Political competition over such concessions “quick passport to fiscal calamity”, says NK Singh, chief of finance commission, populist move in Punjab, Rajasthan
Finance commission chief says political competition over such concessions is a “quick passport to fiscal disaster”
India could face the prospect of sub-national bankruptcy if states continue to give freebies to influence voters, Fifteenth Finance Commission chairman NK Singh warned on Tuesday, calling such political competition a “fiscal disaster”. for “Quick Passport”.
Emphasizing on the need to issue credit ratings to states based on their financial health, Mr Singh cited the example of the highly indebted state of Punjab, which is expected to implement 300 units like the recently announced ‘free’ ones at an estimated ₹17,000. Expected to spend Rs. Free electricity per household.
Without directly referring to Punjab, the finance commission chief said “a classic example” is of a state that has become prolific and unable to pay its bills, so it immediately turns to the Center for help. . He said that beyond the transfer of revenue to the states as per the advice of the commission, the Center can only help the states in times of distress or calamities.
“Governments across the political spectrum are now getting attracted to this new slogan of freebie politics. The broader issue that has bothered me for some time is whether the politics and economics of free will force us to contemplate what we might call a sub-national bankruptcy,” said Mr Singh at the Delhi School of Economics’ annual Said in an address on the day.
Terming the Rajasthan government’s decision to roll back the old pension scheme for its employees as ‘regressive’ and ‘full of dangers’, Mr Singh said it would benefit up to 56% of the population in a small fraction or just 6%. translates into receiving. The revenue of the state which goes to his pension and salary expenditure.
While subsidies are required for qualifying and public goods that have larger benefits, such as the public distribution system, employment guarantee schemes and greater support for the education and health sectors, Mr. Singh emphasized the need to separate these from other exemptions. Emphasized those who are part of it. Contemporary political narrative.
“Both economics and free politics are deeply flawed. It’s a race to the bottom. In fact, it is not a path to efficiency or prosperity, but a quick passport to financial disaster,” he asserted, adding that ‘cheap’ freebies are expensive for the economy, quality of life and social cohesion in the long run.
A culture of excessive electoral concessions to influence voter preferences also undermines job creation and growth, while affecting the quality of India’s manufacturing and hurting environmentally sustainable aspirations. “Free electricity, free water, some sort of free fertilizer – all these deviates from environmental objectives.”
Suggesting that constitutional provisions like Article 282 should be considered in cases of sub-national insolvency, Mr Singh said the race to the bottom means the government controls the regulation of markets and trade.
“This means that ultimately states compete to undercut each other in reducing taxes, expenditure and regulation. Instead we must strive for efficiency through the laboratories of democracy and strong federalism where states use their authority to come up with innovative ideas and solutions to common problems that other states can emulate.”