Zbigniew brzezinski who served as NSA to president Jimmy carter from 1977-1981 once quoted about populism during the 1981 presidential elections which carter lost to Reagan "We have a large public that is very ignorant about public affairs and very susceptible to simplistic slogans by candidates who appear out of nowhere, have no track record, but mouth appealing slogans”
Two recent happenings have made the debate among economists regarding populism vs sound economics really crucial.The results of 5 assembly elections have been recently announced on 6th march and Dinesh Trivedi has presented its first rail budget on 14th march.Both the BJP and the congress have received a set-back in the most populated state of India Uttar Pradesh while the regional parties emerged as a dominant player in both UP and Punjab while national parties playing a second or third fiddle in both these states.The one major factor which contributed to this tremendous performance of the regional parties is freebies that all these parties promised to the people of the state once it comes to power.Lets first take the case of Punjab last year Manpreet singh Badal who was the finance minister of Punjab and the nephew of CM PS Badal protested against the populist but fiscally infeasible policies of the akalis he was showed the exit door by the Akalis and thus he started his own outfit PPP which contested on almost all assembely elections on the issue of reform but was lost in all seats with manpreet singh badal losing his deposit too.While the other Badals who actually turned The community based party Akali Dal into Family fiefdom with actually 8 of the badal family members in the cabinet won 56 seats out of 118 seats in the assembely.The reason of there victory was certainly not Anna hazare,s anti-corruption movement as claimed by certain leaders in the opposition because if that would have impacted the assembly polls than certainly the Akalis would have not even won 30 seats because serious charges of corruption were levelled against the badals and other Akalis.certainly it was the populist but unbalanced economic policies during last 5 years which helped Akalis to get reelected in a state where since 1977 no party has come to power consecutively.The Akalis worsened the state finances since it came to power in 2007.In 2005-06 the state Fiscal deficit was 2564 crore howerver it worsened to 6170 crore in 2009-10 the reason for this worsening in state finances were freebies like free electricity to farmers,loan at almost insignificant rate of interest and various other agriculture subsidies to please the dominant rich farmer lobby of the state which were the major vote-bank of the Akalis.In 2012 the Akalis manifesto included free laptops to all the students in class 12 and free bicycle for all girls in class 10.
Secondaly lets take another major state where another regional party won the elections with the full majority on the basis of its populist manifesto.The samajwadi party won 224 seats out of 406 in the recently concluded UP polls.The party which was mainly considered an yadav outfit received vote from almost all the sections of the society including the non-yadav OBC,s. Whereas anti-incumbancy against the mis-rule of mayawati played an important role in such landslide victory for SP However the role of populist manifesto cannot be ignored in reversal of fortunes for the former wrestler from etawah.The SP manifesto surpassed every other party in distribution of freebies.The list of freebies included free laptop for all students studying in govt school,free water for irrigation from govt tubewells,unemployment allowence of 12000 p.a for all the people who are 35 and above but unemployed.While these freebies sound promising for the youths and the farmers of the state but in a state which has one of the highest fiscal deficit i wonder where would the money come from which would fulfill these election lollies.The fiscal deficit in Uttar Pradesh is at all time high it has touched 20000 crores in 2008.
Thirdly Mr Dinesh Trivedi presented the rail budget on 14th march.The budget looked like first govt document in last few years which really embraced the present realities through which our govt infrastructure is suffering.The previous railway ministers in last 15 years were all from regional parties and in order to strengthen there regional political base they always chose populist budget over balanced sound economic budget which would bring Indian Railways out of ICU as quoted by dinesh trivedi while presenting his first rail budget.The effects of these populist budget over a period of time led to detriotation of both quality and finances of indian railways.According to the govt of india estimates in feb 2012 the railway deficit would be around 2100 crores in 2012-13 if some rational drastic changes in the freight and passenger rates would not been implemented.Thus dinesh trivedi presented his budget keeping these issues in mind.The budget for the first time increased railway fares in last 9 years and tried to mitigate the bad management of indian railways finances which was done by previous railway ministers.However as always been the case in Indian politics since the emergence of mandal-kamandal coalition era good economics always become bad politics in India thus trivedi came under scanner from all political parties and was forced to resign by his own party leader mamta banerjee.Mamta banarjee has excelled in populist politics during last 6-7 years and in every single issue whether its nandigram singur or FDI in retail sector Mamta has stalled every single economic reform which the Congress led UPA has intended to take in last 3 years.While mamta is painting bengal in sky blue the only excuse she has for any of its policy failure since she has taken control of the writers building is that she has no money but she is not taking any steps to augment the revenue of its govt.
Thus with all these recent happenings one thing is clear that the major theories of macro-economies which include fiscal consolidation,revenue augmentation,ill effects of subsidies and MSP does not suit the agenda of our strongly emerging regional outfits.And eventhough with 5.9% fiscal deficit fiscal austerity is the buzz among most indian economist the politicians who make economic policies seems to remain either unaware or relaxed.If the unconstrained political populism continues in India it is a matter of time when India will turn into next greece.
