Are the 5 guarantees of Karnataka's new government sustainable?

-

Mr Siddaramaiah will be sworn in as CM of Karnataka today for the second time. The Congress after a series of electoral failures, has finally achieved a thumping victory in Karnataka elections by getting clear majority under the leadership of Mr Siddaramaiah and Mr DK Sivakumar.

Major role in its electoral victory is played by 5 social sector guarantees the INC has promised in its manifesto.

  1. ₹2,000 monthly assistance to women heads of all families ( Gruhalakshmi),
  2. 200 units of power to all households ( Gruhajyoti)
  3. ₹3,000 every month for graduate youth and ₹1,500 for diploma holders ( Yuvanidhi), 
  4. 10 kg rice per person per month( Anna Bhagya) and 
  5. Free travel for women in the State public transport buses ( Uchita Prayana). 

Whether the upcoming government remains true to its promises is  the curiosity shared by the common man.

Giving out 5 guarantees is possible in two ways.

  • Either putting too many exclusions to reduce expenditure and strain on budget or 
  • Risk high revenue deficit by making them broad-based and rolling out universal inclusions.

If they go with the first, It means they have failed to fulfil promises and aspirations of the electorate.

If they stick to second, it means the state finances will be put into severe strain.

According to analyst estimates, these 5 guarantees will cost around ₹65,000 crore a year. 42000 crore for Gruhalaksmi, ₹15,500 crore for Gruhajyoti, ₹5,700 crore for Annabhagya, and ₹900 crore for Yuvanidhi, will be the cost breakup. This is nearly 20 per cent of the State budget. 

This will make Fiscal deficit(FD) to cross 3% limit set out in Karnataka Fiscal Responsibility Act 2002. It may overshoot by 2.4% to reach 5.4%.  Violating this will deter several concessions from Government of India as per FRBM Act. Then the state government may cry foul that Modi led central government is not cooperating.

In nutshell, this will entail following potential negative outcomes:

  • State has to mobilise more resources by increasing taxes. It will punish the real wealth creators.
  • There will be a reduction in new recruitments, to reduce the salary burden.
  • As with all entitlement-based schemes, there will be a lot of leakages and corruption.
  • Due to bad finances, growth and investment will be affected. Inefficiency and unemployment will increase.
  • There will be deterioration of financial health of state power and transport corporations like KSRTC,KPTCL and KPTCL etc.
  • It will strain the budget of future governments as well with bulging fiscal deficit.

 As argued by famous economist, Jagdish Bhagwati, for sustainable growth, what we need is an empowerment-based approach rather than an entitlement-based approach. We need to teach people, how to fish, rather than give them fish.

With his huge experience of having presented 13 state budgets, how Mr Siddaramaiah will handle this conundrum, is remains to be seen.

Best wishes to the new government.

 

ReplyForward

 

Comments

Post a Comment

Popular posts from this blog

Five reasons why you should and you shouldn’t vote for Modi Sarkar

-
Image
  India is going for 18th Loksabha elections from 19th April 2024. There is confidence among the ruling Modi government that it will win and claim power at the centre for third term. But the ultimate power lies in the hands of the common man. Beauty of democracy lies in the importance it accords on the intellect of every common man. Hence Abraham Lincoln once said-“The Ballot is stronger than the Bullet”.   This article will list out 5 reasons why you should vote for Mr Modi/BJP and why you shouldn’t.  5 reasons you should Vote for Modi Sarkar: External security and foreign relations: Fist things first. We are living in a world at the brink of third world war due to geopolitical tensions on the backdrop of Russia-Ukraine war and Israel-Palestine conflict. We need a government,which can protect national interests by carefully steering the foreign policy balancing conflicting interests. Modi government has definitely done well under the ministership of S.Jaishankar. Hostile...
Read more

Heart touching story of Maniben Patel(Sardar Patel's daughter)

-
Heart touching story of Maniben Patel (Daughter of Sardar Patel) as narrated by Varghese Kurien(Milkman of India) in his book:    "Maniben Patel was a woman of tremendous honesty and loyalty.She told me that when Sardar Patel passed way, she picked up a book and a bag that belonged to him and went to meet Jawaharlal Nehru in Delhi.She handed them to Nehru, telling him that her father had instructed her that when he died she should give these items to Nehru and no one else.The bag contained Rs 35 Lakh that belonged to the Congress Party and the book was the party’s book of accounts.Nehru took them and thanked her.Maniben waited expectantly, hoping he would say something more,but he did not, so she got up and left. I asked her what she had expected Nehru to say to her. ‘I thought he might ask me how I would manage now, or atleast ask if there was anything he could do to help me.But he never asked.’ she explained.She was extremely disheartened and in a way the incident reve...
Read more

EQUALISE UG&PG SEATS; SAVE DOCTOR,SAVE PATIENT.

-
The medical field today is facing a challenging time. At one end are millions of patients(mostly from rural areas) who are not getting minimum healthcare.On the other end there are budding doctors,who despite of working hard at the cost of all the fun they might have had at their age,are not happy with their career. The gangotri of all these problems is the healthcare policy and infrastructure we have.In the light of making rural service compulsary,the medical student after passing MBBS enters a dilemma. Whether he should go to village to serve rural people,as a part of the social responsibility he is entitled to by studying UG in govt. funded institution. Or prepare for a PG entrance exams,to get a MD/MS degree,without which his glorious academic track record from schooldays becomes a flop show.Doing both is practically difficult looking at the competition PG entrance exams carries.                 T...
Read more