With the general elections due next year, there are obvious pressures on the finance minister to provide goodies for the aam aadmi.
There are calls to abandon, or at least postpone by a few years, the fiscal deficit ceilings prescribed by the Fiscal Responsibility and Budget Management Act, so that funds are not a constraint. (If most of us believe that many politicians are corrupt, they reciprocate by believing that the best way to get the vote is by bribing the voter.)
Given the concern about the aam aadmi in the bleeding hearts of our political masters, I have often wondered who exactly this aam aadmi is -- and I remain very confused:
- Is the Delhi housewife, worried about the rising prices of foodgrains and onions part of the aam aadmi? Since political wisdom argues that a government can lose election on onion prices, the housewife's reaction is clearly very important.
Even while the average middle-class incomes have gone up several times over the last 15 years, should the urban middle class be considered aam aadmi and, therefore, eligible for subsidised foodgrains and vegetables?
- The farmer obviously is included in aam aadmi, and hence the successive increases in support prices for foodgrains. Cynics may see some contradiction in wanting higher prices for the farmer and lower ones for the consumer; but they obviously are not familiar with the beauty and creativity of the single entry bookkeeping which the government follows.
If subsidies are directly given from fiscal resources, they are part of the deficit; on the other hand, when they are routed through, say, the Food Corporation of India, and the FCI given "special" government bonds by way of compensation, these are not counted as part of the fiscal deficit.
Very interestingly, they are income of FCI, but nobody's expenditure -- and people blame our bureaucracy for not being imaginative!
- If inflation is a worry in terms of re-election prospects, tight money and higher interest rates are obviously the solution -- such measures may do nothing to bring down onion prices, but obviously one has to be seen to be doing something.
But then this hurts the middle-class house buyer because the cost of home loans goes up. Since these home-buyers are aam aadmi, their EMIs need to be brought down. The solution is creative -- ask banks in the public sector to bring down interest rates on home loans, even as the RBI maintains an unchanged monetary stance.
- Users of cars are obviously in the aam aadmi category -- that is why they get subsidised petrol at a price nowhere reflecting the global prices (even after the recent hike).
- The users of LPG, most of them from the urban middle class, also need subsidised cooking gas. It is a minor, and easily forgotten, inconvenience that we had promised investors in the LPG distribution a decade back that subsidies on LPG would be removed.
But outmoded concepts like honouring the promises made, can obviously not be allowed to come in the way of our desire to make the life of the aam aadmi easier.
- For the rural poor who are obviously part of the aam aadmi category, we have the NREGA -- that the scheme is suffering from extremely poor implementation in no way takes away the genuineness of the concern of our political masters for the rural poor. In fact, their concern does not end with the poor; the major beneficiaries of free water and power are the richer farmers.
- Our political masters are highly sceptical about any data suggesting a drop in the number of people living below the poverty line -- and rightly so. How can poverty come down when we, its lovers and guardians, the "careerists of poverty," as Sagarika Ghose described them, are in power?
- There is, of course, a case for increasing the caste- and community-based reservations and extending them to the private sector; that should really give us some mileage with the aam aadmi.
More seriously,
- Successive governments have created the impression that the government can solve all problems. This is, of course, false -- but then plain speaking is no way to get re-elected.
- One also wonders to what extent our political masters are really in touch with the aam aadmi, with platoons of armed bodyguards and fleets of cars following their every move, with sycophants and hangers on surrounding them, with the system making every effort to ensure that they do not get polluted, by actually mixing with the common man.
In a recent NBER research paper, Carmen M Reinhart and Kenneth S Rogoff argue that financial crises "share striking similarities, in the run-up of asset prices, in debt accumulation, in growth patterns, and in current account deficits" [In a BIS paper (no 243) Maria Socorro Gochoco-Bautista makes the same point]. All these are disturbingly present in India -- to be sure, equity prices have become a little more reasonable.