Deconstructing and reconstructing the theory of “freebies”

In this article…

• Why India is witnessing the debate now?
• Should we stop social spending
• What about fiscal discipline?
• Distinguishing welfare from freebies
• Changing narrative: A light at the end of the tunnel

‘Universal adult Franchise’ is one of the essential pre-requisite for sustaining democracy. It provides the value of one man – one vote – one value and thus it ensures the dignity of an individual. But the other side of this coin is a cause of concern in today’s democracy. It is accused of populist policy in order to gain votes. Subsequently, it leads to an economic crisis. Sri Lankan economic crisis is being put forward to oppose the notion of a freebies culture. On the same line, public expenditure done by the concerned government is being criticized for populist policy.

Recently, PM Modi warned people of ‘Revari culture’. Even institutions like the Reserve Bank of India have been linking the bad shape of the state’s economy with “freebies”. Surprisingly, a man belonging to civil society filed a PIL claiming – “Irrational freebies is analogous to bribery”. Subsequently, solicitor general, Tushar Mehta put forward the notion that “populist freebies distort the informed decision making of the voters”. Even the supreme court of India warned against the conception of “freebies“.

Why India is witnessing the debate now?

What does it indicate when a thrust is created against “freebies” – Should we stop welfare spending? This is not a new debate that has been taking place in India. Before the second world war, classical liberalism prevailed, which believed in the notion of minimum intervention of state or ‘night watchman state’. Post-WW II, liberals like Daniel bell claimed the ‘end of ideology’ because development took a front seat when the state started welfare policies. It led to modern liberalism.

But modern liberalism didn’t last long. Criticism of welfare policies was started by prominent libertarians like Nozick and Hayek. Over the period of time, the 1990s witnessed the rebirth of classical liberalism in the face of neoliberalism. It was based on the theme of market fundamentalism. India’s LPG (Liberalism-Privatization-Globalization) policy is one of the reflections of a surge of neo-liberalism. It became one of the causes behind the rise of conservative parties in the world.

India was not on the island when this development was taking place. Consequently, India witnessed the rise of the BJP. In 1984, BJP won only 2 seats out of 229 contested seats. This figure reached 120 in 1991, 182 in 1998, 282 in 2014, and 303 in 2019. This increasing trend can be decoded by its structure and functions. Electorally, BJP is a party of the majority community, structurally it is a party of the subaltern class and in terms of public policy, it is a party of the capitalist class. Because it seeks to vote through Hindutva, gives representation to the subaltern class and assistance to industrialist society.

Should we stop social spending?

Urban elites in India have long been Sceptical of the welfarist policy of government including the PDS system and MGNREGA. Reflections of such debate and discussions are found even in PM Narendra Modi’s speech in parliament where once he described MGNREGA as a ‘living monument of Congress-led UPA’s failures. Initially, he allocated a reduced amount for MGNERGA. Paradoxically, he increased additional Rs 40,000 crore to MGNREGA amid the COVID-19 pandemic in between the financial year.

We must not forget the significant contribution of MGNREGA during the Global financial crisis of 2008. In 2008, the whole world was facing a financial crisis but it failed to shake India’s economic strength significantly. It is so because those people in India who returned from cities to villages got employment through MGNREGA. Subsequently, it continued the financial flow in the hand of poor people. Smooth financial flow didn’t create obstacles against demand creation. Thus, economic activities continued.

Apart from its role in emergency situations, India has been constitutionally obliged to follow welfare policy under the ‘Directive Principle of State policy’ (DPSP). Following constitutional obligations becomes imperative when we understand the actual strength of poor people. RBI reports say that 22% of the Indian population liver under the tag of “Below Poverty Level” (BPL). It indicates that 22% of people in India are not able to earn Rs 32 per day in urban areas and Rs 23 per day in rural areas as per Tendulkar’s estimation.

The situation becomes even worse in the rural areas of Chhattisgarh and Jharkhand where, as high as 45% of the population live below the poverty line. Such people need the support of the state for the process of redistribution of resources in a just and fair manner.

What about fiscal discipline?

