On 26th August 2022, the Supreme Court of India referred petitions to ban freebies distributed by political parties before elections to a three-member bench which would weigh in on the implications of such a practice before coming to a conclusion.
The term ‘freebies’ has become a point of contention in the political culture of India. In order to woo voters to their side, political parties try to outdo each other by promising free goods, such as mobile phones, laptops, etc.
There are economic, if not moral aspects to it. The moral aspect to it is that when it comes to choosing political parties, it all boils down to how much a party has given incentives packaged as freebies, in other words it can almost be said that political parties are bribing people into voting for them.
The economic aspect is how sustainable it is for the state to keep providing freebies at state expenses. The Sri Lankan Crisis itself is an example of economic collapse brought about by the lavish bestowing of freebies.
Both aspects will be discussed at length in this article. The concept freebies will both feature in the Political Science and Economic subjects in the IAS Exam.
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What are Freebies?
Simply put ‘Freebies’ are public welfare measures – goods or services – offered free of cost by the government. As far as the Indian context is concerned, freebies are not precisely defined in the legal framework.
As of now it is used as a political term by the Central Government to express its disapproval of certain schemes at the state-level. It is highly likely that the meaning will change as time evolves.
Now it must be noted that certain expenditures done under populist pressures are questionable to say the least, but given the astronomical rise of income inequality among the Indian populace, some of these freebies may be justified in order to put the economy on its right track.
To know more about Fiscal Policies of India, visit the linked article.
Freebies in India –Download PDF Here
Still we will be shortly discussing the pros and cons of freebies in India in the table given below:
Pros and Cons of Freebies:
| Pros and Cons of Freebies | |
| Pros | Cons |
| Stimulates Growth: There have been instances where freebies have stimulated economic growth through some public expenditures, which in long term have increased the productive capacity of the workforce | Leads to Macroeconomic instability:
The basic framework of Macroeconomics is stability and freebies end up undermining it. Freebies undercut this framework as the subsidies offered will have an impact on the state’s fiscal situation, most of which do not have robust financial health to begin with.
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| Boosting supplier industry: Depending on the type of items given as freebies, the economic well being of the state will improve/
For example the state governments of Tamil Nadu and Bihar are known to give sewing machines, cycle. Although bought with the state budget, these items contribute to the sales of their corresponding industry, at least considering the supply aspects. |
Opposed to Free and Fair Elections: Promising irrational, if not outrageous freebies from public funds is against the idea of free and fair elections.
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| Essential for Fulfilling Expectations: In a country like India where the states have (or don’t have) a certain level of development, upon the emergence of the elections, there are expectations from the part of people which are met by such promises of freebies. | Negative effect on manufacturing industry: Freebies lower the quality and competitiveness of the manufacturing sector by detracting from efficient and competitive infrastructure that enable high-factor efficiencies in the manufacturing sector. |
| Gives advantages in terms of growth to less developed states: Freebies will help the populace of the lesser developed states, especially if they are large in numbers, to be uplifted from poverty. Usually such freebies become need/demand-based depending on the situation in question. | Long term financial drain: Once freebies are offered the government will be compelled either to make good on their promise in the next election cycle or outdo their promise altogether, this ends up putting huge financial strain on government resources. |
Conclusion
The debate on freebies also needs to be looked at from the perspective of income of states. As the Centre imposed more cesses, the share of tax revenue that the Centre gives them has dropped.
The end of the Centre’s GST compensation payout has further reduced the headroom available with states for social sector expenditure.
What can be done at the moment are:
Striving for an economic system that does not uplift the population through short term measures like freebies.
The need to differentiate between subsidies and freebies as there is a need to understand the impact of freebies in the economic sense. It is also essential to distinguish between subsidy and freebies as subsidies are the justified and specifically targeted benefits that arise out of demand.
Every state has the right to create a subsidiary system or even a freebie system but it should be done in a way that it may not become an economic burden on the population.
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