The Freebies Debate: An 'Anti-Democratic' Turn

From a reading of the freebies petition, it is clear that the petitioner is making political arguments, and merely using (poor) economics to buttress overtly undemocratic prayers.

In a nutshell, the petitioner argues that electoral promises made in manifestos of political parties are ‘freebies’ that lure voters, influence electoral outcomes, and therefore such promises amount to bribery. As per the petitioner, giving ‘freebies’ is not a function of government. Yet, governments spend on them and are unable to pursue their core functions because of them. Additionally, the petitioner argues, freebies are the cause of the fiscal strain on the government’s budget.

Mercifully, at the onset itself, the Supreme Court rejected his undemocratic prayers (e.g., to derecognise political parties for promising ‘freebies’). Unfortunately, however, by latching on to the fiscal question, the apex court failed to avoid the bait.

A debate on fiscal discipline is important. It is unfortunate that the Supreme Court was not able to rectify the skewed framing of the debate. Its statement that ‘economy losing money and the welfare of people, both have to be balanced’ was disappointing because it suggests that in striving for fiscal discipline, the axe must fall on welfare spending.

Welfare spending is already very low in India, especially in comparative perspective. By contrast, in 2001, when the Union of India pleaded helplessness in acting on widespread hunger due fiscal reasons, the court directed it to ‘cut the flab elsewhere’.

To cut the flab, we should be looking at wasteful expenditure without any productive effects – e.g., vanity projects such as large statues, each draining the exchequer by hundreds of crores, bullet trains, central vista, etc. Another avenue for cutting the flab is expenditure that does not achieve any redistributive goals, or that ends up in the hands of the privileged. This would include large loan waivers given to high net-worth individuals, sops to industry and so on.

Thus, as far as expenditures are concerned, we need to look at expenditures other than welfare when we speak of fiscal discipline. This is because redistribution through welfare is an important role of the government and, as mentioned earlier, our welfare spending is quite low.

Moreover, a fiscal crisis can arise as much from government spending as from poor resource mobilization. Our efforts on raising tax revenues need much greater policy action. With high rates of growth of GDP until recently, there should have been a steady increase in the share of the income tax paying population. It has risen, at best, at a snail’s pace. This suggests that either the economic condition of around 90% Indians is quite precarious or that there is widespread tax avoidance and evasion.

Beyond income taxes, other sources of tax revenues that are either non-existent in India (e.g., the wealth tax was abolished some years ago) or are grossly under-utilized (e.g., latest estimates suggest that we are only able to raise 0.2% of GDP through property taxes; the OECD average from this source was 2% of GDP).

This also needs the sort of vigorous public debate that we are having on ‘freebies’.

The reason that revenue mobilization or ostentatious expenditures make a scant appearance in the debate around freebies is that those of us who participate in them come from privileged sections that would either end up paying more taxes or losing some of our privileges.

For a moment, imagine how the debate might be framed if a rural Adivasi woman were to anchor it. Over the years, at protests across the country, speakers have asked: why are the wages of NREGA workers stagnating in real terms, when the government is able to protect its employees from inflation by providing a “dearness allowances”.

When government finances are under strain, why doesn’t the axe fall on privileges such as the two years of paid child-care leave which some enjoy (on top of 23 weeks of paid leave as maternity entitlements), or “Leave Travel Allowance” provided to government employees for visiting their families and for holidays? In 2020, when government employees could not avail their leave travel allowance due to Covid-19, the government urged them to buy goods that attracted GST of 12% or more. Is that not a freebie?

The Supreme Court’s time is a scare and precious resource. This petition is wasting the court’s time for two reasons. One, the Supreme Court has already deliberated on this matter in 2013 (Balaji vs Union of India), when it rejected the plea to consider electoral promises as bribes.

Two, it is poorly argued. Here are a few excerpts from the current freebies petition. Freebies are a “sure way of screwing the State” that have “made us so lazy that we don’t want to do anything.” “The time is not too far when one party will say that “We will cook food for you in your residence” and other will say that “We will not only cook, but also feed you”. It is mainly a rant.

How did such a poorly drafted, inconsistently argued, factually incorrect petition get so much traction? There is an element of Chinese whispers in the debates emanating from cases in the Supreme Court. Typically, petitions make detailed arguments and submissions. When the matter is taken up in court, some fraction of it is discussed, the judges make a comment on one or two aspects of what is discussed, journalists present in court in turn select which comments to report on and finally, the headline writers add their twist. The result is a distortion or trivialization of important matters.

For instance, in an article headlined “Supreme Court Says Balance Needed Between Economy and Welfare of People”, other observations of the court are also reported: “Question is, now to what extent we can interfere or go into the issue?“ Or, “I don't want to look into the aspect of de-registration. That's an anti-democratic thing.” Those observations might have made better headlines and steered the public debate in a more desirable direction, because “interfering” in election manifestos is indeed an “anti-democratic” thing.

The author is a professor of economics at the Indian Institute of Technology Delhi.

The views expressed here are those of the authors, and do not necessarily represent the views of BQ Prime or its editorial team.