Former RBI Governor Subbarao Calls for Dialogue on Freebies with Centre-State Conduct Code

Former Reserve Bank Governor D Subbarao urges Prime Minister and Finance Minister to collaborate with states on a code of conduct for freebies. Pointing out competitive populism, he emphasizes the need for limits on government borrowings used for freebies, as it affects India's fiscal health.

In a call for fiscal prudence, former Reserve Bank Governor D Subbarao urged Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman to lead a dialogue with states for a code of conduct on political freebies. Speaking at an NSE event, Subbarao criticized the prevailing 'competitive populism' among governments.

Subbarao pointed out that government-issued freebies often lead to increased national debt, which he labeled unsustainable despite India's 80 percent debt-to-GDP ratio. He argues that resources should be directed towards creating assets, contrasting government borrowing for consumption with educational loans.

The former central banker stresses the need for expenditure restructuring and warns that the current debt burden is already affecting government budgets through rising interest payments. Subbarao also called for updates in the inflation targeting framework to reflect contemporary economic realities.