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Aiding or HoundingThe freebie politics

BY YUVIKA SINGH  JULY 6, 2024

The welfare state is the mandate of democracy. With 75 years in existence, the ethical and economic implications of promises are under heavy deliberation. As political competition reaches new heights, should accountability be forced?

           s the dust settles after the general elections of 2024, it is evident that the public verdict has changed. While the campaigns were dominated by bulldozer politics, the market's attention had shifted to bread-butter issues of jobs and prices. Despite its economic strides, India, the world’s largest democracy and a fairly young and steadily developing nation, faces numerous challenges, especially the baggage of poverty stemming from its history of colonisation. According to the World Bank, 13% of India’s population is still below the poverty level, and the country’s per-capita incomes are meagre by global standards. Impoverished people care more about their next meal than the state of the economy, logically and naturally so. Constant uncertainty and adverse socio-economic conditions exhaust their limited resources, leaving little room to focus on their ‘social problems’. Imagine a mother working the whole day, struggling to put food on the table for her child. In such a situation, where survival is at stake, national problems remain in the background. To address this, politicians emerge as 'saviours', unveiling a range of promises in their rallies, from cash to jobs to grains to your bills, they’ve got it all covered. However, the reality often starkly contrasts with these assurances. This was demonstrated by an independent candidate, Thulam Saravanan, in the 2021 Tamil Nadu state legislative election, wherein he promised a 100-day trip to the moon and an iceberg to keep the constituency cool. His manifesto and outlandish promises kept up with the long tradition of Tamil Nadu politics, grabbing attention, and for good reason. His aim was to raise awareness among people falling for freebies and to encourage voters to choose good candidates instead of those with the most unrealistic promises (Business Today, 2021).

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As a market tool, tested and proven, freebies are not a novel idea for any profit-making entity. They are not new in politics either and the general Indian public too is aware of both legal and illegal forms of it. While the lure of freebies is undeniable, their impact extends far beyond immediate relief. To understand the full picture, their multifaceted nature must be examined.

The most common way of providing freebies legally is through welfare schemes. Governments implement multiple measures for the socio-economic upliftment of their citizens. Generally, the lines between freebies and welfare programs are quite blurry. In rare cases, freebies when coupled with other initiatives can offer temporary relief. However, effective programs go beyond mere handouts. They address the root cause of poverty and provide people with the tools and resources they need to help achieve lasting self-sufficiency. Given this distinction, a closer look is necessary to assess whether the programs offered are designed effectively to break the cycle.

One of the most successful schemes was the mid-day meal in Tamil Nadu’s schools aimed at increasing the enrollment of students from disadvantaged communities. While it undeniably falls under the freebie category, it improved school enrollment and nutrition for millions (James, 2013). Over time, however, the effectiveness has been debated. It became susceptible to issues like corruption and inadequate infrastructure, leading to concerns about the scheme’s consistency and quality. However, its initial high success rate led to the nationwide implementation in 1995, making it a prime example of well-designed freebies meant to create lasting impact. Only by addressing such issues which constantly hurdle the path of social welfare programs' true potential, can it be ensured that these programmes become the instruments of social upliftment rather than mere political tools.

 The Mid Day Meal scheme’s journey highlights that by addressing key weaknesses, freebies can be transformed into powerful welfare programs.

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Pictured: Illustration by unknown via Pinterest

India’s social safety net is vast and ambitious with an array of welfare schemes currently running in the country. While they aim for improvement in multiple sectors like education and health, their effectiveness is hampered due to lack of infrastructure and the misuse of funds. Perhaps, the most critical challenge is the perception of these programs as freebies. They create a sense of dependency among beneficiaries and a decline in demanding accountability, but also raise concerns about the timing of such announcements. 

