By Ashok Gulati
At the outset, let me say that I feel proud of our democracy no matter how imperfect it is. Election time is a time to celebrate our democracy. And, right now, as we are going through some state elections—a prelude to the 2024 parliamentary elections—the pitch is high when it comes to political rivals blaming each other. From ‘panauti and pick-pocket’ to ‘maha gyani’, all sorts of vocabulary is being flung at rivals. Simultaneously, however, many promises are being made to the electorate. How far these promises can be termed doles or development is difficult to distinguish as there is always a thin line that separates the two.
It is difficult to list here all the promises that political parties are making in their election manifestos. But it would be good to discuss at least some prominent ones made to the farming community. The latest one is in Rajasthan, where the ruling Congress party is promising to make a law to implement minimum support prices (MSPs) in line with the Swaminathan formula. While the BJP maintains that they have already implemented the Swaminathan formula when, at the Centre, they made MSP equal to Cost A2+FL plus 50% margin on that. So, what is new that the Congress is promising in Rajasthan? Do they want to replace Cost A2+FL with Cost C2, where C2 is the comprehensive cost, including imputed land rent on self-owned land and imputed interest on owned capital, while Cost A2+FL refers to paid out costs plus imputed cost of family labour? If so, the MSP for various crops will go up anywhere by 25-33% over their existing levels.
The simple question that arises is why did the Congress not implement this at the Centre when it was in power during 2004 to 2013, as the Swaminathan Committee report had already been submitted to them? The obvious answer is that it was not considered economically prudent for the adverse consequences it will have on the economy. Then, why now?
Similarly, in Chhattisgarh, the Congress party is promising to raise the MSP for paddy to Rs 3,000/quintal, while the BJP has gone a step further promising Rs 3,100/quintal—as against the present MSP of Rs 2,183/quintal. Any party that comes to power in Chhattisgarh will have to face the situation of having to redeem the promises on giving the highest MSP for paddy in the country. If the BJP is promising paddy MSP of Rs 3,100/quintal in Chhattisgarh, why will it not be forced to give this in other states? Pressure over this would obviously mount before the parliamentary elections. Raising MSP for paddy to that level—a 42% jump from the current level—will have severe repercussions for the economy. Has anyone in the BJP thought about this before promising the Moon? Where will food inflation go, and what will happen to interest rates, and overall growth of the economy?
If the BJP truly feels that the current MSP for paddy is too low, which is 50% higher than the Cost A2+FL, why did it ban exports of non-basmati white rice, and put all sorts of export restrictions on other rice, including basmati rice? And why is it that the Food Corporation of India (FCI) is unloading its rice stocks at a price lower than Rs 3,000/quintal (equivalent to paddy MSP of almost Rs 4,500/quintal) against its own economic cost of Rs 3,900/quintal? It seems the right hand does not talk to left in the policy-making circles.
But, in the Madhya Pradesh elections, the prime minister himself announced that free ration (5kg/person/month) will continue for next 5 years under PM Garib Kalyan Yojana. I presume this promise was not just for Madhya Pradesh but for the entire country. Already, the food subsidy bill is more than Rs 2 trillion per annum, and as the MSPs will be raised for paddy and wheat in the next five years, this bill is surely going to bloat further. And if the MSP for paddy is raised to Rs 3,100/quintal, as the BJP is promising in Chhattisgarh, where will the food subsidy bill reach? Has anyone in the finance ministry given it a serious thought?
So, there are doles galore in an election year, without much thought given to the consequences these will have on the economy. The only silver lining that I see in these dole promises is that it will lead to temporary increase in the incomes of those who have been left behind in this process of economic liberalisation. This may raise their expenditures, especially in rural areas, and create a business opportunity for some to serve the rural demand better.
But the flip-side is that it will create major distortions in the agri-markets, and give rise to a signficant pressure on the fiscal balance of the relevant state or the Centre. This will have multiplier effects in the economy that may not be very palatable to the party in power.
Hence, there is a need to exercise restraint and caution before promising the Moon to the electorate in the heat of elections. It can cause long-term damage to the development story of India. If the hearts of political parties bleed for the poor, let them give an income/investment support within the budgetary constraints. Income/investment support is much better than higher price support for some crops, as income/investment support is crop neutral. Something on the lines of PM-KISAN at the Centre or Rythu Bandhu in Telangana or KALIA in Odisha.
Investments are always better than even income support, but investments take time to fructify while political parties need quick quid pro quo for the dole announcements in terms of votes. Can the Election Commission of India or the Supreme Court form a taxpayers’ committees in poll-bound states to evaluate how much of the promises made by major political parties are rational welfare measures, and how much are simply ‘bribes for votes’ to educate the electorate? Ultimately, it is taxpayers’ money, and they are being relegated to the background in this race to distribute revdis (doles)!
The author is a distinguished professor at ICRIER
Views are personal