Political
Diary
New
Delhi, 9 August 2022
My Subsidy, Your Revadi
ECONOMIC COSTS BE DAMNED!
By Poonam I Kaushish
It is raining freebies wherein sound economic sense has
been surrendered to political gamesmanship. Reckless subsidies are being given
by Parties with gay abandon, on the assumption that populist hand-outs yield
better electoral rewards than reasoned policies and sustainable programmes. Who
cares? After all, Government money is nobody’s money!
The populism our polity indulges in would be comic were it
not for its future consequences. None sees the danger of economic derailment.
Tragically, in this nautanki of one-upmanship and populist
bravado all expose the hollowness of their political commitment. Dismissing as
nonsense the economic logic that there is no such thing as a free lunch as all
merrily dole out wages of populism.
Recently, Prime Minister Modi called halt to free “revadi” culture
followed by Supreme Court mooting a committee of Government, Niti Aayog,
Finance Commission, RBI and Opposition to brainstorm “dispassionately and make
recommendations. Succinctly, underscoring the reality, “no Party will allow
taking out these freebies. We are heading towards disaster.”
Borne out by Niti Aayog’s governing council meeting
attended by 23 Chief Ministers, 3 Lieutenant Governors and 2 Administrators and
Union Ministers Sunday which was silent on the issue.
Raising a moot point: Where do netas get
monies to fund these doles? Obviously, by taxing the people. Should our
hard-earned tax money be used to boost a Parties electoral
votebanks? Shouldn’t leaders or their Parties pay for it from their
pockets or funds? Should loans be waived? Is freebie different from subsidy?
Are they good and bad hand-outs? Who decides?
This needs to be juxtaposed with Modi’s model of “new
welfarism” which involves public provision of private goods against provision
of free power and water by State Governments like AAP in Delhi and
Punjab, mid-day meal schemes in Rajasthan, Kerala, MP etc. Also, with
many States poised at different levels of economic development what may be
necessary State support for people in one State may not hold in another.
As it stands the
economic situation is worsening with prices rising and high inflation
notwithstanding Reserve Bank saying economic parameters are OK. Take
power: As of May end, at a consolidated level, dues of State distribution
companies to generating companies was Rs 1.01 lakh crores, State Government to
distribution companies Rs 62,931 crores and subsidy receivable by distribution
companies from State Rs 76,337 crores.
Adds RBI, a
bailout in 18 large States costs these Governments about 4.3 lakh crores or
2.3% of their combined GDP, more than Union Government’s spends on education,
rural development and health. According to Union Finance Ministry, between
2019-20 and 2021-22, Andhra borrowed Rs 23,899 crores, UP Rs 17,750 crores,
Punjab Rs 2,879 crores and MP Rs 2,698 crores by mortgaging assets and
escrowing future revenues.
Shockingly, 86%
of Punjab’s expenditure is committed towards salaries, pensions and interest on
past borrowings. Its capital outlay (spending for creating productive assets
like roads, schools, hospitals, etc) is just 7.5% said an official. Worse
is the situation in Tamil Nadu, Rajasthan and MP.
Asserts a senior Opposition leader, “Why blame us? In February
2018 Prime Minister gave Rs 25,000 to working women, covering 50% of a
two-wheeler cost and PM Kisan Yojna of Rs 6,000 a year to every farmer”. Besides, “when
the rich really rip off the banking system, with huge NPAs and write-offs
alongside a rent-seeking bureaucratic culture, can we say the poor are too
pampered with these freebies? Call it the ‘endowment effect.”
Alas,
both Centre and States stand equally guilty. A classic case of the pot calling
the kettle black. Two, Centre is wary of unilateral curbs on States whereby
leaders would blame Prime Minister for not letting them “do good” for people
and being branded anti-poor by States. A catch 22 situation. Three, these revadis come
at the cost of hospitals, schools, roads, railways etc.
Certainly it is nobody case rural
poverty should be ignored. Assurances of providing cheap rice, wheat or free
electricity can be justified on grounds of acute poverty. Aren’t such
concessions imperative in a country where 40% people live below the poverty
line and over 700 million earn less than Rs 20 a day. India's ranking in Global
Hunger Index 2021 is 101 (from 94 in 2020) out of 116 countries. Is it not the
duty of our jan sevaks to take care of its peoples’ welfare?
True, freebies are not a new
phenomenon. Recall, this ‘catch-all’ politics reared its ugly head first in
1967 Tamil Nadu’s DMK when it guaranteed rice at Rs 1. In 1983 Andhra TDP’s NTR
Rama Rao promised rice at Rs 2 per kg and emerged victorious. Then came 80’s
disastrous “loan melas” followed by era of gifting colour TVs,
fans, sewing and washing machines, gold jewellery etc.
Subsequently, ‘rice politics’ again
took centre-stage at Rs 1 and Rs 3. BJP, Congress and regional Parties outbid
each other. From 5 lakh Government jobs, monthly income of Rs 2,000 to
housewives, 200 free electricity units, 33% women reservation in Government
jobs, free education for girls from KG to PG.
It can be argued that Parties are
obliged to be seen as populist as it would be foolish and stupid to wish away
political lollipops to entice the electorate. However, political revadis in
the economic sphere should not cross the prudence limits, where it starts
hurting the economy as a whole.
But by providing free candies to voters, citizens have
become dependent on netas resulting in no empowerment.
Consequently, a populist scheme is invariably paid for either by higher taxes
or increased inflation.
Who
will bell the cat? Clearly, care should be taken to draw a distinction between
welfarism and freebies. Welfarism takes into account needs of different
sections of society as part of a large development framework. Freebies are
guided not so much by social concerns but by vote banks. It essentially implies
granting certain concessions which have no economic rationale and are not part
of larger economic planning as enunciated by Government.
Highlighting again that free-falling
gifts is the reality of grinding poverty, which continues to haunt us after 75
years of Independence. Remember, hand-outs will only provide immediate succour
at the expense of the entire future. It is no remedy for neglect of education
and health, faulty priorities in respect of industrialization and
under-investment in rural areas, growth of corruption and a bloated bureaucracy
and over population and apathy to greater productivity. A Government cannot
afford to throw away money on populist whims.
Unfortunately, our policy-makers
have been unable to perceive the truth of the situation. They have consistently
failed to evolve a strategy of development which would take into account our
pluralism and fluctuating economic disparities. Governments need to stop
throwing away money on populist freedies. Time to draw a ‘lakshman
rekha.’ ---- INFA
(Copyright, India News & Feature Alliance)
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