Competitive populism

Promises of freebies are not sustainable

Populist handouts have become a standard feature of closely contested Assembly elections in India. But even so the number of promises being made for the coming round of the Assembly elections in Uttar Pradesh, Punjab, Manipur, Uttarakhand, and Goa are worthy of scrutiny. The Aam Aadmi Party (AAP), which is participating in almost all of these but is competitive in Goa and Punjab, is most associated with the promise of free power, which helped bring Arvind Kejriwal to power in Delhi. Now, 300 free units of power is part of the party’s platform even in these other states. Nor are they the only contestants offering free power.

In Uttar Pradesh, the challengers from the Samajwadi Party, led by Akhilesh Yadav, have also promised 300 units of free power to most of the 27 million plus households with electricity connections in the state. Aside from free power, Mr Yadav has revived his pledge of free laptops to students and has promised Rs 5 lakh to the families of those killed by stray bulls. In Punjab, the AAP has promised not just free power but also Rs 1,000 a month to every woman in the state. The Shiromani Akali Dal has promised to double that — offering Rs 2,000. And finally the state chief of the ruling Congress party, Navjot Singh Sidhu, has said that if voted back to power the Congress will provide not just Rs 2,000, but also eight free gas cylinders. The Bharatiya Janata Party, in power in UP, has reduced the electricity rates applicable to private tube well connections in the state by half.
 

Competitive welfare policies are an understandable consequence of recent developments in the Indian political economy. Many analyses of the general election results in 2019 suggested that Prime Minister Narendra Modi had been re-elected partly because of the effective expansion of the welfare net. In the years since then, dominated by the pandemic, there has been widespread distress in the rural and informal sector and so there is a strong temptation to hand out freebies as a form of poverty alleviation and for popularity in elections. Yet this temptation must be resisted, as it is neither sustainable nor sensible. In Uttar Pradesh, for example, some reports have claimed that the cost of 300 units of free power for most households will add Rs 22,000 crore to a subsidy bill that is already Rs 11,000 crore. Most of these states can scarcely afford the additional fiscal burden of such schemes. Welfare measures in Punjab have already been a burden on state government budget. Schemes that might be affordable in smaller states like Goa or rich ones like Tamil Nadu are scarcely possible in UP.

The contesting parties must refrain from promises that they would be able to fulfill only at the cost of destroying the states’ fiscal capabilities. But the Union government too must be careful. The Union Budget is due to be presented in a few weeks, and no doubt there is pressure to include sops for poll-going states. Yet that would not only be incorrect but dangerous, given the overall debt burden on the country. The Centre must not add fuel to the fire of competitive welfare policies through the Budget.