Supreme Court calls for a panel to look into freebies issue

Source: The post is based on the article “Supreme Court calls for a panel to look into freebies issue” published in The Hindu on 4th August 2022.

What is the News?

The Supreme Court has suggested setting up a specialised body composed of persons who can dispassionately examine the problem of Freebies.

What are 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’.

However, it is necessary to distinguish freebies from public/merit goods, expenditure which brings economic benefits such as the public distribution system, employment guarantee schemes, and states’ support for education and health.

What is the negative impact of freebies?

Freebies potentially undermine credit culture, distort prices through cross-subsidisation eroding incentives for private investment and disincentivising work at the current wage rate leading to a drop in labour force participation.

RBI Study on Freebies

According to the RBI, State governments have announced over Rs 1 trillion in welfare schemes and subsidies.

For instance, Andhra Pradesh, Madhya Pradesh, and West Bengal are among the state governments with the largest welfare scheme announcements in their respective Budgets this year. They collectively account for over Rs 67,000 crore worth of schemes in 2022-23.

Supreme Court on Freebies

The Supreme Court has said that the freebies were paving the way for an “economic disaster” besides “distorting the informed decision of voters”.

Hence, it has suggested setting up a specialised body composed of persons who can dispassionately examine the problem of Freebies. The political parties can suggest the composition of the body.

The proposed body could examine ways to resolve the issue of freebies and file a report before the Centre or the Election Commission.