Wheat and paddy procurement at Rs 2,700 and Rs 3,100 per quintal, as against their respective minimum support prices of Rs 2,275 and Rs 2,200 fixed by the Centre. Annual income support of Rs 12,000 to farmers, twice that under the Centre’s PM Kisan Samman Nidhi scheme. LPG cylinders at Rs 450 for poor households. These are assurances in the BJP’s poll manifestos for Madhya Pradesh and Rajasthan, and advertised as Prime Minister Narendra Modi’s “guarantees”. Although not as expansive as the “revadi” (freebie) offerings by the Congress — from farm loan waivers and 100 units of free electricity, to Rs 3,000 monthly allowance for unemployed youth — the BJP isn’t far behind. In MP, it is already paying Rs 1,250 per month to women from poor families — the Congress has pledged Rs 1,500 — has promised one lakh government jobs over two years in Chhattisgarh and 2.5 lakh over five years in Rajasthan.
Simply put, with Lok Sabha elections only months away, the two main national parties are engaged in competitive populism. This fiscal race to the bottom is something one wouldn’t ordinarily expect from the Modi-led BJP. The Modi government’s first term was marked by a commitment to macroeconomic stability. The Centre’s fiscal deficit averaged 3.7 per cent of GDP, compared to the 5.4 per cent during the last five years of the previous Congress-led regime. Even its welfare schemes focused on subsidised public provision of essential private goods and services such as bank accounts, toilets, housing and LPG, electricity and tap water connections. This New Welfarism, as the former chief economic adviser Arvind Subramanian termed it, differed from the open-ended subsidies and entitlement programmes — especially the National Food Security Act (NFSA) and MGNREGA — of the earlier government. The Modi government schemes emphasised targeted cash transfers, leveraging the JAM (Jan-Dhan accounts, Aadhaar and mobile numbers) of individual beneficiaries.
The Modi government’s second term has seen the Centre’s fiscal deficit average 6.6 per cent of GDP. Some of that has resulted from necessary Covid-induced relief measures and clearing of all outstanding subsidy dues. But there has also been a reversion to the old fiscal populism. Not only has the 5 kg/person/month grain entitlement under the NFSA been retained, the Modi government has slashed the issue price from Rs 2-3/kg to zero and extended it “for the next five years”. The retail price of urea has been unchanged since November 2012, even as that of other so-called decontrolled fertilisers (besides petrol and diesel) has been brought back under control. If one adds the repeal of the farm laws, it’s clear that reforms and fiscal prudence have hit political economy hurdles. It may not be advisable to expect any different till the next government comes in.
