During a nearly four-hour meeting on Saturday, several top bureaucrats briefed Prime Minister Narendra Modi that the announcements of freebies in several states are financially unsustainable and that they needed to be persuaded to make a balanced decision that aligned political imperatives with economic stability.
They expressed alarm over populist initiatives and freebies promised by political parties during elections. They cautioned that if the trends persisted, some states may end up in the same situation as cash-strapped Sri Lanka or Greece.
The pronouncements made by state governments like Punjab, Delhi, Telangana, Andhra Pradesh, and West Bengal, as officials stated, are unsustainable and a remedy is needed at the moment. Several political parties are providing free electricity, putting a strain on the state budget. Also, it restricts their capacity to commit more finances to critical social sectors like health and education.
Although it was not particularly highlighted in the meeting, central government officials also voiced fears about the “unsustainable” consequences of the transition to the old pension system in states like Chhattisgarh and Rajasthan. Officials say the norm of political parties competing to deliver freebies before every election would have major long-term consequences for state and central government finances.
According to some reports, the bureaucrats, who held prominent positions in the states before going to the Centre, warned that numerous states were in dire financial straits and would have gone bankrupt if they had not been a member of the Union.
The discussion focused on socioeconomic development, according to some officials, and the PM asked the secretaries to take all feasible efforts to reduce poverty and come up with governance ideas given their broad experience in state governments and at the Centre.
Free schemes in trend
Several political parties like the Aam Aadmi Party and the All India Trinamool Congress offered tonnes of freebies before the elections. This trend is growing as many other political parties are imitating this action in search of power. In fact, after coming to power on promises of freebies claiming that they have the calculations to fund freebies sorted, AAP government in Punjab asked Centre for Rs 50,000 crore aid for two years as the state’s financial situation is very bad.
In the recent assembly elections of 5 states, these political parties announced various schemes where they promised free electricity for households and free money to all women. However, these schemes are not feasible to the society whether it is the social sector, or the economic sector.
India’s power distribution companies are suffering badly. In such circumstances, when past dues are already unpaid, offering free electricity and increasing the burden on the power industry is hardly something to be celebrated.
States get a percentage of national taxes and GST, while their own revenue streams are restricted to alcohol excise and petroleum VAT, as well as property and motor vehicle registration fees. In such a position, efforts to mobilise resources are constrained, depriving them a foundation from which to spend that money on appeasements.
