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It is a common practice in Indian politics for politicians to vow to donate various items during campaigns to help gain the public’s vote. These promises, which are often reckless, can negatively impact the overall budget status of some states. The fact that such commitments impose enormous burdens on state economies and their further leads to the state excess fiscal capacity.
Freebies go from hampers containing day to day products, food items, and house wares such as mixers, television sets, fridges to non-trivial incentives like free electricity supplies and loans write offs. Although these actions may offer short-term benefits or yield a political advantage, they are costly to absorb. Such giveaways cost up to 2.2% of a state’s Gross Domestic Product (GDP). High spending is not only burdensome to state budgets, but it also limits good objective planning of economic development for years to come.
Maharashtra reveals perhaps the most frightening picture of the skewed planning and resource allocation favouring the welfare sectors than sectors like infrastructure, education and health. This in turn results in a vicious cycle of poorly funded sectors, less human development, lower quality of life and ID in the state.
The central government is also not immune to this trend, although in general it tends to carry a smaller share of the burden than do the state governments. Only in the last two decades have the states begun to bear the fiscal burden of these populist policies. This shift is worrying to say the least, especially for states whose economies are not buoyant and end up opening their expenditure to freebies may cause further deterioration of their fiscals.
The issue also deals with elements such as the morality of the establishment and allocation of public funds with the aim to ensure gains in the elections. Although democratic systems give such promises, their economic feasibility and future germination needs to be analysed. Election-driven gains normally lead to negative impacts on sustainable economic growth and sound public finance.
Thus, if given to voters during an election, though it resolves some sectional issues and booked votes of some people, the economic repercussions are very dangerous. There needs to be responsible spending toward welfare programs by the states to avoid causing a strain in the overall states’ economy. Political stability that calls for responsible governance also demands the people to eschew seeking quick and temporal benefits at the expense of the nation’s future.
Thank you.
Regards,
Kautilya, IBS Mumbai.
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