What's a freebie? Experts dissect basic definition amid SC hearings

'Strain on exchequer arising from sops to industry, bad loan waivers, etc., must be discussed'

The current debate over ‘freebies’, sparked by the hearings in the Supreme Court, has taken a pedantic turn, with public finance experts and economists raising doubts over whether an accurate definition can be arrived at.

Experts and serving government officials who spoke to Business Standard (the latter on condition of anonymity) say while announcing and implementing schemes before elections or at any other time is the prerogative of the political executive, there is a need to further improve public finances in Centre and states by weeding out inefficiencies, bogus beneficiaries and cutting down programmes that don’t serve their stated purpose.

“It is impossible to define a freebie. You cannot rule out a scheme based on a definition. This whole issue is a matter of serious discussion, especially on how you handle fiscal responsibility,” said Montek Singh Ahluwalia, former deputy chairman of the Planning Commission and a former finance secretary.

On Tuesday, Chief Justice of India NV Ramana raised in court the very issue of defining freebies. “Suppose tomorrow a particular State says they are giving out freebies or launching a scheme, do we say it is the prerogative of the State government and leave it as it is? There has to be a balance,” he said.

Reetika Khera, associate professor at IIT-Delhi, told this paper that electoral promises such as electricity, laptops, gold chains, etc, should be discussed separately as rights such as health and education and legislated entitlements such as subsidised rations under the National Food Security Act, 2013.
 

“In this debate, the strain on the exchequer arising from sops to industry, bad loan waivers, etc., should also be discussed. Also, I don't think that deciding what is a freebie is straightforward. Therefore, it's unlikely that we can settle this question easily. What is required is educating the public on the possibility that electoral promises trivialize elections or could be against the essence of good democratic practices,” Khera said.

Among serving officials in the government, there is a general consensus that while a more robust, informed discussion on freebies or populist schemes needs to take place, it should be reserved for political and public policy space and not the legal realm. 

“You can’t define populist scheme, although the 15th Finance Commission tried. What can be done is better targeting, by removing inefficiencies and weeding out of bogus or duplicate beneficiaries,” said a top government official. “The Centre and some states are doing this in their own capacity but there needs to be a coordinated effort,” the person added.

“Providing something for free may or may not be justified, calling it a freebie does not help. Some free provisions, like school meals, are extremely valuable. Others may be wasteful. They should be judged on their own merits, like all subsidies,” said economist Jean Dreze.

Dreze added that in India, the biggest beneficiaries of wasteful subsidies have been privileged classes and the corporate sector. “Some wasteful subsidies may benefit poor people as well, but they are quite small in comparison,” he said.

When the 15th Finance Commission was formed, one of the terms of reference given to it was recommend performance-based incentives to states based on “control or lack of it in incurring expenditure on populist measures”.

In its report for 2021-26, the 15th FC stated: “Many states stressed that the categorisation of schemes into populist and non-populist cannot be done objectively, as development requirements differ from state to state. Further, they argued that elected sovereign governments are accountable to the people of the state and they, rather than the Finance Commission, should have the prerogative of deciding the welfare schemes.”

This even though 15th FC Chairman NK Singh had said that the body will come up with a definition of populist schemes. In the end, the 15th FC did not define freebies or populist schemes.