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Sansad TV: Perspective- Freebies Culture & Economy

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Introduction:

Supreme Court has said that there is a need for an apex body consisting of members from the Niti Aayog, Finance Commission, ruling and opposition parties, the RBI and other stakeholders, for suggestions on how to control freebies by political parties during campaigns. Hearing a plea against the practice of political parties promising freebies during elections, the apex court bench said this panel is required to determine the pros and cons of freebies as these have a significant impact on the economy. Prime Minister Narendra Modi has also raised his concerns about the practice of using freebies for votes at the cost of long-term development. Recently PM Modi had flagged this issue while pointing to mounting dues of power distribution companies as a looming crisis. According to a study based on the data of major financial assistance/ cash transfers, utility subsidies, loan or fee waivers and interest-free loans announced by the states in their latest budget speeches the expenditure on freebies range from 0.1 – 2.7 per cent of GSDP for different states.

Freebies:

  • It refers to a public welfare measure – any good or service – that is offered free of cost by the government to its citizens.
  • But our existing legal or policy framework does not provide a precise definition for the term.
  • The general meaning of the word freebie is something that you’re given free. So, free power, healthcare, and education can, technically, be counted as a freebie.
  • The actual meaning of it however, depends on who you are asking and the time and place.
  • As the Election Commission has explained that freebies was a term open to subjective interpretation and has no precise legal definitions.
  • A RBI report has stated that freebies are not merit goods or expenditures such as public distribution system, employment guarantee schemes, and states’ support for education and health facilities.
  • It states that freebies are provisions for free electricity, water or transportation, besides waiver of pending utility bills and loans, and other such benefits.

Boon or bane?

  • There have been endless debates on the matter of freebies and if they are actually helpful. Financially, freebies are a drain to the country’s resources.
  • Economists opine that as long as any State has the capacity and ability to finance freebies then it is fine; if not then freebies are the burden on economy.
  • Some scholars go further and say that there is little evidence to support the relationship between freebies and economy. So freebies are only a bad political philosophy.
  • The sorrow of poor people in India cannot be solved by freebies or by incentives. As far as farmers and their productivities are concerned, free electricity, free water, farm loan waivers, subsidies are not the sustainable solutions.
  • Another argument against freebie culture is that it’s a manipulation of the voter.

Measures to mitigate the negative impacts:

  • Finance Commission (an independent body) when it makes allocations to various states, can take into account the debt of the state and in the context of that find out whether the state’s economy will be sustainable over the years in the context of the freebies.
  • Bringing freebies under MCC and regulating manifestos by ECI.
  • Priority to DPSPs based or merit goods such as PDS system, education, health etc. for greater prosperity.
  • Ensure it reaches real beneficiaries. e.g. a farm loan waiver reaches only actual farmers.
  • Placing a limit on expenditure on loan waivers, free electricity and water.
  • Makes the departments accountable for their work, as done on Jharkhand recently fixes responsibility on debts.
  • Educating the public on effects of such freebies and need for fiscal discipline.

Conclusion:

  • There is a need to spend more resources on welfare schemes
  • There’s a need to keep track of allocations to the social sector.
  • One day, India might aspire to reach the Scandinavian social contract that motivates people to practice self-imposed restraint in exchange for the greater good though, perhaps, it will first require India’s enrichment and achievement of the $10 trillion GDP goal.