Scale of populism on display in state Assembly polls is staggering

Promises in poll-bound states are a cause for concern

There is no doubt that the forthcoming Assembly elections in Chhattisgarh, Madhya Pradesh, and Rajasthan among others will be a major test of strength for both the ruling Bharatiya Janata Party (BJP) and the Opposition Congress. They take on special significance thanks to the fact that the general election campaign will begin a few short months after the results of these state elections are declared. If the BJP retains its strong position, then efforts to create a strong Opposition alliance will be rendered more difficult; contrariwise, if the Congress does well then its claim to be the lynchpin of any effort to remove the BJP from power will be bolstered. It is thus natural that major efforts are being made to sway the electorate and all sorts of promises are being held out to voters. However, what is worrying is the overtones that the campaigning and poll promises have taken on, especially in the context of the tight fiscal situation and the upcoming elections.
 

Campaigning in Madhya Pradesh and Rajasthan, the president of the Congress, Rahul Gandhi, has repeatedly promised a loan waiver to farmers in the state. This follows similar promises made by the Congress in Karnataka before that state’s elections, and also the efforts by the Congress’ government in the state of Punjab to waive farmers’ loans. Meanwhile, in Telangana — where it is not currently in power — the BJP has also promised a loan waiver of agricultural loans up to Rs 200,000 in its manifesto. It has also promised other populist giveaways, such as an increase in the amount of subsidy being given to shepherds, free cycles to schoolchildren, free two-wheelers to college students, free laptops, houses for all, and 200,000 government jobs. In Madhya Pradesh, the BJP has promised a bonus over and above the declared minimum support prices but such bonus will be handed over only after the election results. The scale of the economic populism on display from all parties —  especially those that are in Opposition in each state — is staggering.

It is also a dangerous signal for the Indian polity. Regardless of who wins, it is clear that state finances will worsen. This comes at a time when, even given the Union government’s efforts to reduce the fiscal deficit over the past five years, the general government deficit of both the Union and the states has unfortunately remained dangerously high. The microeconomic effect of loan waivers, in particular, is problematic, with various crop insurance schemes targeted at farmers suffering in areas where loan waivers have been delivered. Insurance schemes are obviously a better way of dealing with rural distress than loan waivers since they do not carry the burden of moral hazard — and also are less likely to strain the fisc and weigh down taxpayers. It is hoped that this climate of competitive populism does not continue into the general election season. India can ill afford a general election being fought over competing giveaways, especially when deeper questions of governance and reforms lie unaddressed. Not only is there simply not enough money to run the sort of deep and expansive welfare state that such populism seeks to set up, but also it puts the real policy reform that will lead to sustained growth and prosperity on the back-burner.