Classical liberal thinker Adam Smith famously gave the concept of the ‘invisible hand’, in which he represented the invisible hand as the unseeable market force created by individuals acting in their own self-interest, unintentionally benefiting the broader economy and society. Adam Smith opined that the state should be limited to the role of facilitator for the left-alone individuals to conduct their businesses. He championed the idea of free markets, minimal government intervention, and individual liberty through his foundational work, ‘The Wealth of Nations’. Later on, the famous economist John Maynard Keynes denied the auto-correct mechanism of market forces as advocated by Smith; he emphasised the idea of government intervention in the turbulent times of recession or depression to stabilise the economy through fiscal policies. Eventually, these two ideas of looking at economics became the major contesting perspectives of any nation’s economic model. Whether a nation chooses the pure capitalist model as given by Smith or a nation chooses the welfare state or government interventionist model majorly shaped by the Keynesian economic model. In this article, we would be exploring the intricacies of an amalgamated economic model chosen by India. We would be largely discussing the grey area between welfarism and ‘freebie’ politics, as termed by the critics; basically, at what point welfarism ends and ‘freebie’ starts for the electoral leverage, although the term ‘freebie’ is essentially contested.
When India got independence, it chose neither the absolute capitalist model nor the purely socialist model, as the majority of the nations gaining independence at that time did. It chose the mixed economic model with majority sectors under state control; the reason behind it was the then economic state of India; it was majorly agrarian, with huge inequality persisting in the society. Thus, the condition of the society prompted the government to make certain policies to provide immediate relief to the people rather than planning a long-term success from the outset.
India had already faced severe famines, so the first priority of the government was to ensure food security for the poor households. The government introduced a ‘Public Distribution System’ (PDS) to provide highly subsidised cereals at a very nominal cost. Nevertheless, it put a heavy fiscal burden on the state primarily through the drain in foreign exchange reserves due to food imports. India's foreign exchange reserves, which stood at over $2 billion in 1950, plummeted to less than $500 million by 1964, largely due to the need to finance the gap between imports (driven by food) and exports. The food subsidy bill, which was recorded at Rs 19.91 crore in 1948-49, continued to grow as the government procured grains to stabilise prices. Can this policy of the government be termed a ‘freebie’? Perhaps the answer would be in the negative, even though the financial condition of the nation was deteriorating due to this policy. Because food is the very fundamental requirement of a citizen of a free nation, and we had already seen some catastrophic famines under the British rule, whether it’s the Great Bengal Famine (1769-1770), in which it is estimated to have killed roughly one-third of Bengal’s population, or the famine just before the independence in 1943, which as well resulted in about 3 million deaths. Thus, we can’t simply term the food distribution policy of the government as a ‘freebie’ or populist welfare.
From the 1960s onwards, the government started the policy of fertiliser subsidies to increase agricultural productivity and also to fuel the green revolution. This policy helped India in gaining food independence to a large extent, as the use of fertilisers rapidly boosted productivity. Still, this policy is often criticised for burdening the finances of the state. Later on, the government took many more debatable steps, like the nationalisation of banks with directed cheap credit. Many labelled it as a policy to promote politically directed lending, but the positive impact of it could be seen in financial inclusion and rural credit expansion.
For a few decades after independence, India was largely a one-party democracy, as the centre and the vast majority of the states were Congress-ruled. Thus, due to lack of high electoral competition, the lucrative policies or schemes were not that upfront. But post the 80s, when Indian politics became highly competitive as many regional as well as national parties started competing rigorously, the electoral promises of lucrative schemes or perhaps ‘freebies’ started setting its feet. One major such promise that started appearing frequently is farm loan waivers. As a major chunk of the Indian population is still agriculturally employed, it becomes important to get their votes to win a majority. And that is why almost every party makes such alluring promises of loan waivers for the farmers. Meanwhile, it is true that many cases of farmers suiciding due to the stress of not being able to repay the loan have surfaced, but a universal waiver of loans has encouraged repayment indiscipline and defaults on the loans. Many people deliberately take loans before elections to get them waived later on, as almost every party keeps it in their manifesto. The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, introduced by the contemporary regime, provides eligible landholding farmer families with an annual financial benefit of ₹6,000. Though the eligibility is so broad that it covers almost every farmer, either a large landholder or a small landholder. The government presents this scheme as a masterstroke for the welfare of farmers, especially as a definite income support for small farmers, but the direct income support without productivity conditions tilts it more on the freebie side of welfarism. Direct Benefit Transfer (DBT) has also been a debatable step, as it provides a leak-free direct benefit from the government schemes to the beneficiaries. Many schemes of the government, like PM Awas Yojana and Swachh Bharat Mission, have been targeted and meaningful due to this mechanism. And such schemes could be examples of social welfare, as they fulfilled the very fundamental requirement of the people.
However, there are many other schemes under the DBT that could be referred to as potential freebies, like Mukhyamantri Mahila Rojgar Yojana in Bihar, which provides an initial grant of ₹10,000 to one woman per family to start small businesses, with the potential for up to ₹2 lakh in additional funding for successful ventures. Although this scheme sounds good prima facie, the caveat is that there is no obligation for the eligibility of the scheme; you may redeem the initial amount without any obligation to start the business. In MP, there is the Ladli Behna Yojana that provides up to ₹1,500 monthly assistance to the married women (between 21 and 60 years old). In Maharashtra, the Ladki Bahin Yojana provides a monthly allowance of ₹1,500 to women (between 21 and 65 years old). Almost every state ruled by any of the parties has such schemes, as they have become a starter for every election manifesto. Now, as it has become the demand of the rigorously competitive electoral democracy, the parties which initially questioned this approach have also become part of the same politics. So, it has become an unopposed unanimous policy of every party. Nevertheless, the supporters of these schemes do consider them a remarkable step towards women’s empowerment.
From our discussion so far, we may still not be able to draw a clear line between true welfare and populist welfare termed as a ‘freebie’, as the difference is very blurred, but we can still find some distinction in the approach of both kinds of policies. There are policies like the Right to Education, the Mid-Day Meal scheme, Ayushman Bharat, old-age and disability pensions, scholarships, PM Awas Yojana, Jal Jeevan Mission, etc. that aim to build human capital; improve health, education, housing, or basic social security; and often generate long-term economic and social returns. Even schemes like PM Garib Kalyan Yojana (PMGKAY), which are often debated as freebies, provide free food to more than 80 crore people of the nation and should not necessarily be categorised as a ‘freebie’, as they provide food security to the downtrodden section of society and assure them of their fundamental right to food, that too without really burdening the nation’s economy. But on the other side there are electoral freebies like free smartphones, free scooters, free electricity, repeated farm loan waivers, free travel, cash transfers, etc. that are completely consumption-orientated and just to gain electoral leverage by persuading the voters.
The stance on welfare must be made so that any policy, notwithstanding the fulfilment of the very fundamental rights of the citizens, should be targeted and provided with precision to only those that require it. But a stalemate situation has been created where the one opening the window will be the first to be thrown out of the window.
— Saurabh Srivastava