTV television and Hansa Research indicated that BJP will gain 195 of 543 seats in play in the lower house of parliament, versus only 106 seats for Congress. Rahul’s mother, Sonia, the widow of former Prime Minister Rajiv Gandhi, told reporters in the capital on Wednesday: “Opinion polls, I don’t have much faith in them because they have been proved wrong again and again. Our people are ready to fight, many have already started the fight, and we will win.”

The outgoing Prime Minister Singh, in power since 2004, also asserted that Congress has the track record with respect to poverty alleviation – he claimed that over the past decade, 140 million Indians have been lifted from destitution.

In contrast to Congress' manifesto, Modi opposes most state subsidies, while pointing to economic growth he has engineered in his native province of Gujarat as a three-term chief minister by encouraging more foreign investment, including from China, Japan and even Israel. Not surprisingly, BJP has condemned the Congress manifesto as a sham. "This is not a manifesto. ... It is a rank insult to the people of the country," said Ravi Shankar Prasad, a BJP spokesman, in a statement. Modi, who also promises jobs and economic growth as part of his policy platform, derided the Congress manifesto as a “bunch of lies,” citing that previous programs from prior years by Congress failed to deliver the goods. "For other parties, the manifesto is a serious document, but for Congress, it's just a joke. They are just trying to make fun of the common man," Modi told a large rally in New Delhi. "If you look at the [Congress] manifestos from 2004 and 2009, there's hardly any difference. They have just repeated the pledges that they failed to fulfill.”

Indeed, perhaps as a way to discredit or diminish Modi’s economic accomplishments in Gujarat (which has enjoyed an economic growth rate well above the national rate during his term as chief minister), Congress is appealing to the public’s fear of Modi’s pro-Hindu communal politics. In 2004, more than 1,000 people (mostly Muslims) died in a series of riots and massacres in Gujarat – a conflagration that many blame on Modi himself for failing to prevent or control.

Some analysts were less than impressed with Congress' manifesto. “There is nothing earth-shattering in this manifesto,” said Sujan Hajra, a Mumbai-based economist at Anand Rathi Financial Services Ltd., to Bloomberg. “Manifestos are mostly symbolic in nature and there isn’t much departure from what they had promised earlier.” Given the urgent concern over the state of the economy (Modi’s strong suit), there are some doubts that many Indians will be swayed to vote for Congress and its huge welfare program. “Congress have failed to address the central point of Modi’s appeal, which is that the economy has collapsed and he is promising to put it back on track again,” Prem Shankar Jha, an author and independent political analyst in New Delhi, told Bloomberg. “This is mainly just a recycling of previous promises and commitments. It doesn’t inspire much confidence.”

Michael Kugelman, senior program associate for South and Southeast Asia at the Woodrow Wilson International Center for Scholars, commented in an interview that party election manifestos are not known for being accurate indicators of actual policies, “so we should take some of these Congress Party promises with copious grains of salt.” That said, he added, this election will be about economic and bread and butter issues. “Congress knows that the BJP and the wildcard [third-party Aad Admi Party] are making these issues the center-points of their campaigns, and Congress knows that if it wants to remain at all relevant -- and to have any chance whatsoever of making election-day gains -- then it must promise big things on this front.” But the main problem with the manifesto is that by emphasizing economic issues in a big way, Congress is amplifying its greatest weakness: many voters see Congress as responsible for India's economic slowdown in recent years, and specifically for failing to keep food prices down, Kugelman added.

Interestingly, despite Modi’s image as a seeker of foreign investors, he has adhered to some very protectionist polices that is likely to turn off some Western investors, including his opposition to allowing foreign retailers like Walmart (NYSE:WMT) and Tesco (LON:TSCO) into Indian markets. In contrast, the Indian government under Congress has eased some foreign-investment restrictions, including for giant retailers – an act that lost Congress one of its key coalition partners, the Trinamool Congress party. As such, it remains unclear which party Western investors would favor in the election.

With respect to health care, the Congress government has already launched two pilot programs for universal coverage in the southern states of Karnataka and Kerala, where every district has received a pledge to receive five mobile clinic vans with the capabilities for X-rays, mammography and blood testing. Despite the economic advances India has engineered in recent decades, the country’s poor remain ravaged by health care issues – indeed, infant and child mortality rates are the highest in the world, while an India child dies from malnutrition every half-a-minute, the Telegraph noted.

Consequently, some health care activists have praised the Congress party’s vows of providing health care coverage, citing that the rising costs have actually pushed tens of millions of Indian people back into poverty. “India is [at the] bottom of the table of public health financing,” said Dr. K. Srinath Reddy, president of the Public Health Foundation India, a government-founded public-private initiative that advocates for more public health professionals in the country, reported the Telegraph. “Forty to 50 million people have been pushed into poverty because they have had to pay for treatment they cannot afford. The poor and the near-poor will benefit most, so the right to health care is welcomed, but it must be translated into a cogent plan.”

Compared to most other major emerging economies, India’s health care system and public health indicators have fallen behind such nations as Brazil, Mexico and Malaysia, Amarjeet Sinha, a senior health official in the state of Bihar, told the Washington Post. “Just two decades ago, we were all in the same place. It’s a shame that we got left behind in our health performance despite our economic progress.” Singh himself has blasted India’s health care system a “national shame.”

BJP will release its election manifesto next week.