The several cash guarantee schemes by incumbent governments in MP, Maharashtra and Jharkhand warded off the anti-incumbency. A direct cash deposit of Rs 7500 for 5 months in the account of women voters is certainly smart politics. Building hospitals, schools, colleges and industry for employment generation is not good politics any more. Their gestation period is too long to reap the harvest. In any case, private interests can provide these services for profit. Data reveals that there are electoral dividends by increasing female voter participation and influencing family votes. Some pollsters suggest creation of a new core women constituency with cash driven welfare schemes.
At Rs 1500 per woman, the Ladki Bahin scheme of Maharashtra costs Rs 46000 crores a year. Cash guarantees brought electoral success to the Congress party in Karnataka and Himachal. Free water and free electricity promise gave victories to APP in Delhi and Punjab. The PM mocked at these schemes but his hypocrisy were exposed when schemes in MP & Maharashtra were approved as a game changers.
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The debate between freebies and welfare schemes is an old one. Supreme Court seized with the petition on irrational freebies is told about loans written off by the government for the Adani group and loans waiver of Rs 7.27 lakhs crores between 1917 to 1922. Tax rates for corporates were cut in September 2019 reducing from 30% to 22% and for new companies from 25% to 15%. The justification was tax-cuts stimulate economic growth. Nobody has the time to question the decrease in both investment and employment. Due to the concessional tax regime, India’s largest corporates saved almost Rupees 3 lakh crores in tax payment.
Tax cuts is again considered good politics as our politics and elections are run on illicit money. The electoral bonds case has demonstrated how the ruling parties cornered the booty destroying the level of electoral playing field.
Whether it is welfare measure, freebie, subsidy or a tax break for corporates, a look at the state and centre revenues show that there is hardly any revenue growth with fiscal deficit heading northwards and expenditure galloping at a rate like never before.
That is bad economics. Slow down of tax revenue, a high share of committed expenditure and rising subsidy brought Sri-Lanka where it is. But free food and free services of education and health with intent to minimise social inequalities cannot be construed to be a part of bad economics in a country with inequalities. The boundary between a freebie and a welfare measure gets blurred when politics overtake economic wisdom.
A freebie is a public welfare measure for a short term or a onetime measure to address specific needs of a particular disadvantaged section but it is generally meant to attract voters, while a welfare measure is a long-term promotion on a sustained basis like the Rural employment Guarantee Scheme or the Public Distribution system.
In as social welfare, state provision of economic security and promotion of social justice with a good living standard for citizens shall always be its goal. In such a state, there will always be schemes which can be dubbed as ‘revdis’. The state policy must be directed to creation of an environment favouring reduction of the citizens dependent on such measures. But in current times freebies and not welfarism is the norm as promises are made at election time only. Unchecked increase in unproductive revenue expenditure, unmerited subsides and non-realisation of tax and non-tax revenues may bring electoral dividends but that political profligacy is bound to push into a debt trap. An expenditure without a matching plan of generating revenue can create a fiscal chaos but who is bothered as long as elections are won?
When policy like the first new deal in USA was introduced by Franklin Rosevelt, it was in the first hundred days of his resuming office in 1933. The new deal was collaterally supported by Emergency Banking Act enabling federal result to ensure bank deposits, National Recovery Administration creating codes of fair competition and security exchange commission protecting abuses from abusive stock market practices and agricultural adjustment administration which raised rural incomes by controlling production. That is building of state capacity.
A well thought of social welfare scheme can help the citizen and the state. The freebies in Telangana and Himachal are getting unsustainable. In Karnataka, Shivakumar was very skeptical when he said ‘forget any development we are implementing our guarantees’. The finances of Punjab, Himachal and Karnataka are in shambles and these states are struggling to pay salaries to government employees. Delhi has requested the central government for a loan of Rupees ten thousand crores to meet its current financial year expenditure.
Even before the ‘Ladki bahin’ was brought in, the CAG had warned the Maharashtra government against the rising debt burden. Maharasthra’s finances are such that 67% expenditure is on salaries, pensions and interest payment on past debt. How Ladki Bahin would affect the two lakhs crores revenue gap is anybody’s guess. A Dy Chief Minister said ‘don’t ask about ideology … everybody wants power here’. That is tolerable in Maharashtra but when a top central minister, when questioned about fiscal prudence says ‘I have a election to win’- is not acceptable. Maharashtra has 14% of the nation’s economic output and is the GST capital of the country. Maharashtra cannot lead the way to the pit. Rajdeep Sardessai has correctly summed up ‘never before have the payout deliveries being so sudden, brazen and unmindful of financial consequences just before an important election’.
Cash transfers is a brilliant Election strategy, though cynical. Election management and fiscal prudence have become sworn enemies. Election time political gimmicks are working well as people are also getting more transactional. Responsible leadership is required to deal with election myopia. Can we get a Franklin Roosevelt in the near future?
(The writer is a Political Thinker and a Senior
Advocate)
