Can The Elite Sleep Peacefully With This? 

Rahul Gandhi is pushing the country off the fiscal cliff with unprecedented populism in an equally unprecedented desperation to come to office or stay relevant at all. For him, it is a personal existential question. So, country does not really matter here.

He is stirring competitive populism everywhere. Gujarat has written off power dues now. There will be more to follow. He is pushing both Congress-ruled states and the Union government to engage in fiscal recklessness.

Just as the National Democratic Alliance (NDA) government’s measures have long-run positives (goods and services tax, Insolvency and Bankruptcy Code and even, arguably, demonetisation) and short-run costs, his populism will hardly have any short-term redeeming features but substantial long-run costs. It is the flip side of NDA’s structural reform efforts.

More importantly, even the fiscal populism is only of second order importance. The first order issue is their effectiveness in addressing the underlying issues and durability of such effectiveness. The absence of both has been established repeatedly. But, the Congress party is not one to bother itself with such evidence.

On Friday, a brief research report from the Chief Economist of the State Bank of India came to me. He offers a simple proposal that might make a big difference both for banks and for farmers:

My friend Dilip Subramanian forwarded me an article written by Shamika Ravi in July 2015 which is worth re-reading now. She wrote about farmers’ suicides and said that analysis of data showed that debt was not a factor but health issues and expenditures were.

In India, fiscal profligacy has always occurred under Congress watch and it has been left to the two NDA governments to repair them. Yet, the rallying cry of elites is that the NDA government is about to slip into the fiscal abyss.

Surely, demonetisation cannot be the worst policy decision since Independence in the face of such repeated criminal fiscal irresponsibility.

Opinion-leaders – collectively – must issue a strong, unequivocal, joint public statement against this journey into fiscal disaster and economic oblivion that the president of the Congress party wants the country to embark on, collectively. Silence on the part of elites will make them partners in crime.

This article first appeared in The Gold Standard and has been published here with permission.