Col Shiv Choudhary (Retd)
Freebies are nothing new in India. They have been around for a long time. In the past, freebies were given by the government in the form of subsidies, free education, healthcare, and other essential services. However, in recent times, freebies have become an integral part of the Indian political culture. Political parties woo voters with freebies ranging from cycles, laptops, TV sets, sarees, sewing machines, solar lights, health insurance, free power, water, rations, gas cylinders, old age pension, loan waver, cash incentives, travel, Wi-Fi etc. One wonders if such an array of freebies and competition amongst political parties to continue with such largesse are worth ITR filing by 7.28 cr. against 1.45 billion Indian population. It is worth mentioning that tax payers in France, USA, Germany and UK are 78.3 %, 50.1%, 63.3% and 59.7% tax payers respectively of their population.
The idea of freebies is not inherently bad as for instance, free healthcare, education, and essential services can go a long way in improving the standard of living of the people. However, the problem arises when political parties use freebies as a tool to either win elections or stay in power that are neither sustainable in the long run, nor address the root causes of the problems they aim to solve. Ultimately, nearly 5.2% of tax payers with transparent mode of income out of 1.45 billions of Indian population suffer for every such largesse. Typically, a phenomenon of squeezing salary and pension class.
“The first time you give something for free, you create Appreciation. The second time you give for free, you create Anticipation. The third time, Expectation. The fourth time, Entitlement. If the 5th time you don’t give, you create Resentment and Hatred”.
Freebies may seem like a quick fix to win elections, they often have negative consequences for the overall development and economic growth of the country. Freebies are costly, leading to budget deficits and increased Government debt. This can lead to increased consumption, inflation, high-interest rates, and reduced investments. Moreover, freebies can lead to corruption, as officials may siphon off funds meant for the provision of freebies. It is important for governments to focus on sustainable policies and infra that address the root causes of the problems while creating employment opportunities.
In a RBI report in 2022, freebies have been defined as “a public welfare measure that is provided free of charge”. It adds that freebies are different from public/merit goods which have wider and long-term benefits. Freebies are well thought-after plans aimed at improving the standard of living and access to resources, and a way of promoting social justice, equity, and human development. PDS, MGNREGA and Mid-Day Meal Scheme are apt examples.
As per Oct 2024 report of the World Bank, approx. 129 million Indians are living in extreme poverty, earning less than Rs181 per day against the set threshold of Rs 576 per day. Thus, it is important to have all the affected people accommodated in the development plan of the country. Thus, some expenditure outlays are basic necessities, and not a wasteful expenditure.
The big question is why are freebies connected with elections or political parties? Thus, it becomes becomes essential to distinguish between subsidy and freebies. Subsidies are justified and specifically targeted benefits against demands, while freebies are more for political reaping. Whatever, the judicious and sensible offering may be accommodated in the states. Both have advantages and disadvantages.
Freebies are not always bad as they lead to public outreach and engagement adding to increased public trust and satisfaction. Freebies such as bicycles given to schoolgirls in Bihar and West Bengal stimulated economic growth and productive capacity of work force, mobility, increased students enrolment, learning outcomes, and reduced dropout rates as reported by NITI Aayog. Similarly, freebies such as food subsidies under the PDS reduced the poverty ratio in India by 7% in 2011-12 as per a study of World Bank. The returns against health insurance under RSBY was on similar lines for BPL households as per NSSO. Freebies can reduce income inequality and alleviate from poverty.
Schemes such as loan waivers, or cash transfers can empower the indebted. The loan waver relief by the government reposed public faith in the government. RBI opined that loan waivers relieved the debt burden and improved the credit worthiness of farmers.
A study by the Centre for Policy Research reveals that freebies had a positive impact on voter turnout, political awareness, and satisfaction with the Government in UP and Tamil Nadu a long side enhancing the skills, and income opportunities. Freebies can also act as incentives for desirable social behaviour, such as female education, family planning, or environmental protection through renewable energy sources.
