Freebies by Governments-Economic outcomes

Context

The freebies politics - Economic Perspective

• Freebies will put an additional burden on the exchequer, political parties have been competing with each other in the run-up to elections by announcing a string of freebies to woo the voters.
• The culture of freebies was started by late Tamil Nadu Cheif Minister, J Jayalalitha, promising free sarees, pressure cookers, washing machines, television sets etc, It was quickly followed by other political parties.
• Aam Aadmi Party took the lead, sweeping the Delhi Assembly Elections in 2015, by promising free electricity, water and bus travel to the voters of Delhi.
• In 2019, when the Modi government announced a Rs 6,000 gift to all farmers in India, it was hailed as a political masterstroke. 
• In the 2021 Kerala Assembly elections. Two years after being routed in the Lok Sabha polls, the ruling Left Democratic Front is said to have got elected for a second straight term with a thumping majority, promising subsidised rice and food kits.
• The pronouncements made by state governments like Punjab, Delhi, Telangana, Andhra Pradesh and West Bengal are unsustainable.
• Aid to the poor is seen as a wasteful expenditure. But low-interest rates for corporates to get cheap loans or the sop of cutting corporate taxes are never criticised.
• The utter failure of our economic policies to create a decent livelihood for a vast majority of Indians.
• If anything, both the RBI-KLEMS estimates for employment since 1981 and the employment surveys done by the Centre for Monitoring India’s Economy (CMIE) since 2016, have shown that employment growth initially slowed down from the 1990s.
• Then has turned negative over the past few years. It is obvious that if people don’t earn enough to get two square meals a day, they will be unlikely to vote governments back into power.

• Several political parties like the Aam Aadmi Party, Telangana Rashtra Samithi, Yuvajana Shramika Rythu Congress Party, Telugu Desam Party, Dravida Munnetra Kazhagam and the All India Trinamool Congress offered tonnes of freebies before the elections. 
• AAP government in Punjab asked the Centre for Rs 50,000 crore aid for two years as the state’s financial situation is very bad.
• In the recent assembly elections of 5 states, these political parties announced various schemes where they promised free electricity for households and free money to all women.
• However, these schemes are not feasible for society whether it is the social sector or the economic sector.
• India’s power distribution companies are suffering badly. In such circumstances, when past dues are already unpaid, offering free electricity 
• These mouth-watering sops yield savings of a few thousand rupees per month per household.

• The Government of India’s standards of financial propriety lays down inter alia that “no authority shall exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly, to its advantage;
• The reckless spending of the taxpayer’s money on freebies is neither a recognised policy/custom nor sanctioned in a court of law.
• It is a blatant financial irregularity that amounts to bribing voters using public money solely for gaining an advantage in electoral politics. 
• The tax revenue is used for giving subsidies to the poor sections of the society—for instance, beneficiaries under Ayushman Bharat which covers 100 million poor households—it passes muster as a welfare-oriented measure.
• But, when it is used to give freebies to all including the rich, this is bound to be strongly resented. This may even trigger non-compliance amongst taxpayers and eventually lead to lower revenue.
• The ‘freebies culture’ is bound to affect the state’s finances, if allowed to continue at an increasing pace, will end up converting a surplus into a deficit.
• During 2014-19,  the N Chandra babu government in Andhra Pradesh failed to fulfil a lot of election promises.
• In the 2019 election, he was defeated by Y.S Jagan Mohan reddy who offers more freebies to the voters. 
• Debt-driven freebie schemes dominate the Rs 2.56 lakh crore Andhra Pradesh Budget 2022-23.
• The revenue expenditure, including for the numerous freebie schemes, crossed 70.70 per cent of the targeted Rs 1.82 lakh crore by the end of November 2021.
• Telangana has committed 35% of the revenue receipts of the state to finance several populist schemes.

How can it be good?

• During the covid-19 pandemic, the Central government announced the Pradhan Mantri Garib Kalyan Anna Yojana, providing 5 kgs of rice or wheat and 1 kg of pulses to eligible people free of cost.
• In addition to the regular entitlement of quota of foodgrains. The scheme was initially meant to be implemented from April 2020 to April 2021.
• By bringing more people into the 'market', they'll have a discretionary power of spending, which becomes a bigger market, leads to a virtuous circle
• If extra 200 million people can start buying their favourite soap or a shirt, which actually creates a demand for the goods, services, labour also
• Developed countries also provide the need which can create a bigger market
• Freebies can make people healthy and educated which can indirectly add the feature to the active economy 

Conclusion