From loan waivers and laptops to free electricity and subsidised cooking gas, poll promises in India cover a wide range of goods and services. For all the debate on the culture or freebies or revdis, no political party seems to be able to restrain itself from rolling out a ladli behna scheme or reverting to the Old Pension Scheme. Economists have pointed out how loan waivers can leave state finances debilitated and create a moral hazard; they have also highlighted the dangers of reviving the old pension scheme. But to no avail. In its draft manifesto, the Congress party has come up with a package of as many as 25 guarantees that is set to be the principal plank of its electoral agenda.
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Expectedly, it covers all constituencies—farmers, women, and gig workers.On paper, the pursuit of social justice makes eminent sense as a political strategy. But consider the very irresponsible promise to provide a legal guarantee for the minimum support price (MSP) for the purchase of crops. Farmers have been demanding a legally guaranteed MSP which is based on the comprehensive cost of production plus 50%, as recommended by the Swaminathan Commission. Apart from the fact that this would discourage farmers from switching to food grains that are in short supply, it would be a huge burden on the exchequer.
Estimates by CRISIL MI&A Research said the expenditure for the government could be as much as Rs 13 trillion if the total production of 16 of the 23 crops—for which there is an MSP—is procured at the MSP announced for 2022-23. For perspective, subsidies in the agri-food space currently account for about Rs 5 trillion, of which 80% is consumer-centric and aimed at keeping food prices in check. Food subsidies amount to around Rs 2.12 trillion while subsidies on fertilisers, which also help rein in costs for farmers, are close to Rs 1.9 trillion. Agri economists like Ashok Gulati have said the entire gamut of subsidies needs to be re-examined and re-oriented such that 75% of the amount could be put into a price stabilisation fund. The Congress Party would do well to take such expertise into consideration rather than promising loan waivers.
Also Read Building codes and Indian cities Chinese Perceptions of India Anchoring trust within MSMEs: Making significant contribution to resolving business challenges Biden or Trump: Who Do Gulf Allies Prefer? While the farm lobby may be an important electoral constituency, courting it in this manner would jeopardise the allocation of resources to other equally important segments of society. The Congress Party is also promising a cash benefit of Rs 6,000 a month for a fifth of the country’s poorest households. While well-intentioned, this again, would be unaffordable largesse apart from the fact that the leakages could be high. The free foodgrains scheme, for instance, will cost Rs 11.8 trillion over five years. What can be done instead is to take stock of all existing social welfare schemes and re-allocate the funds, perhaps some to create a social security net for gig workers.
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Resources need to be utilised efficiently, especially in schemes like the Rs 5,000 crore start-up fund. In this context, the promise to create 3 million jobs in government is not a good idea because it would only end up adding to costs. Rather, the Right to Apprenticeship Act, to ensure a one-year apprenticeship for college graduates or diploma holders, below 25 years at a salary of Rs 1 lakh should help youngsters. Welfarism is a good poll strategy, but overdoing it can boomerang big time.
From loan waivers and laptops to free electricity and subsidised cooking gas, poll promises in India cover a wide range of goods and services. For all the debate on the culture or freebies or revdis, no political party seems to be able to restrain itself from rolling out a ladli behna scheme or reverting to the Old Pension Scheme. Economists have pointed out how loan waivers can leave state finances debilitated and create a moral hazard; they have also highlighted the dangers of reviving the old pension scheme. But to no avail. In its draft manifesto, the Congress party has come up with a package of as many as 25 guarantees that is set to be the principal plank of its electoral agenda.
Expectedly, it covers all constituencies—farmers, women, and gig workers.On paper, the pursuit of social justice makes eminent sense as a political strategy. But consider the very irresponsible promise to provide a legal guarantee for the minimum support price (MSP) for the purchase of crops. Farmers have been demanding a legally guaranteed MSP which is based on the comprehensive cost of production plus 50%, as recommended by the Swaminathan Commission. Apart from the fact that this would discourage farmers from switching to food grains that are in short supply, it would be a huge burden on the exchequer.
Estimates by CRISIL MI&A Research said the expenditure for the government could be as much as Rs 13 trillion if the total production of 16 of the 23 crops—for which there is an MSP—is procured at the MSP announced for 2022-23. For perspective, subsidies in the agri-food space currently account for about Rs 5 trillion, of which 80% is consumer-centric and aimed at keeping food prices in check. Food subsidies amount to around Rs 2.12 trillion while subsidies on fertilisers, which also help rein in costs for farmers, are close to Rs 1.9 trillion. Agri economists like Ashok Gulati have said the entire gamut of subsidies needs to be re-examined and re-oriented such that 75% of the amount could be put into a price stabilisation fund. The Congress Party would do well to take such expertise into consideration rather than promising loan waivers.
While the farm lobby may be an important electoral constituency, courting it in this manner would jeopardise the allocation of resources to other equally important segments of society. The Congress Party is also promising a cash benefit of Rs 6,000 a month for a fifth of the country’s poorest households. While well-intentioned, this again, would be unaffordable largesse apart from the fact that the leakages could be high. The free foodgrains scheme, for instance, will cost Rs 11.8 trillion over five years. What can be done instead is to take stock of all existing social welfare schemes and re-allocate the funds, perhaps some to create a social security net for gig workers.
Resources need to be utilised efficiently, especially in schemes like the Rs 5,000 crore start-up fund. In this context, the promise to create 3 million jobs in government is not a good idea because it would only end up adding to costs. Rather, the Right to Apprenticeship Act, to ensure a one-year apprenticeship for college graduates or diploma holders, below 25 years at a salary of Rs 1 lakh should help youngsters. Welfarism is a good poll strategy, but overdoing it can boomerang big time.
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Irresponsible guarantees: Overdoing welfarism can boomerang big time
17
5
24.03.2024
From loan waivers and laptops to free electricity and subsidised cooking gas, poll promises in India cover a wide range of goods and services. For all the debate on the culture or freebies or revdis, no political party seems to be able to restrain itself from rolling out a ladli behna scheme or reverting to the Old Pension Scheme. Economists have pointed out how loan waivers can leave state finances debilitated and create a moral hazard; they have also highlighted the dangers of reviving the old pension scheme. But to no avail. In its draft manifesto, the Congress party has come up with a package of as many as 25 guarantees that is set to be the principal plank of its electoral agenda.
Also ReadLok Sabha Elections 2024: Congress unveils manifesto, promises ‘Nyay’ guarantees
Expectedly, it covers all constituencies—farmers, women, and gig workers.On paper, the pursuit of social justice makes eminent sense as a political strategy. But consider the very irresponsible promise to provide a legal guarantee for the minimum support price (MSP) for the purchase of crops. Farmers have been demanding a legally guaranteed MSP which is based on the comprehensive cost of production plus 50%, as recommended by the Swaminathan Commission. Apart from the fact that this would discourage farmers from switching to food grains that are in short supply, it would be a huge burden on the exchequer.
Estimates by CRISIL MI&A Research said the expenditure for the government could be as much as Rs 13 trillion if the total production of 16 of the 23 crops—for which there is an MSP—is procured at the MSP announced for 2022-23. For perspective, subsidies in the agri-food space currently account for about Rs 5 trillion, of which 80% is consumer-centric and aimed at keeping food prices in check. Food subsidies amount to around Rs 2.12 trillion while........
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