Sansad TV: Perspective- Freebies Culture & Economy | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Introduction

• The Supreme Court has emphasized the necessity of establishing an apex body comprising members from various entities such as Niti Aayog, the Finance Commission, ruling and opposition parties, the RBI, and other stakeholders. This body would provide recommendations on how to regulate the distribution of freebies by political parties during electoral campaigns. 
• In response to a plea challenging the practice of political parties making promises of freebies during elections, the apex court bench argued that such a panel is essential to evaluate the advantages and disadvantages of freebies, considering their significant impact on the economy. Prime Minister Narendra Modi has also expressed concerns about the use of freebies to secure votes at the expense of long-term development. 
• Recently, PM Modi raised this issue while highlighting the growing arrears of power distribution companies as a looming crisis. According to a study based on data related to major financial assistance, cash transfers, utility subsidies, loan or fee waivers, and interest-free loans announced by states in their latest budget speeches, the expenditure on freebies varies from 0.1% to 2.7% of the Gross State Domestic Product (GSDP) for different states.

Freebies

• Freebies refer to public welfare measures, encompassing any goods or services, offered by the government to its citizens free of charge. 
• However, the existing legal and policy framework lacks a precise definition for this term. 
• The interpretation of "freebie" varies depending on the context, the individuals involved, and the circumstances. 
• The Election Commission has noted that "freebies" is a term open to subjective interpretation and lacks precise legal definitions. 
• According to a report by the RBI, freebies do not encompass merit goods or expenditures like public distribution systems, employment guarantee schemes, and state support for education and healthcare. Instead, they entail provisions such as free electricity, water, transportation, the waiver of pending utility bills and loans, and other similar benefits.

Boon or bane?

• The issue of freebies has sparked extensive debates regarding their actual benefits. Economically, freebies place a burden on the country's resources.
• Economists argue that as long as a state has the capacity and means to finance freebies, it may be sustainable; otherwise, freebies become an economic burden. 
• Some scholars contend that there is limited evidence supporting a positive relationship between freebies and the economy, suggesting that they may represent flawed political philosophy. 
• Addressing the challenges faced by poor people in India, particularly farmers, requires sustainable solutions beyond freebies, such as addressing issues related to free electricity, water, farm loan waivers, and subsidies. 
• Furthermore, critics argue that the culture of freebies can manipulate voters.

Measures to mitigate the negative impacts

• The Finance Commission, as an independent body, could consider a state's debt when allocating funds to determine the sustainability of the state's economy in the context of freebies.
• Bringing freebies under the Model Code of Conduct (MCC) and regulating party manifestos through the Election Commission of India (ECI).
• Prioritizing Directive Principles of State Policy (DPSPs) and merit goods like the Public Distribution System (PDS), education, and healthcare for greater prosperity.
• Ensuring that freebies reach their intended beneficiaries, such as farmers benefiting from farm loan waivers.
• Implementing expenditure limits on loan waivers, free electricity, and water.
• Holding government departments accountable for their actions, as seen in recent developments in Jharkhand, where responsibility for debts was assigned.
• Public education campaigns to inform citizens about the effects of freebies and the importance of fiscal discipline.

Conclusion

• It is crucial to allocate more resources to welfare schemes and monitor allocations to the social sector. 
• India may aspire to achieve a social contract resembling the Scandinavian model, motivating people to exercise self-imposed restraint in exchange for the greater good. However, this aspiration may require India to first attain its goal of a $10 trillion GDP.