Freebies and their impact on the Indian economy

Indian politics and economy fascinate people in multiple areas of interest, and the way people swing to the whims of the political ideologies for the next five years. A term where people are masked, in the promises of good governance and security of the society- does come at a cost. The tactics of using freebies are high due to competition from multiple political parties. Winning and losing the election is a game here.to what cost??

Analysis in depth

Let's take an example mid-term polls or even the general elections the kind of money spent on freebies to get the majority vote, is said to be immense. Freebies like laptops and cycles for kids, cooking gas, and stove for lower-income families, are some of the common ones we have seen so far. It does take a toll on people's lives, and the economy. A situation like this is a cyclical one, where the taxes paid by tax filers are being utilized for all the freebies. It is a disincentive to the people belonging to the lower income group of individuals in the nation. Monetary help to individuals would not help in terms of generating better livelihoods, and a better living standard. It’s a detrimental approach to the concept of development of society as well as development.

A hurdle to public expenditure

The promise of development and better quality of life is always the motto and goal of governments coming to power. Once the government comes into power, most state governments, do not get to fulfill all the promises. This is pretty much the case since the debt to the state GDP is said to be higher. All the development projects about the infrastructure. In simple terms, it is difficult to run a sustainable government, for a full term, keeping all their promises to their voters. Some of the forecasts have shown some of the states with high debts and liabilities, which is very alarming to see at the moment. Freebies do pose a massive challenge in this regard. Essential utility services like electricity and transportation services like public transportation services, if given as freebies for a considerable period, pose a threat to private investments. The entire incentivization would erode the wage rate and also reduce labor participation.

Freebies add to the eating away of the revenue of the government. As per estimates from sources, the percentage eaten away by the subsidies can go as high as 18 percent. If this continues, the kind of pressure on the welfare programs of the states would be far more ineffective, not reaching the maximum potential of the deserving population in society.

Recent developments in the matter…

On August 26, 2022, a plea was filed in this regard of freebies headed by a three-member bench. Interestingly this matter was being argued way back in 2013, nine years ago, over a judgment passed by a Tamil Nadu bench and has requested a reconsideration. Justice NV Ramana back then stated that the power was vested with the ruling party, and also had stated that the freebies could lead to the bankruptcy of the states. He also mentioned that it is an important and complex issue that needs to be addressed. The current public interest litigation filed by the ruling party has sought steps to regulate and monitor the promises in the election manifesto. The use of taxpayers' money to hold the election is detrimental to the economy.

We can hope to see this issue being addressed seriously to keep the free and fair election stays in the true sense, without causing any dangerous damage to the central and state exchequer.