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Costly Promises


According to a news report, the newly elected Congress government in Himachal Pradesh intends to rake in Rs 400 crores by raising VAT rates, another Rs 100 crores through ‘economy’ measures, and Rs 300 crores by ‘clamping down on corruption’ in the mining industry. All this is being done to get together the Rs 800 crores needed to fund the re-introduced Old Pension Plan for government employees. This is being touted as the government’s commitment to implementing its election promises, but the cost will be paid by the ordinary taxpayers.

Economists have warned against this tendency to promise a return to the old pension plan merely to get the support and votes of government employees, as it is very likely to bankrupt the state in the coming years. It is being claimed that the Congress won in Himachal because the government employees voted in its favour due to this promised largesse. While this promise has not worked in states like Gujarat and Uttarakhand, the chances are that it will be a favourite election ploy in the 2023 round of elections. Such is the desperation to win that unsustainable economics certain to harm the people in the future does not seem to deter the politicians.

The best way for a government to raise funds is to implement policies that boost the economy. This requires hard reforms that may hurt vested interests. This was the case with the attempts to reshape agricultural practices so that the farmer could benefit from modern day best practices. However, the entire nation saw how these were scuttled by farmers’ lobbies that are ‘addicted’ to various government subsidies. These subsidies are paid for, as usual, by the tax payer in direct and indirect ways. Free electricity and groundwater ensure that the long term impact on availability and prices will be severe, but those focused on short term political gains don’t care.

The Joshimath disaster is an example of how failing to consider the long term consequences can eventually catch up, with the ordinary people having to pay the price. This is exactly what will be the kind of result if populism becomes the dominant political creed – it will wreck the entire political system and lead to unmanageable social unrest. This can already be witnessed in many parts of the world at the present. India should avoid falling into this trap.