Tariff debate .... is good ::: But Indian economy has to come out of political populism and thoughtless disbursements

 The best thing would be a ban from the Election Commission on political parties that no freebies can be part of election manifesto. But such a thing is ideal and idealism often must stay away from politics and day to day governance. 

This piece is being written at a time when experts and stakeholders are debating Donald Trump's tariff regime. 

Will India turn this phase into an opportunity like it did during the Covid and the Y2K problem ? Also in debate is StartUps. 

To start with Indian startups face numerous challenges, including securing funding, navigating complex regulations, attracting and retaining talent, and overcoming infrastructure limitations.

Of course these challenges can hinder their growth.  

Before we talk about the challenges of contemporary setting; there is much relevance to talk about the early period of the new century. In 2004, Dr Manmohan Singh became India's Prime Minister. The going was already good under his predecessor Atal Bihari Vajpayee.  

At its peak the UPA-I could take the country to a growth level of 9 per cent in 2009. However, Sonia Gandhi and NAC prevailed. Since then populist welfare measures and subsidies destroyed growth graph. Politically, the Congress party also lost grip on governance. 

Around that time our senior colleague Jaya Raj, now deceased, wrote an article stating among other things that for Dr Singh, changing the course from the path of greater investment and productivity to vote bank populism and massive financial subsidies marked the beginning of a down-slide. 

The reform strategies as expected did not come under Narendra Modi too. Political opportunism was the order of the day. 

Hence the "virus of cash transfers" with numerous schemes across states and political parties also became the order of the day. 

Most state governments prioritised welfare initiatives, running some at least 10 to three dozen schemes in different states including the likes of Delhi (under AAP) and West Bengal (under Mamata Banerjee).

 These include free bicycles to get to school, scholarships for girls, financial aid, pensions for women, the elderly and the disabled, alongside universal health insurance. 

The Congress is hardly better or rather always the chief spoil sport of healthy economic governance. It promised a series of freebies in Karnataka and Himachal Pradesh.  

The thoughtless disbursements could turn the country again into a poorhouse.  

It is worth mentioning that India has used subsidy as an instrument of vote bank politics since beginning and that made the country virtually bankrupt in 1991.  But no lesson was learnt. 

Over the years the inflation-worsening and growth distorting subsidies that upset the fiscal deficit have shot up.  

A few years ago the Andhra Pradesh government under Y S Jagan Mohan Reddy, leader of the YSR Congress Party, funded more than two dozen welfare programmes. one of them was monthly payments to kidney patients for dialysis.  

"But evidence of welfare translating to votes is more mixed. Victories in Indian elections aren't solely determined by a single factor - caste, demography and religious identity are other key predictors of support for a party," says a BBC report.

In 2019, a survey by polling group Lokniti-CSDS, found that the BJP had attracted more women voters in that year's general elections, because of a rise in PM Modi's popularity and the impact of welfare schemes. 

Yet, a study in West Bengal concluded that "ideology and identity politics" outweighed welfare considerations in explaining the growing popularity of the BJP in the state.

But there are issues. There are slippages in the much-hyped welfare programmes. 

In Visakhapatnam, it was reported that notwithstanding ample handouts, people spend a fortune buying drinking water because of the lack of a water connection.

But it is true that India's public debt - of central and state governments - exceeds more than 80% of GDP, according to IMF data. 

This is what is called contingent liability risks.

These schemes have become permanent entitlements. It is like playing with fire. Someone has to bell the cat.

'New Welfarism' is hurting the exchequer. And there are reasons to believe that these schemes aren't enough to lift people out of poverty.

ends