It should be a matter of serious concern that the country is slipping deeper and deeper into doling out sops to sections of the population to appease them in the face of rising public expectations. Doubtlessly, the biggest chunk of voters are the farmers and it is to woo them more than any other section that the political parties are spreading out the goodies. Inherently, it is the relatively rich farmers that are gaining the most, with the small and marginal farmers who borrow from moneylenders and not from banks per se losing out to them. In the process of redistribution, disparities are increasing but there is not a thought for increasing the size of the cake itself. Public investment is on a low ebb and capital formation is just not happening on an appreciable scale.
Before the elections to five state assemblies recently, the Modi government underestimated the anger among the farming community over the raw deal it was getting. But today, there is acute consciousness and a realisation that remedial measures would be required if the farmers are to be won back. The bitter battle between the Nehru-Gandhi family and Prime Minister Narendra Modi and the BJP on the other has led Congress party president Rahul Gandhi to commit to a potentially fiscally crippling national loan waiver if elected to power in the general elections, due in a few months.The competitive populism that has been unleashed with the Congress announcing farm loan waivers would be debilitating for the economy with non-Congress regimes coming up with variations of farm relief.
The central government has plans of writing off loans worth Rs 4 lakh crore ($56.5 billion) across the country all in the pursuit of competitive populism.Pushed by how potent the Congress strategy has been in winning over vote banks which were well-entrenched in the BJP camp until now, the Modi government has shed its complacency and is preparing to match populism with populism.With limited resources where that will leave fresh investment in infrastructure and other key areas is a moot point but nobody seems to care about it.
Our governments are really living for today with not a thought about the potential harm that would be caused.Huge environmental damage is being caused by extensive tree-felling and highly acute is the problem of air pollution in New Delhi but neither the ruling dispensation nor the Opposition have solutions at hand. Instead, they are obsessed with non-issues and petty politicking.The erstwhile Congress-led coalition government had announced farm loan waivers worth nearly Rs 72,000 crore in 2008, which helped it return to power with a bigger mandate in 2009. That is a precedent that the Modi government would inevitably look at.
Economists caution that farm loans waivers would widen a fiscal deficit the government has aimed to cap at 3.3 per cent of its gross domestic product (GDP), or Rs 6.24 lakh crore. Even without the farm loan waiver, some credit rating agencies have estimated the country’s fiscal deficit at Rs 6.67 lakh crore – or 3.5 per cent of GDP. While winning back the farmers is a priority for BJP, the middle class also is feeling alienated. The slashing of prices of several items of daily consumption through reduction in GST is a way by which the government is meeting the expectations for price concessions. Consequently, GST revenues have declined but the Modi government was caught in an unenviable price spiral and had to attack it before it went out of hand. That it has lowered the burden considerably is good but it will have to keep a tab on the fiscal deficit. It is a matter of relief that petroleum product prices which were ruled by high prices abroad have stabilised at lower levels in recent months after having peaked earlier.
However, the Modi government would be imprudent to let the fiscal deficit run riot at a time when prices have been brought under control. Electoral sops cannot disregard the health of the economy and the role of healthy parameters. All in all, the Modi government is tending to tackle the problems facing it with greater seriousness than in the past. But it will have to guard against leaning too heavily on populism, ignoring the developmental imperatives.Some hard decisions will always be required and it would be folly to view the defeat in the three Hindi heartland states as a vote for reversal of basic thrust. A judicious mix of the old and the new would be more efficacious.
The Congress strategy of calling Modi a ‘chor’ (thief) will serve little purpose as the prime minister’s personal integrity is unimpeachable. The party must attack the government on issues. So far, the experience has been that the Opposition has not carried conviction while taking on the BJP on corruption. Finally, there is advantage for the BJP in projecting the contest of 2019 as virtually a presidential one. Modi’s public ratings continue to be much higher than those of Rahul Gandhi and the Opposition cannot lose track of the fact that in the Stat elections Modi was hardly on the scene but that in the Lok Sabha polls he would have his superior oratory to stand him in good stead.
Kamlendra Kanwar is a political commentator and columnist. He has authored four books.