11-February -2025-Special-Article

ELECTORAL FREEBIES

In recent times, political parties have increasingly used freebies to attract voters, as seen in the Delhi Assembly elections of 2025.

While some argue that these welfare measures aid socio-economic development, others believe they strain government finances and hinder long-term growth. This debate has sparked discussions on the difference between necessary welfare schemes and unsustainable electoral giveaways.

What Are Electoral Freebies?

• The Reserve Bank of India (RBI) defines freebies as public welfare measures provided free of charge.
• They include free electricity, cash transfers, gadgets, or transport services, often distributed before elections.
• The debate around freebies centers on their economic impact and whether they are essential welfare measures or political incentives.

How Freebies Contribute to Socio-Economic Development

Women Empowerment

• Direct cash transfers enhance financial independence and decision-making for women.
• Reduces dependency on family members for immediate needs.

Improving Human Capabilities

• Welfare schemes like free food and healthcare enhance overall well-being.
• Reduces healthcare costs, aligns with Amartya Sen’s ‘capability approach’ of providing dignity and self-sufficiency.

Boosting Consumer Demand

• Cash assistance increases purchasing power and stimulates local businesses.
• Encourages economic circulation by raising consumption levels.

Reducing Poverty and Inequality

• Schemes like the Public Distribution System (PDS) and Mid-Day Meals ensure food security.
• Helps bridge the gap between different income groups, promoting inclusive growth.

Long-Term Benefits

• Investment in healthcare and nutrition reduces disease burden.
• Improved public health leads to enhanced workforce productivity.

Challenges Posed by Excessive Freebies

Fiscal Burden

• Increases state revenue deficits and debt burden.
• Example: Delhi’s revenue surplus declined by 35% between 2022-23 and 2024-25 due to rising expenditure on freebies.

Diversion of Resources

• Large expenditures on freebies reduce funds for infrastructure, healthcare, and education.
• The RBI estimates that subsidies cost governments an additional ₹10,000-12,000 crore annually.

Increased Taxation Pressure

• To fund freebies, governments may raise taxes, impacting middle-class disposable income.
• Higher taxes can reduce overall economic growth and investment.

Crowding Out Essential Investments

• Excessive government spending on non-productive subsidies can limit funds for essential public infrastructure.
• Weakens long-term economic growth potential.

Debt and Credit Default Risks

• High debt obligations may lead to states defaulting on loans.
• Future taxpayers may bear the cost of unsustainable fiscal policies.

Impact on Electoral Decision-Making

• Critics argue that freebies act as ‘bribes’ and discourage voters from making informed decisions.
• This can distort democratic processes and policy priorities.

Judicial Perspective on Freebies

• S. Subramaniam Balaji Case (2013): Supreme Court ruled that welfare measures fall under legislative policy and cannot be judicially reviewed.
• PIL (2022): Argued that freebies compromise fair elections, leading to a Supreme Court recommendation for an expert panel to assess their impact.

Criteria	Freebies	Welfare Schemes
Concept	Provided free, often for political gain.	Government initiatives aimed at long-term socio-economic development.
Type of Goods	Non-merit goods (e.g., TVs, mixer grinders, cash handouts).	Merit goods (e.g., education, healthcare, food security).
Economic Impact	Short-term benefits with minimal structural improvements.	Reduces poverty and enhances productivity.
Fiscal Viability	Can lead to excessive borrowing and deficits.	Budgeted within policy frameworks.
Political Influence	Often election-driven incentives.	Designed for sustainable development.
Governance	May lack transparency, leading to financial mismanagement.	Implemented under institutional frameworks.

Merit and Demerit Goods

• Merit Goods: Provide positive benefits to society, e.g., education, healthcare.
• Demerit Goods: Have negative societal impacts, e.g., alcohol.

Way Forward

Strengthening Fiscal Responsibility

• Implement stricter guidelines under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.
• Introduce time-bound and well-targeted subsidies to ensure responsible fiscal management.

Defining Welfare and Freebies Clearly

• Establish policy guidelines to differentiate necessary welfare schemes from unsustainable electoral giveaways.
• Use social utility, long-term benefits, and fiscal sustainability as key criteria.

Improving Institutional Oversight

• Strengthen financial regulatory bodies to monitor public spending.
• Improve tracking of off-budget borrowings and hidden subsidies (e.g., electricity pricing mechanisms).

Balancing Welfare with Fiscal Prudence

• Prioritize long-term investments in education, healthcare, and job creation to ensure economic stability.
• Promote schemes that enhance self-reliance rather than long-term dependency.

Conclusion

Electoral freebies remain a contentious issue, with arguments for both their necessity and potential harm. While welfare measures are crucial for social equity, excessive reliance on freebies without fiscal responsibility can harm economic growth. The need of the hour is to strike a balance between welfare and financial prudence, ensuring that government resources are used efficiently for sustainable development.

Mains Question:

1. “Discuss the impact of electoral freebies on India’s socio-economic development. How can the government balance welfare measures with fiscal sustainability?” (150 WORDS)