Irrational Freebies

In Context

• Recently, the Supreme court bench said it will see to what extent it can or cannot intervene to stop political parties from distributing irrational freebies.

More about the news

• The Supreme Court had issued notice to the Centre and Election Commission of India on the plea against freebies offered by the state parties.
• The standpoint of Election Commission of India(ECI):
  • ECI said it has no power to regulate the same or take action against parties making such poll promises. 
  • ECI stated that offering freebies before or after the election is a policy decision of political parties.
  • Financial viability of these policies and their adverse effects on the economic health of the state is a question that has to be considered and decided by the voters. 
  • ECI also stated that it cannot regulate state policies and decisions which may be taken by the winning party when they form the government.
• The Centre did not file any response in the matter.

Action taken by ECI to avoid such scenarios

• Model code of conduct guidelines have been framed by ECI after consultation with recognised political parties.
• The promises made in manifestos are not enforceable under election law. 
  • However, the ECI had advised all the recognised political parties to submit a declaration along with copies of the manifestoes. 
• Also to see that the promises made therein are in consonance with the Model Code of Conduct.
• ECI is of the opinion that without enabling provisions in the law, de-registration of political parties will be an overreach of powers. 

What are Freebies?

• There is no such thing as a freebie in economics because ultimately somebody has to bear the cost of the supposedly free giveaways. 
• The concept is popularly known as “There’s No Such Thing as a Free Lunch”. 
• It means that everything has to be paid for by taxes if not today then tomorrow.
• When governments dole out gifts, citizens have to pay for them. It isn’t always the rich who pay. 
• Often the poor pay for the gifts, as governments collect taxes on everything from matchboxes to diamonds.
• But it affects the way people vote. 

Reasons for giving Freebies

• The failure of the parties and governments to deliver development to the ordinary people has led to the increased phenomenon of “freebies” and the parties have to resort to it to win over the voters.
• If you have done work during five years, then you won’t have to resort to it.

Issues with Freebies

• Financial irregularity: 
  • The reckless spending of the taxpayers’ money on freebies is neither a recognised policy/custom nor is sanctioned in a court of law. 
  • It is a blatant financial irregularity that amounts to bribing voters using public money solely for gaining an advantage in electoral politics.
• The burden on Public Exchequer: 
  • If states continue with fiscal profligacy, they will be heading towards the unsustainable high debt with catastrophic consequences for macro-economic stability and the ability of India to sustain high growth. 
• Vote bank politics: 
  • Political parties’ promises to lure voters in their favour is analogous to bribery and undue influences.
  • Their attitude seems to be – if we lose, we do not have to deliver, but if we win then we shall cross the bridge when we get to it. 
  • Hence, they have set out to make promises without a sense of responsibility as to whether it will at all be feasible to deliver on even some of them.
• Lacking equity or fairness: 
  • Freebies serve even those who are capable of managing on their own at the cost of those who can not pay for their own. This promotes inequality.
• Fiscal mismanagement: 
  • Most states lack the cushion to spend money as freebie and then be able to save state finances from going down into fiscal deficits.
• Promotes tax avoidance: 
  • Freebies may even trigger non-compliance amongst taxpayers and eventually lead to lower revenue. 

Way Ahead

• Development specialists point out that there is nothing wrong in having a policy-led elaborate social security programme that seeks to help the poor get out of poverty. 
  • But such a programme needs well-thought-out preparation and cannot be conjured up just before an election.

• The Finance Commission could be the appropriate authority to deal with it.
  • The Finance Commission, when it makes allocations to various states, can take into account the debt of the state and in the context of that find out whether the state’s economy will be sustainable over the years in the context of the freebies.