Nearly 30 months ago, prime minister, Modi was catapulted to lead India primarily on the plank of promoting ‘development’ and eliminate ‘corruption’. He has utilized every bit of this period to over-zealously pursue these objectives; those efforts and achievements are very much visible on the ground to everybody except those [opposition parties and his die-hard critics in media and intellectual fraternity] who have a vested interest in not taking note of these.
Bringing development agenda on to the center-stage is something unique to Modi – dispensation since 2014. Prior to that, for decades, successive governments [barring 6 years stint of NDA (National Democratic Alliance) – government 1998-2004 then under Vajpayee] had only harped on giving doles to the poor. Even while following this model, the politicians and bureaucrats mis-appropriated funds meant for them.
Only a fraction of hundreds and thousands of crores allocated under a plethora of welfare schemes for majority of the poor and downtrodden reached the beneficiaries. There could not be a more potent testimony to this than a statement by former prime minister, Rajiv Gandhi [late 80s] that only ‘15 paise out of every Rupee under welfare schemes actually reaches them’.
This model was used ‘systematically’ and ‘brazenly’ by a handful of persons to loot scarce resources leading to exponential increase in their unjust enrichment even as majority of the poor continued to live in acute deprivation and backwardness. Modi has challenged this and is putting in place a model that empowers the poor and makes them partner in development.
Now, with elections to five state assemblies underway, shockingly, all major opposition parties have latched on to ‘development’ as their main election plank – presuming that this stance clicks with electorate as demonstrated by success of Modi in 2014 general elections and many a assembly elections that followed.
Prima facie, this course correction could be a good omen from the perspective of giving a push to the economy and ameliorating the conditions of the poor in a sustainable manner. But, this is merely an election gimmick. They continue to vigorously follow their age-old agenda of giving doles/subsidy.
This resonates in election manifesto of Samajwadi Party [SP] – ruling political establishment in Uttar Pradesh [UP] – which is desperately making efforts to retain power in the state. Its pronouncements/promises go well beyond standard subsidies on food, fertilizers, health, irrigation etc. Thus, it is promising pressure cookers to all housewives and ‘smart phones’ to millions of youths. The party is also talking of waiving all loans given to farmers and giving monthly pension of Rs 1000/- to senior citizens [over 10 million].
Congress which is a coalition partner of SP contesting elections in UP has promised to extinguish all outstanding dues of farmers [under a long-drawn campaign, it had issued ‘promissory notes’/certificates saying once elected to form the government, these will entitle them to loan waiver], reducing power tariff by 50% and substantial increase in procurement price on farmer’s produce.
Now, if one or two parties make such promises, this inevitably gives rise to what one may term as ‘competitive populism’ or triggering similar pronouncements by other parties in the fray. This has also forced BJP [which has brought about a paradigm shift in policy priorities from doles to development and empowerment of the poor] to take a recourse to populism. Sans this, it would lose the race even before it starts. The reasons behind this are very compelling.
The emphasis on development – an approach that Modi has adopted – yields results over a period of time [from conceiving a project, designing, implementing and commissioning] unlike populist measures like giving a pressure cooker or smart phone wherein the deliverable s are ‘instantaneous’. Without doubt, public/electorate is more likely to be carried away by a party which follows the latter route. True, former is the preferred approach but it cannot win votes.
The trend is dangerous. When, elected to power, such parties are duty bound to fulfill the promises they made during election campaign. This will inevitably result in loss of tens of thousands of crores, destabilizing state budgets, increase in their fiscal deficit and borrowings reaching astronomical levels. In short, this produces a debilitating effect on the economy and hampers growth.
During the last two-and-a-half years under Modi – dispensation, India has registered a spectacular GDP growth of around 7.5% annually. This together with a substantial increase in transfer of resources from central government to states [courtesy, recommendations of 14th Finance Commission], the states fiscal deficit has shown some improvement. But, they run an unprecedented risk of a set-back due to huge expenditure commitments made during elections.
Already, due to populist steps of political establishments in the past to keep electricity tariff on supplies to farmers and poor households heavily subsidized [free in some states], state electricity boards [SEBs] ran in to huge losses. To salvage SEBs, those losses had to be absorbed by states on their balance sheets [besides union government owned banks to some extent by way of restructuring loans at lower/concessional interest rate].
Under the latest round of financial restructuring package [FRP] hammered by center in 2015, the state governments were compelled to absorb 75% of outstanding losses of SEBs on their budgets. As a result, their fiscal deficit [FD] targets are in serious jeopardy prompting them to seek relaxation in FD target from center under Fiscal Responsibility and Budget Management [FRBM] Act.
Intensification of populism will make fiscal situation un-sustainable. It will affect availability of resources for executing projects in roads, rails, ports, airports, irrigation, schools, homes, hospitals etc. In turn, this will impair the ability of states to create jobs and increase income which is a fundamental requirement for a good living. Without job, of what use will a laptop, smart phone etc be to him/her?
Electoral promises to make various consumable items available free of cost can only lead to economic disaster. All parties should put their heads together to end this scourge. As regards impressing voters and winning their hearts, they should go for innovative ideas, policies and programs to improve their living.