ET looks at the crucial debate on freebies-- from their genesis and definition to their impact on welfare and economy
On August 12, 2013, the Election Commission ( EC ) invited representatives of all recognized political parties to frame guidelines on freebies announced in election manifestos. Leaders of political parties reacted sharply at the meeting, arguing that it would be an infringement of their rights, according to election officials privy to the matter: However; backed by the supreme court's directives in the Subramaniam Balaji vs Government of Tamil Nadu case, the EC went ahead, adding a new chapter to its Model code of conduct on February 2 authorized to empowered the commission to ensure a party if its manifesto could not give a rationale for a particular promise or failed to explain how the resources would be mobilized for it. The power of the EC to fight freebies has remained vague and limited. There have only been a few instances where the EC exercised its power. For instance, in 2016, it " censured" AIADMK and advised DMK to be "more circumspect".
Nine years later, the debate on freebies has returned to the supreme court The issue was brought to the forefront with Prime Minister Narendra Modi commenting in mid-July that the "review culture" ( read, a sweet, used as a metaphor for freebies ) was a threat to the development of the nation. It delves into the issue with 10 key questions:
What triggered the latest debate on freebies?
This began with advocate Ashwini Kumar Upadhyay, a former Delhi BJP spokesperson, filling a petition in the supreme court in January. The petition sought the court's intervention to direct the EC to deregister political parties that promise "irrational freebies"', Financed with public money, before elections. He argued that it is a threat to "democratic values" and is akin to bribing the voters. The issue got a fillip with PM Modi saying that "Verdi culture needs to be removed from the country's politics".
What is a freebie? Does it differ from a subsidy?
While the dictionary meaning of freebie is "Something that is given to you without you having to pay for it, especially as a way of attracting your support for or interest in something", there is no clarity on how it should be interpreted in policies. What is called a freebie could well be defined as a positive step towards inclusive economic growth. Former chief election commissioner OP Rawat attempts to coin a definition.
"Except for subsidies given to promote food production, direct benefits for employability, educational attainments, sports, cultural activities, free medical care for the poor, free food for those who are destitute and affirm, active action for weaker sections including women, everything else is a freebie and should be so recognized"
OP RAWAT, former Chief Election commissioner
He adds that free power, free cell phones, free laptops, etc, fall in the ambit of freebies.
How should the government strike a balance between fiscal deficit and welfare spending?
Reetika Khera, Professor of economics at IIT Delhi, points out that it's hardly the case that fiscal deficit arises solely from welfare spending. "All government spending contributes to fiscal deficit, So we need to scrutinize all spending. With welfare, at least it functions as a redistributive mechanism, " Says Khera. Fiscal deficit, she says, can be tackled by raising more revenue through taxation, not restricted to income tax. Whether it's the center or states, this is a difficult balance to strike, says Amit Basole, associate professor of economics at Azim Premji University. There is also a widening gap between rich and poor states. "We have a system of transferring resources from rich to poor states, which adds another dimension of complexity," says Basole. While poor states need more welfare, they are constrained by a narrow tax base and lack of productive activity.
Which states spend the most on subsidies?
Jharkhand, Kerala, Odisha, Telengana, and Uttar Pradesh are the top five states with the largest rise in subsidies over the last three years, according to the Reserve Bank of India's ( RBI'S) bulletin for June 2022. Though
Instead of talking of welfare measures as freebies, the debate should focus squarely on the poor resource mobilization efforts of central and state governments"
REETIKA KHERA, Professor of Economics, IIT Delhi
there is no clear definition of freebies, the RBI says that provision of free electricity, free water, free public transportation, waiver of pending utility bills, and farm loan waivers can be classified as freebies as they "Potentially undermine credit culture, distort prices through cross-subsidization eroding incentive for private investment, and disincentivize work at the current wage rate leading to a drop in labor force participation". For FY23, Punjab, Madhya Pradesh, and Andhra Pradesh have announced the maximum freebies, as a percentage of revenue receipts, according to the RBI analysis.
How much are states spending on subsidies?