The peculiar thing about freebies is that they are announced right before elections so that the general public remembers them while casting votes. In a bid to secure voters, politicians resort to a dazzling display of promises. From subsidised food to lifestyle enhancers like laptops and bikes, they offer a bounty of enticements. This approach aims to distract the people on the receiving end from their future. Voters must understand that these schemes have no guaranteed provision since they are dependent on state funding. Recently, during the election campaign in Delhi for Lok Sabha seats, the Chief Minister offered free electricity and water, under specifications of consumption, for free to every urban household. Similar instances have been going on for a decade now, while a river is declared dead in the same territory. 

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Pictured: Illustration by unknown via pinterest

While such policies and schemes may influence a sizable category of voters, they raise the question of the long-term sustenance of both the environment and the economy. These handouts require careful assessment before widespread implementation. Free electricity could be replaced with investment in renewable energy sources, creating a resilient economy while minimising environmental impact. Regulation can be used to incentivise this shift from a short-term plan to a resilient growth plan.

This aligns with the concerns of experts that providing freebies and social welfare schemes from public funding may prove to be dangerous to the economy. Public funds used to give away ‘freebies’ not for ‘public purposes’ violate articles 162, 266(3) and 282 of the Constitution of India. A 2022 report from RBI warns the Indian states of a looming fiscal crisis. The strain is fueled by a widening gap between state revenue and expenditure, exacerbated by increased freebies offered by State governments. In the 2021-22 financial year alone, State governments’ expenditure on subsidies grew by 11.2% (Supreme Court Observer, n.d.). Critics warned that unchecked spending coupled with the pandemic’s lingering impact could force a raise in taxes and cut essential services. ​​​While democracy empowers voters, those with socioeconomic disadvantage and disenfranchisement are vulnerable to manipulation. This lack of transparency further weakens the prospect of accountability. The lack of regulation here promotes a specific type of moral hazard: ‘free-riding’, where people over consume and undervalue resources, believing that someone else bears the cost. In the case of free public transportation, this can lead to strained services, with overuse and disregard leading to a decline in quality and potential disruptions. Free resources, while initially appealing, can create dependence which hinders resource management. A habit of easy access to such resources may also weaken work ethic, leading society away from self-sufficiency. 

In April 2022, the Election Commission of India (ECI) refused to regulate the promises of freebies in election campaigns, saying that it is a policy decision, and that voters are accountable for assessing the viability of such offerings.

Furthermore, this culture comes at the expense of taxpayers. Taxpayers are burdened because often, these freebies are funded by public funds. This strains public finances, forces cuts in essential services and increases tax rates. Additionally, increased government expenditure can lead to the crowding out effect: increased public spending creates a situation where less money is available for private investment. Reduced access to capital can stifle innovation and long-term growth.

Redistribution programs raise several economic concerns, as they reallocate resources from crucial investments in education, healthcare, and infrastructure. This can have a domino effect: a less qualified workforce may emerge in the future because of the lack of investment in education today. Neglecting infrastructure can build bottlenecks in transportation and logistics, impacting overall economic efficiency. Historically, poor implementation of redistributive policies do not contribute to growth in the long run. Venezuela, for instance, went from a flourishing nation into a state of prolonged economic crisis due to mismanagement of funds. The country holds the world's largest supply of crude oil and was once a powerhouse of South America. After experiencing extreme inequality, it turned to socialism in 1999. The then championed populism led to overspending on welfare programs: declaring farmland state property and then abandoning them. This along with total dependence on oil sales, contributed to the severe economic crisis (CNN Business, 2017). Furthermore, these programs trigger high inflation levels which disproportionately affects the lower income segments, as they spend a large share of their income on essentials that are susceptible to inflation. 

Freebies may create the headline illusion of helping the poor, but in reality, they create inflation and macro-stability risks that hurt them.

The ongoing discourse around freebies raises questions about their effectiveness and does not equate to eliminating them. They have always been controversial because of the pushed notion of them being “free” when they are the exact opposite. Freebies may create the headline illusion of helping the poor, but in reality, they create inflation and macro-stability risks that hurt them. Policymakers should improve the effectiveness of spending on social welfare. For a country with such a diverse population consisting of several age groups, targeted programs for education and skill training will empower individuals to break the cycle of poverty. Additionally, as advocated by former Reserve Bank governor, D Subbarao, enacting fiscal responsibility laws can promote long-term financial health and accountability. These would limit government spending and require a ‘White Paper’ outlining specific expenditures (Business Today Desk, 2024). By fostering a culture of responsible and transparent social spending, we can build a stronger and more equitable society.

