Freebies for votes in India before elections pose deficit risk
Parties promising freebies threaten to undermine Narendra Modi’s promises to impose fiscal discipline if he forms govt
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New Delhi/Chennai: Clara Mary lights an oil lamp in her one-room shack, revealing a 14-inch colour television sitting on a blue plastic chair that she hasn’t been able to turn on since the Tamil Nadu government gave it to her three years ago.
“I don’t have any electricity, so I don’t know what to do with these things,” Mary, a 40-year-old mother of four, said from the slum in southern India, where naked children played in garbage next to rats meandering through raw sewage. “We just want basic amenities. We don’t want any luxuries.”
Goats, cable television, blenders, fans and gold are among freebies promised by Tamil Nadu’s ruling All India Anna Dravida Munnetra Kazhagam, or AIADMK, as it campaigns in national elections ending 16 May. State budget documents show Tamil Nadu has spent more than Rs.16,000 crore on similar handouts since 2006—equal to its annual outlay on education.
Regional parties promising government giveaways threaten to undermine pledges by Narendra Modi’s Bharatiya Janata Party (BJP), which leads in opinion polls, to impose fiscal discipline if he forms a coalition government. A fragmented coalition that leads to increased spending on subsidies and weaker growth would put the nation of 1.2 billion people at risk of a credit-rating downgrade, Standard and Poor’s (S&P’s) said last week.
“It’s all about instant gratification, and the voters are as culpable as the politicians in all of this,” said M.R. Venkatesh, a Chennai-based independent analyst who has written a book about Indian politics. “If you have to give everyone clean drinking water and schooling, it’s not going to happen in an instant, whereas if I give you a fan, then it’s easier.”
India’s subsidy bill rose fivefold in the past decade under Prime Minister Manmohan Singh’s ruling Congress party to Rs.2.6 trillion a year. In the same period, the Indian economy has only doubled in size, according to the International Monetary Fund (IMF).
Polls show Modi’s BJP winning the most seats while falling short of a majority, which would make him reliant on regional parties such as the AIADMK to form a government. The BJP, while saying it will continue the world’s largest food programme providing cheap grain for the poor, said in its manifesto that it would strictly implement fiscal discipline.
The ruling Congress party saw the fiscal deficit rise to a peak of 6.5% of gross domestic product (GDP) in the 2010 fiscal year. It pledged in its manifesto to get it below 3% of GDP in three years while still providing legal rights to housing and free medicine.
Other regional parties are also getting into the act. The Biju Janata Dal party (BJD), which holds power in Odisha, is offering free bicycles to some students. The Telugu Desam Party (TDP) in Andhra Pradesh is promising to waive all farmer loans.
Tamil Nadu, which is among states that will vote tomorrow, is one of India’s better-performing states, with a per capita income of about $1,380, about one-third more than the national average. Even so, about two-thirds of rural households don’t have a toilet, the government says, and about 12 million of the state’s 70 million residents—more than the population of Portugal—live on $2 a day, according to the World Bank.
The AIADMK is projecting its leader, former film actress J. Jayalalithaa, as a future prime minister. Campaign posters in the state depict world leaders such as President Barack Obama and Sri Lanka President Mahinda Rajapaksa bowing down to her.
Every poor Indian household would get four goats, a cow, solar panels and cable television if the party takes power. Poor women will get electric blenders, fans and 4 grams of gold if they are getting married.
“These are important welfare programmes because people at the lower rungs of society cannot afford these things,” said B.V. Ramanaa, an AIADMK leader and the state’s minister for revenue. “Rural families spend longs days working hard in the fields. After work they need some comfort.”
The AIADMK is forecast to win as many as 21 of Tamil Nadu’s 39 seats, making it the fourth-biggest party in the 543-member parliament, according to an opinion poll published this month by CNN-IBN. The BJP and its allies would win as many as 246 seats, short of the 272 needed for a majority, it said.
S. Subramaniam Balaji, a Chennai-based lawyer, petitioned the Election Commission and Indian courts to stop the giveaways. The handouts constitute bribes and are illegal because the Indian constitution says government spending must be for the public, not individuals, he said.
“The government doesn’t have an infinite amount of money,” Balaji said in an interview in Chennai. “If we are spending on these programmes, we are neglecting far more important areas.”
In 2006, the Tamil Nadu’s main opposition party, the Dravida Munnetra Kazhagam (DMK), offered free colour televisions for women’s recreation and general knowledge. The party bought more than 16 million televisions at a cost of about $827 million.
T.K.S. Elangovan, a DMK member, defended the policies and said he doesn’t object to similar promises now by the AIADMK.
“All these subsidies have to have a reason,” Elangovan said in an interview as he stood on a jeep while out campaigning. “If it is a laptop or a television, which have a purpose, I don’t think there is a problem.”
Mary says the government has let her down. Her children study by the light of street lamps, and must walk a kilometer to find a quiet field to relieve themselves because they don’t have a toilet. Their school has no tables or chairs, and the playground consists of piles of rubble frequented by stray dogs.
While Mary voted for the AIADMK in the last national election, she says she’s undecided this time around. No matter what, she won’t sell her television set.
“When we got the television, we thought that we would get electricity as well but it never arrived,” Mary said, standing by her husband. “We are keeping the television in the hope that one day we can turn it on. That would signal we finally have a better life.” Bloomberg