THE MALADY OF ELECTION FREEBIES

The state of economy in our neighbourhood, in Sri Lanka, Pakistan and Nepal, is alarming. They were irresponsible with their spending and taking loans and today they do not have money left in their coffers to pay for essential imports like food and fuel and are looking up to IMF or China to bail them out, which they ultimately will but after extracting a pound of their flesh. Almost all states in India too are in a habit of spending beyond their means of revenue earning, thus running a deficit budget. Their fiscal irresponsibility is further compounded during every election with the promises of innumerable election freebies. 

 

States with worst debt-to-GDP ratio are Punjab, Rajasthan, Andhra, Kerala and West Bengal, but other states are not far behind. As the Prime Minister's popularity among voters remains unchallenged the opposition governed states try to offset it by promising and often delivering fiscally imprudent freebies. But by this attitude and action they are digging a pit which will bury their future. When tax payer's money is spent in freebies it helps a select few but when it is spent on infrastructure, job creation, education and health it is money well spent as it helps everybody. Election freebies have become that entitlement behemoth which is now killing empowerment and threatening our dream of Atmanirbhar Bharat! We cannot keep on promoting freebies and subsidies as our prescription for poverty instead of jobs.

 

Before 2014 corruption in high places was almost institutionalized and a major share of our tax money was swindled by the crooks in a politician – businessmen nexus. From black-marketing of train tickets to high stake defense deals the system was as leak proof as a sieve. Such was the state of affairs that a Prime Minister of yesteryear once lamented that when he sent Rs. 100 from the centre for the welfare of villagers only 10 paisa reached them. With the JAM trinity (Jan Dhan bank accounts, Adhar and Mobile phone) we have managed to plug this leak but election freebies remain a huge fiscal challenge for us.

 

Election freebies are incentives or enticements for voters to rob their votes. Political parties promise to offer free electricity/water supply, monthly allowance to unemployed, daily wage workers and women, free gas cylinders, a kilo of ghee, free rations for five years as well as gadgets like sewing machine, washing machine, television, laptops, tablets, smartphones etc. in order to secure the vote of the people. As if these were not enough other freebies include one litre of petrol to all two-wheeler owners and three litres of petrol plus six kg of CNG (Compressed Natural Gas) every month to auto rickshaw drivers, free electricity for irrigation, free scootys for meritorious girls, free medicines, free parking, pension increases of Rs 2,500, free education in primary schools and the list goes on and on and on.......

 

How it all started?

Pre election freebies have a history in India. The mother of this malady was the most popular Chief Minister of Tamil Nadu, the cinema star turned politician Ms. J. Jayalalitha. She would lure her voters with a new promise in every election and her freebees ranged from supply of rice or wheat at incredibly low prices to free distribution of washing machines, TV sets to monthly cash transfer to the poor. Not to forget waiver of farmer loans and promise of significant drop in income taxes.

 

The current champion of pre-election freebees.

Today Ms. Jayalalitha has many followers, the most ardent one being the Delhi Chief Minister Mr. Arvind Kejariwal. In the recent Punjab assembly election, which his party  won hands down, his list of freebies was simply irresponsible - giving 300 units of electricity free & providing Rs 1,000 per month to each woman is a big challenge, given that the existing debt burden of the State is Rs 2.82 lakh crore (100 crore = 1 billion and 1 lakh crore = 1 trillion). Punjab has around 73 lakh (1 lakh = 100,000) domestic electricity consumers, 14 lakh agricultural consumers, 11.50 lakh commercial consumers and 1.50 lakh industrial consumers with electricity being completely free for them. For the 2021-22 financial year, the total power subsidy bill of the state was reportedly Rs 10,668 crore, of which, Rs 7,180 crore i.e., 67.30% went towards subsidy to farmers, and Rs 1,627 crore towards subsidy to SC, BC and BPL (Scheduled Caste, Backward Class and Below Poverty Line) households. Additionally, financial assistance of Rs 1,000 per month for every woman, aged 18 years and above in the state, is expected to put an additional financial burden of Rs 15,600 crore on the State Exchequer. Simply put, the state will spend more in freebies than it will earn in revenues!

 

Why do politicians support it?

