- As India navigates the complex intersection of electoral politics and fiscal management, it is imperative for political parties to tread a path of prudence and accountability.
- The need for comprehensive evaluation, informed decision-making, and sustainable fiscal policies has never been greater.
- The nation’s economic health, the well-being of its citizens, and the stability of its governance all hinge on the balance that can be achieved by aligning electoral promises with fiscal responsibility.
The Indian political landscape is no stranger to the allure of election freebies. These promises of subsidized services, financial assistance, and other incentives often play a significant role in shaping electoral outcomes. As the nation gears up for the Assembly Elections in Mizoram, Rajasthan, Chattisgarh, and Telangana, followed by the highly anticipated 2024 Lok Sabha Elections, it becomes increasingly pertinent to dissect the ramifications of these enticing offers on the financial health of the states and the nation at large.
A glaring case study emerges from the recent Assembly Elections in Himachal Pradesh, where the Congress party set forth a slew of compelling commitments. These included the revival of the Old Pension Scheme, the provision of free electricity up to 300 units per month for households, and financial aid extended to women aged between 18 and 60. The political strategy of offering such attractive incentives is evident; they have the potential to resonate deeply with voters and sway their preferences. However, the aftermath of these promises paints a sobering picture.
Media reports have brought to light the harsh financial realities the Himachal Pradesh state government now faces. The consequences of these commitments have led to the unfortunate predicament of delayed salary payments to around 15,000 government employees. These individuals, who work in sectors ranging from the Himachal Road Transport Corporation (HRTC) to the forest corporation, medical colleges, and the irrigation department, have been left grappling with uncertainty due to the mounting debt burden. The state’s debt has snowballed to an alarming figure of nearly Rs 76,000 crore, resulting in a dire fiscal situation that casts shadows over even the most well-intentioned election promises.
Venturing into the neighbouring state of Punjab, a similar story of financial quagmire emerges. Governed by the Aam Aadmi Party (AAP), the state grapples with the arduous task of fulfilling the election freebies promised during their campaign. Despite their commitment to implement the Old Pension Scheme seven months ago, the reality on the ground remains incongruent with the promises made. Astonishingly, Punjab’s debt looms at a staggering Rs. 3.12 lakh crore, while the price tag of the election freebies stands at a colossal Rs. 20,000 crore. This gaping hole in the state’s finances has forced the government’s hand to increase the Value-Added Tax (VAT) on essential commodities like petrol and diesel. Unfortunately, this step exacerbates the burden on consumers, leading to a cascade of economic implications.
The Karnataka Assembly elections offer another illustrative example. The Congress party’s triumph can be attributed, at least in part, to the allure of their promises, colloquially termed the ‘five guarantees.’ These included monthly allowances for select demographics, free rice distribution, complimentary electricity units, and subsidized bus travel. Yet, the cost of these commitments, a staggering Rs. 62,000 crores, shines a spotlight on the intricate fiscal tightrope that governments tread when seeking electoral gains. To bridge the funding gap, the Karnataka government found itself resorting to raising electricity tariffs, a decision that triggered pushback from various industrial sectors, thereby compounding the complexity of the situation.
In Delhi, where the Aam Aadmi Party (AAP) ascended to power in 2015, the narrative of freebies taking precedence over infrastructural development comes to the fore. The party’s slew of free services, encompassing water, power, and healthcare, has certainly endeared them to certain sections of the populace. However, this policy approach has resulted in perceived neglect of critical infrastructure projects such as schools, colleges, hospitals, and transportation networks. Consequently, the city’s essential amenities like roads, water supply, and sewage systems have suffered, leading to a litany of challenges and concerns.
In a bid to infuse accountability and transparency into the electoral ecosystem, the Supreme Court of India took a significant stride last year. It issued a directive mandating political parties to disclose the sources of funding for their election manifestos. This decision aims to empower voters by arming them with insights into the financial viability of the promises made during campaigns. By compelling political parties to reveal the origins of the resources earmarked for these promises, this step hopes to infuse greater integrity into the electoral discourse.
On the central front, the Finance Ministry’s projection of a reduced fiscal deficit for the fiscal year 2023-24 underscores a commitment to prudent fiscal management. This projection of 5.9% of GDP, lower than the revised fiscal deficit of 6.4% in the previous year, 2022-23, suggests a focus on fiscal responsibility. In stark contrast, some state governments appear to prioritize short-term electoral gains over long-term financial sustainability. The implementation of freebies often compels them to resort to augmenting taxes and increasing prices on essential commodities. This approach burdens their citizens, leading to a cycle of economic strain and raising concerns akin to the travails faced by countries like Sri Lanka, which experienced severe financial distress due to escalating debt.
One of the cornerstones of sustaining welfare schemes and election freebies is a robust tax base and an efficient taxation system. These mechanisms provide the necessary financial resources to fund these initiatives and ensure their long-term viability. However, recent revelations from the Finance Ministry highlight a stark disparity. In the fiscal year 2020-21, a mere 4.8% of the population filed income tax returns. The implications of this statistic are staggering. Out of this fraction, only 1.69 crore individuals actually paid taxes. Moreover, a substantial 65% of the taxpayers earned less than Rs. 5 lakh. Consequently, the burden of financing these initiatives falls disproportionately on a minute fraction of the population, leading to ethical and fiscal concerns.
In light of the evidence, the practice of offering freebies without conducting a comprehensive evaluation of their fiscal implications raises poignant questions. It could potentially be construed as exploiting taxpayers who are already fulfilling their obligations. The existing taxpayers, who contribute diligently to the government’s coffers, find themselves shouldering the financial load of these electoral promises. This phenomenon not only undermines principles of justice and equity but also exacerbates the financial burden on responsible taxpayers.
As the narrative unfolds, it becomes evident that political parties must exercise greater caution and prudence when formulating their election manifestos. These commitments should be meticulously analyzed for their fiscal feasibility and potential impact on the broader economy. The responsibility lies with these parties to avoid unjustly burdening the public and to prioritize responsible governance that takes into account the long-term well-being of the nation.
In summary, as India navigates the complex intersection of electoral politics and fiscal management, it is imperative for political parties to tread a path of prudence and accountability. The need for comprehensive evaluation, informed decision-making, and sustainable fiscal policies has never been greater. The nation’s economic health, the well-being of its citizens, and the stability of its governance all hinge on the balance that can be achieved by aligning electoral promises with fiscal responsibility. By adopting such an approach, India can ensure a prosperous and equitable future that is free from the shackles of undue financial burden.
(Umesh Agarwal, an entrepreneur and veteran in IT architecture, is a renowned geopolitical expert passionate about increasing public awareness of global affairs, economics, and international relations. His writings have been featured on reputed platforms and have gained international recognition. Views and opinions expressed are the author’s own.)
Sourabh Shetty 
Aayush Pal 
Parag Gilada