News Update

New Bharat needs Electoral-cum-Fiscal Reforms

DECEMBER 07, 2023

By TIOL Edit Team

WITH the Euphoria or dismay over the results of five States subsiding, time is ripe to pave the way for electoral-cum-fiscal reforms.

The reforms should envisage legislation for prudent debt ceilings for both the Centre and the States. The ceilings would serve as built-in check against uncontrolled political gush to shower freebies on voters.

The reforms should also include introduction of simultaneous polls for Lok Sabha, State Assemblies and local governance bodies. This initiative would squeeze frequent political competition over doling out freebies into once-in-years freebies war. (Turn a delayed electoral initiative into a big-bang reform AUGUST 03, 2016)

Thus electoral-cum-fiscal reforms, when integrated, can serve as credible rein for freebies horses that go wild in each and every election. Political class rationalizes dole-outs as the quest to fulfil the Constitution's social welfare-focused Directive Principles.

Freebies thus can't be banned. They can, however, be regulated by 1) enacting debt ceiling laws as envisaged by the Constitution 3) Revised fiscal responsibility laws and 3) by restricting holding of elections to an event held once in five years. (Time for a Constitutional call on institutionalized corruption MARCH 29, 2011)

We thus urge all governments, political parties and the Supreme Court to shift gears from narrower freebies turf to enlarged perspective of multi-facet reforms.

The new opportunity for the change-over is available in the Union Cabinet's approval of the terms of reference (ToR) for 16th Finance Commission on 29th November.

Couple this with the fact that the Government had constituted in September 2023 a committee under the chairmanship of Former President of India, Ram Nath Kovind. Its key mandate is to study and suggest roadmap for holding simultaneous elections to Lok Sabha, State legislatures, municipalities and panchayats.

As put by the Government notification constituting this panel, "elections are held almost every year and within a year too at different times, which result in massive expenditure by the Government and other stakeholders, diversion of security forces and other electoral officers engaged in such elections from their primary duties for significantly prolonged periods, disruption in developmental work on account of prolonged application of Model Code of Conduct, etc."

The Supreme Court has already been hearing a bunch of Public Interest Litigation (PIL) petitions against freebies promised by political parties to woo voters.

The hearings generated few good suggestions. One proposal was to form a committee of experts on freebies under the aegis of apex court. Another idea that emerged was to strive for political consensus on electoral freebies. Yet another idea was to enact a law to control freebies.

The recent polls witnessed bitter freebies war between the BJP and other political parties. It opened a new chapter in open-budgeting of freebies with the Union Cabinet approving on 29th November extension of free ration for the poor for next five years with an estimated expenditure Rs 11.80 Lakh crore.

The cabinet thus formalized Mr. Modi's announcement of this bonanza for 81.35 crore persons on 4th November at an election rally at Durg in Chhattisgarh. It is here pertinent to recall the fact that Mr. Modi had last year mocked & disapproved forcefully freebies as rewris/revaris, a popular Indian candy.

(Decode Freebies Maze to free Growth Genie DECEMBER 03, 2022)

The free-ration decision is unprecedented in the one-track, open-budgeting under which political parties or governments offer revari to voters. Such declarations are one-track as they deal only with the expenditure with assumption that money grows on trees or can be borrowed without any limit.

They don't specify how the expenditure on new or expended freebies would be financed. At present, all expenditure on freebies can be deemed as debt-financed as both the Centre and States borrow to repay past loans and fund new expenditure every year. Modi Government took foreign loans to fund free ration scheme during the Covid-19 pandemic.

The government borrowings have breached the prudential limits - a fact borne by repeated amendments to the rules of Fiscal Responsibility and Budget Management Act (FRBMA). (Replace FRBMA with debt ceiling law as mooted by Dr. Ambedkar June 30, 2016)

The country urgently needs two-way open budgeting of freebies with political parties specifying how they would finance them. Would resources be raised through fresh loans? Would they be financed by cutting capital expenditure on projects such as building roads and dams? Would they be funded through taxation route? The freebies-loving, gullible voters don't seek such information.

The freebies issue has been debated for years without realizing that it can be resolved by invoking Articles 292 & 293 of the Constitution. The former provision provides for legislation to limit the debt that can be raised by the Centre. Similar, latter envisages law by state assemblies to cap borrowings of respective State Governments.

The 15th Finance Commission and FRBM Review Committee, which submitted its report in 2017, both recommended resort to the twin Articles to usher in sustainable debt management in freebies-infected politico-governance system. Modi Government has avoided acting on the recommendation for debt ceiling law for the Central Government as it can serve as deterrent to its political passion for freebies. It has not even put in place new FRBM framework as recommended by 15th Finance Commission.

The Government has not specified review of fiscal responsibility framework in the ToR approved for 16th Finance Commission (FC). We urge the Government to include this gazette notification, constituting the FC. This situation puts the ball for statutory debt capping in the Supreme Court.

It remains to be seen whether the Apex Court would ever ask the Government to justify its reluctance to legislate debt ceiling law. It is anybody's guess whether Supreme Court would feel compelled to issue writ of mandamus to the Centre and the States under Article 292 & 293, in its judgment on freebies.

Put simply, India needs to clip the borrowing wings of the governments to checkmate freebies frenzy, improve the quality of welfare schemes and to reboot the economy's growth momentum.


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