When Tamil Nadu Chief Minister J. Jayalalithaa promised free laptops to students if voted to power two years ago, she probably didn't realise she was sparking a political trend in the country. The Samajwadi Party's Akhilesh Yadav rode to victory in Uttar Pradesh on the same plank last year and now the Congress party has come to power in Karnataka on the back of the same populist promise.
But free laptops/digital notepads are not the only freebies Karnataka's new chief minister, Siddaramaiah, is offering. The mass leader kickstarted his term on a populist note by announcing giveaways worth Rs 4,410 crore, mostly targeted at marginalised groups who account for almost a fourth of Karnataka's 60 million people. The government has also doubled the subsidy it doles out to the state's 23 lakh cooperative dairy farmers, waived loans to deprived sections and announced a monthly 30 kg rice quota for the poor at Rs 1 per kg. The milk subsidy bill will be Rs 496 crore a year while the rice scheme will mean an additional burden of about Rs 500 crore.
The killer promise in the manifesto is free round-the-clock electricity supply to the farm sector. The state already provides six hours of free power to farmers, which is estimated to cost the exchequer about Rs 5,500 crore this financial year. The subsidy burden will jump threefold if the government sticks with its election promise. But the chief minister is undaunted. "We drafted the election manifesto only after assessing the availability of resources in the government," Siddaramaiah told Business Today in an interview. "We will begin with some programmes in the first year, and stagger the rest over the reminder of the term. We will implement all our promises in four years."
But the freebies are probably a worthwhile investment for the Congress ahead of the general election. The party has been battered by allegations of corruption while the economy is in the throes of a slowdown. It needs all the support it can get from rural voters if it wants to come back to power in New Delhi, especially with the opposition baying for its blood over the so-called Coalgate and Railgate scandals. They involve the allotment of coal mining blocks and bribery allegations over a railways post.
I've requested the CM to form a Vision Group under Narayana Murthy. We can bring a lot of expertise to solving the problems
The Congress win in Karnataka has certainly boosted the party's morale but is not necessarily a ringing endorsement of its politics. It is actually a vote against the Bharatiya Janata Party
(BJP) whose image was dented by allegations of corruption during its five years in power. Its reputation was hit by a massive illegal mining scandal that triggered a ban on iron ore mining.
Voters were fed up after the party landed in one scandal after the other and, changed two chief ministers in five years: B.S. Yeddyurappa was forced to quit after the Lokayukta accused him of corruption in its report on illegal mining in Bellary. Yeddyurappa denied the allegations. Anti-BJP sentiment was also high because the party was seen to be busy fixing its own affairs instead of paying attention to governance.
The toughest challenge will be balancing the populist schemes without hurting the state's finances. Karnataka does not have a revenue deficit and its fiscal deficit is under control, but the state's economy is not in great shape. In 2011/12, its economic growth is estimated to have lagged the country's GDP growth by close to one percentage point. "I left behind robust finances. But the BJP regime destroyed it," he told Business Today. "Now I have to restore financial discipline. The debt burden has gone up, because resources have not been mobilised properly."
Siddaramaiah is no novice. The 64-year-old former deputy chief minister has presented Karnataka's Budget seven times, and is credited with successfully implementing the value-added tax (VAT) in Karnataka ahead of many other states.
"Karnataka has not got even those investments it should have got in the normal course. This is because of instability and corruption in the BJP government," the chief minister said. "The government did not treat investors properly, forcing them to look elsewhere for opportunities. Now I am going to talk to large companies and persuade them to invest here."
Karnataka's industrialists are optimistic. Toyota Kirloskar Motor Vice Chairman Shekar Viswanathan does not support loan-waivers, but backs populist programmes as long as they reach targeted sections. "We may see some increase in taxes, which is only to be expected. Having seen him in the past, I am sure Siddaramaiah will display great maturity in handling finances," he says. Biocon Ltd Managing Director Kiran Mazumdar-Shaw has urged the chief minister to appoint a minister exclusively for Bangalore where, according to her, infrastructure development suffered under the BJP. "We have to now get into execution mode," she says. "I have requested the chief minister to form a Vision Group under (Infosys co-founder) N.R. Narayana Murthy. We can bring a lot of expertise to solve the problems in Bangalore... Siddaramaiah is a capable administrator. We hope he will bring about a positive change.
'Karnataka has lost a little of its IT momentum'
Karnataka Chief Minister Siddaramaiah
Karnataka's new Chief Minister, Siddaramaiah, discusses his government's priorities with K.R. Balasubramanyam. Edited excerpts:
Q. Where does Karnataka stand as an investor destination?
A. Karnataka hasn't got even the investments it should have in the normal course because of the instability and corruption of the BJP government. I am going to talk to large companies and automobile industries, and persuade them to invest in Karnataka.
Q. How will you handle the mining issue?
A. The subject of mining is before the Supreme Court. Once it is settled there, the government will come up with a comprehensive policy. We will not allow mining for export to other countries, but will supply the ore available first to steel industries within the state, and then to industries outside the state.
Q. What is your approach to the IT sector?
A. Traditionally, Karnataka enjoyed the upper hand in the export of information technology services. However, the state lost a little of its momentum after Andhra Pradesh and Maharashtra picked up. I will step up our efforts.
Q. Your manifesto promises a lot. Where will you find the resources?
A. We drafted the manifesto only after assessing availability of resources. We will implement all our promises in four years.
For the full interview, go to www.businesstoday.in/cm-sid
'Under BJP, focus was on extortion'
Congress spokesman in Karnataka, Rajeev Gowda
The Congress spokesman in Karnataka, Rajeev Gowda, speaks to Sebastian P.T. about the challenges facing the new government. Edited excerpts:
On the investment climate in the state:
Karnataka had a very good investment climate during S.M. Krishna's tenure as chief minister. In the last few years, however, the government has been seen as predatory. The focus was more on extortion with permits not being given on time, inconsistencies in notifications, and so on. There has been no predictable environment (for investors) to operate in. That needs to change.
On agenda Bangalore:
Under the BJP we have ended up as a garbage city from being a garden city. We need to do a few things such as scientific management of waste, and fix the existing systemic incentive problems.
On youth and skill development:
The Congress and other parties have talked about giving free laptops, tablets and the like. These are not just freebies, but can remove the digital divide in Karnataka. However, it is not just about access to the poor. It is about creating a strong educational system that can cater to the job needs of a changing world.
On cleaning the mining mess.
Well, there are mining barons across party lines. If mining can be managed in a legal, environmentally respectful manner, it is a legitimate source of economic growth. We must find a way for that to happen and not allow the pillage that took place.
For a more detailed interview go to www.businesstoday.in/rgowda