By Aryan GK

Abstract

Democracy and diversity make India’s politics complicated. Caste, religion, and region shape Indian politics. Parties target certain social segments to get support. Welfare and handouts are popular political techniques. Freebies strain the economy and cause financial pressure, imbalanced market incentives, and resource misallocation. Freebies reduce poverty, social exclusion, and local economic growth, despite their downsides. Long-term economic stability and growth in India require balancing social welfare goals with fiscal sustainability.

Introduction

India’s democratic and diversified society makes politics complex and ever-changing. India, the world’s largest democracy, holds regular elections under a multi-party system. Caste, religion, and regional affiliations intertwine in Indian politics. Political parties target certain social groups by appealing to their unique interests and concerns.policies like provding free electricity and free public transport for women laptops and bicycles for students aims to attract and win over certain demographics. Governments have instituted caste-based reservations and affirmative action to address socioeconomic inequality. However, caste, religion, and regional identities severely bind Indian politics. The caste system in India shapes society. Political parties have developed ways to capitalise on caste-based support and boost their election prospects. Religion dominates many aspects of life. Religious diversity shapes India’s political landscape. This country’s diverse faiths shape its voting patterns and political alliances, despite its Hindu majority. Caste, religion, and regional identities are interwoven in Indian politics, revealing the complexity of Indian society.

Freebies and welfare

Since India’s independence, welfare programmes have provided food, clothing, and shelter to the poor. They now cover retirement pensions, healthcare, and education. Political parties have used these campaigns to attract people and support their ideas across India. The National Rural Employment Guarantee Act (NREGA), launched in 2005 to give guaranteed employment to rural households, has been criticised for its inefficiencies and inability to target economically disadvantaged people. The Pradhan Mantri Jan Dhan Yojana (PMJDY), launched in 2014 to guarantee financial inclusion for all Indians, has been criticised for its bureaucracy and inability to help economically disadvantaged people.

“Freebie politics” is a common practice in India and elsewhere. Political parties offer supplementary goods, services, or perks to voters to win their support. A frequent approach to election campaigns is to engage the public and promote the political party.

Freebies have been a ubiquitous theme in Indian election campaigns. Political parties have used promises to win votes and support. Free or significantly subsidised goods are routinely promised to specific populations. These parties offer everything from rice to computers and TVs to attract voters. Some parties have even promised direct cash transfers to help financially disadvantaged groups. Parties use such promises to woo voters, affecting election dynamics. Pledges have been made to attract farmers, women, students, and low-income people. These promises seek to target specific groups to sway their support for upcoming events.

Macro-analysis of free electricity and water schemes

Complementary electricity and water can strain a nation’s economy. These burdens include financial pressure, lost opportunities, unbalanced market incentives, lowered investments, resource misallocation, and long-term financial responsibilities. Free utilities require major funding for infrastructure generation, distribution, maintenance, and development. Budget deficits can stem from poor cost management. This may increase government debt, cut funding for key sectors like education and healthcare, or raise taxes.

Opportunity costs arise from allocating financial resources to provide electricity and water instead of productive expenditures that could boost economic growth. Artificially low or free power and water costs can upset market incentives, resulting in inefficient and excessive use. This strains infrastructure encourages waste and worsens environmental issues.

Free utility policies can hurt investments and companies. Cross-subsidisation or inadequate infrastructure may raise business costs, inhibit investment, reduce productivity, and lower the competitiveness of electricity- and water-intensive businesses. This might reduce economic growth, job prospects, and private sector participation in utilities.

Free utilities distort resource allocation, reducing economic efficiency and production. The phenomenon could limit resource diversity and technological advancement. Complementary utilities may also incur government debt. When delivering complementary services, infrastructure maintenance, growth, and improvement costs may be overlooked.

To protect the nation’s economy, free electricity and water programs must be evaluated for sustainability, efficiency, and trade-offs.

Social Benefit 

Freebie schemes have numerous micro-level consequences for individuals and households. Micro-level consequences of freebies:

• Freebie scheme recipients save money. Free goods and services allow people to spend money on other things. This can help low-income people immediately. Freebies can help people afford necessities. Food, healthcare, education, and utilities are examples. Freebies help people live better by reducing financial restrictions.
• Poverty Alleviation: A freebie scheme can help alleviate poverty by meeting immediate needs. Vulnerable populations can benefit from free goods and services in nutrition, healthcare, and education.
• Social Inclusion: The freebie scheme helps marginalized populations get resources. This can improve social equality by bridging socioeconomic gaps. Freebies can minimize social inequality and foster a sense of belonging.
• Freebie schemes can boost local economies, especially where goods and services are obtained or distributed. Free school uniforms or supplies can promote local companies that sell them. This can produce local economic activity and jobs.

Conclusion

India’s freebie debate has exposed poverty, economic inequities, and inadequate funding for healthcare and education. Long-term capacity-building programs in education, healthcare, and employment are underutilized, prompting a study. Freebies from political parties are draining public funds and confusing resource allocation. The Election Commission ordered political parties to limit giveaways, sparking a heated discussion. Non-elected institutions have been intruding on electoral democracy, potentially altering its dynamics and raising concerns about the electorate’s agency and ability to make informed democratic decisions.

Policy instruments offer optimism for India’s social systems’ massive untapped resources. Financial regulators must be reinforced to track and steer unseen and illogical spending. Welfare programs need simplification to identify and serve the poor, prompting concerns about rampant corruption. To protect the underprivileged, urgent action is needed. To grasp these provisions’ complexity, frameworks must be re-evaluated. But blatantly providing Free energy and water can put the national economy under fiscal strain due to opportunity costs, flawed market incentives, decreased investments, distorted resource allocation, and long-term financial liabilities. These costs can raise government debt, fiscal deficits, market-driven motives, resource allocation, consumption, and utility industry investment. Free public services’ inequitable resource allocation and financial commitments affect the nation’s economy. Electricity and water can increase financial savings, the availability of vital goods and services, poverty alleviation, and social integration on a smaller scale. These essentials can alleviate economic problems, improve quality of life, help underprivileged people, and make society fairer. Complementary goods and services boost economic growth and employment development.

In conclusion, free utilities can improve social outcomes, but their macroeconomic effects are costly. Free utilities’ sustainability, efficiency, and trade-offs directly affect the nation’s economic well-being. Long-term economic stability and growth necessitate balancing social welfare goals with fiscal sustainability, resource allocation and use.

Author’s Bio

Aryan Govindakrishnan is a second-year student at the Jindal School of Government School and Public Policy, pursuing Masters in Economics. His research interests include finance policy and economics.

Image Source: https://theleaflet.in/freebies-debate-highlights-the-limits-of-judicial-overreach/