Politics of Freebies

Context: 

The Prime Minister recently remarked that state-provided freebies may yield political results in the short term, but it will lead to a great social and economic price in the long term with the poor paying a heavy price.

More about the News: 

• Webinar Against Freebies: A webinar titled ‘Freebies Culture and its Impact on Indian Politics & Democracy’ was organised by the Association for Democratic Reforms (ADR) in view of a public interest litigation (PIL) challenging freebies.
• OPS as a Populist Move: The choice of certain states to revert to the old pension scheme (OPS) has been criticised as a populist measure to attract government employees.

• • Five states – Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have decided to go back to the OPS. 
• Rise of Populist Policies: Political parties in states preparing for assembly elections have begun pledging freebies, which include cash transfers and supplementary income initiatives.

Concerns associated with excessive use of freebies:

• Heavy Tax Burden on States: Many states are burdened with substantial debts, limiting their capacity to invest in more significant welfare programs. 
• Against Constitutional Principles: Making promises when the states lack money to guarantee fundamental rights and implement directive principles is against constitutional principles.
• Shrinkage of Fiscal Space: The subsidy burden needs to be to be funded through debt, which will result in mounting deficits.
• Violation of the Principle of a Level-Playing field: Freebies gives the political parties undue advantage by making promises to provide private goods for only a section of voters.
• Opportunity Cost: States offering loan waivers often have to cut spending on crucial infrastructure such as roadways development and skill development.
• Social Impact: Despite receiving more resources, the RBI’s study reveals a decline in social sector spending by states, particularly in vital areas like health and education.
• Environmental Concerns: States offer free electricity to farmers, leading to overuse of groundwater and the continuation of traditional crop patterns. 

Challenges in curtailing Freebie Culture:

• Lack of Regulatory Powers with ECI: The Election Commission of India (ECI) has stated that it lacks the authority to regulate or penalize political parties for making electoral promises. 
• No assessment of financial viability of populist policies: Political parties often fail to clarify the funding sources for the promises made in the form of freebies.
• Lack of Information to the Voters:  They don’t delve into the financial aspects of freebies, prompting political parties to compete for promising freebies. 

Way Forward: 

• Responsibility of voters: Voters need to be vigilant and inquire about the financial implications of the populist policies.
• Empowering the ECI with greater authority: Statutory provisions as a backup or warnings on the use of funds are needed.
• Model Manifesto: The ECI needs to prepare a Model Manifesto to be followed by all political parties. 
• Fixing limit of welfare schemes: Fixing spending of 1% of GSDP or 1% of state own tax collections or state revenue expenditure would help to implement welfare schemes properly.
• Distinction between freebies and welfare measures: There has to be a distinction between the offer of ornaments, television sets, consumer electronics free of cost and real welfarist offers. 
• Tracking social sector budgetary allocations: Prioritizing higher resource allocation to welfare schemes is needed.
• Role of Finance Commission: It should consider the state’s debt burden during state allocations, and assess whether the state’s economy can sustain the financial impact of freebies over the long term.

News Source: Business Standard