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Open Forum
New Delhi, 29 November 2023
Politics
of Populism
STATES
BURDENED, LOWIMPACT
By
Dhurjati Mukherjee
With the state elections coming
to an end this year, the spate of schemes and promises announced in the run-up
to these polls by both the Congress and the BJP reveal that the political
discourse is getting increasingly populist. From cash transfers to cheaper
cooking gas cylinders to higher support prices for farm products, are all meant
to woo the voters from the lower income groups and economically weaker
sections. This should particularly be viewed in the backdrop of a recent
World Bank study in the context of South Asia which notes that the primary
deficit, on an average, tends to widen by 0.5 per cent of GDP around national
elections.
It was indeed interesting to
see the two major political parties vying with each other with one scheme after
another in their manifestos released in the different states. However, the
impact of these electoral promises is neither considered nor how much
additional resource the states would be able to generate in the immediate
fiscal outgo.
At the same time, the reverting,
or the promise to revert to the old pension scheme (OPS) entails a fiscal
burden on states by as much as 4.5 times the National Pension System with the
annual addition burden increasing by 0.9 per cent of GDP. Moreover, this
decision will mostly help the middle class, which will have extra money to
spend on consumer items. Economists are of the opinion that this may result in
inefficient government spending, hurting the very section that actually needs
support.
Considering the high levels of
populist spending, the issue gains credence as the country’s public debt and
general government budget deficits are increasing. In the current fiscal, the
target to contain the fiscal deficit at 5.9 per cent of GDP may not be met and
even this target is quite high and needs to be brought down. Though schemes for
the poor are no doubt welcome, there is a definite need for some amount of
fiscal discipline, both by the Centre and the states with even unanimity
amongst left-wing economists.
The high debts of some state
governments are definitely not healthy as a major chunk of the state’s income
goes towards payment of interest, thereby severely curtailing development
expenditure. And it is these states whose per capita income is below the
national average. In such a scenario, it is necessary that the 16th
Finance Commission, which is to be constituted shortly, should be entrusted the
task of making a comprehensive assessment of subsidies and other payouts. It
may choose an appropriate definition of merit and non-merit subsidies and
calculate the total outgo along with the opportunity
cost.
Though one cannot deny the need
for providing welfare measures, these must reach only the poor and the
economically weaker sections. Moreover, it has to be ensured that the existing
schemes are well-funded, and the real beneficiaries are identified and get the
benefits, and not those who are close to the ruling party, as has happened in
many states, particularly in West Bengal. The few rural economists agree that
the conditions of the rural poor in most states, specially in the northern and
eastern regions, have not improved significantly.
When the rural economy needs a
thrust, the funds provided for the MGNREGA programme is not sufficient to
provide employment for more than 35-40 days when the scheme talks of 100 days
assured employment. Not just employment but the labour force can take up
projects that would help in infrastructural development of villages. While new projects
are being announced to woo voters, the present ones that could actually
help the lower segments of society are suffering due to lack of funds.
If the question of employment
is considered, statistics reveal that there is virtually no increase in formal
sector jobs. As per recent statistics, there has been a slowdown in the pace of
formal job creation in the June-September period as new subscribers added to
the Employees’ Provident Fund declined by over 10 per cent. Recently, the
annual periodic labour force survey (PLFS) showed that the unemployment rate
dropped to a six-year low of 3.2 per cent in July-June from 4.1 per cent 2023. Plus,
the data showed an increase in the share of people engaged in agriculture and a
fall among those engaged in manufacturing. The decline in formal employment and
the corresponding increase in labour force participation clearly point to the
fact that most new entrants to the job market have no option but to be
satisfied with low-paid work in the informal sector.
The economic situation of most
states is in a deplorable condition. There is no possibility of things
improving in the near future, even if there is some shift from agriculture to
industry. The new situation of industrial development does not warrant jobs or
even development of backward areas as most manufacturing units are set up in
industrial belts or in fairly developed areas within the state. Moreover,
mechanised means of operation require less labour and only the skilled workers
get the opportunity.
One is constrained to refer to
the recently released 2024 Asia-Pacific Human Development Report titled ‘Making
our Future: New Directions for Human Development in Asia and the Pacific’, which
states that though per capita income in India, between 2000 and 2022, soared
from $442 to $2,389, it does not reflect the incomes of the rural
population. Again, though between 2015-16 and 2019-21, the share of the
population living in multi-dimensional poverty fell from 25 to 15 per cent, if
the total population increase is taken into consideration, this figure would
not be spectacular at all. The economic distress is well manifest but even then
the government is not looking at a comprehensive strategy to improve the
incomes of the rural poor.
Significantly, the report aptly
refers to three new directions in human development, which is very much
applicable in India’s context. These are to put people at the heart of
development, to recalibrate growth strategies to generate more jobs and respect
the environment, and to focus relentlessly on the politics of reform and the
science of delivery to turn ideas into practice. How much of these are being
followed is a big question, but it is necessary for India to follow these
principles through action for a better future. However, this would involve
change in its planning and development approach.
Whether the country would
seriously take cognisance of the report and within what timeframe remains to be
seen. Genuine welfare schemes that go towards improving the conditions of the
impoverished and backward sections is necessary at this juncture apart from
measures of ensuring income support. Not just the Centre, but the political
leadership of the states too must be serious in the matter of both resource
generation and expenditure, keeping in view how maximum numbers of people could
get the desired benefits. A knee-jerk reaction during elections is not an
alternative.---INFA
(Copyright,
India News & Feature Alliance)
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