All about Freebies in India
What do freebies mean:
- Political parties promise to give free electricity and water, monthly allowances for women, daily wage workers, and unemployed people, as well as electronic items like laptops and cellphones, in order to secure the favour of the general population.
- States have a history of giving away free things, such as waiving off loans, free electricity, bikes, laptops, TVs, and other commodities.
- There may be some dubious spending choices made in reaction to populist pressure or with elections in mind.
- However, given that inequality has risen over the past 30 years, it may not only be justified but actually necessary to provide some type of relief to the populace in the form of subsidies if we want the economy to continue growing.
What are the reasons for freebies?
- Promotes Growth: The Public Distribution System, employment guarantee programmes, support for education, and increased health spending, particularly during pandemics, are a few examples of expenditures that have a good overall impact.
- Both of these are crucial elements of any growth strategy since they have a substantial impact on increasing the population’s capacity for output and helping to build a stronger and healthier workforce.
- The same is true for public spending on healthcare and education.
- Industry Sales Growth Although sewing machines, sarees and bicycles are frequently given to women in states like Tamil Nadu and Bihar, these purchases are made with budgetary money, which boosts industry sales.
- It can be considered as a benefit for the supplier industry rather than an unnecessary investment in the production of the same.
- Critical to Surpassing Expectations: In a nation like India, where each state has a different amount of development, people have expectations that these freebie pledges help to meet as elections draw near.
- When inhabitants of neighbouring or other states (with different ruling parties) receive freebies, there are often expectations of comparison.
- Helps Lesser Developed States: Such freebies become need- or demand-based in states with a bigger percentage of the population living in poverty and a lower degree of development, and it is vital to give the people such subsidies for their own upliftment.
What Negative Effects Do Free Things Have?
- Freebies threaten the foundations of macroeconomic stability, freebie politics change expenditure priorities, and most spending is still devoted to subsidies of one kind or other.
- Impact on the fiscal health of the states: Given that the majority of Indian states have weak financial positions and frequently have minimal resources in terms of revenue, giving things away for free eventually has an impact on the public purse.
- If states continue to spend money for ostensible political purposes, their finances will deteriorate and fiscal profligacy will take charge.
- The Fiscal Responsibility and Budget Management (FRBM) regulations limit state borrowing, and any deviation requires the federal government’s and the central bank’s consent. States are not permitted to borrow more than is permitted.
- States may therefore spend their money however they see right, although they are generally not permitted to exceed their permitted deficits.
- A Free and Fair Election Is Opposed by: The distribution of irrational freebies made possible by public funds prior to elections taints the fairness of the electoral process by unduly swaying voters and disturbing the balance of power.
- It amounts to dishonest behaviour akin to buying voters’ support.
- Approaching the Environment: Freebies that involve offering unlimited amounts of free water, power, or other consumables divert money from investments in renewable energy, ecologically friendly development, and improved public transportation systems.
- Additionally, there is a normal human tendency to use something excessively when it is supplied “free” (wasting resources in the process).
- Freebies have a devastating impact on future output because they deplete the competitive and effective infrastructure that supports high-factor efficiency in the manufacturing sector, which lowers the manufacturing sector’s quality and competitiveness.
- Giving away loan exemptions in exchange for gifts could have unforeseen consequences such as destroying the entire credit culture and obfuscating the real reason why so many farmers keep getting themselves into debt problems.
Way Ahead:
- Finding Out What Freebies Really Cost: Freebies are not really cheap in the short run, but their true cost to the economy, quality of life, and social cohesiveness is.
- Instead, we must strive for an efficiency race through democratic and optimistic federalist laboratories, where states use their authority to implement creative solutions to global problems that other states can follow.
- Effective Demand-Based Freebies: Even in the vast nation of India, there are still many individuals who are impoverished. The nation’s development strategy must account for the entire population.
- Freebies or subsidies that are wisely provided and can be readily incorporated into the state budget do no harm and can be used as leverage.
- In an ideal world, a portion of governmental spending would be set aside to guarantee better resource utilisation overall.
- Separating Freebies from Subsidies: It’s crucial to understand the financial implications of freebies and how they connect to tax revenues.
- Freebies and subsidies must be distinguished from one another since subsidies are benefits that are justified, carefully targeted, and the outcome of demand.
- Every political party has the freedom to fund ecosystems to aid some people in need, but doing so shouldn’t have a long-term detrimental effect on state or federal resources.
