Why neoliberal India rages against ‘freebies’

A Lopsided Debate

The perils of "freebie culture" are fiercely back in mainstream public debate. A recent report from the RBI bulletin regarding the sustainability of public debt at the state level and observations made by the Supreme Court in response to a public interest litigation gave ammunition to the pro-neoliberal voices. The mainstream critiques of ‘freebies’ believe that vote-hungry politicians are pushing State finances into deep trouble by financing such spending. In this infuriated yet lopsided discussion, the fundamental question of the role of the Welfare State and the squalid collapse of economic reforms in creating social wealth, combined with the slackening public investment that necessitates some ‘freebies’, are missing.

The ever-present principal contention against freebies is that it merely promotes the current consumption and does not improve the productive capacity of the economy. However, this claim does not comprehend the welfare impact of such programmes on the lives of marginalised sections.

The RBI's report considers public welfare measures provided by the State free of cost as a ‘freebie’ and not merit good, as such spending does not have economic benefits. Thus it designates common programmes such as electricity subsidy, interest subsidy on farm loans, financial assistance to parents of female children, female students, the female population for betterment of livelihood, maternity benefit schemes, support to self-help groups, and self-employed population, among others, as ‘freebies’. Such spending is an investment in the human capital of future generations.

Surprisingly, if not shockingly, the Bihar government's Mukhya Mantri Balika Cycle Yojana, and a similar scheme of the Haryana government for Dalit students, are also categorised as ‘freebies’. These schemes can influence the retention rate of the girls and Dalit students and add to the capability development of the younger generation.

These ‘freebies’ are improving the welfare of the nations's socially and economically vulnerable citizens, who hardly benefitted from three decades of market-oriented reforms. The economic growth in the post-reform period has excluded a large population and widened the gender and caste disparities. The specific assistance given to the woman, Scheduled Caste (SC), and Scheduled Tribe (ST) populations ensures a dignified life and overcoming of socio-economic barriers. Such financial assistance has a multiplier effect at multiple levels which cannot be grasped through a cost-benefit analysis.

The Welfare State is responsible for looking after the citizens, especially the vulnerable among them. Article 38 of the Constitution directs the State to ensure social and economic justice. Thus, an indiscriminate critique of welfare schemes as “populist” measures by market-worshippers based on a utilitarian prism is a myopic and elitist perversion. The comparison of states in India to the Sri Lankan crisis is cunning exaggeration. The indispensability of financial assistance to vulnerable sections emerges out of the economic stagnation thanks to neoliberalism.

The development trajectory of the economic reforms characterised by jobless growth has failed to disturb the reality of social injustice and economic inequality. Instead, indiscriminate privatisation of public goods excluded a large population from accessing the necessities of life. Hence, the welfare schemes act as distributive mechanisms in a stagnating economy with wide disparities.

The welfare schemes, including the employment guarantee scheme (MNREGS), were opposed as ‘freebies’ when introduced. These very schemes proved beneficial during the pandemic, when the economic model adopted in 1991 could not respond.

This debate on freebies also raises the federal-state question. While the advocates of fiscal austerity scrutinise the states, similar welfare measures by the Union government are not under the scanner. State governments have an advantage in providing such welfare measures by assessing local requirements more efficiently than the Union government. The ‘freebies’ are complementary to the investments in social capital, such as health and education.

The narrative of fiscally irresponsible states implementing such schemes is also problematic. State governments started and successfully implemented many schemes that have become national schemes since, such as the mid-day meal scheme. A lopsided critique of state governments undermines the federal structure and the creative welfare politics at the state level. The judiciary's overarching intervention erodes the powers of the elected executives who are answerable to electorates.

It should not be forgotten that the beneficiaries of the welfare scheme are also taxpayers and tax burden on them is heavy. Spending on welfare is the entitlement of every citizen of the modern State. Nevertheless, mainstream resistance to ‘freebies’ is firmly grounded in class roots. The tax concessions and soaps to the upper middle class and corporates aimed at boosting consumption are termed fiscal stimulus. The mounting non-performing assets (NPA) with banks are primarily due to corporate defaults. The writing off of these loans, fresh equity infusion, and disingenuous sops to corporates and the upper middle class go unnoticed in the mainstream discourse backed by corporate media. These concessions are never called ‘freebies’, and the effect of such policies on efficiency and productivity is hardly assessed.

The current discussion on ‘freebies’, dominated by the privileged, is flawed in treating a voter as someone prone to a "populist" scheme and portraying welfare schemes as a public bad. The decisions regarding the public provision of welfare should not be coming from a group of functionaries unanswerable to the people. Even when we conform to the principle that social investment should be preferred over such consumption through ‘freebies’ in the long run, at least for the transition period, this support is necessary for society and economy to function smoothly.

Cutting down VIP perks, wasteful expenditure, and the socialisation of corporate profits are sufficient to support these temporary reliefs, along with proper and just devolution of resources to the states by the Union government, to improve the health of state’s finances. The voters are the best judge of underlying economic stagnation and the need for short-term measures such as ‘freebies’ and economic growth with a just and equal redistributive mechanism. Any other intervention on the matter would undermine the democratic process and the people.

(Harikrishnan is a UGC Senior Research Fellow; Gourishankar Hiremath teaches economics at IIT-Kharagpur)