SC Questions States Over Indiscriminate Distribution of Freebies

Syllabus: GS2/Polity and Governance

Context

• Recently, the Supreme Court questioned State governments for distributing freebies and expressed concern that such measures, particularly ahead of elections, resemble an ‘appeasement’ policy that disregards the health of the public exchequer.

What Are ‘Freebies’?

• These refer to goods, services, or financial benefits distributed by governments at no direct cost to beneficiaries. 
• These may include free electricity, water, farm loan waivers, laptops, scooters, cash transfers, free bus travel, or subsidised food grains.

Types of Freebies in India

• Universal Freebies: Benefits provided broadly without strict income-based targeting.
  • Free electricity up to a certain limit;
  • Free bus rides for women;
  • Distribution of consumer goods (TVs, laptops, scooters).
• Targeted Welfare Schemes: Designed for specific vulnerable groups.
  • Free ration under the Public Distribution System (PDS)
  • Scholarships for economically weaker students
  • Housing schemes for low-income families.
• Loan Waivers: Agricultural loan waivers; MSME relief packages;
  • Loan waivers are among the most debated forms of freebies due to their high fiscal impact.

Constitutional and Legal Basis

• India’s Constitution envisions a welfare state. The governments are encouraged to promote social justice, reduce inequality, and ensure access to education, healthcare, and livelihood under the Directive Principles of State Policy (DPSP).
  • Articles 38, 39, 41, and 47 call upon the State to promote social and economic justice.
• RP Act, 1951 (Section 123): It deals with ‘corrupt practices’, if any gift, offer or promise of gratification is made to voters directly or indirectly by a candidate or his agent or any other person acting on their consent.

Supreme Court (SC) Observations

• S. Subramaniam Balaji v. State of Tamil Nadu (2013): The Supreme Court held that freebies promised in election manifestos are NOT ‘corrupt practice’ under the Representation of the People Act, 1951, but they may affect free and fair elections.
  • The Court directed the Election Commission of India (ECI) to frame guidelines for manifestos.
• Ashwini Kumar Upadhyay v. Union of India (2022): Court said freebies create serious economic and fiscal impact, and referred the matter to a 3-judge bench.
  • The court suggested forming an expert body including NITI Aayog, RBI, and Finance Commission.
  • It distinguished between Welfare schemes (education, food, health) and Freebies for political gain.
• Dravida Munnetra Kazhagam v. State of Tamil Nadu (2023): Matter referred to a larger bench to reconsider the Supreme Court’s 2013 judgment.
  • The issue remains constitutionally significant and under judicial consideration.

Arguments in Favour of Freebies

• Social Justice and Equity: India has high income inequality. Free or subsidised access to essential services can improve living standards for vulnerable populations.
• Human Capital Development: Providing free education tools, healthcare, and nutrition can yield long-term economic benefits.
• Economic Stimulus: Cash transfers and subsidies may increase consumption, boosting local economies.
• Political Accountability: In a democracy, voters choose governments based on promised benefits. Welfare commitments can be seen as a legitimate part of electoral competition.

Arguments Against Freebies

• Fiscal Burden: Many States operate under significant fiscal deficits. Large-scale giveaways increase debt and reduce fiscal space for infrastructure.
  • Several Indian States have debt-to-GSDP ratios exceeding recommended limits. Freebie-driven expenditure can worsen fiscal stress.
  • Free or highly subsidised electricity, especially in agriculture, has led to mounting losses for State electricity boards.
  • Borrowing to fund current consumption shifts the financial burden to future taxpayers.
• Crowding Out Development: Excess spending on short-term benefits may reduce investment in roads, irrigation, public hospitals, schools, and power infrastructure.
• Lack of Targeting: Benefits often reach affluent groups who do not require assistance, reducing efficiency.
• Electoral Populism: Schemes are sometimes announced close to elections, raising concerns about vote-buying tendencies.

Way Forward

• Targeted Delivery Mechanisms: Use income data, Aadhaar linkage, and direct benefit transfer (DBT) systems.
• Fiscal Responsibility: Adhere to Fiscal Responsibility and Budget Management (FRBM) norms.
• Outcome-Based Evaluation: Assess schemes based on measurable social and economic outcomes.
• Transparent Funding Plans: Governments should disclose funding sources and long-term financial implications.
• Balancing Welfare and Growth: Allocate sufficient resources to infrastructure, healthcare, and education while protecting vulnerable populations.

Source: TH