In a welfare state, the government is expected to provide the citizens much-needed relief in hours of crisis. This is why, distribution of free rations to the people belonging to the lower strata of society during the pandemic by the Indian government, was a welcome move. A number of other steps taken during the same time have also received widespread support as it helped both the people and the economy, which has made a remarkable turnaround as soon as the pandemic lost its severity. But if such freebies are announced only for political considerations, it will cause irreparable damage to the economy. For example, the newly elected Punjab Government has announced free power for agriculture in the state. While the state government claims that free power will bring revolutionary change in the state’s agricultural sector, economists are in strong opposition of the move as they feel that such freebies will only weaken Punjab’s economy and have warned that other states indulging in such practices will also face similar fiscal disaster.
Punjab’s new freebie will cost INR 17 thousand crore, which means an extra three per cent burden on the state's GDP. Unfortunately, Punjab’s debt to GDP ratio in 2021-22 fiscal already stands at 53.3 per cent. Thus more burden will derail the state’s macroeconomic stability further and it will have to completely depend on the Centre to bail the state out of the financial mess. But Punjab is not the only state in India which indulges in freebie politics. Many states are guilty of announcing freebies just to please sections of the electorate. The West Bengal government proudly announced that from health to education, it has made everything free. At the same time, it cannot deny the fact that too many freebies have affected developmental works in the state. In various administrative meetings, the state government has made it clear that its priority is to continue with various welfare schemes and the demand for a new hospital or road will be taken up later.
This is a dangerous trend and the practice of offering freebies should be scrapped at once in order to keep the economy in good shape. Freebies meant for strengthening the public distribution system, employment guarantee, education, health, etc. are helpful for the economy. But sops, which will benefit only a small section of society should be discouraged. Recently, the Rajasthan Government decided to revert back to an old pension policy, which was discarded long ago. The political leadership of the state is hopeful that such a decision will help them get the support of the government employees. But the financial situation of the state does not support such an economic adventure. By spending 56 per cent of the total tax and non-tax revenue of the state, the recent decision of the state government on pension to government employees, will help only six per cent of the populace. Now is the time to ensure real economic growth that will lead us to long term prosperity, rather than using freebies for narrow gains.