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Shackled to the vote-bank

The dismal state of Bengal’s economy proves once again that populism as a public policy only promotes greed. Prasenjit Chowdhury writes.

india Updated: May 10, 2012 22:33 IST
Prasenjit Chowdhury

The challenge for Mamata Banerjee after she wrested power from the hands of the Left in West Bengal was formidable. She had to inherit all the pathogens of the changeover, at the top of which was a huge debt burden of the state that — like most other debt-ridden brethren, Uttar Pradesh, Maharashtra and Punjab — was mired in the politics of populism, freebies and irrational subsidies. For an impulsively populist leader like Banerjee, it was a situation akin to her wings being lopped off before she could fly.

Consumed by a cesspool of a high revenue deficit, high expenditure and spiralling borrowings, Banerjee’s mandate was to buck the trend. In the last leg of the Left regime, the state’s debt burden increased to Rs 1,92,000 crore, against Rs 1,48,110 crore in 2008-09 — registering a rise of about 29% while the state’s ratio of debt to the Gross State Domestic Product (GSDP) as on March 2009 stood at 47.67% , compared to 48% in 2008-09. The 12th Finance Commission had recommended a debt-GDP ratio of 30.8% to be achieved by states by the end of March 2010.

Banerjee, barely 10 months into office, chose instead to go into a spending spree when the need of the hour was to rein in finances. The state’s total outstanding liabilities as on March 31, 2012 shot at Rs 2,08,382.58 crore compared to R1,87,387.40 crore as on March 31, 2011. Moreover, according to the budget estimates, this figure would further increase to Rs 2,26,550.87 crore at the end of 2012-13.

Why has West Bengal come to such a pass? The answer is simple. A revenue-strapped state indulging in mindless overspending was bound to go bust. While the state cannot be faulted for not reneging on its commitments that include employee salaries and retirement funds on account of which some 85% of Bengal’s revenue receipts are spent, it must be condemned for spending vast sums on subsidies of electricity and other ‘necessities’.

Since Banerjee is already being dubbed as an astute politician with a bad economic sense, it is about time we all understand the perils of populism as public policy. If we recall the much tom-tommed railway budget of 2012, we can see why the Indian Railways was once called a white elephant by the Rakesh Mohan Committee in 2001 with a debt of Rs 61,000 crore and even a predicted fatal bankruptcy by 2015.

But Banerjee alone cannot be accused of resorting to unabashed populism. Historian Ramachandra Guha once noted how surging to populism determined and conditioned the course of Indian politics right after Jawaharlal Nehru and after a brief tenure of Lal Bahadur Shastri. Political imagination and objectives were shackled to the ‘vote-bank’ of which there is much evidence in the history of politics in post-independent India.

In the instance of the new land acquisition and foreign investment rules, we saw UPA 2 dragging its feet. In seeking to provide further subsidies on food and fuel burning, along the way, hundreds of thousands of crores, and in seeking to write off farm loans, ensure communal reservations and discourage foreign investments, it is already evident that the Union government has chosen to stall economic reforms at the altar of populism. It is financing its massive public expenditure by resorting to heavy borrowing in the smug belief that there is no chance of the country getting caught in a debt trap. The 13th Finance Commission recommends a revised roadmap for fiscal consolidation at the Centre and the states that seeks to bring down the fiscal deficit to 3% of gross domestic product (GDP), mandated originally by the 2003 Fiscal Res-ponsibility and Budget Management Act.

With much needed funds in short supply or being siphoned off, our villages and slums are deficient on basic community infrastructure. It is time to think about whether they are benefiting from the policies of cheap handouts — in view, for instance, of the huge corruption in the flagship Mahatma Gandhi National Rural Employment Guarantee Scheme — and across-the-board subsidies. Populism in India as a political practice is anti-national too, in the sense that it has spawned a whole industry of unsustainable greed and entitlement in the country by compromising the larger interests of the nation.

(Prasenjit Chowdhury is a Kolkata-based writer)

The views expressed by the author are personal