This act of luring voters with freebies is such a contagious disease that no political party today can stay away from it. Supporters of such freebies argue that pole promises are essential for voters to know what the party would do if it comes to power and they have the chance to weigh these options. They feel that these freebies are essential for fulfilling the expectations of the poor who live in great hardship otherwise. Then again there are also comparative expectations when the people of the adjoining/other states (with different ruling parties) get freebies. Politicians in states that have comparatively lower level of development with a larger share of the population suffering from poverty, feel that such kind of freebies assist in improving the quality of life of their voters.

 

The impact of freebies was visible in the 2021 Kerala Assembly elections. Two years after being routed in the Lok Sabha polls, the ruling Left Democratic Front is said to have got elected for a second straight term with a thumping majority, promising subsidized rice and food kits.

 

Why is it wrong?

Those against the freebies point out that these result in a huge economic burden on the exchequer of state as well as center (if the elections are held for Lok Sabha). Offering freebies today has become a competitive bidding done by every political party; however, a big problem is that the subsidies / loan waivers or any of the freebies announced are not incorporated into the budget proposals. The financing of such proposals are often not incorporated into the election manifestos of the parties and it invariably impacts the public exchequer. Most of the states of India do not have a robust financial health and often have very limited resources in terms of revenue to meet this unplanned expenditure. Announcing freebies in haste without legislative debate does not produce the desired benefits but only ends up in irresponsible expenditure which is fiscally disastrous. This money is then withdrawn from other avenues of planned expenditure thus depriving essential sectors like national security, employment generation, public transport, public schools, public hospitals, roads, electricity, plumbing and sewage. Economically speaking, there are no freebies because there is someone paying for it, and it eventually catches up with the public in the form of bad roads, bleeding discoms (power distribution companies), poor public infrastructure, and at some point, higher taxes.

 

Subsidies vs. Freebees

India is a large country and there is still a section of our population which is struggling below the poverty line. It is also important to have all the people accommodated in the development plan of the country. Money spent on giving them a better life should be a part of our planned expenditure and not mere tokenism like loan waivers and free electricity. Politicians of all parties resort to this gimmick because nothing catches the eyes of the poor voter more than the assurance of free or almost-free supply of essential food, clothing, electricity and primary healthcare. After the institutionalization of the JAM trinity the government has formulated effective economic policies where the welfare policies or government schemes have good reach without any leakages. They are targeted at the right audience, and the taxpayer is happily paying for this. That is why we have to ask do we still require such kinds of freebies which put undue burden on our limited resources and force us to siphon money out of planned expenditure essential for both national security and nation building? 

It is also essential to distinguish between subsidy and freebies as subsidies are the justified and specifically targeted benefits that arise out of demands.It is the responsibility of the government and all the other political parties to ensure better living and good governance. The judicious and sensible offerings of subsidies that can be easily accommodated in the states’ budget do not do much harm and can be leveraged. The subsidies in basic necessities such as giving free education to younger children or offering free meals at schools are rather positive approaches. There can be no argument with these measures. However, luring voters with irresponsible dog-whistles like free electricity, free WI-Fi and loan waivers are totally unjustified.  These leave a long-term burden on the economic health of the state or the central government. If the money spent for freebies is utilized constructively by creating job opportunities, building infrastructure such as schools, hospitals, dams and lakes and better facilities and providing incentives to agriculture, then all of us will benefit.

 

Intervention by Honorable Supreme Court

Thankfully the Supreme Court of India has taken cognizance of this malady. Responding to a petition filed by advocate Ashwani Kumar Uppadhayya on January 25, 2022, a bench of Chief Justice N V Ramana and Justices A S Bopanna and Hima Kohli issued a notice to the Election Commission of India (ECI) and the Centre on the issue of political parties wooing voters with the promise of freebies ahead of the assembly elections in five states - U.P, Uttarakhand, Manipur, Goa and Punjab. Freebies are going beyond the budgets, the Court felt and observed that the promise of freebies was a 'serious issue'. Freebies promised by political parties in their election manifestos shake the roots of free and fair polls. Within the limited scope, it appears that the court had directed the ECI and the Central Government to frame guidelines or regulating contents of election manifestos. This competitive populism resorted to by political parties is unconstitutional besides being a huge drain on the state exchequer.