Mountain of debt owing to sops, Mamata's bugbear

Mountain of debt owing to sops, Mamata's bugbear

Dateline

Where Amma gives away laptops and scooters, Didi offers bicycles and shoes. Both examples of sops-driven populist politics, Didi’s (West Bengal Chief Minister Mamata Banerjee) pain seems to have just started, unlike that of Amma (Tamil Nadu CM J Jayalalithaa).

And the pain can be traced back to the dismal financial condition of West Bengal, an issue Mamata, also Trinamool Congress chairperson and Didi to her supporters – and even some detractors – has never stopped harping on.

Unlike Amma, Didi was never a matinee idol or known for an ostentatious lifestyle. Despite coming from opposite ends of the spectrum, both women followed a similar brand of politics. Unlike Jayalalithaa, however, Mamata never had the means to run her drive of populism. With Bengal facing a severe financial crunch, Mamata could be facing something Jayalalithaa is not likely to ever face: bankruptcy.

Two months into her second term, which Mamata entered like an unstoppable force, her government seems to have met with an immovable object. Trinamool, the ruling party in Bengal that returned with an unbelievable mandate, is often blamed of
ideological bankruptcy. For Mamata, the term could come with a new meaning since Bengal is among the most cash-starved states in India.

Mamata has never minced words to state that the biggest challenge before her is not holding on to power but insolvency, notwithstanding the politics of largesse she has turned into her trademark since coming to power in 2011. In the last six years that she has been in office, Mamata has given away millions of cycles to hapless girl students, shoes to others who cannot afford a pair and lakhs of rupees to neighbourhood clubs so they can pursue ‘sporting activities.’

Even as her politics of largesse continues unabated, the wrinkles on the forehead of state Finance Minister Amit Mitra seems to have set deeper. The matter on top of Mitra’s head has to be Bengal’s outstanding debt of Rs 3 lakh crore, a nightmare he had to combat while presenting the state budget in June. While Mitra admitted in the Assembly that the state was facing a “debt trap,” Mamata went a step further and described it as a “death trap.”

Party insiders have admitted that the mountain of debt on Bengal could go some distance to change Trinamool’s political priorities. Political analysts have noted with some caution that Mamata’s politics of largesse to the bottom of the pyramid, funnelling crores of rupees into social and civic infrastructure – free bicycles and shoes, rice at Rs 2 per kg, metalled roads through villages – might have reaped her rich political dividends but have left the exchequer further crippled.  And despite the landslide majority, money remains her top concern.

Mitra has often pointed out that during its first term in office, the Trinamool government raised plan expenditure from Rs 14,000 crore to Rs 53,000 crore. That, however, was not enough to keep the debt burden at bay, which is fast devouring the state’s resources. Going by cold statistics, in 2015-16, the Bengal government paid almost Rs 28,000 crore to its debtors, with the accumulated interest during the ongoing fiscal year likely to stand at upwards of Rs 32,000 crore.

Mitra also admitted that even though the state’s debt stock increased by more than Rs 1 lakh crore till March 2016, around Rs 94,000 crore would go just to service existing debt. While Mamata and the Trinamool leadership are not oblivious to this scenario, with the panchayat elections scheduled for 2018, the ruling party cannot afford to deviate from its path of creating human capital, based on sops. Leaders are aware that this means spending more on social and civic infrastructure, funds for which are fast drying up.

Overtakes Left

Officials have often admitted in off-the-record conversations that even though Mamata counts the debt burden as the only legacy of the 34-year-long Left rule, her government has borrowed more money in the last six years than the Left did between 1977 and 2011. Bengal’s latest market borrowing came in February, when the state borrowed up a loan of Rs 2,500 crore. With this fresh loan, Bengal’s total open market borrowing reaches Rs 1,03,546 crore.

Statistics from the RBI reveal that the quantum of open market borrowing, which attracts the highest interest rate, has far exceeded the figure during 34 years of Left rule, which between 1977 and 2011 was little over Rs 72,000 crore. In contrast, Mamata’s government has borrowed Rs 1,01,046 crore in its first five years, between May 2011 and February 2016. The open secret is that her government has done little to lessen the burden during her first term, with debt repayment amount set to reach Rs 18,359 crore by 2017-2018.

Analysts say that Mamata will have to find ways to keep Central funds flowing in from Prime Minister Narendra Modi, whom she considers her ideological rival, largely owing to her vote bank politics of keeping Muslims in good humour. It is common knowledge that nearly 80% of the state’s tax revenue was consumed by debt repayments in 2015-16, and even in this fiscal, the situation is no better.

Although Trinamool has been able to convince voters about the government’s development efforts, Mamata is aware how much the debt burden is bothering the administration and the ruling party.

The Opposition parties have often alleged that high market borrowings are essentially used to service sops Mamata has been giving away. She, however, has always argued that borrowings are used to repay debt left behind by the earlier regime.

What is waiting to be seen is whether she can generate enough resources to support her politics, along with necessary administrative expenditure, or if she crumbles under the mountain of debt and is forced to change her political path.

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