The Wages of Past Populism

How elections upend economics is evident in the just-passed budget of Maharashtra. Recollect that last year just before the Assembly elections, the ruling alliance passed the Ladki Bahin scheme giving ₹1,500 to women between the ages of 21 and 65. It was the trump card that returned them to power but drove a massive hole in the finances of the state. The new government trying to bring in stability was evident in what the budget did not contain. It had no new big-ticket schemes. The promise of increasing the Ladki Bahin amount to ₹2,100 was postponed to the future. And this despite setting aside ₹36,000 crore for it. No farm loan waiver as promised before the elections also made it to the budget.

All this is good because there was always the other option of continuing with the populism and forgetting about prudence, some­thing some states have done earlier and then paid a hefty price for it. Altogether, Maharashtra still spends about ₹1.3 lakh crore more than it makes. The Ladki Bahin scheme’s outlay is more than one-fourth of that amount. It shows the scale of what the dole involves. On top of that, it has been found to be availed by a large number of women who were not eligible but that was ignored earlier because everyone who got it became a potential voter. Now, an exercise to prune such recipients is ongoing because without an election for five years, the negative fallout can be absorbed.

Even for such a deficit, the state has had to scramble for new lines of earnings, like increasing tax on CNG, LPG and high-value electric vehicles, or a hike in stamp duty. Elections are paradoxical in that they are the foundations of a democracy but also the mechanism whose imperatives lead to corruption and populism. A country or a state can still thrive so long as these forces are contained but it doesn’t take much for it to become unmanageable.

Assembly electionbudgetLadki Bahin SchemeMaharashtra