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Question- 2. Are freebies affecting the economic growth of India? Explain. 


Answer:  The issue of freebies given out by Indian states has come under the lens here. Over the years the freebies have become an integral part of the politics in India, be it for making promises in the electoral battles or providing free facilities to remain in power.

● Political parties promise to offer free electricity/water supply, monthly allowance to unemployed, daily wage workers, and women as well as gadgets like laptops, smartphones etc. in order to secure the vote of the people.
● The states have become habituated to giving freebies, be it in the form of loan waivers or free electricity, cycles, laptops, TV sets and so on.
● Certain kinds of expenditure that are done under populist pressures or with elections in mind may be questionable.
● But given that in the last 30 years there has been rising inequality, some kind of relief to the population in the form of subsidies may not be unjustified but actually necessary for the economy to continue on its growth path.
● There are some examples which show that some expenditure outlays do have overall benefits such as the Public Distribution System, employment guarantee schemes, support to education and enhanced outlays for health, particularly during the pandemic.
● States like Tamil Nadu and Bihar are known for giving women sewing machines, saris and cycles, but they buy these from budget revenues, contributing to the sales of these industries.
● Freebies undercut the basic framework of macroeconomic stability, the politics of freebies distorts expenditure priorities and outlays remain concentrated on subsidies of one kind or the other.
● Impact on States’ Fiscal Situation: Offering freebies, ultimately, has an impact on the public exchequer and most of the states of India do not have a robust financial health and often have very limited resources in terms of revenue.
● The promise of irrational freebies from public funds before elections unduly influences the voters, disturbs the level playing field and vitiates the purity of the poll process.

● It is not about how cheap the freebies are but how expensive they are for the economy, life quality and social cohesion in the long run.
● The judicious and sensible offering of freebies or subsidies that can be easily accommodated in the states’ budget do not do much harm and can be leveraged.

Updated on 02 Sep 2022 |   Added on .02 Sep 2022  |  by admin