RBI member urges detailed financing for election promises ahead of 2024 vote

MUMBAI – Ashima Goyal, a member of the Reserve Bank of India’s Monetary Policy Committee (MPC) and a scholar at the Indira Gandhi Institute, has emphasized the importance of political parties clearly outlining their financing plans for election promises. In her recent paper titled ‘Indian Fiscal Policy: A possible escape route,’ published today, Goyal discusses the critical need for such transparency ahead of the national elections in 2024.

Goyal’s paper advocates for the implementation of “pay-as-you-go” (PAYGO) rules to avoid debt-financed populist schemes and criticizes the deteriorating fiscal health of states due to promises like ownerships of IPL teams and other voter incentives, as observed during Karnataka’s May elections. She contrasts this with the Centre’s fiscal prudence, highlighting how state governments often circumvent financial discipline through local alliances and political agreements.

The paper points out that while there have been improvements, such as better performance by power distribution companies, persistent “competitive fiscal populism” continues to undermine the consistent delivery of quality public services—a constitutional promise that remains unfulfilled. The demand for Old Pension Schemes (OPS) by opposition parties further adds to concerns about the financial sustainability of states.

Goyal’s analysis suggests that only with a true commitment to fiscal consolidation can the trend of competitive populism be curbed and equitable services be provided across the nation. The financial community awaits a decision from TV Somanathan’s panel on pension schemes, which is still pending and could have significant implications for state finances.

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