Fiscal discipline doesn’t only depend on public welfare. In fact, it has not been the top item on the expenditure list. Fiscal discipline also includes proper and judicial use of common resources. For example, currently, 5G allocation (Rs 1.5 lakh crore) is much lesser than what Vinod Rai estimated financial loss in 2G spectrum allocation (Rs 1.76 lakh crore). On the basis of Vinod Rai’s estimate, 2G was idealized and conceptualized as a scam. Even the government has itself estimated that 5G would be sold up to 5 lakh crore as claimed by former minister A Raja. But now 5G has been auctioned for only 1.5 lakh crore.

Instead of cutting spending on social security, resources should have been allocated at a reasonable rate. This step has the potential to minimize inequality. But adhering the other way round is one of the main causes behind increasing inequality in Indian society as found by an Oxfam report. Apart from this, according to Budget 2021-22, petroleum subsidy is being curtailed over the period of time. It has repercussions on everyone’s life because it is one of the important factors behind increasing inflation.

Decreasing petroleum subsidies may save dollars. But in spite of having coal resources in India, it is not a wise idea to spend the same dollar to purchase coal from Australia. Thus, Amartya Sen rightly says that ‘poverty and famine‘ are not due to a lack of resources but due to a lack of proper management of resources. His argument can be extrapolated in the case of India’s fiscal discipline, India doesn’t lack resources but it definitely lacks proper management of resources. Further, prioritizing spending can make welfare policy economically sustainable.

Prioritization: Distinguishing welfare from freebies

There should be a common consensus on essential and non-essential things on which public spending is supposed to be done. Negative expenditure needs to be stopped. For example, the TRS government in Telangana planned to distribute Saree on the occasion of Bathukamma. Similarly, distributing electrical appliances, liquor, irrational cash transfers like PM-KISAN that don’t go to the tiller, etc is not a good idea. However, there are good initiatives like distributing sewing machines by the governments of Tamil Nadu and Bihar is a good step in the direction of women empowerment.

Similarly, distributing bicycles to girl students and laptops are good step because it adds value to human capital. The importance of distributed laptops was seen during the lockdown. It helps students in taking online classes during a closed environment due to the pandemic. Apart from this, education and health are not in the top 5 priority in Budget 2021-22 but it plays a prominent role in building social and economic capital. On the same line, National Food Security Act, (NFSA) 2013 covers 75% of rural and 50% of the urban population to receive highly subsidized foodgrains.

The UN has praised the Indian government for its food program in its study, “Programmes to Protect the Hungry: Lessons from India“. In spite of such programs, the Global Hunger Index 2021 ranks India 101st out of the 116 countries. Declining food subsidies will make the case further worse. It may further push people into poverty and hunger. Similarly, it is the duty of a responsible government to take care of people in their old age because they have contributed to the nation’s growth when he/she was young. Stopping railway concession to senior citizens is not a good idea at all.

On the line of the senior citizens, women also belong to the weaker section. Curtailing expenditure on LPG cylinders may worsen their health situation. A RTI reply shows that 90% of people under the PM Ujjwala Scheme fail to refill their LPG cylinders. Thus, prioritization of government spending is important.

Changing narrative: A light at the end of the tunnel

Thus, there is a need to burst a bubble formed by elites against the poor. This envy can be encountered through a proper understanding of the situation. It is also true that taxpayers are an important stakeholder and their concerns are genuine. But a new narrative should be inculcated based on the truth that what government does for the poor is not “freebies” but their entitlement. Even the entitlement extended by the government is not enough to them for the losses done by us. In reality, they are not “Labharthi” (beneficiaries) but they are magnanimous and entitlements to them are merely a “token of apology” and not ‘revari’.

For example, a taxpayer uses AC, refrigerators, and vehicles in his/her life but poor people don’t use them. But the repercussions of these appliances are born by everybody including the poorest of the poor. If a poor man dies on road due to heat waves, it can’t be included in the criteria of natural death. These appliances play role in polluting the environment and deteriorating the health of the poor who didn’t participate in its cause. Thus, free health became his right and taxation becomes his duty.

Public policies need to be prioritized on the principle of Gandhi’s Talisman. For this, we need to go back to the drawing board and divide public policy into – ‘essential’ and ‘non-essential’ on the basis of rationality. A sketch should be made that promises economic sustainability. If it is economically viable then, free education, free healthcare, and employment are not freebies but are fundamental rights, and the duty of a responsible government.

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