Freebies - The political path to economic disorder

Abstract

The provided article discusses the impact of "freebies" in Indian politics and their consequences on the economy. The culture of offering free goods and services as political promises has been on the rise in India for the past few decades. Political parties make reckless promises in order to win over voters, without considering the economic implications.The article highlights examples of political parties in India, such as the Indian National Congress, All India Anna DravidaMunnetraKazhagam (AIADMK), Aam Aadmi Party (AAP), Telugu Desam Party (TDP), DravidaMunnetraKazhagam (DMK), and Samajwadi Party (SP), that have made promises of providing free electricity, laptops, water, transportation, and other benefits to gain electoral support. These promises create a burden on the government's finances and hinder the development of other welfare programs that could be more effective for the overall well-being of the population. While the provision of essential services like healthcare and education can be justified as social welfare programs, the indiscriminate distribution of free goods and services without considering their long-term economic impact is problematic. The article mentions that schemes like Ayushman Bharat, food security bills, and PM KISAN Yojana, which target specific beneficiaries based on need, cannot be classified as "freebies" since they contribute to the long-term growth of the nation. Comparisons are made with other countries like the United States, Brazil, and Scandinavian countries, where politicians also promise and implement social welfare programs. However, the tax-to-GDP ratio in these countries is higher than in India, indicating a higher capacity to fund such services through tax revenue. In contrast, India has a lower tax-to-GDP ratio, resulting in deficits and increased debt burdens when governments fulfill their freebie promises.The article also emphasizes the negative consequences of freebies on public finances. The government's expenditure on giveaways can divert resources from essential projects such as infrastructure, healthcare, education, and social welfare. It can lead to resource misallocation, discourage private investment, and hinder economic growth. The 2008 loan waiver program implemented by the UPA government is cited as an example of how freebie culture can disrupt the banking system and create a credit crisis. In conclusion, the article argues that while some social welfare programs are necessary for the development and well-being of the population, indiscriminate freebies offered for political gains can have adverse effects on the economy. It calls for a more responsible approach to governance and a focus on sustainable development rather than short-term populist measures.