In this article, we will discuss Freebies Politics in India. So, let’s get started.
Freebies Politics in India
- Political parties promise to offer free electricity/water supply, monthly allowance to unemployed, daily wage workers and women as well as gadgets like laptops, smartphones etc. in order to secure the vote of the people.
- The states have become habituated to giving freebies, be it in the form of loan waivers or free electricity, cycles, laptops, TV sets and so on.
- Certain kinds of expenditure that are done under populist pressures or with elections in mind may be questionable.
- But given that in the last 30 years there has been rising inequality, some kind of relief to the population in the form of subsidies may not be unjustified but actually necessary for the economy to continue on its growth path.
Advantages of Freebies
- Facilitates Growth: There are some examples which show that some expenditure outlays do have overall benefits such as the Public Distribution System, employment guarantee schemes, support to education and enhanced outlays for health, particularly during the pandemic.
- These go a long way in increasing the productive capacity of the population and help build a healthier and a stronger workforce, which is a necessary part of any growth strategy.
- The same goes for a State spending on education or health.
- Boosts Industries: States like Tamil Nadu and Bihar are known for giving women sewing machines, saris and cycles, but they buy these from budget revenues, contributing to the sales of these industries.
- It can be considered a boost for the supplier industry and not a wasteful expenditure, given the corresponding production.
- Essential for Fulfilling Expectations: In a country like India where the states have (or don’t have) a certain level of development, upon the emergence of the elections, there are expectations from the part of people which are met by such promises of freebies.
- Moreover, there are also comparative expectations when the people of the adjoining/other states (with different ruling parties) get freebies.
- Helps Lesser Developed States: With the states that have comparatively lower level of development with a larger share of the population suffering from poverty, such kind of freebies become need/demand-based and it becomes essential to offer the people such subsidies for their own upliftment.
Disadvantages of the Freebies
- Macroeconomically Unstable: Freebies undercut the basic framework of macroeconomic stability, the politics of freebies distorts expenditure priorities and outlays remain concentrated on subsidies of one kind or the other.
- Impact on States’ Fiscal Situation: Offering freebies, ultimately, has an impact on the public exchequer and most of the states of India do not have a robust financial health and often have very limited resources in terms of revenue.
- If states keep spending money for supposed political gains, their finances will go awry and fiscal profligacy would prevail.
- As per the Fiscal Responsibility and Budget Management (FRBM) rules the states can’t borrow beyond their limits and any deviation has to be approved by the Centre and central bank.
- Therefore, while states have flexibility on how they choose to spend their money, they cannot in ordinary conditions exceed their deficit ceilings.
- Against Free and Fair Election: The promise of irrational freebies from public funds before elections unduly influences the voters, disturbs the level playing field and vitiates the purity of the poll process.
- It amounts to an unethical practice that is similar to giving bribes to the electorate.
- A Step Away from the Environment: When the freebies are about giving free power, or a certain quantum of free power, water and other kinds of consumption goods, it distracts outlays from environmental and sustainable growth, renewable energy and more efficient public transport systems.
- Moreover, it is a general human tendency to use things in excess (thus leading to wastage of resources) when it is provided for ‘free’.
- Debilitating Effect on Future Manufacturing: Freebies lower the quality and competitiveness of the manufacturing sector by detracting from efficient and competitive infrastructure that enable high-factor efficiencies in the manufacturing sector.
- Destroys Credit Culture: Giving away loan waivers in the form of freebies may have undesired consequences such as destroying the whole credit culture and it blurs the very basic question as to why is it that a large majority of the farming community is getting into a debt trap repeatedly.