From freebies to welfare

Source: This post is based on the article “From freebies to welfare” published in the Indian Express on 28th July 2022.

Syllabus: GS 2 – Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes.

Relevance: India’s subsidy burden.

News: Recently, the Prime Minister has called for an end to this free “revdi” (freebies) culture. A recent report of the RBI on states’ finances also highlighted the dangerous condition of states’ finances and enhanced debt stress on account of these flawed policies.

What are the various types of subsidies given by the government?

Why does India need to eliminate freebies?

Upset India’s quest for sustainable development: Subsidies are being promised in one form or the other by way of free electricity. This a) Deteriorates the health of state distribution companies and seriously undercuts their financial viability, b) Make discoms inability to actively encourage solar power, c) India’s orderly and socially-cohesive transition to an era of non-fossil fuel energy critically depends on the health of state electricity boards. This is hampered by the freebie culture.

The Delhi government’s decision to make the electricity subsidy optional was largely due to rising costs.

In Punjab, as pointed out by the RBI, the free power promised undercuts its ability to move to a more sustainable pattern of growth.

Not ensure access to basic facilities:  The government seeks to address the challenge of inequity by ensuring access to a wide range of basic facilities such as access to banking, electricity, housing, insurance, water and clean cooking fuel, etc. Eliminating freebies will help the government to provide access to these facilities.

Irreversible empowerment from other programs: Benefits under various welfare schemes such as PM Awas Yojana, Swachh Bharat Mission and Jal Jeevan Mission have provided irreversible empowerment and self-reliance. For instance, a house built under the PM Awas Yojana is a lifelong asset for the beneficiary household that cannot be taken back by any government.

Use of technology in direct transfer benefits: Identification of beneficiaries through the SECC and prioritisation based on deprivation criteria has enabled the government to assist those who need it the most. But the universal subsidies or freebies often end up ignoring the poor and transferring public resources to the affluent.

Weakening effect of freebies: The future of manufacturing and employment gets hampered by the freebies. Freebies lower the quality and competitiveness of the manufacturing sector by detracting from efficient and competitive infrastructure.

Aristotle said, “the worst form of inequality is to try to make unequal things equal.” The PM’s recent remarks about the perils of freebie culture should serve as a timely reminder to those promising fiscally imprudent and unsustainable subsidies. The freebie culture is not a road to prosperity, but a quick ticket to fiscal disaster.