The story of freebies and taxpayer’s torn pockets

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Apurva Dhamankar

6/7/20232 min read

Whenever there is an election year there are different news stories, notices, and public meetings where the legislators are seen promising free power, water supply, transportation, pay to the jobless, and so on. Despite their claim that it is free, these things are actually paid for by the taxpayer. Some refer to it as the "welfare of the people," while others refer to it as "freebies" or a brand-new culture known as "Revdi" culture. Let’s comprehend what are these terms and would they say they are going about as a torn to citizen's pocket?

Basically 'Freebies' are public government assistance measures - labor and products - offered liberated from cost by the public authority. Freebies are not precisely defined in the legal framework for the Indian context. Presently it should be noticed that specific uses done under populist tensions are sketchy without a doubt.

In the economic context, there is no such thing as a freebie¸eventually someone needs to bear the expense of the free giveaways. Citizens are required to pay for gifts that are distributed by governments. It isn't generally the wealthy who pay. Frequently the unfortunate compensation for the gifts, as state-run administrations gather charges on everything from matchboxes to jewels. The RBI's report considers free public welfare measures to be a "freebie" and not a merit good because spending on them does not result in economic benefits.

However, given the galactic ascent of pay imbalance among the Indian people, a portion of these freebies might be legitimate to put the economy in good shape. Common programs like the subsidy for electricity, the interest subsidy on farm loans, financial aid to female students, the female population for bettering their livelihood, maternity benefit programs, and support for self-help groups and the self-employed, among others, are also referred to as "freebies” by RBI but this kind of spending is an investment in the future of human capital. The socially and economically disadvantaged citizens of these nations, who hardly benefited from three decades of market-oriented reforms, are benefiting from these "freebies."

The recent case of Sri Lanka, where the government eliminated taxes and announced a number of free programs, has been cited by a number of economists as an illustration. If political parties announce these free schemes to attract voters, they may be forced to spend a significant portion of their budgets to fulfill their promises, which could slow down economic growth and increase state debt.

As of late when this freebie banter arrived in front of The Supreme Court, saw that freebie governmental issues are utilized at the expense of citizens' cash and may push the state towards "fast approaching insolvency". In addition, it directed the formation of a bench of three judges to hear all arguments against the practice of political parties promising handouts prior to elections.

According to a number of experts, it is necessary to distinguish between subsidies and freebies in order to comprehend the economic impact of freebies. Additionally, it is essential to make a distinction between freebies and subsidies because subsidies are justifiable and specifically targeted benefits that result from demand. Any state can set up a subsidiary system or even a freebie system, but it should be done in a way that doesn't put too much of a financial strain on the people living there.

Thank you.

Regards,

Omkar Sutar,

Kautilya, IBS Mumbai

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