Adding to the Burden of the Poor

Adding to the Burden of the Poor
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The twin “sisters” of the IMF and the World Bank, in their” structural adjustment” and similar other programs insist on “conditionalities” before dishing out grants or loans to countries in need or even in crises. This has historically been done under the broad rubric of the so called “Washington Consenus”, whose major thrust is giving a free rein and hand to markets, and privileging these over the state. A matter of political economy, the “Washington Consensus” insists on “reforms where the state is gradually shunted out of the political and economic lives of states. It is, in the final analysis, a supremely, ideological stance and position that was actually discredited in and during the 2008 Financial crisis. However, vestiges remain. One is the insistence of removal of subsidies on essential items. Subsidies in the schemata of the IMF and the World Bank constitute not only a “distortion” but also a drag on the exchequer, in terms of budgetary outlays required for these. These then, according to the protagonists of the World Bank and the IMF, add a burden which creates fiscal and budget deficits for a state in contention. These deficits have an economy wide impact and if the tax base of a given country is narrow, then these are funded by borrowings from overseas. This is insofar as the economics of subsidies is concerned but the political economy of these suggest that, in less developed economy contexts, where most of the people are poor and many live under below poverty lines, eking subsistence wages, subsidies on essential items, subsidies play an important role in alleviating the general and specific burdens of life. One case in point is the kerosene subsidy which, is being phased out in Kashmir after a period of 50 years, generally in consonance with the reasons delineated here. In defense of the move, the administration is stating that kerosene is being replaced by LPG, which is cleaner, among other things. While, in the main, this might be true, but the nuances suggest that kerosene still caters to a nagging need in society, especially during the harsh winter months, for many societal and even commercial segments. Removing the subsidy will hurt these segments and will be more poignant given that the most vulnerable do not have access to LPG and so on. The financial burden on their meager incomes will increase and they will suffer. All in all then, in the least, special caveats and provisions must be made for these vulnerable segments of society and targeted subsidies kept in place, if a broad umbrella subsidy is not feasible or possible.

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