Clear and present danger of unsustainable welfare costs

Promises made to the electorate in Bihar are an example of impending fiscal crisis and future collapse if remedial steps are not taken quickly

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The union government has exhibited an impressive degree of fiscal prudence over the past decade. But some states are fiscally profligate and are facing ways and means problems on a regular basis and getting into a debt trap. As a result, their capital investments are inadequate, and future growth is retarded. It will be useful to understand how some of the state governments are mired in fiscal crisis so that remedial steps can be taken to redress the situation.

A democratic government assumes office and survives in power with the consent of the people. It is always relatively easy and tempting to entice the voters with short-term, tangible, and individual welfare programmes that put money into their pockets immediately, rather than investing in collective needs and the long-term future. This reconciliation of short-term desires with long-term good is difficult even in families, but the bonds of love, trust and loyalty make difficult choices easier. Also, as families are frugal and care for outcomes, the benefits of working for a better future are relatively easy to appreciate. But in the public domain, there is always a healthy scepticism of the government's intentions and capacity to deliver the long-term good, and there is a tendency to opt for immediate benefits at the cost of the future.