HYDERABAD: Former Governor of Reserve Bank on India (RBI) Duvvuri Subbarao on Thursday suggested that the Union government formulate and adopt a code of conduct on freebies.
Considering the prevailing fiscal challenges and the more productive alternatives that the same money can be used on, Subbarao said that the Centre must launch wide-ranging consultations with all the states and other stakeholders to reach a workable formula for restraining political parties from announcing freebies. He was delivering the third BPR Vithal Memorial Lecture on “India’s Fiscal Federalism — Quo Vadis?” at the Centre for Economic and Social Studies (CESS) in Hyderabad.
Stating the freebies are not evaluated with “a big picture” in mind, he said: “If one chief minister decides that I am going to give free bus ride to women, (one has to ask) have you done a study? Is the free bus ride the best way to support women? Where is the evidence? Probably... it is the best way because politicians have a sense of ground-level realities. But we need some evidence to prove that this is the best (option).”
“In a poor country where millions struggle to make a decent living, transfer of payments to the most vulnerable groups are necessary, indeed even mandatory. But competitive populism, like what is unfolding of late, is fiscally perilous, possibly even inimical to our long-term growth and welfare,” he added.
Recalling that the PM decried the “revdi culture” but disappointingly, he had “not followed on that”, Subbarao said: “Two months after the PM’s statement, in the UP polls, BJP went on giving freebies. Today, they are competing head to head, toe to toe with AAP on freebies in Delhi.”
‘Increasing population won’t solve problems’
Meanwhile, he said that southern states pushing for more population is not a good idea to address disparities in central funds distribution. He said: “Evidently, the subtext of the message is that some states which have done well in population control are losing out on central transfers. But I don’t believe that increasing the population is not a solution, because India is one country. We still have a population problem at the aggregate level.”
Meanwhile, in his opening remarks, Special Chief Secretary of Finance department K Ramakrishna Rao said that the contributions by the southern states to the national exchequer are much higher than the returns they get from the Centre.
“Telangana’s per capita income in 2014 was Rs 1.24 lakh. It has now increased to Rs 3.56 lakh. It increased three times in 10 years. This has adversely impacted the devolution to the state. Because the per capita is the major criteria for devolution of funds. This is a major concern,” he added.