Supreme Court’s stinging comments on freebies miss the real harm they do

We need to distinguish between freebies promised before elections and welfare schemes like MNREGA that aim to build resilience for those facing adversity

Justice B R Gavai’s scathing comments on freebies doled out by political parties, criticise the practice for harming the national work ethic.

“Because of the freebies in Maharashtra, which were announced prior to the elections, the agriculturists are not getting labourers. When everybody is getting free [money] at home, (why would they want to work)?”

He asked, “Are we not creating a class of parasites?”

This kind of fusillade becomes a moment to target all and every government measure on social welfare. That is the real harm that freebies do turning people against constructing a sustainable social security system.

Government data on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), has busted the myth that any kind of welfare scheme would discourage citizens from productive labour. It showed that demand for work under the scheme was largely during the lean season in agriculture. People opted for agricultural jobs when they became available and paid well.

Nevertheless, there is a growing discomfort, especially in the middle class, about freebies financed by their taxes.

It is important to make a distinction between the freebies promised before elections and welfare schemes like MNREGA which have sought to build resilience among those in a situation of adversity. Specific benefits are targeted at households classified below the poverty line under the National Food Security Act of 2013 and the National Social Assistance Programme.

The public distribution system and old age pension of Rs 200 per month (revised by some states now), MNREGA, the Rashtriya Swasthya Bima Yojana, and the PM-Kisan, etc., are all well-institutionalised welfare schemes whose targets are quite clear as poverty mitigating measures. Many states have also charted out their own distinct social welfare strategies.

Compared to these well-thought-out welfare schemes, which are building blocks of a social security system, freebies appeal to a vote bank and cover all voters, marginalised or not. They cannot be sustained in the long run and, therefore, do not provide a stable support system to the poor and marginalised. Nor do they help them move out of dependence.

Aam Aadmi Party (AAP) leader Arvind Kejriwal’s universal handouts tried to create a permanent vote bank but did not increase household resilience through access to increased job opportunities. The success of his schemes lay in constantly increasing the number of people dependent on freebies rather than a reduction in their number.

Ad-hoc freebies to win voters are not sustainable. This is evident in almost every state.

In Punjab, still ruled by AAP, the Bhagwant Mann government finds itself unable to implement the promise of Rs 1,100 per month to every woman above 18-years as that would cost Rs 12,000 crore to the state exchequer. Punjab's debt of Rs 3.7 lakh-crore may constitute 46% of the state’s GDP of over Rs 8 lakh-crore, by the end of 2024-2025.

Other states where the ruling party rode to power on the promise of ad-hoc freebies also demonstrate that freebies are essentially fiscally imprudent, strain public resources, and compromise the quality of governance.

In Himachal Pradesh last year, Congress ministers decided not to take any salaries for a few months as the state government struggled to meet its poll promise of freebies and subsidies amid a significant debt burden. The salaries and pensions of government employees were delayed as the exchequer had no money.

The story of Madhya Pradesh, Karnataka, Telangana, and Maharashtra are similar where freebies promised by the winning party have increased the debt burden of the state enormously.

In Madhya Pradesh, the state government is planning to borrow Rs 94,431 crore this fiscal year while its total allocation for freebie schemes adds up to Rs 34,780 crore annually. These include poll-winning schemes such as the Ladli Behan Scheme, the agricultural pump subsidy, the offer of 100 units of electricity for Rs 100 and Ladli Laxmi Scheme for girls. The state’s fiscal deficit has gone up to 4.1% against the 3.5% prescribed by the Union government.

In Karnataka, the Griha Lakshmi Yojna, free electricity for agriculture, free bus rides for women, free electricity for some households, etc., cost the state Rs 36,000 crore in FY2024. The state plans to borrow ₹1,05, 246 crore in the current budget and has appointed Boston Consulting to explore how it can generate an additional Rs 55,000-60,000 crore to meet the expenses of the freebies promised in the 2023 election.

In Telangana, the state is struggling to find funds for the freebies it had announced including debt relief to farmers, Mahalakshmi scheme providing women with financial assistance, free gas cylinders, free bus rides, and 200 units of electricity free to households. Although budgetary allocations have been made for these schemes (except the Mahalakshmi scheme), the state says it is exploring ways to generate money for farmers’ loan waivers.

The Devendra Fadnavis government in Maharashtra is pruning the Ladki Bahin Yojna, which it deployed to woo voters, by disqualifying those already receiving state benefits under other schemes. Around five lakh women who were receiving benefits under the scheme have now been dropped.

Election-winning freebies are clearly not sustainable and can impact economic growth and a state’s finances adversely. They challenge the fiscal health of the state and its macroeconomic stability. Invariably resources are diverted from essential sectors like education and healthcare.

Because the freebie schemes need to appeal to the largest section of voters, they usually lack proper targeting and create permanent dependency rather than promoting self-reliance.

State assistance to the poor and the marginalised needs to replace freebies with a cohesive and a well-thought-out social security system which addresses systemic issues of poverty, social equity, and justice.

What India needs is not abstract talk about the promotion of work ethic vs freebies, but a more substantial policy discussion about developing a social security system. While welfare schemes such as the Public Distribution System, Food Security Act, and MNREGA are designed to address the systemic issues of poverty and inequality, and promoting the economic integration of marginalised groups, there is a need for more long-term solutions.

Developing social security schemes which promote education, skill development, and employment must be an integral part of any effort to address structural inequities.

Promoting a transactional relationship between voters and the party in power prevents substantial policy debates. That is the real harm that a freebie culture does.

(Bharat Bhushan is a New Delhi-based journalist.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.