03-Oct-2023-Editorial

THE NARRATIVE OF DEVELOPMENT AND POPULISM

Slew of Infrastructure projects in MP

On September 14, the Prime Minister laid the foundation stone of projects worth over ₹50,700 crore in the election-bound State of Madhya Pradesh. This included a petrochemical complex and 10 new industrial projects.

Just a few days later, on September 18, a major Opposition party announced “guarantees” for the people of Telangana ahead of the Assembly elections.

‘Development and populism’ gain wide circulation before elections and these two are pitched as poll promises. The most common narrative is that development is the long-term ideal and populism is dubbed as myopic (narrow minded), with development-retarding effects.

The development Obsession: Is it good?

There are no two arguments on the need to achieve higher and better development outcomes. However, there exists a need to assess its trajectory and inclusivity to understand the implications for welfare and sustainability.

Development through the route of physical infrastructure

An easy route to make development an appealing proposition for voters is to define it narrowly in terms of visible physical infrastructure.

The advantage of such a narrow definition is that it can be easily showcased, and achievements can be quantified. This in turn would give an advantage to the incumbent governments if the scale of physical infrastructure creation is high.

What can the opposition do in such a scenario?

The opposing political parties would then be left with three options:

1. promise an even higher scale of infrastructure creation if voted to power;
2. highlight the unsuitability of the created infrastructure and dub it as failure,
3. and/or address welfare of some section of the population that is left out through economic populism.

Perils of Infrastructure led development

Equating development to visible mega-infrastructure could, over time, become a dangerous obsession for two reasons.

First, the suitability of such projects for the specific geographic location or users is often overstated without realistically assessing long-term environmental consequences and its implications on the livelihoods of present and future generations.

Second, the mechanisms of financing mega-infrastructure are often on the assumption of exaggerated revenue accruals from multiplier effects and flattened costs without any time and cost over-run. The fiscal burden of such financing modes would start surfacing in the medium term, and addressing it imposes additional costs.

Unplanned Development and its cross effects

Himachal Pradesh is an active participant in the race to ‘development’ through the construction of several highway roads connecting various tourist locations, thereby making the mountain regions fragile and unleashing unplanned urbanisation.

Uttarakhand faced a big disaster in 2013. Rather than learning from it, the government went on to ‘rebuild’ the State, which was a rebranding of the State with many highway projects.

The ‘Char Dham Yatra’ is hyped as road connectivity that brings millions of people as religious tourists despite the fact that most places have infrastructure for only a few thousand people.

These are two of the many recent examples of projecting mega-infrastructure as development symbols, resulting in environmental disasters.

Let’s Assess the fiscal burden

The total debt of the NHAI stood at ₹3,42,801 crore as on March, 2023, up from ₹23,797 crore in 2014. The bulk of the debt, i.e., ₹3.27 trillion, was contracted between 2017-18 and 2021-22.

The NHAI’s debt servicing cost will cross ₹50,000 crore in FY28 as the money was raised through bonds in 112 tranches; the last of those will mature in 2050.

These are the perils of the obsession of symbolizing mega- infrastructure as icons of development.

Space for populism

Populism has two dimensions — political and economic. According to Dani Rodrik, noted political economist of Harvard University, “The distinctive trait of populism is that it claims to represent and speak for ‘the people,’.

Political Populism

Since the projects claim to represent ‘the people’ at large, populists dislike limits on the political executive. They see limits on their exercise of power as necessarily undermining the popular will.”

Economic Populism

“Macroeconomic populism is an approach to economics that emphasizes growth and income distribution and deemphasizes the risks of inflation and deficit finance, external constraints and the reaction of economic agents to aggressive non-market policies.”

On conventional models

Conventional models of economic growth assumed that the benefits of growth would percolate through the ‘trickle-down effect’. In this scheme of things, populist re-distributive policies do not find a place.

However, cross-country growth experience shows that the benefits of growth do not trickle down and some sections of the population become ‘outliers’ in the growth process.

Government-led redistribution is needed to reduce the size of such outliers and spread the benefits of growth more evenly. The rationale for economic populism arises in this context.

Conclusion

While economic populism imposes fiscal costs, inappropriate physical infrastructure-led development imposes additional costs, especially environmental costs. These costs might work as a binding constraint on subsequent governments.

Mains Questions

1. Critically assess the path of development led by both Political and Economic Populism? (250 Words) 15 Marks