If Aam Aadmi Party and Congress have their way, Gujarat will be soon on its way down the slippery slope of insolvency

Gujarat, an urbanised, pro-entrepreneurship state with 90 per cent Hindu population has long been the saffron laboratory for the Bharatiya Janata Party’s social re-engineering strategies. In polls due in December, the BJP, which has ruled the state for 27 years and had bagged all its 26 seats in 2019 Lok Sabha elections, is expected to make a comeback and beat the anti-incumbency, which the other two major challengers are banking on.

After the removal of the Vijay Rupani government last year, perceived to be corrupt and inefficient, the BJP has salvaged its image somewhat, though the Morbi disaster which has exposed the deep-seated cronyism and corruption in administration take its toll, but may not be enough to beat PM Narendra Modi’s charisma and the high trust he enjoys among Gujrati voters. Even Muslims seem to be siding with the BJP, whether out of fear one doesn’t know.

The BJP flaunts its Gujrat model as a shining example of growth, progress and prosperity.

Gujrat has pioneered many exemplary initiatives, backed by efficient delivery. Its Kanya Kelavani for girls’ education launched in 2003 has been replicated in many states in India and its ecosystem of innovation, start-ups, and incentives for new industries is an envy of other states. Gujaratis are known for their hard-work and business acumen.

Given the work ethic of Gujaratis, they are more inclined towards social justice being delivered through the market or workplace rather than through government doles.

The AAP is yet to release its manifesto but going by the promises it has made, it has no need for a formal manifesto. They are copying the Punjab model: 300 units of free electricity a month, Rs 3,000 for unemployed youth and Rs 1,000 for every adult woman every month, 80 per cent quota for local youth in private sector jobs, Rs 40 per day for the upkeep of each cow and reverting to old pension scheme.

In response to Modi’s criticism of ‘revdi’ or freebies culture as opposed to development – “those with revdi culture will never build new expressways, new airports, or defence corridors”, Kejriwal told women voters, “Rs 1000 is not revdi. This is your right. People’s money should go to the people, not in the Swiss bank.”

As election approaches, more freebies will surely be promised. In his lust for power, Kejriwal will stop at nothing, even if it means selling the whole state of Gujrat. In 2017 elections, the BJP got 99 of the total 182 seats, with 49 per cent vote share to Congress’s 72 seats, with 41 per cent vote share. The AAP had contested 29 seats, but won none, and lost deposits in most, getting fewer votes than even NOTA.

Congress, which is showing obvious signs of an advanced state of decay and bankruptcy of ideas, could only promise to outdo the AAP in promising freebies. Rahul Gandhi said in a rally that his party will give all the “freebies” offered by the AAP and more. So, its manifesto released a few days back promised implementation of the old pension scheme, 10 lakh government jobs (like the RJD promised in Bihar), free medical treatment of up to Rs 10 lakh, LPG cylinder at Rs 500, 300 units of free electricity, unemployment allowance of Rs 3,000, pension of Rs 2,000 to Divyangs, widows, senior citizens and needy women, waiver of Rs 3 lakh loans, Rs 20,000 scholarship to the needy students, Rs 1,000 crore for upkeep of cow shelters, etc. Many of these promises are borrowed from its Rajasthan model where it wrested power from the BJP in 2018.

Gujarati voters ought to be thrilled, but the opinions polls suggest otherwise. Perhaps the AAP will gain the votes lost by Congress, which has perfected the game of giving doles, learning it from the Congress only. Walking a tightrope in the competitive populism of promising revdis, the BJP has so far maintained it was not in the race of “freebies” and advised voters to be wary of the AAP. “Promises by a visitor (Kejriwal) to Gujarat are like Chinese products. How long they will last is a question mark,” its state president CR Patil said.

The BJP is yet to release its manifesto, for which it is seeking public suggestions through its ‘Agresar Gujarat’ campaign. One hopes the Gujarati voters will give the correct feedback. The AAP’s reckless magnanimity has already sent the state of Punjab on ventilator and it is well advanced on its way to coma from which it will be unlikely to return anytime soon. It can safely be predicted that the state of Punjab government will implode from the financial pressures that are fast building up, with deadly social consequences.

Punjab’s committed expenditure on pension, salary and interest in FY21 was 67 per cent of its revenue expenditure (RE), with subsidy bill of Rs 9,758 crore adding an additional 17 per cent, leaving very little for anything else. In the current fiscal, its total power subsidy bill would be Rs 25000 crore, of which the freebie of 300 units of power from July 2022 alone will cost Rs 16,000 crore. The government has borrowed Rs 8,000 crore in two months just to pay interest on old loans, and its debt ratio at 54 per cent of its GSDP is the highest in India.

With a per capita debt of Rs 1 lakh, it is in the throes of a vicious debt trap when borrowing is made just to repay the past loans and interests. Still, in its first two months in power, it has spent Rs 37 crore on advertisements. It is the worst managed economy in India today.

In contrast, Gujrat is in a much better position, through in FY21, the growth rate of its gross state domestic product (GSDP) had plummetted to only 0.57 per cent from 9.75 per cent a year earlier, a fallout from the pandemic. Inadequacies in its public healthcare delivery were severely exposed during the pandemic, something that the AAP hopes to gain from electorally. Since 2011-12, Gujrat has continuous surpluses in its revenue account, but in FY21, the revenue account had a huge deficit of Rs 22,548 crore. However, it still contained its fiscal deficit at 2.44 per cent, well within the limit of three per cent prescribed by the Gujarat Fiscal Responsibility Act (GFRA), 2005. It could also manage its debt ratio at 18 per cent of its GSDP, well within the GFRA limit of 27 per cent.

During FY21, Gujrat generated 63 per cent of its total revenues from its own resources, compared to Punjab’s 50 per cent. But Gujrat’s own revenues have been stagnating in real terms even before the pandemic, while its borrowing has been growing at 22 per cent and outstanding liabilities at 10 per cent at a compound average annual rate. If AAP and Congress have their way, Gujarat will be soon on its way down the slippery slope of certain insolvency.

(The author, former Director General at the Office of the Comptroller & Auditor General of India, is Professor at the Arun Jaitley National Institute of Financial Management)