Fiscal discipline is not a virtue in Indian politics, especially at the state level, where realpolitik dictates both social and economic policies. But it seems to be facing fresh headwinds, as is evident in Bihar.
It was payback time for Chief Minister Nitish Kumar last November when he announced alcohol prohibition effective from 1 April this year, a major demand of women who presumably voted for his coalition in large numbers. But the estimated Rs 3,000 crore that the state would have to forego has prompted it to look for other options to compensate this revenue loss, the most unexpected being a tax on samosas and kachoris, popular snack items in most parts of India.
Nitish Kumar's Janata Dal (United) has defended the 13.5% value added tax (VAT) on salted snacks like samosas, kachoris and namkeens costing more than Rs 600 per kg, Mint reported.
"Only Bihar sold items like samosas, kachoris and packaged food without any tax. But we have now decided to impose a tax of 13.5% on these items. We've taken this step to increase revenue," said JD(U) spokesperson Neeraj Kumar.
The decision is a clear pointer to the fact that there is a trade-off between populism and pragmatism.
The decision has attracted sharp criticism, on expected lines, more so because Kumar landed a third term in Bihar only a few months ago, defeating the Bhartiya Janata Party (BJP), which leads the coalition that rules at the Centre under Prime Minister Narendra Modi. A party spokesperson called the decision "insane".
"I think Nitish and Lalu have decided to trouble the poor more. They have not done anything for Bihar; I wonder why they are making the poor people's life tougher here. Imposing tax on items like samosas and kachoris is insane," said Shahnawaz Hussain.
A sociologist is actually anticipating a protest march against the decision. "This is nothing but lack of imagination. I am waiting for a samosa march in Bihar," said Shiv Vishwanathan, a New Delhi-based sociologist and a professor at the Jindal School of Government and Public Policy in Sonipat, Haryana, added the Mint report.
Far away from Bihar, another state has witnessed vehement protests by women demanding prohibition. Tamil Nadu, which goes to polls this summer, is likely to see competitive populism by political parties to lure voters. The state is famous for election-eve freebies.
In 2011, the AIADMK — then the Opposition party which would go on to record a landslide victory — announced 20 kg of free rice for ration-card holders, laptops for students from classes XI, free fans, mixers and grinders to all and mineral water to Below Poverty Line (BPL) families if voted to power.
Its arch-rival, the DMK, had offered to distribute mixies or grinders to women, free laptops to SC/ST students and free rice of 35 kg to BPL families, IBN Live had reported.
The freebies are not free in a way, given that they dent the states' finances, pushing up fiscal deficit.
Tamil Nadu's fiscal deficit has been on the rise, from Rs 1,788 crore in 2013-14, to Rs 3,537 crore (revised estimate) in 2014-15, and its budgeted estimate is Rs 4,616 crore for the current fiscal.
Tamil Nadu is heavily dependent on excise revenues arising from burgeoning liquor sales, which is a state monopoly. Liquor is sold through the Tamil Nadu State Marketing Corporation Limited (TASMAC), whose revenues stood at Rs 26,188 crore for FY2014-15, reported The Hindu. It's a cash cow that comes in handy to distribute largesse.
In case the ruling AIADMK, led by Chief Minister J Jayalalithaa, or the principal Opposition party, the DMK, tries to lure women voters the way Nitish Kumar has done by imposing prohibition, how will they manage the state's revenues? Will they impose taxes on idlis and dosas, the Tamil Nadu equivalent of samosas and kachoris? It remains to be seen.