Another example of poor and pathetic economics by AAP. For students studying in universities and colleges where they have a good chance of being employed well enough to be able to repay the loan, the scheme already exists. They do nothing new. For other universities where employability is low, by introducing this scheme, they will only increase the load on the exchequer since the students themselves would not really be able to pay back the loans themselves (due to low employability). Another surprising thing is that AAP conveniently (and perhaps intentionally) uses vague statements such as ismein koi bahut jyada paise kharch nahi honge. With 2 lakh students, almost all will apply for this loan. But lets assume only 50% for the sake of argument (below that it will be impossible to monitor and refuse). At 5 lakhs per student which is the average cost of the any higher education program in India of the kind they mention (doctor, engineer or MBA; actual average cost would be higher than 5 lakhs), we are talking about 5000 crores of guarantees every year. That is about 13-14% of State of Delhis annual budget. Even if you assume that the default rate will only be 20% (it will be higher for students of institutes where such loans are not already available both due to lower employability of their students and also the fact that if the student defaults, AAP has not thought of any way to get the money back), we are talking about an increase of about 3% extra budget deficit for the state of Delhi. Brilliant planning AAP. I am actually not sure whether to feel pity for them who do not understand economics or for the people who do not understand that this party will destroy the economy of the state.
Posted on: Fri, 16 Jan 2015 23:53:58 +0000
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