Time for economic rethink

Nirmal Sandhu

It is budget time and also the time to question old certainties and make an honest effort to retrieve Punjab’s sinking economy. One year is enough for making political noises about past blunders. Now is the time to correct them. The state can do without another business-as-usual budget. 

The Punjab leadership keeps knocking at the door of the Centre for help. The easiest thing to do is to fling all the blame towards the Centre. Parkash Singh Badal has been doing that for years and politically profiting from “Central discrimination” before inviting a humiliating defeat by tying the state to an unreasonable Rs 31,000-crore loan on the Centre’s terms. 

A Central bailout is unlikely because of Punjab’s limited relevance in the political calculations of Narendra Modi and Amit Shah. During his recent Chandigarh visit, Niti Aayog’s Dr Rajiv Kumar reiterated Delhi’s message — clearly, bluntly and publicly: stop asking for funds. “You can leave the country’s food security to us”. There is a message in the snub.  

Every budget presents the leadership a choice: use the taxpayers’ money to bribe voters in the hope of a favourable verdict in the next election or take hard, unpleasant decisions for long-term gain. Both Badal and Capt Amarinder Singh have so far chosen the path that suits them more than the state. They seem to be in politics to leverage power, not to unsettle a beneficial arrangement. 

The result is they have continued with absurdities experts disapprove of. Free power is the single big blunder that has (1) hurt Punjab’s agriculture, (2) depleted Punjab’s water resources by encouraging paddy cultivation, (3) added to farmers’ production cost by forcing installation of submersible pumps, (4) drove the state to rely on private power companies which dictated own terms, (5) curtailed industrial activity during the paddy season and (6) consumed resources that could have been used to modernise power plants and enhance generation capacity, and thus save jobs lost in shutting down unviable plants. Abandoning the age-old wisdom — teach fishing to a man instead of giving him a fish — they have made Punjabis freebies dependent.

The damage caused by state neglect, diversion of resources to meet demands of vote politics and patronage of the private sector is not limited to power. It extends to public transport, education, health and highways with consequences of public sector jobs shrinking or disappearing and costs rising for all. Waiting for a waiver, farmers have stopped repaying loans. The Congress can take credit for adding cooperative societies and banks to the list of institutions turned dysfunctional by politics of appeasement.

Every economic pundit has said a loan waiver is no solution to farmer distress. Yet this government, which has raised a battalion of advisers, has ignored this sane advice. There is no effort to look beyond the set framework. In recent years, Punjab has not thrown up a single big idea to solve any of its serious problems. Haryana is promoting sports and offering secured price for vegetable growers. Himachal Pradesh is known for its single-minded devotion to human development. Madhya Pradesh gives deficiency payments to farmers selling produce below the MSP. Telangana pays a flat subsidy of Rs 4,000 per acre every sowing season. 

There is little hope the coming budget will be any different. We have policy-makers who tend to shut the door when an opportunity arrives. The Chief Minister can go to Mumbai to woo private investment, but when Canada’s Prime Minister, with all the goodwill for Punjabis arrived, he had no economic agenda to talk of. Instead, he produced a list of nine wanted men and revived a dead issue called Khalistan. He could not get over the slight Canada dealt him by denying a visa.  

North India in general and Punjab in particular can benefit from increased trade with Pakistan and countries beyond, but none of the Punjab leaders have cared to counter war-mongering by BJP foot soldiers. Trade is the best answer to terror and that requires greater opening up to Pakistan. But the Captain seems busy figuring out how on earth he tied himself in knots with those outrageous election-time promises on the advice of a clever poll strategist.

“Politics is about promising, disappointing and managing disappointment,” says Prof Stephen Holmes of New York University. Holmes may not have heard of Capt Amarinder Singh but what he says sums up the Punjab CM’s practice of democracy. The Captain has spent one year reminding people how big a mess the Badals have left behind. 

The Chief Minister’s sense of surprise at the state’s Rs 2.08 lakh crore debt seems manufactured since all state debt figures, including Uday bonds, state guarantees and loans of public sector enterprises, have been in the public domain. 

In a TOI interview (February 27) he said: “The growth rate of the state in 2006-07 (when he was the CM) was 10.18%, which was higher than the all India average of 9.57%. By 2016-17, it had fallen to 4.20% of all India average of 7.5 per cent”. 

The Hindu report “No fresh taxes in Punjab Budget” (March 8, 2006) mentions Punjab’s likely growth rate at 5.5 per cent — almost half of what the Captain claims. This reminds one of what American politician-diplomat Daniel Patrick Moynihan has said: “Everyone is entitled to his own opinion but not to his own facts”.

Cost-cutting has started in Punjab but at the wrong end: closure of rural schools, bare minimum fixed salary for teachers, winding up of “suvidha kendra” and shutting down of power plants. Taxes, power tariffs and bus fares have gone up. There has been little sacrifice at the top. Hoping for a cut in wasteful government expenditure is like expecting a royal to live like Gandhi.

Capt Amarinder Singh says he will retire once Punjab’s finances are put in order. That means no getting away from the lure of power. Why would he make himself politically redundant by seriously working for fiscal improvement? He praises Badal for memorials while his Finance Minister points to the absurdity of spending Rs 2,000 crore on memorials and denying Rs 20 crore to Panjab University.

The budget offers a chance to the ruling political operatives to change the perception of being anti-change. It is time to go back to the basics: water, air, soil, education and health. The declining quality of water, air and soil has enormous ramifications for human health and family budgets. Substandard education has made youth unemployable. The budget can fund a credible rescue plan for each of these areas. It is time to move from extravagance to productive use of resources.

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