The Supreme Court said "There is a need for an apex body, consisting of NITI Aayog, Finance Commission, ruling and opposition parties, Reserve Bank of India (RBI), and other stakeholders to make suggestions on how to control freebies by political parties." The Supreme Court observed that political parties' promising to distribute freebies during election campaigns is a "serious economic issue" and said there is a need for a body to examine the issue.

What are freebies?

According to Cambridge Dictionary "freebies is something that is given to you without you having to pay for it, especially as a way of attracting your support for or interest in something."

It refers to Politicians' promising free sops to people along with guarantees of development during election season in exchange for votes. The issue was dragged into the limelight when Prime Minister Narendra Modi slighted Opposition parties and warned the youth not to get carried away by this 'revari culture'.

Welfare schemes and freebies

The difference between freebies and welfare schemes is not always clear, but a general way to distinguish them is by their long-term impact on beneficiaries and society. Welfare schemes have a positive impact, while freebies can create dependency or distortions.

Freebies are goods and services given free without any charge to the users. They are generally aimed at benefiting the targeted population in the short term. They are often seen as a way of luring voters or bribing them with populist promises.

Some examples of freebies are free laptops, TVs, bicycles, electricity, water, etc.

While Welfare schemes, on the other hand, are well thought-after plans that aim to benefit the target population and improve their standard of living and access to resources. They are typically aimed at fulfilling the constitutional obligations (Directive Principles of State Policy) towards citizens. They are often seen as a way of promoting social justice, equity, and human development.

Some examples of welfare schemes are public distribution system (PDS), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), mid-day meal scheme, etc.

Freebies in elections

In India, political parties often use "freebies" to gain support from voters. From laptops and Smartphones to bicycles and even goats, there's no telling what freebies can provide. But why do they do it? What is the reason for giving all these gifts?

The answer is simple: it is a strategy to win votes. And it has worked time and again in Indian elections. By promising free donations, political parties can take advantage of voters' desires for material possessions and entice them to vote for the party with the most generous list of donations. Free payments can effectively increase voter turnout, but their impact on voting behavior needs to be elucidated. While some studies show that people are more likely to vote for a party that gives them a free gift, other studies have found no such link. At the end of the day, it's up to each voter to decide if a free gift will affect their vote. But one thing is certain: in India, handing out freebies is still essential to winning elections.

States like Rajasthan, Madhya Pradesh and Punjab have announced free tolls for smartphones, gas bottles, electricity etc. Whoever forms the next government will inherit the financial burden of tolls.

The Supreme Court has issued a notice to the Central Government of India, the Madhya Pradesh Government, the Rajasthan Government and the Election Commission on a PIL alleging misuse of public funds to distribute cash and other freebies. Supreme Court of India DY Chandrachud and Justices JB Pardiwala and Manoj Mishra asked the Centre, states and the probe team to respond within four weeks. The Supreme Court heard a PIL filed by social worker Bhattulal Jain and ordered to merge it with the pending suit in the matter.

Gratuities and related regulations and their impact on the national economy

Freebies and related provisions and its effect on state finances
As expected, the issue of freebies has taken a political turn, but its essence remains unnoticed. The choice of spending should rather be the responsibility of the government, because priorities are different. The problem arises when the public finance deficit reaches a high level that is unsustainable when the debt level increases.

Interestingly, before the pandemic, the national debt was about half the level of the central government. While the Center has never recorded a deficit ratio below 2007-08 in the third half, all states combined from the third half of 2004-05 to 2020-21 except 2015-16 and 16-17. Here too it was below 3.5%.

So, in principle, there is reason to believe that countries have managed their public finance deficit ratio better. They have generally been more limited due to fiscal responsibility and budget management (FRBM) rules that limit deficits to 3 percent of GDP. Violation of this level requires special permission, leading to internal discipline. It is not the same for the center, which was advised but... never forced, due to the level of responsibility assumed.

Fiscal Responsibility and Budget Management (FRBM) Act: The FRBM Act recommended that for 2022-23 a debt-to-GDP ratio of 20 per cent for the state governments before the financial year (40 per cent for the Centre).

What will come:

1. The financial propriety norms of the Government of India clearly state, inter alia, that "no authority shall use its power of expenditure to make an order directly or indirectly for its own benefit; and expenditure incurred out of public funds should not be made for the benefit of any particular person or group of people, unless the amount is recoverable in court or the expenditure is inconsistent with recognized policy or practice.
    
2. Reckless expenditure of tax payer's money on gratuitous fees is not a recognized custom/custom and is not punishable by court. It is an obvious financial offence, which means bribing voters with public funds for the sole purpose of obtaining advantages in electoral politics. An individual candidate handing out cash or bottles of vodka (with his own pocket money) to garner votes is seen as a corrupt practice, and rightly so, while a party that bribed voters with public money gains legitimacy (albeit in reality). If the tax revenue is used to support the poor sections of the society, such as the beneficiaries of Ayushman Bharat, which covers 100 million poor households, it passes as a welfare measure. But when it is used to give freebies to all, including the rich, it inevitably deteriorates. It may even lead to negligence on the part of taxpayers and ultimately reduced revenue.
    
