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Home / Opinion / Columns /  Our problem is fiscal mismanagement and not freebies

Recent weeks have seen increasing apprehensions raised by India’s political leadership as well as the judiciary on the increasing tendency of governments and political parties to promise ‘freebies’ to citizens. On 15 July, speaking at a function in Uttar Pradesh, Prime Minister Narendra Modi expressed concerns about the ‘revdi’ (a sweet of jaggery and sesame seeds) culture of political parties promising freebies to garner votes. The matter also received attention from the Supreme Court, which has advised the government to appoint an expert committee to examine the issue after the Election Commission expressed its helplessness in regulating it.

While there are genuine reasons for such apprehensions, there is no clarity on what constitutes a ‘freebie’. Governments provide a variety of goods and services free of cost to citizens. That includes free textbooks, uniforms, food and so on. In many cases, even services such as free health and education. The way the debate is currently framed, freebies appear to be any goods and services given free of cost by the government to citizens. But many of these may be essential and necessary for improving the lives of people and the overall well-being of society.

Free uniforms, textbooks and items of classroom stationery have been essential in increasing the school enrolment ratio in the country, so that an educated and skilled workforce can contribute meaningfully to economic growth. So too is the case of subsidized foodgrains under the National food Security Act (NFSA) as part of the country’s public distribution system, mid-day meal scheme and Anganwadi services. Their contribution in improving the nutritional status of children and adults is widely recognized. Moreover, it was the NFSA that came to the rescue during the covid pandemic, when the free foodgrains distributed to beneficiaries proved to be an essential lifeline for a large number of households.

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While many would like to make a distinction that considers essentials like nutrition, health and education both necessary and part of the constitutional obligations of the state, there have been objections to various other goods provided by state and central governments. Bicycles have been provided free to girl students in many states. Cooking gas stoves and gas cylinders have been provided free as part of the Ujjawala scheme. Some state governments have also provided laptops and smartphones.

None of these are wasteful expenditures by any stretch of the imagination. Free distribution of cooking gas has certainly helped women from the drudgery of cooking, but also helped curb environmental pollution and prevented diseases. Likewise, smartphones and laptops have offered relief to many students who otherwise would have lost out on basic education during the last two years of online classes. Similarly, free vaccines provided by the state in the usual course of life and particularly during the pandemic have prevented millions of deaths.

But even where cash is provided in place of goods and services, such as cash transfers to farmers or social pensions to vulnerable parts of the population, these provide relief to the disadvantaged and affected groups. These are all counted as essential functions of the redistributive policies of the state.

Clearly, there is a thin line between what can be termed as a ‘freebie’ and what can be treated as an essential constitutional obligation of the state. The problem lies is how this debate is framed, often done in a way that seeks to club everything provided by the state to citizens as freebies. Each of these need to be evaluated in the context of the function they play in improving the lives of citizens and their impact on the economy. Some of these are essential social safety nets, while many others are necessary incentives for better social and economic outcomes.

However, this debate completely ignores the fiscal consequences of the large bailouts given to the corporate sector. India’s tax reduction for corporations in 2019 did not contribute to any rise in investment, but helped contribute to rising private-sector profits. The write-off of large corporate debts at the cost of the public exchequer is justified on financial grounds, but is hardly treated as a freebie.

The real issue is not the distribution of these goods and services to Indian citizens, but whether these are fiscally sustainable. It is true that in many cases, these have contributed to fiscal stress in states. However, blaming such expenditure on the provision of essential services is unlikely to solve the fiscal problem. Part of the blame must also lie on the government’s inability to mobilize adequate resources to enable these. Tax exemptions, bailouts, loan waivers and instances of crony capitalism, where public resources have been given to the private corporate sector, are equally responsible for deterioration in the fiscal situation of the states and Centre.

It is important that we take a fair and balanced view of freebies. The real debate should be about the performance of the state and central governments on fiscal management. The current debate on freebies is only an excuse to divert our attention from the serious issue of fiscal mis-management by states as well as successive central governments. This would require not just looking at the issue of government expenditure priorities, but also at the challenge of resource mobilization, something which hardly gets any attention, unfortunately, let alone a public debate on it.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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