States may go the Lanka way with too many freebies: Bureaucrats to Modi
States need to balance fiscal health with political compulsions, else it may cause long-term harm, say officials
Several top Central bureaucrats have warned that some states are headed the way of cash-starved Sri Lanka and Greece, if they don’t curb the practice of offering populist measures and freebies.
This counsel was given by top bureaucrats at a meeting, the ninth such meeting since 2014, between Prime Minister Narendra Modi and secretaries of all departments at his camp office at 7, Lok Kalyan Marg, on Saturday (March 2). Sri Lanka is currently experiencing its worst economic crisis in history. The island nation is witnessing lines for fuel, cooking gas and essentials, which are in short supply, and the people are suffering long hours of power cuts for weeks.
During this four-hour long meeting, some of the secretaries expressed their concern over these populist schemes announced during Assembly elections in the states, which were clearly economically unsustainable. They said that states needed to balance the fiscal health of the state and political compulsions. BJP too had promised free LPG connections and free pilgrimages for senior citizens and other such freebies during the elections in UP and Goa.
Officials cautioned that this competition among political outfits will seriously affect the long-term financial health of the Centre and the states.
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According to some of the senior bureaucrats, who have served in the states before moving to the Centre, several states would have gone bust by now if they had not been part of the Union.
The states which were red-flagged were Punjab, Telangana, Delhi, Andhra Pradesh and West Bengal. Several political parties in these states had promised free power to the people putting a lot of pressure on the state exchequer. Doles needed to be provided for in the budget and freebies were taking away funds needed for critical sectors such as health and education.
States also have limited ways to mobilise resources to unable them to dish out sops in a big way. Their only sources of revenue being their share of central taxes and GST, excise on alcohol and VAT on petrol in addition to receipts from property and motor vehicle registration. For this reason, Opposition ruled states have accused the Centre of holding back funds. This allegation has been rejected by finance minister Nirmala Sitharaman, who pointed out arrears going back many years were finally cleared only in this financial year.
In this meeting, the PM asked the officials to use their wealth of experience to come up with an innovative roadmap to fight poverty. And he urged the bureaucrats to think big and focus on improving governance. Â This is the ninth such meeting the PM has held with secretaries of departments since he took over in 2014.
