FREEBIES – POLITY
News: Separate
rights from freebies
What's in the news?
● The
current political discourse on freebies vs rights seems loud and superficial,
like a shallow TV debate.
Key takeaways:
● A
deeper examination of what constitutes a right and a freebie is needed in
policy and political debates — nationally and globally.
● With
large numbers of people living under conditions of extreme economic
vulnerability in several countries, poverty alleviation should be the central
focus for governments across the ideological spectrum.
● In
electoral democracies, ensuring a minimum income is not only critical for the
survival of millions, but it is equally critical to the survival of political
parties.
What are freebies?
● The
term Freebies is not new; rather it is a prevalent culture in Indian politics
(in the name of socialism).
● Political
parties promise to offer free electricity/water supply, monthly allowance to
unemployed, daily wage workers and women as well as gadgets like laptops,
smartphones etc. in order to secure the vote of the people.
Why do freebies become popular?
● Failure of economic
policies to create decent livelihood for a vast majority of Indians.
● Low income
along with spending a disproportionately higher amount on education and health,
from which, the state increasingly withdrew.
● Prevailing
unemployment over the years.
● Increased cost of living
and rising inflation.
● Increased consumerism
as the poor today also spend on things which appear to be luxuries such as cell
phones and data-packs are two such examples which are shown as signs of India’s
increased affluence.
● Myopic opinion of masses
as the Indian masses vote and react more on short term freebies and less on
long term policies. This encourages parties to offer more freebies.
Arguments in favour of freebies:
1. Welfare State:
● The
Constitution places an obligation on the State to take proactive measures for
the welfare of the poor and downtrodden.
● For
instance, Art. 39(b) calls for
resource distribution for achieving common good.
2. Glaring Inequality in the society:
● In
India there is a wide inequality between the rich and the poor in terms of
income and wealth.
● The
OXFAM report 2021 showed that the
income of 84% of households in the country declined in 2021, but at the same
time the number of Indian billionaires grew from 102 to 142.
3. Sacrifices by the marginalized section:
● They
gave up land for cities, roads, factories and dams. However, they largely
became landless workers and slum dwellers. Their kinship, culture and lives got
disrupted.
● Several
economists argue that the gains of development have hardly trickled down commensurately, especially after 1991. The
cost of freebies offered is a fraction of what the poor lose.
● The
World Bank recognized in the 1980s that the prevalent policies marginalize the
poor and a ‘safety net’ (freebies) is needed.
4. Cushion during Emergencies:
● COVID-19
has been one of the biggest health emergencies in the world in over a century.
● Such
extreme events warrant state support to prevent chaos and disruption in society
e.g., the free COVID-19 vaccination for every individual in India led to a more
prudent management of the pandemic.
5. Economic Push:
● They
help increase the demand that prevents the rate of growth from declining
further. Free education and health are anyway justified because they are cases
of ‘merit wants’ and increase
productivity of labor.
6. Incentives for the rich:
● The
well-off and businesses get ‘freebies’ that are euphemistically called “incentives”.
Since 2006, the Union Budget estimates these to be between Rs 4-6 lakh crore
each year.
● If
the well-off who don’t really need freebies can get so much, why can’t the
marginalized (especially women and youth) get a fraction of it.
7. Social Stability:
● Freebies
enable the government to release the growing discontent in the marginalized
section.
● They
keep a lid on societal disruption
which would be far more expensive.
Arguments against freebies:
1. Undermines the spirit of Democracy:
● This
is the primary concern as many people tend to vote for parties based on the
free incentives offered by them.
● They
fail to judge them on their performance and don’t vote as per merit.
● Even
the Supreme Court has observed that
freebies shake the root of free and fair elections.
2. Fall in Productivity:
● Freebies
create a feeling in masses that they can live with minimal effort. This
decreases their productivity towards work e.g., a trend has been created that
whoever avails loans from banks does not repay them, expecting a waiver of
loans during the election.
● This
gives rise to moral hazard and an
incentive to default.
3. Fiscal Stress:
● Freebies
generally form part of revenue expenditure. Excess allocation towards them
leaves little to spend on capital expenditure that is a sine qua non for
achieving long-term growth.
● A
case in point is Tamil Nadu which has been rolling out freebies in keeping with
poll promises and ended up with unsustainable
fiscal conditions.
4. Discourages the honest taxpayer:
● It
creates a sense of discontentment in the mind of an honest taxpayer whose money
is used to fund the freebie expenditure.
● This
feeling is more dominant especially when the State is unable to improve the public services due to freebie
commitments.
5. Sectoral Collapse:
● The
populist measures of loan waiver have put significant pressure on the banking
sector.
● Similarly
rising power subsidies have enhanced pressures on discoms who are failing to
sustain themselves.
6. Wastage of Resources:
● Promises
of free water and electricity creates a severe stress on the water table and
leads to over exploitation as seen in states of Punjab and Haryana.
● NITI
Aayog has cautioned that 21 major cities of India are on the verge of running
out of groundwater in a few years.
Impact of freebies:
1. Never ending trail:
The continuity of freebies is another major disadvantage as parties keep on
coming up with lucrative offers to lure more votes to minimize the risk of
losing in the elections.
2. 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.
3. 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 centered on freebies.
4. Low tax collections:
Due to Free electricity, free water, free rides etc., there is no realization
of tax on these.
5. Ultimate loss of poors:
The politicians and middlemen wipe away the benefits and the poor have to
suffer as they are deprived from their share of benefits which was to be
achieved out of the money.
6. Inflationary practice:
Such distribution freebie commodity largely disrupts demand-supply dynamics.
7. Lethargy in population:
Freebies actually have the tendency to turn the nation’s population into:
Lethargy and devoid of entrepreneurship.
8. Money becomes the only remedy:
Everyone at the slightest sign of distress starts demanding some kind of
freebies from the Govt.
9. Popular politics:
This is psychology driving sections of the population expecting and the
government promptly responds with immediate monetary relief or compensation.
WAY FORWARD:
● Strengthening of internal
party democracy so that promises of development and
not freebies are made in the elections. This would also reduce the magnitude of
criminalization of politics.
● The
Election Commission should be given
greater powers like power to deregister a political party, power of contempt
etc. This would curtail distribution of liquor and other goods during elections
and ensure expenditure as per the desired limit.
● Government
should use the money spent on freebies towards job creation and infrastructure
development as advised by Madras HC in 2021. This will lead to social
upliftment and progression of the State.
● Improve public
expenditure efficiency by focusing on outcomes
and not merely outlays. One good example is the distribution of LPG subsidy
through direct benefit transfer (DBT) which led to a decline in the subsidy
bill.
● The
Government should also focus on decreasing the magnitude of black economy.
Black Economy erodes the fiscal pool of government and leads to suboptimal
spending thereby enhancing the tilt towards freebies to lure voters.
● In
the long run, eradication of unnecessary freebie culture requires an
attitudinal change in the masses.