Two recent happenings have made the debate among economists regarding populism vs sound economics really crucial.The results of 5 assembly elections have been recently announced on 6th march and Dinesh Trivedi has presented its first rail budget on 14th march.Both the BJP and the congress have received a set-back in the most populated state of India Uttar Pradesh while the regional parties emerged as a dominant player in both UP and Punjab while national parties playing a second or third fiddle in both these states.The one major factor which contributed to this tremendous performance of the regional parties is freebies that all these parties promised to the people of the state once it comes to power.Lets first take the case of Punjab last year Manpreet singh Badal who was the finance minister of Punjab and the nephew of CM PS Badal protested against the populist but fiscally infeasible policies of the akalis he was showed the exit door by the Akalis and thus he started his own outfit PPP which contested on almost all assembely elections on the issue of reform but was lost in all seats with manpreet singh badal losing his deposit too.While the other Badals who actually turned The community based party Akali Dal into Family fiefdom with actually 8 of the badal family members in the cabinet won 56 seats out of 118 seats in the assembely.The reason of there victory was certainly not Anna hazare,s anti-corruption movement as claimed by certain leaders in the opposition because if that would have impacted the assembly polls than certainly the Akalis would have not even won 30 seats because serious charges of corruption were levelled against the badals and other Akalis.certainly it was the populist but unbalanced economic policies during last 5 years which helped Akalis to get reelected in a state where since 1977 no party has come to power consecutively.The Akalis worsened the state finances since it came to power in 2007.In 2005-06 the state Fiscal deficit was 2564 crore howerver it worsened to 6170 crore in 2009-10 the reason for this worsening in state finances were freebies like free electricity to farmers,loan at almost insignificant rate of interest and various other agriculture subsidies to please the dominant rich farmer lobby of the state which were the major vote-bank of the Akalis.In 2012 the Akalis manifesto included free laptops to all the students in class 12 and free bicycle for all girls in class 10.
Secondaly lets take another major state where another regional party won the elections with the full majority on the basis of its populist manifesto.The samajwadi party won 224 seats out of 406 in the recently concluded UP polls.The party which was mainly considered an yadav outfit received vote from almost all the sections of the society including the non-yadav OBC,s. Whereas anti-incumbancy against the mis-rule of mayawati played an important role in such landslide victory for SP However the role of populist manifesto cannot be ignored in reversal of fortunes for the former wrestler from etawah.The SP manifesto surpassed every other party in distribution of freebies.The list of freebies included free laptop for all students studying in govt school,free water for irrigation from govt tubewells,unemployment allowence of 12000 p.a for all the people who are 35 and above but unemployed.While these freebies sound promising for the youths and the farmers of the state but in a state which has one of the highest fiscal deficit i wonder where would the money come from which would fulfill these election lollies.The fiscal deficit in Uttar Pradesh is at all time high it has touched 20000 crores in 2008.
Thirdly Mr Dinesh Trivedi presented the rail budget on 14th march.The budget looked like first govt document in last few years which really embraced the present realities through which our govt infrastructure is suffering.The previous railway ministers in last 15 years were all from regional parties and in order to strengthen there regional political base they always chose populist budget over balanced sound economic budget which would bring Indian Railways out of ICU as quoted by dinesh trivedi while presenting his first rail budget.The effects of these populist budget over a period of time led to detriotation of both quality and finances of indian railways.According to the govt of india estimates in feb 2012 the railway deficit would be around 2100 crores in 2012-13 if some rational drastic changes in the freight and passenger rates would not been implemented.Thus dinesh trivedi presented his budget keeping these issues in mind.The budget for the first time increased railway fares in last 9 years and tried to mitigate the bad management of indian railways finances which was done by previous railway ministers.However as always been the case in Indian politics since the emergence of mandal-kamandal coalition era good economics always become bad politics in India thus trivedi came under scanner from all political parties and was forced to resign by his own party leader mamta banerjee.Mamta banarjee has excelled in populist politics during last 6-7 years and in every single issue whether its nandigram singur or FDI in retail sector Mamta has stalled every single economic reform which the Congress led UPA has intended to take in last 3 years.While mamta is painting bengal in sky blue the only excuse she has for any of its policy failure since she has taken control of the writers building is that she has no money but she is not taking any steps to augment the revenue of its govt.
Thus with all these recent happenings one thing is clear that the major theories of macro-economies which include fiscal consolidation,revenue augmentation,ill effects of subsidies and MSP does not suit the agenda of our strongly emerging regional outfits.And eventhough with 5.9% fiscal deficit fiscal austerity is the buzz among most indian economist the politicians who make economic policies seems to remain either unaware or relaxed.If the unconstrained political populism continues in India it is a matter of time when India will turn into next greece.
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