Truth may be stranger than fiction, but Indian politics is stranger than both. For how else could one explain the Rs 60,000-crore farm loan waiver by Finance Minister P Chidambaram without the mention of as who would bear the brunt of such mindless populism?
Even after five days of the presentation of Budget 2008-09 in Parliament, when these lines are being written, we do not know where the money would come from. As Leader of the Opposition L.K. Advani said in a debate in the Parliament, ?He (Chidambaram) is yet to announce how banks will be reimbursed the amount of Rs 60,000 crore. What one reads in newspapers is that the Government could issue bonds to the banks. This means that the bonds will have to be redeemed by a future government. In other words, the Government has placed the burden of making good the loan waiver on the shoulders of a future government.?
But this is typical of the ruling of the United Progressive Alliance (UPA). It follows Louis XIV (1710-74) of France who knew of all the problems in his country but did not take any serious step to check the rot. He is supposed to have said, Apr'smoi, le d?luge (After me, the deluge). The denouement was in 1789, a sanguinary bloody episode in world history.
The Budget was formulated with a similar disdain for the future: that will be ?after me.? She-who-must-be-obeyed and her coterie feel that the waiver would be having some sort of magic wand that, along with other tricks like the National Rural Employment Guarantee Scheme (NREGS), would make the electorate forget the misdeeds and misdemeanours of UPA rule.
Chidambaram has obeyed their diktats quite enthusiastically. In his Budget speech, he said, ?The total value of overdue loans being waived is estimated at Rs 50,000 crore and the OTS (One Time Settlement) relief on the overdue loans is estimated at Rs10,000 crore.? The Finance Minister can argue that the debt waiver is not a political move, that there was demand from various quarters for such relief, that other sections like the salaried people have also got something (in terms of hiked tax slabs), that the corporate sector has also got a few excise cuts. In his interaction with business chambers, he said, ?I have not forgotten the corporate sector.?
The fact, however, is that the Budget has been used by the UPA dispensation to further its political purposes. All the so-called sops given to industry, income-tax payers, etc, were long overdue. It has been ages since a substantial change in I-T slabs was made; what has come has come too late and too little, as the highest tax slab is still very low. The excise cuts are also not much. The corporate tax rate has not been brought down. There is considerable buoyancy in tax revenues; yet, the Finance Minister did not do much to bring down taxation.
The reason is not difficult to find. Apart from the money-guzzling schemes like the NREGS, now there is the farm loan waiver. In fact, this is worse than the social sector schemes, for it explicitly rewards and promotes irresponsibility and penalises honesty. A news channel interviewed about a dozen farmers in the Vidarbha region of Maharashtra immediately after the Budget speech. One of them said that he felt cheated as he paid the loan. So, for the sake of fairness, what next should be done? Reimburse his money and those of others who paid up? Where will this populist spiral end? All the noble thoughts expressed in Economic Survey, tabled in Parliament a day before the Budget, were forgotten within 24 hours.
Significantly, none of the farmers were satisfied by the Finance Minister, for they know that a relief of a few thousand rupees would not salvage the farm sector. This is the sad story of populism: the more you woo a section, the more dissatisfied and demanding it becomes. Had it not been the case, former prime minister VP Singh would have got 80 per cent of vote (for he had, as per populist theory, pleased other backward classes, scheduled castes and tribes, and Muslims). Former deputy prime minister Devi Lal'sRs 10,000-crore bonanza to farmers in 1990, too, would have earned him eternal gratitude of agriculturists and got him the to post. But their mindless populism did little good to them.
However, their irresponsible politics caused colossal damage to the nation. Thanks to Singh'sMandalisation, Indian polity is much more caste-based than it was in 1990, when he supposedly played his trump card. Similarly, Devi Lal'sloan waiver ruined the public exchequer and brought an unprecedented financial crisis.
Chidambaram, too, is unlikely to win many votes by using the taxpayers? money. As in earlier cases, it may turn out to be a lose-lose situation. Unfortunately, it is not only the taxpayer who will suffer; banks, too, will.
In an interview after presenting Budget 2008-09 in the Parliament, he said, ?I have said that we will find ways and means to provide equivalent liquidity to the banks over a period of three years. That we will do.?
Liquidity or compensation?
If the Government wants to give relief to farmers, it should pay for the succor; it cannot expect to gather all the accolades and let banks pay for political adventurism. The taxpayer is the primary victim; the banking sector is collateral damage, as evident from the drubbing banking stocks got on Dalal Street.
This also brings the issue of public sector autonomy into sharp focus. The national Common Minimum Programme (CMP), which supposedly guides the UPA Government, says, ?Public sector banks will be given full managerial autonomy. Burdening them with colossal waivers is surely not the best way to enhance full managerial autonomy.?
Then there is also the matter of investor interests. Since major public sector banks are listed, millions of small shareholders have suffered because of the UPA regime'smindless waiver. The CMP said, ?Interests of small investors will be protected… SEBI will be further strengthened. Strictest action will be taken against market manipulators and those who try to deliberately engineer market panic.? But who will take action against a government that has proved to be the biggest market manipulator and engineered market panic?
The entire waiver story is a nauseating mixture of lies, populism and mindlessness.
This is not to say that India'sagriculturists are living in some sort of idyll; but their problems are because of the policies promoted and formulated by Leftist economists, incorrigible sentimentalists, and unscrupulous politicians. Chidambaram, his Cabinet colleague, Agriculture Minister Sharad Pawar and other worthies of the ruling dispensation are trying to sell the loan waiver as a great redemptive scheme. In his Budget speech, the Finance Minister said, ?Government is conscious of the dimensions of the problem and is sensitive to the difficulties of the farming community, especially the small and marginal farmers.? This is wrong, for the Government is sensitive only to its own electoral concerns; had it been worried about the plight of villagers, it would have dismantled the socialist policy framework that the farm sector is still saddled with.
Unfortunately, the gigantic waiver is not the climax of populism; it appears to be just a point in the spiral of populism. For instance, Pawar said after the Budget, ?Farmers are under no legal or moral obligation to repay these (moneylenders?) illegal loans.? It is strange that a Cabinet member is instigating people to breach contract, which is the basis of social conduct. Where would mindless populism lead us to? Any partisan of liberty and democracy fears this question.
Politicians will come and go, but the evil they leave behind will make all of us to suffer. And they know about the ?deluge.?
(The author works with The Political and Business Daily.)