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Freebies: A race to the bottom - II

The top bureaucrats while discussing the deleterious effects of announcements of freebies by various state governments with Hon’ble Prime Minister of the country have raised concerns on this culture of freebies

Post by on Thursday, May 19, 2022

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The culture of freebies even goes against the basic concept of a welfare state. Basically welfare measures are meant for the needy, those with meagre income as they cannot pay for even the basic facilities. Now what actually is happening is that the freebies given by contemporary breed of political parties defies this cardinal principle. Let me clear this example, rupees 1000 to every women in the state of Punjab, free bus ride in Delhi to all women  even if she is a millionaire and on the other hand a man even if he could not afford to travel by bus and is the most appropriate person for such freebies will get nothing. Does not this also defy equity? The fall out of such freebies can be very serious. Infact the top bureaucrats while discussing the deleterious effects of announcements of freebies by various state governments with Hon’ble Prime Minister of the country have raised concerns on this culture of freebies.  The bureaucrats have cautioned against various political parties providing free electricity, which they feared, would put strain on the state budgets and may restrict their capacity to commit more finances to critical social sectors like health & education.

 

In this mad race of offering freebies to the peoples the lessons and experiences of countries like Venezuela and Srilanka can be an enlightening example and a good case study for all of us. Venezuela, a petro state and an oil-rich country was quite prosperous till 1980 because of an oil price boom. Successive governments then began to offer everything free, from food to public transport. The country, which imported 70 percent of its food, faced an economic crisis soon after the oil prices started crumbling. Corruption became rampant. The governments continued to waive off farm loans, further damaging the economy. The country has still not recovered fully even after four decades. In Sri Lanka, President Mr. Gotabaya Rajapaksa made large tax cuts that affected government’s revenue and fiscal policies, causing budget deficits to soar. The wrong policies of the government have led to the bankruptcy of Sri Lanka. The cabinet has resigned. Mr. Ramesh Chand member of NITI Aayog said has also warned that India could end up facing a Sri Lanka type economic crisis if it doesn’t shun the culture of freebies and subsidies in sectors like agriculture.

 

According to Mr. N. K. Singh, Chairman of Fifteenth Finance Commission, India is a Union, not a confederation of states. It is not a question of holding together but of coming together. The Union is indestructible. The configuration of the states which constitute the Union can change. The Union, therefore, is integral to both the Centre and the states. The strength of the Centre lies in the strength of the states. Therefore, the macroeconomic stability of the Union is contingent on the macroeconomic stability of both the Centre and states.

 

Freebies are a race to the bottom. Indeed, it is not the road to efficiency or prosperity, but a quick passport to fiscal disaster. Freebies undercut the basic framework of macroeconomic stability. The politics of freebies distorts expenditure priorities as outlays are being concentrated on subsidies of one kind or the other. It thus impacts seriously the fiscal sustainability for states which are already debt-stressed. Mr. Pant, chief economist at India Ratings and Research Pvt Ltd also opined that freebies are tools in the hands of the government. If governments dole out too many freebies, they will directly reflect in the fiscal deficit of the states. This can impact the economy negatively. State governments need to be wary of these freebies and subsidies.

 

Given the prevailing circumstances and the lessons learnt and experiences gained from across the globe, it is not wrong to say that the culture of freebies is a threat to democracy and not viable in the long run. Either the government must come up with some legislation to stop this or the Election Commission has to come forward to take strong steps to curb this menace before the country goes for any state or central elections.

          (Concluded…)

 

(The author is a Scientist at SKUAST-K; can be reached at pkumar6674@gmail.com)

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