Why are EC, SC and government singing the same tune on “freebies”?

Bharat Bhushan

The growing noise in public discourse about whether freebies should be promised to the electorate suggests that the playing field is about to change for the 2024 general election. Not only the Election Commission (EC) but the Supreme Court and the government have also contributed to this debate.

The Law Minister has announced moves to amend the Representation of Peoples’ Act to introduce major electoral reforms. The announcement came a day after the EC overcame its reluctance to interfere in the freebies issue and asked political parties to disclose the cost of freebies and their source of budget funding if they came to power.

The debate started with Prime Minister Narendra Modi’s diatribe against freebies when he said in mid-July that “people of revadi (a North Indian sweet) culture feel that by distributing free revadis to people, they can buy them.” Even earlier, he railed against “populist politics”, saying, “it is very easy to lure people and get votes by making promises without thinking of the consequences. But this is the biggest truth – that a country that plays shortcut politics faces short-circuit.”

As if on cue, Bharatiya Janata Party spokesperson and advocate Ashwini Upadhyaya moved the Supreme Court seeking regulation of political parties promising freebies in their election manifestos. The apex court suggested a panel be set up comprising various stakeholders like the Union government, Niti Aayog, Finance Commission, the Reserve Bank of India and even representatives of the Election Commission on the issue, while it did not wish to interfere in a “policy matter”. It rapped the EC for not taking a stand on the issue. Smarting under the criticism, the EC argues that regulation of freebies would amount to “over-reach” on its part. A month later, the EC changed its mind.

The way the debate is framed, “freebies” are what is promised by parties out of power, while “welfare measures” are what are taken by the government as mandated by the Constitution, striving “to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations” (Article 38). So those electorally challenging the political dispensation of the day are required by the EC to demonstrate fiscal prudence. In contrast, the government of the day does not face the same pressure as its expenses are sanctioned politically by the legislatures and supervised legally through an act of Parliament, the Fiscal Responsibility and Budget Management Act, 2003.

The BJP knows the power of welfarism in an iniquitous society. In the last big election in Uttar Pradesh, a new phrase was coined — “the Labharthi factor”. It was used for people receiving monetary benefits from the Centre’s welfare schemes. UP tops the country in the number of those receiving financial assistance.

Under the Pradhan Mantri Awas Yojana, money was transferred to the bank accounts of around 1 million people in UP; Rs 1.2 lakh for the construction of a house in rural areas and Rs 25 lakh in urban areas. Under the Swachh Bharat Mission, money was transferred for constructing toilets at home. Under the Ayushman Bharat scheme, 13 million UP residents were insured for their medical needs. In addition, nearly 28.5 million farmers in UP received two instalments of Rs. 2,000 each before the UP-assembly polls in 2022 (it is another matter that later a state government probe showed that 2.1 million out of these had been ineligible for payment!). These welfare measures worked wonders for the party in the assembly elections, where farmers traded concerns about the stray cow menace for a roof over their head with an attached toilet — they voted overwhelmingly for the BJP.

However, the problem with freebies/welfare measures is that the voters always want more the next time. While the challengers can promise the moon, the government knows that the economic situation is tight and might even worsen before 2024. It is unlikely that the economy will allow the escalation of freebies. Hopes of domestic revival have been dampened by the fiscal pressure, no meaningful revival in private investment, lack of job creation, continuing distress in the MSME (micro, small and medium enterprises) sector, tighter monetary policy, falling rupee and subdued demand. The government’s exasperation was evident in the finance minister chiding Indian corporates whether, like Lord Hanuman, they were unaware of their strength and must be prodded to act, “Who is stopping you (from investing)?” she asked.

The government is already reeling under the pressure of additional spending on ongoing welfare schemes. The free foodgrain scheme under Pradhan Mantri Garib Kalyan Anna Yojana, started as a Covid-19 relief measure in April 2020, has had to be periodically extended by the Centre. Any further extension would mean that government expenditure must be cut to meet costs. The World Bank has already cut the Indian growth rate for FY23 from 7.5 per cent in June to 6.5 per cent in September.

Globally too, economic prospects appear bleak. The International Monetary Fund, warning of increased recession risk, has projected that the world economic growth could be lower by $4 trillion through 2026. The European Central Bank has echoed the fear that recession was becoming “increasingly likely.” The stress on the credit valuation of the second largest Swiss bank, Credit Suisse, and Germany’s Deutsche Bank also does not bode well for the global economy. Their combined asset value is $2 trillion compared to the $600 billion of Lehman Brothers when it collapsed in September 2008, plunging the world into a deep recession.

Further subsidies to the poor are extremely difficult in these economic circumstances. The government in power can never outmatch the “freebies” promised by its challengers who promise to outdo it on every count. If the economic situation makes it unlikely for the ruling party to contest the 2024 general election on the promise of additional welfare measures, its effort will be directed at restricting Opposition parties from promising freebies. The talk of “fiscal responsibility” in electoral politics here will undoubtedly favour the political party in power.