3. As for (iii), a "free payment culture" will inevitably affect public finances. It is the duty of every government to raise the revenues necessary to cover development costs and ensure the well-being of the poor. This cannot be a valid justification for indiscriminate free spending, which is allowed to continue more rapidly, turning a surplus into a deficit.

The proof of the pudding is in the eating. However, if states continue to waste public funds, if states continue to waste taxes, if states continue to ignore the FRBM protocol, they are on the way to unsustainably high debt, with disastrous consequences for macroeconomic stability and India's ability to sustain rapid growth. The free gift must be stopped immediately.

Advantages of freebies
Public information and engagement:
Free government offers can increase public trust and satisfaction with government by demonstrating its responsibility and accountability to the people. In addition, free gifts can create opportunities for feedback and dialogue between government and citizens, which increases transparency and democracy. A Center for Policy Research study found that free gifts such as laptops, bicycles and cash transfers had a positive effect on voter turnout, political awareness and satisfaction with the government in Uttar Pradesh and Tamil Nadu.

Economic growth:
Free payments can stimulate economic growth by increasing labor productivity, especially in less developed regions. For example, free gifts such as laptops, bicycles or sewing machines can improve the skills, mobility and income opportunities of poor and rural people. A NITI Aayog report found that in Bihar and West Bengal, free gifts such as bicycles to schoolgirls increased their enrollment and learning rates, reduced dropouts and improved their academic performance.

Social welfare:
These can provide basic needs and social welfare like food, education, health care, electricity etc. to the poor and marginalized sections of society. For example, free gifts such as uniforms, textbooks or health insurance can improve literacy. Health and quality of life of the poor and disadvantaged groups.

A study by the World Bank estimated that free payments such as Public Distribution System and #40;PDSand#41; reduced India's poverty ratio by 7 percent in 2011-12. A study conducted by the NSSO found that free gifts such as health insurance under the Rashtriya Swasthya Bima Yojana (RSBY) reduced out-of-pocket expenses and catastrophic health events among sub-poor households.

Income equality:
Free payments can reduce income inequality and poverty by distributing wealth and resources more fairly. For example, free gifts such as loan waivers or cash transfers can give households in debt or on low incomes access to real estate, loans or income support. A report by the Reserve Bank of India analyzed that the loan waiver eased the debt burden and improved the creditworthiness of distressed farmers.

Disadvantages of freebies
Disadvantages of dependency syndrome:
Freebies can create a pattern of negative dependency and entitlement among recipients, who may expect more free gifts and be less motivated to make an effort or pay taxes.

For example, free gifts like Rs 1/kg rice or free electricity can reduce the responsibility and accountability of beneficiaries and make them dependent on foreign aid. A poll by the Association for Democratic Reforms found that 41% of Tamil Nadu voters considered free grants an important factor in voting, while 59% said they were satisfied with the state government's performance.

Fiscal burden:
Gratuities can have a negative impact on the health and macroeconomic stability of the finances of a country or state by increasing public spending, subsidies, budget deficits, debt and inflation. For example, free subsidies such as farm loan waivers, unemployment subsidies or pension schemes can limit the country's fiscal resources and fiscal discipline, affecting the country's ability to invest in other sectors or pay its liabilities. An RBI report analyzed that bonuses such as the Indira Gandhi National Old Age Pension Scheme (IGNOAPS) for the elderly posed a financial risk to the central and state governments as they meant increased pension liabilities as the population aged.

Misuse of resources:
Gratuities can distort spending priorities and allocation of resources by diverting funds from more productive and important sectors such as infrastructure, agriculture, industry, etc. For example, free cell phones, laptops, or air conditioning can consume a large portion of public spending and crowd out investment in public goods such as roads, bridges, irrigation systems, or power plants. The NITI Aayog report criticized that free gifts such as laptops given by the Uttar Pradesh government diverted money from more pressing needs such as improving school infrastructure, teacher quality or learning outcomes.

Quality compromise:
Free payments can reduce the quality and competitiveness of free goods and services, reducing incentives for innovation and improvement. For example, free gifts such as bicycles or laptops may be of inferior quality or outdated technology compared to gifts available on the market or manufactured in other countries. A report by the Center for the Development of Advanced Computing estimated that free gifts offered by various state governments, such as laptops, were based on outdated technology and software that limited their functionality and effectiveness.

Impact on the environment:
Tolls can have a negative impact on the environment because they encourage the overuse and waste of natural resources such as water, electricity or fuel. For example, free electricity, free water or free gas bottles can reduce incentives for saving and efficiency and increase carbon footprint and pollution levels. The CAG report found that free electricity to farmers in Punjab led to overuse and waste of energy, low tax compliance and poor quality of service at the state-run power plant.

Conclusion:
Lawmakers will better understand how their investments will prosper in the future. Instead of a politically motivated will, what is needed now is a charitable approach. They have to consider the economic impact, how it affects the finances of the country and how it improves the life of the beneficiary. In a democracy, voters have the right to stop or allow free march. It is important to agree on how to manage absurd freebies, ensuring that voters are not swayed by false promises.