We cannot overlook the fact that everything good comes at a cost, and a debate on benefit and curse of freebies continues unabated. “The freebie culture is not a road to prosperity. It is a passport to fiscal disaster,” says NK Singh, chairman of the 15th Finance Commission. Thus, it is imperative to distinguish between what is right and what is not. Freebie politics is effectively electoral insurance paid for with taxpayer money . Freebies influence all people and “shakes the root of free and fair elections to a large degree”, observed the Hon’ble SC in a case during 2013.
Freebies can create a culture of entitlement, over/ misuse and dependency in society. Free electricity, water, or public transportation undermine the credit culture, distort prices, and disincentivize work at the current wage rate, leading to a drop in labour force participation. A report by the CAG revealed that free electricity for farmers in Punjab led to wastage of power, reduced ground water level, higher pollution, low tax compliance, and poor quality of service delivery by the state power utility. Such freebies might also not interest everyone thereby diluting the engagement from target audience.
Freebies can be used to mask performance and promises made by the politicians. Freebies can create disparities and divisions within society. Those not receiving them feel discriminated against leading to resentment and social unrest. Freebies create an added sense of desire, dependency, unresponsiveness and entitlements among the recipients or pay taxes.
Freebies and subsidies can have adverse consequences on the fiscal health, debits, inflation, macroeconomic and political stability of a nation. The recent collapse of the Sri Lankan economy show that freebie culture can lead to chaos, public outcry, emergency state and default on commitments.
Promises of freebies compels state to diversion of funds meant for more productive schemes and compromise of quality. A report by the NITI Aayog revealed that committed freebies of laptops compelled UP state to divert funds meant for other urgent school infrastructure needs, quality, or learning outcomes.
The promise of irrational freebies from public funds before elections are against free and fair elections and macroeconomic stability. They are unethical, and unduly influences the voters, disturbs the level playing field and vitiates the electoral process.
There is an urgent need for remedial measures both by the ECI and establishment to call for fixing the gaps in design, execution and accountability. The intended solution, its cost and where the additional moolah will come from, must be spelled out.
The finance commission must devise a mechanism to limit expenditure on populist schemes for much needed basic public services. A periodic implementing monitoring reports on freebies needs to be instituted for accountability.
ECI must ask political parties to disclose the financing and trade-offs of election jhumlas to the voters before announcing them along with their impact on fiscal balance, the opportunity cost of public spending, and the sustainability. ECI must act as an unbiased tough autonomous body to promptly and transparently de-register parties, impose penalties, or take contempt action for violating the MCC or the court orders.
A massive awareness campaign must be launched for the voters about the consequences of freebies. Judicial involvement may be sought in order to implement measures since any debate on this subject in parliament would serve no purpose. As suggested by the Hon’ble SC, an expert committee consisting of all stake holders to control freebies and their impact on the economy and democracy must be in place quickly.
Focus on inclusive development, would address the root causes of poverty, inequality, and exclusion. We need to remember this quote – “Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime.” Political party aim to make us dependent upon them for each fish.
Experts say it is difficult to calculate the precise economic impact as there is no unanimity on the definition of freebies. While politicians taste the sweet success of freebies, the economic burden on states lingers. 11 Indian states are estimated to have incurred a revenue deficit in 2023-24. For 2022-23, states spent 9% of their revenue receipts on subsidies, says the report, with a larger portion of it going towards free or subsidised electricity.
Former CEC Mr Rawat adds that the EC’s hands are tied as freebies are announced when the MCC is not in force. Similarly, does the promises of free ration for 80 crore Indians for five more years show that India has so many hungry people? The Hon’ble SC is currently besieged with numerous petitions on freebies announced to capture vote banks.
Debate, views and counter views on freebies can continue. Fact is that taxpayers’ money is spent for political gains compelling states to added borrowing for expenditures like salaries and pensions. On the hand sight, failure in meeting the promised freebies avoids financial damage. Voters don’t mind if a promise is not fully implemented. But once a freebie is given, no political party will dare to withdraw it.
The RBI report has a cautionary note, saying that any further provision of non-merit goods and services, subsidies, transfers and guarantees will render their fiscal situation precarious and disrupt the overall fiscal consolidation achieved. Finally, in a democracy the power to block or allow the march of freebies rests with the voters unless nearly 1.36 billion Indian want to allow such freebies from 8.18 cr tax payers.
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