Thursday, Sep 18, 2014

Mindless populism — facts and remedies

The need for the food security act was never there. The need for the food security act was never there.
Written by Surjit S Bhalla | Posted: July 5, 2014 12:05 am | Updated: July 5, 2014 7:46 am

Finance Minister Arun Jaitley recently stated that there was no room for mindless populism in Budget 2014. In this article, the first of two, mindless populism will be defined and estimates provided; the second will contain further facts, and remedies.

The following simple definition of populism may be considered representative. Populism means expenditure programmes aimed at subsidising a large, preferably majority, of the voting population. In many countries, populism would be social expenditures targeted at the middle class. In India, these schemes would be those targeted at the absolute poor. However, what the Congress party did not realise, or appreciate, is the simple fact that the absolute poor were less than a quarter of the population in 2011-12, and possibly less than a fifth at the time of the 2014 election.

There is another element to the “mindful” nature of populism. Indian politicians should be aware that as per capita incomes have increased manifold, so has the percentage of the population subject to income tax. So this financing class worries about the efficacy of the delivery of subsidies to the poor, and to themselves. Mindless populism is now a deep negative for getting elected in India. Don’t believe me, believe the Congress which, despite many populist programmes, has just managed to register the largest loss for any incumbent national government anywhere at any time. In 2009 it won 206 seats; in 2014, just over a fifth of the seats. That is a world record for the BJP and Narendra Modi to be proud of, and for mindless populists to beware.

bhalla-july5

The longest running, and most expensive, of the social programmes for the poor is the food subsidy programme populistically called the Public Distribution System (PDS) — a scheme that has been in operation since the late-1970s. The total expenditure on this policy in 2014-15, thanks to its having been enshrined as law by the Sonia Gandhi-led previous government, is slated to be Rs 1,25,000 crore. The Tendulkar-defined poor today are likely to be around 250 million. So per poor person, the populism of the Congress dictated that the government would spend Rs 5,000 on food subsidies alone — that is, not including NREGA (let us call it by its original name rather than introducing the Mahatma into the controversy), not including fertiliser, not including diesel, not including kerosene, and not including LPG.

Incidentally, these excluded items together account for approximately Rs 1,75,000 crore.

Let us just concentrate exclusively on this PDS subsidy. Is expenditure of Rs 5,000 per poor person, “mindless” populism? The answer is a double emphatic yes. That is, it is not mindless populism but “mindless squared” populism.

In the run-up to the 2014 election, the welfare schemes of the UPA government came up for much discussion. Last year, at the time of the food security continued…

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