Can States Afford Doles?

Finances Of States Have Deteriorated Sharply Since Onset Of Covid-19. The Rising Freebie Culture Will Make Things Worse.

- Ashutosh Kumar

INDIA GOT AREALITY CHECK earlier this year when Sri Lanka went through a massive turmoil that saw its distressed populace—facing the brunt of food/fuel shortages as well as skyhigh prices and job losses—taking to the streets to protest against mishandling of the economy by their government. The violent uprising even led to the ouster of President Gotabaya Rajapaksha in July. The political crisis, which was a fall-out of fiscal mismanagement as government continued to borrow and spend despite falling tourism revenues due to Covid-19, forced economists in India to take note of the poor finances of state governments. Prime Minister Narendra Modi also cautioned state governments about overspending to please their vote banks and retain power, kicking off an animated debate over freebies/subsidies and budget imbalances See Pressure Points).

Amid this raging debate over freebies—doles to garner votes—a top central government functionary shared a story about assembly elections in Punjab where Aam Aadmi Party AAP) won 92 out of 117 seats. One of the reasons for its resounding win was promise of a bunch of freebies such as free electricity and `1,000 per month to every woman over 18. But just two weeks after the results, the newly-elected chief minister, Bhagwant Mann, met the prime minister and sought central assistance of `1 lakh crore in view of the state’s poor financial health. “The government demanded central assistance in tranches of `50,000 crore each for next two years,” the functionary said. A top BJP leader, taking a dig at AAP, says the party made tall promises in public but sought PMO’s help silently.