Simultaneous Polls: Rahul-Chidambaram Kind Of Fiscal Irresponsibility Is The Strongest Argument In Its Favour

The best case for holding simultaneous elections to the Lok Sabha and state assemblies – even if it is twice in five years based on two-and-a-half year cycles – has been made by irresponsible politicians like Rahul Gandhi. That the Congress and most opposition parties oppose the idea of simultaneous elections is the ultimate irony, for it is their financial irresponsibility that provides the strongest argument in its favour.

Take the case of Rahul Gandhi’s recent announcement at Mandsaur, scene of last year’s farmer protests, that if his party comes to power in Madhya Pradesh, it will write off loans within 10 days.

It does not matter whether the Congress comes to power or not; it does not matter if the incumbent chief minister holds strong and refuses to indulge in farm populism. What matters is the announcement by a major party that it will write off loans, which automatically signals to farmers that they can stop repaying loans even if they can afford to do so. As loans go into default, a waiver becomes inevitable.

When political parties get desperate, they get irresponsible. Horribly irresponsible. The Shiv Sena in Maharashtra, desperate to regain political space ceded to the Bharatiya Janata Party (BJP), effectively forced the Chief Minister’s hand on farm loan waivers last year. And this when the Sena has practically no base among farmers in the state.

While these kinds of fiscally ruinous pre-election promises are now common among all political parties, including the BJP, which made them in Uttar Pradesh and Karnataka, what is unusual about the Congress’s own desperation is that it is piling on the pressure that will ultimately bring about the fiscal destruction of the Indian economy.

The loud demands for farm loan waivers and higher minimum support prices (MSPs) are being accompanied by even louder demands for cutting fuel prices, with former finance minister P Chidambaram claiming that petrol prices can be cut by Rs 25 a litre. Unlike pure politicians like Rahul Gandhi, Chidambaram knows the fiscal damage this can cause, for a Re 1 cut in excise on petrol and diesel can reduce Central revenues by Rs 13,000-14,000 crore, and a Rs 25 cut in excise on petrol, with a matching cut in diesel, can set back revenues by over Rs 3 lakh crore. Even assuming diesel excise is cut by lesser amounts, the fiscal depletion will be between Rs 1-2 lakh crore annually. It is also not sensible to cut only petrol prices, for the price differential will again shift demand towards diesel vehicles, and higher diesel usage in all spheres, including captive power generating sets. The demand to cut petrol prices is thus Irresponsibility Squared, and that too by a former finance minister who knows the cost of petro-populism.

To add to this building fiscal pressure, we have Rahul Gandhi claiming even more irresponsibly that big business is being favoured in the matter of loan waivers, when that is manifestly not the case. In no decade in the past have so many capitalists been forced to let go of their big businesses due to loan defaults – whether it is the Ruias, GMR, GVK, Jaiprakash, Bhushan, or even the Tatas and Ambanis – than in the last few years. And yet, this nonsense that poor farmers are not being given loan waivers while rich businessmen are, is now the dominant narrative.

Then we have the Congress targeting the BJP for the anti-Sterlite protests in Thoothukudi (Tuticorin), which cost 13 lives when the protests turned violent, forcing the state government to announce the closure of the plant permanently. While the courts may yet reverse this decision of the state, the economic damage is enormous. The Sterlite plant meets more than a third of India’s copper demand, and shutting it down will set back India’s electrification programme and force us to import costlier copper. While no one needs to hold a brief for Sterlite if it is indeed desecrating the environment, the remedy surely is to penalise the company financially and force it to comply with pollution norms, not shut it down. Crippling the country’s copper output is hardly the answer. Rising copper demand is a barometer of growth, and crippling copper demand is a sure way to target growth itself. It shows how the Congress and the opposition parties will rather cripple the economy than behave sensibly in the pursuit of electoral gains.

This kind of competitive and ruinous electoral politics provides a logical argument favouring simultaneous elections. The opposition would like to paint this idea as one that Prime Minister Narendra Modi wants for his own convenience, but the reality is that simultaneous polls are a solution to the economically damaging consequences of competitive politics.

Electoral desperation leads politicians to pursue scorched earth policies, even if it is their own earth that is being scorched. In the run-up to the 2014 elections, when the Congress saw Modi as a real threat to its return to power, it passed a fiscally irresponsible Food Security Act, it divided Andhra Pradesh without thinking through the consequences, it legislated the Land Acquisition Act that made land inordinately expensive for infrastructure projects, and so on. Worse, in his interim budget for 2014-15, Chidambaram fiddled with the fiscal math by not accounting for expenses (especially oil subsidies) incurred in the previous year and pushing them forward to 2014-15 in order to claim fiscal rectitude. His announcement of 4.1 per cent deficit target was largely fiction. But Arun Jaitley walked into this trap and kept the deficit target intact; it is doubtful he would have been able to keep his word if oil prices had not started sliding in the second half of the year. Luck helped him avoid Chidambaram’s booby-traps. This is what gives Chidambaram heartburn today.

In the run-up to the Karnataka assembly elections, a desperate Congress announced that one per cent of India’s population (the Lingayats) are non-Hindu. That it did not reap any reward from this is clear from the sharp drop in its seat count, but the damage to the Lingayat community is done. The wound will fester and trouble all future governments.

To repeat: any kind of governance needs the law to ensure that electoral irresponsibility is minimised by holding simultaneous elections to Parliament and assemblies, if need be, by holding one lot of assembly elections along with Lok Sabha elections, and another after two-and-a-half years.

The argument that holding elections as per the normal schedule is part of the price we pay for democracy is weak, for bad fiscal practices actually weaken democracy more. It makes political parties act irresponsibly, the price for which is ultimately paid by the citizen.

The current round of farm loan waivers, which began in 2014-15 with Andhra Pradesh and Telangana, and then spread to Tamil Nadu, Uttar Pradesh, Punjab and Maharashtra, and now continues to spread to Karnataka and Rajasthan, will probably be followed by Madhya Pradesh and/or Chhattisgarh by the end of the year.

These waivers would not only have damaged repayment cultures across India but also set back gross domestic product (GDP) growth by probably half a per cent as states now don’t have the fiscal space to invest in important infrastructure, including agriculture infrastructure. Effectively, we are helping farmers today by destroying their future.

Does any kind of democratic norm justify this? Rahul Gandhi’s irresponsibility, not to speak of competitive irresponsibility by BJP and other state governments, is exactly the reason why we need simultaneous elections.