It is a well-known fact that nothing in this world comes for free. However, human psychology often inclines people towards the allure of free gifts, vouchers, and other offerings provided by marketing companies. These companies aim to entice potential customers legally, with full disclosure, and ultimately convert them into clients.
One area that remains largely un-debated is the prevalence of freebie culture in Indian politics. As political competition intensifies, political parties and their leaders strive to outdo each other with extravagant electoral promises. Freebies such as food grains, transportation, water, electricity, electronic items, and even cash are included in political manifestos to win over voters. However, the risks associated with such “free” offers remain largely unknown to the electorate. India’s freebie culture is pushing the nation toward economic disaster, with consequences that will inevitably impact the economy, both in the short and long term.
The adverse effects of this culture are twofold. Firstly, taxpayer money is spent on fulfilling politicians’ economic ambitions rather than investing in crucial areas such as health, education, and infrastructure. Secondly, the increase in debt burdens will burden future generations, jeopardizing their financial stability.
The trend of offering freebies by political parties gained momentum in South India during the 1960s when parties started providing free or heavily subsidized rice. This strategy was later adopted nationwide, extending to free education and healthcare. While these initiatives were initially seen as aligned with constitutional welfare objectives, the concept of providing a certain amount of free water and electricity, as seen in the case of the Aam Aadmi Party (AAP) in 2015, deviates from genuine welfare goals and becomes more of a quid pro quo proposition.
Although India is known as the world’s oldest democracy, we are still a young nation in many respects. Indian laws are evolving, constitutional provisions are being interpreted and challenged, and political parties are constantly innovating their campaign strategies to shape voter perceptions and secure electoral victories. Additionally, the Indian market has transformed into a robust capitalist economy, deviating from its socialist origins as outlined in the Constitution. The Representation of People Act, 1951, defines corrupt practices by political candidates and explicitly prohibits bribing voters to influence elections. However, political parties have taken their campaign methods to the extreme, offering everything from free education to free electricity, water, clothing, travel, and even television sets. These actions underscore the magnitude of the abuse of election rules by political parties aiming to sway voters and gain power.
Economists distinguish between merit goods and non-merit goods. Merit goods, such as education, healthcare, and poverty-alleviation subsidies, have positive externalities and benefit society as well as the economy. However, differentiating between merit and non-merit goods is not always straightforward. What may be a necessity for one group could be considered a luxury for another. The distribution of bicycles, sewing machines, laptops, etc., can promote purposeful growth if targeted and delivered to the right sections of society. Government schemes like the Public Distribution System (PDS), mid-day meals, employment guarantee schemes, health and education subsidies, and certain subsidies for farmers, facilitate growth. Freebies are not limited to pre-election promises; they encompass a variety of services that the government offers to fulfill its constitutional obligations (Directive Principles of State Policy) towards citizens, such as the Public Distribution System (PDS), National Food Security Mission, Free Covid Vaccines, and the Mahatma Gandhi National Rural Employment Guarantee Act. These freebies are essential for uplifting the large population struggling with poverty.
However, the culture of freebies poses significant risks. It can create economic instability by diverting resources from welfare schemes to politically motivated agendas. Furthermore, it undermines the principles of free and fair elections and can ultimately erode democracy by tilting the playing field in favor of those offering the most extravagant promises. The culture of freebies also encourages irresponsible utilization of natural resources and places greater strain on the environment. Subsidies and freebies increase the fiscal deficit and put pressure on government revenue, exacerbating the deficit further.
Moreover, the prevalence of freebies greatly influences voters’ decision-making power. Granting loan waivers as freebies can have unintended consequences, such as damaging the entire credit culture and obscuring the underlying issues causing a significant portion of the farming community to fall into debt traps. Sri Lanka’s economic turmoil serves as an example of the repercussions of freebie politics. Let’s look at the latest Rs. 50,000 crore scam in Karnataka. Karnataka’s total tax collections last year was Rs. 2.27 lakh crore rupees. The promises my made the congress party in the recent elections account for 22% of this. Karnataka currently uses about 15% of its collections to pay for interest on past borrowings. Add to this the cost of the existing freebies. So in lay terms about a fourth of the states revenues will go in just funding the Congress victory in Karnataka. And well over half of the state’s tax collections go into funding overall election promises.
In August 2022, the Supreme Court acknowledged that Parliament might struggle to effectively debate the issue of eliminating irrational freebies offered during elections, as no political party is willing to relinquish them. The court suggested the establishment of a specialized body composed of individuals who can objectively examine the problem. Following various arguments from all sides, the Supreme Court has referred the issue to a three-judge bench for further examination.
The Supreme Court emphasizes that the freebie culture undermines the foundations of free and fair elections. The court believes that the benefits and drawbacks of freebies must be carefully evaluated due to their significant impact on the economy. A recent example from the United States demonstrates how the court can intervene in populist measures, as seen in the Supreme Court’s rejection of President Joe Biden’s proposal to waive educational loans.
Lawmakers must adopt a welfare-oriented approach that considers the future flourishing of investments. Instead of politically motivated actions, they should prioritize the economic impact and how it improves the lives of the intended beneficiaries. It is crucial to differentiate between welfare initiatives and freebies, as highlighted by the Supreme Court. Additionally, measures must be taken to ensure efficient delivery without any leakage so that the benefits directly reach the intended recipients. In a democracy, voters hold the power to either permit or prevent the proliferation of freebies. Consensus must be reached on how to curb irrational freebies while ensuring that misleading promises do not influence voters. This must be done for the sake of the future of India’s economy.