Leo Tolstoy begins his novel Anna Karenina with the words, “Happy families are all alike; every unhappy family is unhappy in its own way.” But unlike unhappiness, when it comes to financial ruin – of an individual, family or government – they all seem to get there following the same path.
It starts with the destruction of their ability to earn presently. While the prudent ones reduce their expenditure to tide over the difficulty, the imprudent resort to immoral ways to shore up their income. When their efforts at either frugality or immorality fail, they borrow – burdening their future and, in the worst case, their future generations. When they can no longer borrow, they resort to the final step – selling their assets, leaving themselves and their heirs nothing to depend on when financial difficulties arise later.
In the Indian context, the sale of inherited property – land or jewellery to make ends meet announces ultimate financial ruin.
Telangana, in 2014, the year of its formation, had copious public assets, robust current income evidenced in a revenue surplus budget, and minimal encumbrances on its future, represented by a low debt of around 75,000 crores. It boasted of Hyderabad, a robust economic powerhouse and considerable revenue generator for the state.
When the Chief Minister and his relatives in the council of ministers proclaimed Telangana a “rich state,” no one had reason t doubt them and considered it self-evident.
While misfortune, sudden shocks from events out of control, lack of application, greed or foolishness can temporarily affect one’s financial situation, it takes incompetence of a monumental scale coupled with bullheadedness to drift into financial ruin over many years.
Nine years into the Bharat Rashtra Samithi (BRS) rule, the decline of the state’s financial health, year after year, leading to its total financial ruin – placing it on the precipice of bankruptcy, is obvious even to an ordinary observer. It all started with the inception of projects with highly inflated costs to create opportunities for wholesale corruption to satiate the greed for riches of those in power. Combined with an insatiable thirst for retaining power, reducing expenditure in other areas could never be a consideration.
With simple living within means ruled out, the BRS government resorted to immoral methods to shore up revenues. With no regard for people’s health, it went into overdrive to shore up tax revenues from the sale of liquor. State liquor sales quadrupled from around 10,000 crores in 2014 to about 40,000 annually today. With the state’s monopoly over liquor distribution and extremely high excise duties reaching 240% on some liquor categories, increasing liquor sales became a mission for the rulers. Illegal Belt Shops became a common feature in every nook and corner of the state, taking the Rule of Law as collateral damage. The state tops the country in inflation – an indirect and immoral regressive tax on the poor – because it imposes the highest VAT (Value Added Tax) on petrol and diesel.
With high tax rates alone not sufficing, the state government concurrently resorted to raising loans. The state’s annual budgetary borrowings have risen since its formation, with this year’s budget pegging net borrowings at 46,318 crores.
The government would have resorted to even higher borrowings without the FRBM rules (Fiscal Responsibility and Budget Management Act), which limits states’ borrowings to a percentage of its GDP. Even on the borrowings front, the government, true to its nature, resorted to immorality. It exploited an FRBM loophole until the Reserve Bank plugged it to raise off-the-books loans through Corporations created specifically for raising loans. Adding the dues it owes to PSUs in the state, the government’s total debt multiplied over seven times in the past nine to cross five lakh crores.
The story of Telangana’s government finances continues beyond liquor and loans. Even after quadrupling liquor revenues and raising unprecedented amounts of loans, the state still cannot pay its employees’ salaries on time. Forget fulfilling its grand promises for coming into power twice; the government coffers lack money to pay for even kids’ mid-day meals.
With elections approaching fast and coming clean with the people against its character, the BRS government kickstarted the final step to total financial ruin. While claiming the government had no land to give landless Dalits for agriculture or build two-bedroom houses for the poor, it started auctioning lands – ancestral property it inherited, earning thousands of crores in the ongoing process.
It’s not that the BRS party and its leaders do not understand the perfidy they are committing. The CM’s son and current IT Minister, Taraka Ramarao, had protested similar sales by the previous government and condemned the government for becoming a “real estate business”. The financial ruin of the state is an outcome of the monumental inefficiency of our rulers, matched only by their deception wrapped in arrogance.
(The author is BJP TS spokesperson)