Culture of Freebies in India: Issues and Recommendations – Explained, pointwise

Introduction

The elections for the Legislative Assemblies are underway in 5 States and every party is promising a plethora of freebies to lure the voters. Political parties consider it a convenient way to take an edge over competitors and try to gain emotional control over the minds of the electorate. The culture of freebies has been continuing since independence and no party or candidate has completely distanced itself from it.

In this article we will try to analyze the reasons behind the rising prevalence of freebie culture in India. Further, a light would be thrown on arguments in support and against the freebie culture along with some recommendations to manage it in the long run.

What is the meaning of Freebies?

The literal meaning of freebie is something that is given free of charge or cost. Political parties are outdoing each other in promising free electricity and water supply, laptops, cycles, electronic appliances, etc. These are called ‘freebies’ and characterized as fiscally imprudent.

Freebies during the Pandemic: Governments (both Union and states) as well as the RBI took several measures to mitigate pandemic effects. This included expansion of the food security scheme for two full years, cash transfer schemes for farmers, expansion of the jobs scheme etc. 

What are the reasons for the rise of freebie culture during elections?

Criminalization of Politics: According to the Association for Democratic Reforms (ADR), 233 MPs in the current Lok Sabha are facing criminal charges, up from 187 in 2014. These candidates often resort to distribution of liquor, money, goods etc. to lure voters. 

Myopic opinion of masses: It is believed that Indian masses vote and react more on short term freebies and less on long term policies. This encourages parties to offer more freebies.

Historical Baggage: Since the independence, parties have been promising some form of freebies to attract voters. Even if a new party comes to power, then also it can’t rationalize or outrightly abolish the freebie commitments of prior governments e.g., Several State Governments have been forced to continue power and irrigation subsidies due to political pressure. Governments fear that discontinuance will antagonize their voter base.

Concealment of Actual performance: Freebies are often used as a means to conceal the poor performance of incumbent Government on economic and social parameters. They provide an opportunity to alter the voter’s mindset from real issues to short term gains.

Domino Effect: The rise in coalition era politics since the 1990s has witnessed a rise of new political parties. These small and new parties have to offer more freebies than larger parties to lure the voters. Moreover the increase in competition among the parties to seek the votes, each party tries to outdo the others in terms of populist promises.

What are the arguments in support of Freebies?

Welfare State: The Constitution places an obligation on the State to take proactive measures for the welfare of poor and downtrodden. For instance, Art. 39(b) calls for resource distribution for achieving common good.

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.

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 recognised in the 1980s that the prevalent policies marginalize the poor and a ‘safety net’ (freebies) is needed.

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.

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. 

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?

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.

What are the arguments against Freebies?

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.

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 avail loan 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.

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. 

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.

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.

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.  

What steps can be undertaken going forward?

First, there should be 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.

Second, 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.

Third, the 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.

Fourth, the focus should now be tilted on improving public expenditure efficiency. This requires 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.  

Fifth, 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. 

Sixth, in the long run, eradication of unnecessary freebie culture requires an attitudinal change in the masses. This warrants delivery of robust moral education at all levels which can be done by properly implementing the New Education Policy, 2020.

India has experienced the politics of freebies for a long time and the outcome of those policies has been sub-optimal, inefficient, and unsustainable. Therefore rather than doling out money, focus should be on spending it efficiently. It is high time the discourse on improving public expenditure efficiency should take center stage while discussing the role of fiscal policy in India. However, until that is achieved, reliance on acceptable freebies like health, education etc. can’t be completely stopped.