Recently the Supreme Court asked the central government whether it is economically viable to distribute irrational freebies (free gifts) during election campaigns.
It also referred to the use of the Finance Commission’s expertise in curbing irrational election freebies.
According to the Election Commission of India, whether such policies are economically viable or have an adverse effect on the economic health of the state is a question for the voters of the state to consider and decide.
Freebies:
Political parties promise to offer free electricity/water supply, allowance to the unemployed, daily wage workers and women, as well as gadgets like laptops, smartphones etc. to secure the vote of the people.
States have become in the habit of giving loan waivers or free gifts in the form of free electricity, cycles, laptops, TV sets etc.
Populist promises or some of these expenditures, certainly in keeping with the elections, can certainly be questioned.
But given that inequality has been increasing in the country for the last 30 years, providing any kind of relief to the general population in the form of subsidy cannot be considered unreasonable, but in fact it is necessary for the economy to stay on the growth trajectory.
Freebies needed:
Facilitate Development:
There are some examples which show that some expenditure is in the form of overall benefit of the outlay such as the public distribution system, employment guarantee schemes, and support for education and health facilities especially during the pandemic.
Help to underdeveloped states:
States having comparatively low level of development with a large section of the poverty-stricken population have such free facilities based on need/demand and in order to uplift them, it becomes inevitable to provide them with subsidies.
Fulfilment of Expectations:
In a country like India where states have (or do not have) a certain level of development, the expectations of the people are met by populist promises made on the occasion of elections.
Drawbacks of Freebies:
Unstable for the macro economy:
Freebies undermine the macroeconomy’s sustainability infrastructure, the politics of freebies distorts spending priorities, and the outlay focuses on subsidies in some form or the other.
Impact on the financial position of the states:
The giving of free gifts ultimately adversely affects the exchequer and most of the states in India do not have strong financial systems, often with very limited resources in terms of revenue.
Against free and fair elections:
Irrational pre-election promises of free public money influence voters unfairly, hinder the freedom of equal opportunity for all, and destroy the integrity of the election process.
Away from environment:
When free electricity is provided, it will lead to excessive use of natural resources and also distract attention from renewable energy systems.
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