The narrative of development and populism

Source: The post is based on the article “The narrative of development and populism” published in The Hindu on 3^rd October 2023.

Syllabus: GS 3 – Indian Economy – Growth & Development

Relevance: About populism and large-scale development

News: In the upcoming state elections, political parties are making announcements and inaugurating a variety of projects and commitments to attract voters.

These announcements highlight the trend of emphasizing “development and populism” before elections, with voters urged to evaluate short-term versus long-term benefits.

What are the different types of populism?

Political populism: It claims to represent “the people”, mostly the majority, often against minorities or financial elites, and resists constraints on executive power, allowing the majority to ride over the rights of the minorities.

Economic populism: It also opposes economic policy restrictions, as they limit their options. However, the economic policy environment prefers rules and restraints to prevent short-term interests from dominating when economic policy is largely shaped by political considerations.

Rules and restraints are necessary to prevent populist abuse, but too many can hinder growth. Hence, a balance between rules and discretion is vital for economic policy.

What are the benefits of economic populism?

Conventional economic growth models assumed that economic growth would naturally benefit everyone through the “trickle-down effect,” but real-world evidence has proven otherwise.

In this regard, economic populism argues for government intervention to redistribute wealth and ensure that everyone benefits from economic growth.

Moreover, economic populism and inappropriate infrastructure-driven development have fiscal and environmental costs.

However, economic populism isn’t always detrimental as it can serve as a necessary counterbalance to an excessive emphasis on infrastructure-led development, which can be harmful.

What are the concerns with announcements made by the politicians for the upcoming state elections?

Politicians often prioritize visible infrastructure like roads and bridges, which is easily showcased and quantifiable, benefiting the ruling party.

However, to assess a project’s impact on well-being and the environment, it’s crucial to evaluate its progress and fairness.

Moreover, relying solely on large-scale infrastructure as a measure of development can be dangerous.

Why is it dangerous to focus on large-scale infrastructure projects as the only measure of development?

First, these projects are often not well-suited to the specific needs of the people or the environment they are being built in. They can also have negative long-term impacts on the environment and people’s livelihoods.

Second, the way that mega-infrastructure projects are financed is often unrealistic and can lead to financial problems for the government in the medium term.

For instance, recent natural disasters in Himachal Pradesh and Uttarakhand disasters of 2013 are examples of how promoting mega-infrastructure with unplanned urbanization can lead to environmental disasters and ongoing costs.

Additionally, the National Highways Authority of India (NHAI) has a debt of ₹3,42,801 crore, and its debt servicing cost will cross ₹50,000 crore in FY28, requiring significant government spending on repayment and interest.

These are the fiscal risks associated with promoting mega-infrastructure projects.