Pictured: Illustration by unknown via pinterest

Keywords 

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democracy, corruption, global, struggles, poverty, politics, government, world bank, jobs, election commission of India, mid day meal scheme, welfare, RBI, freebies: transportation, food, education, healthcare, infrastructure, policymakers

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References

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Aiyar, Y. (2022, August 09). Freebie, subsidy, compensation: Let’s reset the terms of debate. The Indian Express. 

https://indianexpress.com/article/opinion/columns/freebie-subsidy-compensation-lets-reset-terms-debate-8078602/

 

Business Today Desk (2024, April 21). 'Impose restraints...': Former RBI governor Subbarao wants 'White Paper' on freebies by parties. Business Today. https://www.businesstoday.in/india/story/impose-restraints-former-rbi-governor-subbarao-wants-white-paper-on-freebies-by-parties-426274-2024-04-21

 

Business Today Desk (2021, March 2021). Tamil Nadu election candidate promises helicopter, trip to moon, Rs 1 crore, but here's the catch. Business Today. https://www.businesstoday.in/latest/economy-politics/story/tamil-nadu-election-candidate-promises-helicopter-trip-to-moon-rs-1-crore-but-heres-the-catch-291782-2021-03-25

 

Depersio, G. (2023, December 10). What Are Examples of Moral Hazard in the Business World? Investopedia.

https://www.investopedia.com/ask/answers/040815/what-are-some-examples-moral-hazard-business-world.asp#:~:text=Moral 

 

Express Web Desk (2021, March 25). Helicopter, robot, trip to moon: Tamil Nadu candidate’s poll promises go viral. The Indian Express.

Helicopter, robot, trip to moon: Tamil Nadu candidate’s poll promises go viral

 

Gillespie, P., Brocchetto, M. & Newton, P. (2017, July 30). Venezuela: How a rich country collapsed. CNN Business.

https://money.cnn.com/2017/07/26/news/economy/venezuela-economic-crisis/index.html 

 

James, G. (2013, September 01). Fighting Classroom Humger” - Achievements of “Mid Day Meal Scheme”. Yojana Archives. 

http://yojana.gov.in/mid-day-meal-scheme.asp

 

Kenton, W. (2023, December 19). What is the Crowding Out Effect Economic Theory?  Investopedia.

https://www.investopedia.com/terms/c/crowdingouteffect.asp

 

Mateen, Z. (2022, September 12). Freebies: The row over handouts and welfare schemes in India. BBC News.

https://www.bbc.com/news/world-asia-india-62722592

 

Swaminathan, P. (2004, January). Tamil Nadu’s Midday Meal Scheme: Where Assumed Benefits Score over Hard Data. Economic and Political Weeky.

https://www.researchgate.net/publication/262124697_Tamil_Nadu's_Midday_Meal_Scheme_Where_Assumed_Benefits_Score_over_Hard_Data

 

Upadhyay, A.K. (n.d.). Freebies in Electoral Democracy and Welfare State. Supreme Court Observer (SCO).

https://www.scobserver.in/cases/freebies-in-electoral-democracy-and-welfare-state/#:~:text=The 

 

World Bank. (2022). Poverty and Inequality Platform: India. World Bank Group.

https://pip.worldbank.org/country-profiles/IND

 

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The views published in this journal are those of the individual author/s and do not necessarily reflect the position or policy of the team behind Beyond Margins, or the Department of Economics of Sophia College for Women (Autonomous), or Sophia College for Women (Autonomous) in general. The list of sources may not be exhaustive. If you’d like to have the complete list, email us at beyondmarginssophia@gmail.com

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