It is time to have a relook at ‘freebie’ culture, says former RBI Governor
The Hindu
Former RBI Governor Duvvuri Subbarao urges Central and State governments to rethink 'freebie' culture impacting economy and finances.
It is time for both Central and State governments to have a rethink on the ‘freebie’ culture, as it is eating into the economy of the country and the States.
This was the opinion expressed by the former Governor of the Reserve Bank of India Duvvuri Subbarao on the freebie culture, in an exclusive interaction with The Hindu in Visakhapatnam on Tuesday.
‘’Not only Andhra Pradesh but almost all the States that have initiated the freebie culture, including the Centre, are struggling to balance between the ‘electoral promises of freebies’ and development. We are not sure whether the freebies are giving any electoral dividends, but they are surely hitting the State finances,’‘ he opines.
“In principle, freebies are being funded from debts, and as per the norms, the debt must repay itself. But if debts are used for current consumption and not asset creation, where will repayment come from?” he wonders.
Quoting former Chairman of the Chinese Communist Party, he says, “Teach a man to fish, rather than giving him a fish every day.’‘ The principle holds good here, as the Centre and the States have a huge burden of paying interest on the debts. Interest payment is the single largest expenditure for the Centre and the States and it is the fastest growing expenditure.
‘’Every political party is in this culture and it is time for the Centre to take a call and bring out a code of conduct and initiate a dialogue as the ‘Mother’ of the federal system,’‘ says Mr. Subbarao.
Talking about the RBI’s monetary policy role, he says, “The monetary policy is primarily divided into three (aspects) — price stability, growth and financial stability in the country. All three hinge on inflation and the range of inflation is 4% plus or minus 2%, that ideally varies between 2 to 6%. If inflation is within range, then the RBI can focus on growth. If it is beyond the range, only then it needs to shift its focus on price stability.’‘
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