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Populist Pitfall

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‘Bad money drives good money out of circulation’ (Gresham’s Law) is an adage much quoted but rarely understood. This is particularly so in politics – populism can very quickly degrade the quality of conservative, long term policies. This is being seen in the run up to assembly elections in states like Punjab, UP and Uttarakhand. The so-called AAP model instituted in Delhi – of providing free electricity to the poor – has politicians running scared in these states. Not only has Congress maverick Navjot Singh Sidhu advocated this strongly in Punjab, a state already suffering severe power outages, but there are reports making the rounds that something similar may be introduced in UP and Uttarakhand. This is despite the fact that Punjab’s power sector is already devastated by the free electricity being provided to farmers on a large scale.

Uttarakhand’s new Power Minister Harak Singh Rawat has proposed providing free electricity to those who consume 100 units, and charging fifty percent for 200 units. It may not seem much in a state with supposedly considerable hydel resources, but who exactly will pay for it? A government that has been unable to properly pay its employees during the Covid period, will find it hard to compensate the power companies for this largesse. Minister Rawat will not be around forever, but he will leave this albatross hanging around the system’s neck for a long time to come. And, the power generating and transmission companies cannot be expected to bear the burden for reasons that should be obvious to anybody.

Sadly, the only ‘success’ Arvind Kejriwal has had, that matters to the politicians, are the votes the sop has supposedly garnered. It overlooks the fact that, in the end, nothing comes for free. If paid for in a roundabout way, the costs actually go up. This, in turn, raises production costs thereby initiating a vicious cycle leading ultimately to ruin. To give just one example, the ‘noble’ intentions that lay behind the decision to nationalise sick textile mills (for the sake of the workers) led, eventually, to mind-boggling losses to the exchequer and the same result as before.

The BJP leaders, at least, should understand what the party’s policy has been in the past seven years regarding the economy. Economic reform is a must and has to be undertaken in a pragmatic and resolute way. Stay away from such politics unless the desire is to be reduced to little more than a municipality like the Delhi Government.