Inputs from V K Srinivasan, vice-chairman of Indian Institute of Economics and former consultant to Planning Commission and Finance Commission.
RBI unlikely to approve farm Loan waiver scheme.
Promises to dole out freebies during campaigning can be easy, but attempts to fulfill them will only push Telangana and Andhra Pradesh into a deep financial mess.
Chief Ministers K Chandrashekar Rao and N Chandrababu Naidu have respectively announced a slew of big ticket populist measures for the weaker sections.
While the move has helped them in scoring brownie points, experts describe it as a dangerous act with huge financial implication. “It is an irresponsible act taken without correct assessment of the risks involved,“ said V K Srinivasan, vice-chairman of Indian Institute of Economics.
Experts fear the risk of credit agencies downgrading the debt-hit two states and choking the free credit flow, if they go ahead with their plans.
As a former consultant to Planning Commission and Finance Commission, Srinivasan says apart from the states being snubbed by the RBI on grounds of violating Fiscal Responsibility and Budget Management (FRBM) norm, the populist measures would result in the states getting blacklisted in the credit market.
“The situation calls for a pragmatic approach, but what is going on is madness which would push you into a situation, where you cannot even borrow for development,“ said Srinivas an, who has also worked as the Commissioner, Institutional Finance.