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Populist Economy: Oxymoron of the First Grade!

July 4, 2008

I have been sort of a devil’s advocate among my friends. Vehemently criticizing the loan waiver move by our FM, shaking my head each time people talk about it with a relief!

Apparently, I even managed to shock some people, by telling that last year was the right time to hike oil prices. Yeah, yeah, I know! You are scrolling down to the end looking for the comment box, ready to throw all the brickbats at me! 🙂

But you see, populist measures and subsidies seldom make sensible economics.
Take the case of oil.

Last year it was at $60/barrel rate. Inflation was under control and food crisis didnt make it to global strategic lexicon till then. Life was better and there was one less thing to worry about: Friday’s Inflation Data! Yet, strategists shouted, yelled and then again went back to shouting at the top of their voices, that run! run! oil is gonna shoot!. Run! For your dear lives!

Yet Indian Government stayed right where it was, in the peak of complacency. Energy subsidy stayed where it was and today that buffer is increasingly being nipped away. Surely and steadily!
But yes, weak governance also means strong populist rallies [come on, you have got to appear heroic!].

But unfortunately means, BAD ECONOMICS.

Something like, burdening the common man with oil hike, inflation hike and misery hike. Or maybe, something similar to giving a huge massive writeoff to the farmers.
Per se, I am not against our peasant masses. Heck! I want them to be prosperous and be happy. Thats the only way that India as a country whose 70% of the population lives in rural areas, can progress: PROSPEROUS FARMERS!

But surely, populist measures doesn’t bring prosperous end results.

India has to look forward. Long way ahead. It has to scale the entire horizon at one go and find its bearings in the entire scheme of globalisation. And surely, India can’t afford to ignore economics. Economics may be a bitter pill to swallow but an effective pill nevertheless. Populist Policies may bring the party in power and masses in their drawers but surely it is not the way to go forward.

And in many ways, I am looking for patterns of emerging populist steps as a faint image of the past socialistic society of the 1960s-70s. Perhaps, thats why, communism/socialism failed. It ignored economics.

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