Sunday, January 19, 2014

The Subsidy Tamasha

There was once a king. He was known to be very kind, and since he had no dearth of money in his kingdom's coffers, he put up a new policy. For all those who registered themselves as 'Lazy', he opened a free choultry, where the basic needs of Food, Clothing, and Shelter would be taken care of at the King's cost. 
In time, there were too many people who registered for the service, and the capacities were full. The scheme was eating into the kingdom's coffers big time, and the ministers took an SOS to the king one day. They said at this pace, most of the kingdom would call themselves lazy and that the kingdom would run bankrupt in a few months taking care of all those masses. The Chief Minister was a smart man, and he argued with the king that though all those people were enjoying free lunch, not all of them were actually lazy. He pointed out several who left their professions in order to lead a life of laziness; and that caught the king's attention. With the council, he hatched a test to check whether all those people were really lazy.
The next afternoon, after a heavy lunch, while the lazies were all lazing, the King ordered for the Choultry to be set on fire. As soon as shouts of 'Fire!' rang out, most of the people ran away and waited in the fields nearby. Some even ran back to their homes. As the flames got closer, the other stragglers who expected that the fires would be put out also slowly made their way out, and finally only three people were still lying in, preferring death to physical activity!
The king then arranged for soldiers to bodily carry these three people out, and announced that these were the only 'real' lazy people in his kingdom, and made arrangements for them to live on a subsidy. The others were rebuked, and sent back homes to get back on with his lives. And the king learnt a lesson that day.

The Food Security Bill is now almost through, and there's an estimated 81 Crore people who stand to benefit from this bill, being termed as 'Antyodaya'. Probably since I'm among the remaining 30 Crore people, I may I may be seeing this differently, but either way, with my layman economics, I see this breaking the back of our already horrible economy! 
Estimates from last July, when the bill was in talks of being tabled, show that this new subsidy alone could cost the exchequer a whopping ₹1,30,000 Crores!! Here's the Article from Money Control

This article is not just to talk about the Food Security Bill. I've been simmering about the populist measures our politicians have been doling out for decades now - from the Mandal Commission regularizing the infamous reservations policy, to the failed (but masked) PDS, to the sham that is Minimum Guarantee Price for farmers, to the joke that is MNREGA. Yes, there was no social media active when this cascading effect started back then, but why did mainstream media remain silent? Why did the intellectuals allow this house of cards to be built, and built higher each year? Was it because the people who mattered all had a hand in the ever-growing pie? Or did they really think this was going to be beneficial to the country?
The King in our story started out subsidy as a policy because he had an abundance of wealth in his treasury. But in India, we've never had an abundance of anything except for shallow thinking, selfishness, and idiocy! Why did this crime not get nipped at the bud? Or atleast as a flower? Wikipedia has had this article up for long, and the damage is visible as the stats are updated each year. Already, it shows that there's a 3% of GDP for center and 6%+ for states, running into lakhs of crores of rupees! The article says 'leaving the merit subsidies aside, the remaining subsidies amount to 10.7% of GDP'!! And the merit subsidies have a recovery rate of barely 10%, which again is a written-off expense of the remaining 90%!

Now, I'm not an economist. I'm just a common man paying my tax each year, and I don't really enjoy crunching big data. But even with my limited understanding, there is a simple question that pops up constantly - Whose father's money is it??

Will no one bell the cat? Won't anyone dare even speak up about the issue? Ok - if the problem is too big to handle, here's a simple suggestion. Since the political parties are all primarily bothered with their voter base, and they will swap the country's economy for a bunch of votes in a blink of an eyelid, why not get together and talk it out? Yes - if one party suggests reduction in subsidies and a reduction in the doling out of non-worthy grants, the others will tear into it and make the party history! But then, the truth is that even if a party wins on the merit promising an increased subsidy, they can't afford to give a successful budget come March. And the next 5 years are going to be hell to the new parliament! Instead, how about if all parties get together and commit that they won't promise an increase in subsidies. The maths will show that it is not possible anyway. Instead, let them talk about something else! Win on something other than increasing the intake into the free choultry that the government has forced itself into running. Like the jewelry stores, when they all decide that they won't sell at less than 6% or 8% making charge, what option do the people have? They either have to buy at that price, or quit buying gold altogether. With cooking gas and fuel and food, quitting isn't an option really. So have a common agenda of rolling it back over the next 10 or 15 years, and plow those gains back into development. People will be able to afford it themselves once they have confidence and a way to legally earn decent money! And have a really good system of identifying those that are really 'poor' and don't make it a stunt for that one extra vote every five years. This'll do well for the others in the long run, as well as help the incumbent governments funnel better facilities to the people that genuinely deserve them.

The King atleast had a wise council of ministers. We neither have a king, nor a council who can be termed wise. All our wisemen are either dead or pretending to be. Who'll set the fire now?

No comments: