Elections in India have been marked by political parties promising a variety of freebies to secure the votes of the people. These run the gamut from free electricity and water supply, monthly allowances to unemployed and daily wage workers, and women, to incentives like laptops and smartphones. However, the Supreme Court has recently questioned the central government about the financial viability of these practices. This is creating a debate around the implications of freebies on the state’s economic health. The Election Commission of India suggests that these are questions for the voters to decide.
What Are Freebies And Why Do They Exist?
Freebies are essentially goods or services provided without charge, with the aim of winning favor with the voting populace. The trend of distributing freebies during election campaigns has become habitual among states, often manifesting in the form of loan waivers or free appliances.
There is a prevailing belief that offering some relief to the population through subsidies can potentially support the continuing path of economic growth, given the rise in inequality over the past few decades. Indeed, some expenditures such as those towards the Public Distribution System, employment guarantee schemes, and increased outlays for health, particularly during a crisis such as the pandemic, do provide overall benefits.
The Role Of Freebies In Economic Development
In states with lower levels of development and a larger share of the population suffering from poverty, these types of freebies become need/demand-based. Therefore, it becomes essential to offer such subsidies for their upliftment. The inclusion of freebies in election promises also helps fulfill the expectations of the people, especially in less developed states.
The Drawbacks Of Freebies
Despite this, there are a number of negative implications. For one, freebies can undercut the basic framework of macroeconomic stability as the politics of freebies can distort expenditure priorities. They can also have a negative impact on states’ fiscal health, and could potentially influence voters unduly and disturb the fairness of the electoral process.
Furthermore, offering free power as a freebie could lead to overuse of natural resources and divert attention from renewable energy systems.
A Way Forward
It is important to understand that cheap freebies can be expensive in the long run for both the economy and social cohesion. Instead of focusing on providing freebies, the focus should shift towards efficiency through innovative ideas and solutions to common problems. There needs to be a clear understanding of the economic impacts of freebies, and it is crucial to distinguish between subsidies and freebies.
Past Civil Service Examination Questions
The UPSC Civil Services Examination has previously asked questions on these topics. In 2010, one question asked candidates to consider actions by the government in the context of an economic recession and identify which could be considered part of a ‘fiscal stimulus’ package. The correct answer (option A) identified that an increase in public spending or a reduction in taxation levels would support economic growth, whereas abolishing subsidies would be a step towards fiscal consolidation rather than fiscal stimulus.
In a 2015 exam, a question asked how the replacement of price subsidy with Direct Benefit Transfer (DBT) could change the scenario of subsidies in India, eliciting thoughtful responses about the implications of such a shift.