Kashish Rangari

 "Freebies"

The supreme court has directed the union government to consult the finance commission on whether it is possible to regulate the distribution of freebies by political parties using public money.

What are freebies?  

The term Freebies is not new; instead, it is a prevalent culture in Indian politics, The political parties are always trying to outdo each other in luring the Indian voters with assorted freebies. From free water to free smartphones Indian politicians promise everything to attract prospective voters favor. Example of freebies: Promise of Rs 15 lakh in our bank accounts, Free TV, Laptops, Free electricity, Loan waivers, Offering free public transport rides to all women in Delhi. The political dialogue built around freebies is fraught with danger as it shakes the root of free and fair elections to a large degree. The unviable pre-election promises adversely affect the informed decision-making by voters. This calls for fixing the gaps in the design, execution, and accountability of freebie culture.

What are Public goods, Merit goods & Private goods? 

In Economics the products or services are of three types:

• Public Goods: These are non-excludable and non-rival in consumption like national defense, food control system, railways, highways and information on Covid, etc. Such services are challenging to be owned by the individuals even if they are willing to pay for them and are necessary to be provided by the governments.

• Merit Goods: In contrast to pure public goods, merit goods are, provided through the market, but not necessarily in sufficient quantities to maximize social welfare like education, health care, welfare services, housing, fire protection, refuse collection, and public parks. These can be acquired by individuals at a personal level and can provide certain benefits to the larger society. For example, an individual can buy a mask that would prevent Covid from infecting others and promote social good. Therefore, the government is justified in undertaking the free distribution of masks.

• Private Goods: A product or service produced by a privately owned business and purchased to increase the utility, or satisfaction, of the buyer. The majority of the goods and services consumed in a market economy are private goods and their prices are determined to some degree by the market forces of supply and demand.

Issues with Freebies culture 

1. Expenditure side: 

• Huge drain on state resources: farm loan waiver in Maharashtra resulted in an outgo of Rs 45,000-51,000 crore during the financial year 2020-21. The debt-to-GDP ratio of Punjab reached 53.3% in 2021-22 due to the high-subsidy burden.
•  Lack of specific outcome targets: No responsibility for the money spent. Telangana has committed 35% of revenue receipts, almost 63% of the state’s own tax revenue, to finance populist schemes which are cantered on freebies.

2. Revenue side:

• Negative impact on state-owned enterprises: leading loss-making PSU’s.
• March report from ICRA, subsidy payments by governments were estimated to comprise 16% of Discom revenues at an all -India level in 2021-22.
• Low tax collections: due to Free electricity, free water, free rides, etc., there is no realization of tax on these.

3. Political:

• Competitive manifestos, sometimes seem impractical and illogical, and unimplementable. It leads to the degeneration of the political agenda. This can even lead to the wastage of resources on frivolous promises without any real results to show. 

4. Creates a never-ending cycle of freebies: as populist schemes are countered with more populist measures.

5. Social inequalities: With the Rajasthan government’s decision to revert to the old pension scheme for its employees, just 6% of the population captures benefits as high as 56% of the pension and salary expenditure.

6. More expenditure towards servicing just interest costs: Andhra Pradesh spent roughly 13% of its budget of 22,000 crores on interest payments.

7. Revdi (Freebies) for One, Disaster for Other: As a result of reducing prices for consumer beneficiaries, the government overcharges industrial and commercial contracts to maintain the internal fiscal balance. Subsequently, the competitiveness of growing industries is reduced, which results in slower industrial growth and commercial price hike.

8. Private Goods- Based Freebies: Freebies on Private goods and services do not lead to a tangible social benefit. Freebies in the form of incentives benefit the upper caste elites.

What is the Positive Side of Freebies in India?

1. Foundation for Welfare Schemes: 

• Freebies not only include unviable pre-election promises but also several services that the government provides to meet its constitutional obligations (Directive Principles of State Policy) towards citizens like the Public Distribution System (PDS), Free Covid Vaccine, and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

• Free mid-day meals (now extended to free breakfast) have encouraged socially backward parents to send their wards to school at least for the meals, resulting in keeping the evil of child labor under control and, more importantly, imparting education.

• NT Rama Rao's promise of rice at Rs. 2 per kg in Andhra Pradesh is the original avatar of the current day National Food Security Programme.

• Rythu Bandhu of Telangana and Kalia of Odisha were forerunners of what is now Kisan Samman Nidhi.

2. Upliftment of Lower Class: 

• As the states with comparatively lower levels of development have a greater percentage of their population living in poverty, such freebies become more useful for the upliftment of lower strata in these states. The Tamil Nadu government’s free bus pass for women has not only saved families fuel costs but has also encouraged more women to join the workforce, in turn leading to economically stable families and women’s empowerment.

• A paper published in Oxford University Press’ The Quarterly Journal of Economics (2009) has lauded the introduction of free color television in villages as it has resulted in a decrease in domestic violence and also enabled women’s empowerment.

What can be the way forward?

1. Drawing a Line Between Welfare and Freebie: Freebies must be understood from an economic perspective and connected to taxpayers' money. Differences between subsidies and freebies are also essential since subsidies are justified and specially targeted benefits meant to meet specific demands. The freebies, on the other hand, are quite different.

2. Clear Rationale and Indication of Funds: Governments and states should have the capacity to create subsidy programs to assist the needy, but such programs must provide a clear rationale for investing more in basic amenities and have a clear indication of the funds to sustain the state's economic health.

3. Voter Awareness: In a democracy, the power to block or allow the march of freebies rests with the voters. There is a need for consensus between regulating the irrational freebies and making sure voters don't get swayed by the irrational promises. All of this requires eternal vigilance on the part of the voting class.

4. Strengthening Cooperative Federalism: Cooperative federalism will facilitate the coordination between the Center and States to look forward to the National Development Agenda between the Center and States, can reduce the need for glorifying and irrational political agendas to some extent and lead to the collective growth of the nation as a whole.

5. Judicial Intervention: A constructive debate and discussion in parliament are difficult since the freebie culture has an impact on every political party, whether directly or indirectly. Therefore, judicial involvement is required to propose measures. The Supreme Court has recently recommended creating an apex authority to provide recommendations on how to regulate gifts given out by political parties.

6. Strengthening ECI Model Code of Conduct: The Election Commission of India can anticipate enforcing the Model Code of Conduct For the Guidance of Political Parties and Candidates effectively to regulate election manifestos to prevent the manipulation of informed voter behavior.

7. Focus on Skill Development Rather than Freebies: Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime. It is always better to provide useful skills to the people than to give them freebies.

"The subsidies for basic necessities such as giving free education to younger children and offering free meals at schools are rather positive approaches. If the political parties go for effective economic policies where the welfare schemes have a good reach to the targeted population, then infrastructure and development will take care of themselves and the people will not require such kinds of freebies."