Making sense of the ‘freebies’ issue

Most welfare schemes contribute to improving human development outcomes, also resulting in higher growth

August 03, 2022 12:16 am | Updated 12:12 pm IST

‘Undermining the importance of these interventions of the Government by calling them ‘freebies’ exposes the elitism in our society, where the poor are seen as being unproductive and dependent on charity’

‘Undermining the importance of these interventions of the Government by calling them ‘freebies’ exposes the elitism in our society, where the poor are seen as being unproductive and dependent on charity’ | Photo Credit: T. SINGARAVELOU

Concern over ‘freebies’ in Indian politics has recently been expressed by those in the highest offices in the country. Speaking at the inaugural ceremony of the Bundelkhand Expressway (Uttar Pradesh) on July 16, Prime Minister Narendra Modi warned youth not to get carried away by the ‘revari culture’, where votes are sought by promising ‘freebies’. He hit out at the Opposition parties for offering freebies and said that this was dangerous and harmful to the development of the country.

Days later, a Bench headed by the Chief Justice of India, N.V. Ramana, heard a public interest litigation in which the petitioner argued against the promise of ‘irrational freebies’ by claiming that these distort the electoral process. It has been reported that during the hearing, the Chief Justice of India remarked that ‘freebies’ were a serious issue and asked the Central government to take a stand on the need to control the announcement of ‘freebies’ by political parties during election campaigns. The Court also suggested that the Finance Commission could be involved to look into the matter and propose solutions.

Still confusion

The discussion on the demerits of ‘freebies’ distributed to the public as a result of election promises is not new in India. However, there is often confusion on what constitutes ‘freebies’, with a number of services that the Government provides to meet its constitutional obligations towards citizens also being clubbed in this category. The basic argument is that these are a waste of resources and place a burden on already stressed fiscal resources. In such discussions, ‘freebies’ not only include the free distribution of what may be considered ‘club goods’ such as televisions and gold chains but also welfare schemes such as free or subsidised rations under the Public Distribution System (PDS), cooked meals under the mid-day meal scheme, supplementary nutrition through anganwadis, and work provided through the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Foodgrain distribution

But can these expenditures by the Government be considered ‘freebies’, as many commentators seem to do? For instance, is the distribution of free foodgrain during a pandemic that devastated lives and livelihoods at a time when godowns of the Food Corporation of India (FCI) had over 100 million tonnes of rice and wheat a ‘freebie’? The Prime Minister and members of the Bharatiya Janata Party have repeatedly campaigned about the Government implementing the ‘world’s largest food security programme’ by distributing free foodgrain, through the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) to around 80 crore ration cardholders.

The PMGKAY is probably what kept many away from the brink of starvation during the novel coronavirus pandemic. If anything, it can be argued that coverage under the PMGKAY must be expanded to include non-ration card holders as well, as there are many who are excluded from ration lists but are in need of subsidised or free foodgrains. Even before the COVID-19 pandemic, there have been studies which showed the poverty-reducing effect of the PDS. Subsidised foodgrains distributed under the PDS not only contribute to ensuring basic food security but also act as an implicit income transfer allowing the poor to afford commodities that they otherwise could not. Further, the PDS also plays an important role in our country where public procurement at minimum support prices (MSPs) is one of the main instruments of support to farmers. The PDS allows foodgrains to be available for cheap for consumers while assuring remunerative prices to farmers.

PDS coverage, MGNREGA

From around the mid-2000s, the PDS increasingly became a political issue, with State governments expanding coverage and reducing prices. Lower prices in the PDS became electoral issues in the southern States even earlier. Such initiatives were also included in the poll promises of almost all political parties during the mid- to late-2000s, including the general elections in 2009. This ultimately led to the National Food Security Act being passed by Parliament unanimously in 2013. Despite its shortcomings, it cannot be denied that the PMGKAY and the support that it provided during the pandemic would have been impossible had it not been for the NFSA which expanded the coverage of the PDS to about two thirds of the population. In its absence, a much smaller number of people would have had ration cards with high errors in identification of the poor (as was seen in the previous targeted system of dividing the population into those above and below the poverty line. With expansion in coverage, exclusion errors have automatically reduced, although not entirely eliminated. A universal PDS would take us even closer towards this goal.

Other welfare schemes that are repeatedly berated as adding to the ‘subsidy’ burden of the state also contribute to human development and protection of the basic rights of the people to nutrition, work, etc., essentially the right to life with dignity. MGNREGA for instance has been another scheme which has been a lifeline for many during the pandemic and earlier. At a time when there are few employment opportunities, working under MGNREGA can guarantee some assured wages; if implemented in the true spirit of the legislation this is also demand-based and, therefore, responds to as much need as there is.

Similarly, mid-day meals in schools have been proven to contribute to increased enrolment and retention in schools and addressing classroom hunger. A number of other schemes such as old age, single women and disabled pensions, community kitchens in urban areas, free uniforms and textbooks for children in government schools, and free health-care services play a critical role in providing social security and access to basic entitlements in our country. In fact, there are a number of lacunae in these programmes which call for expansion in coverage, allocation of greater resources, along with putting in place mechanisms for greater accountability and grievance redress.

In perspective

Undermining the importance of these interventions of the Government by calling them ‘freebies’ exposes the elitism in our society, where the poor are seen as being unproductive and dependent on charity. Rather, the problem in fact is that these issues are not given enough attention in the political process. If anything, building public pressure towards making welfare delivery an electoral issue is the need of the hour. A discussion on whether eggs will be served in the mid-day meal programme, how many days of work will be provided under the employment guarantee scheme, schemes for access to free medicines, or at what price subsidised grain will be given under the PDS are positive signals of electoral democracy responding to the needs of the majority of people. It is important to recognise that most welfare schemes contribute to improving human development outcomes, which also results in higher economic growth in future. Sometimes, this process throws up initiatives that seem ‘wasteful’ — while these must be discussed, one cannot deny them completely.

In any case, how does one define a ‘freebie’? Around ₹1 lakh crore is the revenue forgone annually as a result of ‘major tax incentives for corporate tax payers’. Putting together all tax exemptions and concessions, including on foreign trade and personal income taxes, the revenue forgone each year is over ₹5 lakh crore. Corporate tax rates have been reducing and Budget documents show that in 2019-20, the effective tax rate (tax-to-profit ratio) declined as profits increased. However, one does not see much pressure for a justification for these concessions in mainstream discussions. The fact that small amounts given to the poor by a system that has mostly failed them are called ‘freebies’, while the freebies that the rich get all the time through low tax rates and exemptions are ‘incentives’ is nothing but a reflection of the nature of democracy in our country.

Dipa Sinha is faculty at Dr. B.R. Ambedkar University Delhi. The views expressed are personal

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