Q. Which of the following is/are the likely impact of providing freebies from the government?
1.Creates a financial burden on the state exchequer.
2.Neglect the government’s focus on other necessary infrastructure.
3.Increase Non Performing Assets of public sector banks.
Select the correct answer using the codes given below;
Neglect the necessary infrastructure: Instead of building public assets, social capacity and society, the policymakers shifted their attention towards direct transfers and welfarism (via distribution of private goods for free). This causes a lack of government interest in delivering good public services.
Financial burden on state exchequer: Recently announced freebies in many States are difficult to fund. For instance, According to the RBI data, Andhra Pradesh announced freebies in FY23 that would consume almost 30.3% of its own tax revenue; for Madhya Pradesh, this figure was close to 28.8%; for Punjab, this was around 45.4%; and for West Bengal, it was about 23.8%. All of this will increase the government debt-to-GDP ratio.
Increase NPA: Over the past five years, banks have written off loans worth ₹10 lakh crore due to freebies such as farm loan waivers. The share of public sector banks in such NPA write-offs was typically between 60% and 80%.
Source: The Hindu
