There is no denying that parties, across the political-ideological divide, often resort to promises of free or heavily subsidised goods and services in an attempt to persuade the electorate. With no less than the prime minister recently calling for an end to the free “revdi” culture, this long-running and entrenched culture of political populism is coming under scrutiny. Whatever they may be called — subsidies, freebies or revdi — the debate is being framed by juxtaposing the Narendra Modi government’s model of “new welfarism”, which involves public provision of private goods, against the provision of services such as free power by state governments such as those led by the Aam Aadmi Party. Beyond the locking of political horns, however, the prime minister’s warning against fiscally profligate policies which tend to be driven more by electoral concerns, echoes widespread concerns over “wasteful” spending. It couldn’t have come at a more opportune moment — the fiscal situation at the central and state level has become increasingly challenging.
The debate, however, calls for the disentangling of several issues. What is a freebie? Is it different from a subsidy? Are there good and bad subsidies? Who decides? The fact is, different sections of society require different kinds of support. Moreover, states are poised at varying levels of economic development. What may be deemed as necessary state support for the population in one state may not be seen in the same way in another. A wider conversation on these issues is much needed. The economic situation that forms the setting for such a debate is worsening. Consider, for instance, the power subsidies extended by state governments. As per a recent RBI report, given the huge losses incurred by power distribution companies, a bailout in 18 large states, structured along the lines of UDAY, would cost these governments around Rs 4.3 lakh crore or 2.3 per cent of their combined GSDP. To put this number in perspective — it is more than what the Union government spends on education, health or rural development. For states like Tamil Nadu, Madhya Pradesh and Rajasthan, the situation is particularly worrisome. A bailout of this magnitude will only further restrict their fiscal space. Ultimately, someone has to pay. Because no freebie is really free.
Understandably, political parties tend to be guided by more short-term motives. Yet, the free provision of goods and services, guided by political imperatives, also involves a fiscal choice. It comes at the expense of spending more on other areas such as roads, railways, schools or hospitals. In the end, however, these decisions are best left to elected representatives and the electorate. The Election Commission or members of the judiciary, for the matter, must resist rushing into the discursive space created by the prime minister by his intervention on this critical issue.