Freebies versus development: How 'Revdi' culture trades off development and results in unsustainable state finances

The country’s richest legislator says his government is too broke to fund development. Karnataka deputy chief minister D K Shivkumar’s assertion that delivering on poll promises will eat up all available resources points to the Revdi culture in Indian politics, and its dire impact on states’ finances. The five poll guarantees made by Congress, including free power and doles, will cost an estimated Rs 40,000 crore. So, MLAs who wrote to the CM asking for development projects in their constituencies have been told there’s nothing in the kitty for them. Karnataka is not the only state where a party, having come to power on the strength of extravagant promises, faces the prospect of prioritising giveaways over productive expenditure. In Punjab, Aam Aadmi Party, which specialises in wooing voters with largesse, now finds itself unable to deliver. “Where is the Rs 1,000 per month promised to all adult women in the state?” asked Congress leader P S Bajwa after the budget. “Where is the promised hike in old age and widows’ pensions?” Meanwhile, Punjab government employees want to know why the old pension scheme (OPS) hasn’t been re-introduced as promised. Nor are they happy that salaries of various categories of state employees are delayed from time to time. AAP has delivered one of the promised freebies - 300 units of free electricity to the majority of households in the state. On the other hand, it has allocated a lot less than the national average for health, education, infrastructure and development (PRS Punjab Budget Analysis 2023-24). Are citizens aware of the trade-off? Free power instead of roads and jobs? Consider the OPS lollipop, offered to state government employees by Congress and its allies. It is an unfunded pension scheme, discontinued in 2004 precisely because the pension liability of governments had reached ‘unsustainable proportions’. In fact, pensions were outstripping states’ revenues, leaving them less and less room for investment in developmental activities. Congress had adopted OPS when it was in power. And today, high-profile economists who served under the UPA have warned against reinstating OPS, be it Raghuram Rajan who was then RBI governor or Montek Singh Ahluwalia, then chief of the Planning Commission. Fifteenth Finance Commission chief N K Singh described Himachal Pradesh’s decision to bring back OPS as a recipe for ‘fiscal disaster’. A State Bank of India research paper estimated that it might cost the state as much as 450 per cent of its own tax revenues! Why has Congress discounted sane advice? Simply because it believes that it won Himachal Pradesh last year on the back of a promise to bring back OPS. That future generations of taxpayers will have to deal with huge pension liabilities does not seem to matter. How does benefiting Sarkari pensioners impact consumers and taxpayers? Badly, going by the Himachal experience – the first act of the new state government was to hike VAT on diesel by Rs 3 per litre in one stroke! This, of course, has a cascading and negative effect on Aam Aadmi. Small wonder that DMK, which had promised to bring back OPS in Tamil Nadu, has not done so. In March this year, the TN Secretariat Association asked why the commitment to re-introduce OPS, fill 3.5 lakh vacancies in government and educational institutions and hike aid to deceased employees’ families had not been met. What about Rajasthan, the first state to re-introduce OPS and offer a Rs 3,000-3,500 per month unemployment dole? Earlier this year, the government revealed that 18.4 lakh persons had registered for the dole, but 1.9 lakh were receiving it. Today, Rajasthan is one of the most indebted states in the country, one of the five that the RBI red-flagged as having a very high expenditure on ‘non-merit goods’. For the last five years, said RBI, the outstanding debt of these states had been growing faster than their respective Gross Domestic Product. Rajasthan’s debt to Gross State Domestic Product (GSDP) ratio is 40 per cent, Himachal’s 43 per cent and Punjab’s a staggering 53 per cent. States invariably tend to blame the ‘previous government’ for financial distress. If AAP blames the Congress in Punjab, the Congress blames the BJP in Karnataka. Legally (under Article 282 of the Constitution) a state government can spend its own revenues wherever and however it deems fit, but is the expenditure on freebies morally tenable? For the record, welfare measures like the public distribution system, employment guarantee schemes and outlays for education and health are uniformly productive and not classed as freebies. The same applies to free bicycles, phones and tablets for rural women, tools that enable them to pursue an education or a career. But power subsidies for domestic consumers, free bus travel for those who can afford tickets, doles, farm loan waivers, the OPS and other benefits to civil servants are hard to justify. Last year, the PM called out the Revdi culture with particular reference to the outstanding dues of power utilities – amounting to over Rs 2.5 lakh crore – thanks to massive power subsidies. The Supreme Court, while hearing a matter related to pre-poll handouts, said that taxpayers’ money was being given away in the form of freebies, pushing states towards ‘imminent bankruptcy’. NK Singh said the votes-for-freebies culture raised the question of whether the concept of sub-national bankruptcies should be adopted in India. Given the poor fiscal health of our states, the ethics of offering inducements to voters without stating the impacts needs to be debated. Voters must be told just how expensive freebies can be. The author is a freelance writer and author of Gurus: Stories of India’s Leading Babas and Just Transferred: The Untold Story of Ashok Khemka_. A journalist since 1986, she has written extensively on national politics._ Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost_’s views._ Read all the  Latest News ,  Trending News ,  Cricket News ,  Bollywood News , India News  and  Entertainment News  here. Follow us on  Facebook ,  Twitter  and  Instagram .