Ever since
the Aam Aadmi Party has formed Government in Delhi, it has given rise to a new
kind of debate. Its policies on free water, Power subsidy have attracted a lot
of criticism. It gives rise to a few questions which I will try to answer with
my limited knowledge.
1.
Do
populist policies always have to be left of center?
2.
Is
there any room for such measures in an economically open country like India?
3.
Is
there a way where a policy can be both populist and economically viable at the
same time?
4.
How
far is the claim of such policies being economically and financially hollow,
true?
Let me start
with last question for that is essentially the question I am set out to answer.
Water,
Healthcare and Education should be equal and affordable to everyone.
Unfortunately, they are not because they are essential for us and hence command
a premium in this world of dwindling resources.
In USA
drinking water is not only affordable, its available 24 hours. In most
countries its either free or subsidized. If Government does not regulate the
market for essential goods, a few large players will control the resources and
command a very high price. In case of Delhi, we already have Water Mafia.
Water mafia
is just one such world, there are land and education mafia too. Unfortunately,
our politicians have a huge stake in all three. If Land, Education and Water
was to be made affordable to all, it would mean a huge loss for some people. In
Chile, government runs a program where everyone can get a home through an
equity program. It keeps the house prices in check. Compare this to our
country, In Mumbai, land/house prices are higher than New York and living
conditions are worse than Bangladesh.
People will
argue that the same policies cannot be in India, with its huge population. I
argue, it makes it even more essential to have such policies. A clean politics
will deliver a cleaner delivery mechanisms and hence a better multiplier
effect. Corruption has created huge sinks where public money gets stuck and no
benefit can be driven out of them. It creates transparency in the system and
cleans out the mafia. With greater effect of every rupee spent, subsidy on
basic goods can be justified.
To the
question if they are economically sound for a moderately free economy like
India, yes they can be. Free Market is not one size fits all. Financial reforms
that aim at freeing up the economy and letting the private players decide the
price maybe what IMF suggests, but it’s not always beneficial when it comes to
basic goods. FDI is welcome and so is the foreign investment in all forms, but keeping
prices of essential goods in control should be the motive of every government.
Left or Right
of center? Anyone who does anything substantial about the poor in this Country
is termed a communist, even Maoist. The political and the intellectuals are
only supposed to talk about it, but god forbid if you get your hands dirty and
actually start doing anything about it, then you are a commie. A populist
measure can also be democratic. People will have you believe otherwise, because
in this Americanised world democracy is often confused with capitalism and
consumerism. In Finland, Government gives a welcome kit worth more than 140 Euros
to every new born baby. Its populist, popular and useful.
I don’t want
to be dragged into the debate of black money, but Corruption scraps off a good
1% from our real GDP growth. If we get rid of corruption not only can be add
that 1%, it will make India a better investment option. It will reduce the red
tape, the cost of greasing palms( its considered the biggest hindrance in doing
business in India) and a better ROI option.
So why not,
popular political parties have us believe that a corruption free politics that
AAP and Arvind Kejriwal promise can be harmful for this country. Its harmful
for them and for some Businessmen they are in bed with, but it’s definitely good
for the country.