RBI's June bulletin on state finances identified 10 states with the highest debt burden--Punjab, Rajasthan, Kerala, West Bengal, Bihar, Andhra Pradesh, Jharkhand, Madhya Pradesh, Uttar Pradesh, and Haryana. In these, the report noted that pension accounts for 12.4% of total revenue expenditure. According to data, itdrawnfromm the comptroller and Auditor General of India, the total expenditure of all state governments on subsidies grew by 12.9% and 11.2% during 2020-21 and 2021-22. The share of subsidies in states' total revenue expenditure also rose from 7.8% in 2019-20 to 8.2% in 2021-22. The report, which draws a distinction between subsidies and non-merit goods, or "freebies", also says freebies have exceeded 2% of Gross State Domestic Product ( GSDP ) for some "highly indebted states such as Andhra Pradesh and Punjab".
Is there a way to measure the impact of subsidies or freebies and prioritize accordingly?
As with the definition of freebies and subsidies, opinions differ somewhat on whether and how the impact of subsidies can be measured. R Ramakumar, professor at the Center for the Study of Developing Economies, Tata Institue of Social Sciences, says that while some studies try to look at the effectiveness of subsidies, it's not always easy to pick out a single reason for the impact of a subsidy. "Usually, when you set strict conditions ( for disbursal of subsidies, you also end up excluding many beneficiaries. Typically, Politicians don't want to take that risk, "says Ramakumar. The way to look at the current debate, he adds, is not to take at freebies as the problem but to see it as an outcome of the inadequacy of investment in the social sector over the last 75 years. "Freebies end up filling the gap of the inadequacy of investment in the public sector," he says.
In 2016, ALADMK Was censured as its reply to EC on some promises made in its manifesto was not found to be satisfactory whereas, in the same year, the DMK too was advised to be more circumspect"
NASIM ZAIDI, Former Chief Election Commissioner
The problem is when ( BJP RULED ) UP allocates funds for populist measures, it's called welfare and if it's done by an opposition-ruled state, it's called reverie"
SACHIN PILOT, Former Deputy CM, Rajasthan
Can the EC curb freebies promise by political parties?
The EC can intervene on freebies announced by a political party in an election manifesto. But the powers that it drew by adding a chapter ( chapter VIII ) to the Model Code of Conduct in February 2014 are both vague and limited. EC can at best censure a party. Former chief election commissioner Nasim Zaidirecalls some of the earliest incidents in which EC had an instance, in 2016, he says, "ALADMK was censured as its reply to the commission on some promises made in its manifesto in the same year, the DMK too was advised to be more circumspect".
What is the SC's role in this debate?
Sc is hearing the PIL filed by Upadhyay. On Wednesday, after asking why the government of India doesn't form a committee to study the issue, the then Chief Justice of India NV Ramana, who retired on August 26, said the case would now be heard by a bench headed by Justice DY Chandrachud. On the court's right to intervene in the matter, SC senior advocate Sanjay Hegde says, "The SC's jurisdiction under Article 32, to protect the fundamental right of the citizen, is rather vast. However, it has been selective about when it exercises the jurisdiction it can, under its jurisdiction, frame suitable guideline that all parties agree to follow till such time than legis, action is brought on the subject."
"The SC can frame suitable guidelines that all parties agree to follow till such time that a legislation is brought on the subject"
SANJAY HEDGE, Senior Advocate, Supreme Court
What is the stand of major political parties on freebies?
Most opposition parties, including Congress, AAP, and DMK, have been countering any move to bring in more restrictions on freebies. Though PM Modi warned against the "Verdi culture", BJP is treading cautiously, awaiting the SC judgment.
If restrictions are introduced on subsidies or freebies, who will be hurt more the ruling party or the opposition?
An election manifesto is not legally enforceable when it comes to holding a political party responsible for not fulfilling its promises. As there is no law on this subject, courts have refused to entertain litigation on manifesto implementations. That explains why all parties try to outbid each other by promising things they can't deliver. Former deputy chief minister of Rajasthan, Sachin Pilot, says, " Policies should be framed for national interests. the problem is when ( BJP- ruled) UP allocate funds for the populist measure, it's called welfare and if it's done by an opposition-ruled state, it's called reverie." he says.
WRITTEN BY PRIYARANJAN KUMAR RAI