Spending choices should be left to governments but fiscal rules must keep their profligacy in check
The freebies issue has expectedly taken a political turn, but its main essence is being missed. The choice of spending should ideally be with the government, as priorities vary. The problem surfaces when the fiscal deficit reaches high levels, which is not sustainable as debt levels rise. Interestingly, before the pandemic, the level of state debt was around half that of the Centre. Also, while the Centre never logged a fiscal deficit ratio of less than 3% after 2007-08, all states combined had clocked less than 3% after 2004-05 right up to 2020-21, barring 2015-16 and 16-17. Here too, it was less than 3.5%.