Union Government is working on setting up the 16th Finance Commission over the next few weeks and is finalizing the terms of reference at a time when several states are facing financial difficulties and the Centre is worried over the impact of several freebies announced across the country without thinking about the fiscal situation. The Election Commission had once asked the political parties their opinion on the standardisation of ‘financial implications of promises to be made in future election manifestos’ and ‘ways of financing them within the available financial space’ and ‘the effect thereof on the fiscal sustainability’. However, the Supreme Court has rightly observed that ‘all promises cannot be equated with freebies …Not only are these a part of the Directive Principles of State Policy, but also are a responsibility of the welfare state.’ Till date there are various definitions of what the term ‘freebie’ means . RBI in its June 2022 bulletin classifies provisions of free electricity, free water, free public transportation, waiver of pending utility bills and farm loan waivers as freebies. Another view distinguishes between ‘merit goods’ and ‘public goods’ and defines freebies in the context of providing free power, water and consumption goods. Then, where is the dividing line between freebie and necessary government expenditure to create demand in the economy as well as help the poor? It is difficult to define . Any expenditure within the budget is acceptable and if financial constraints are not considered while offering some benefits could be labelled as freebie, though the beneficial effect of a freebie cannot be ignored, if it reaches the weak and the vulnerable. Example -Distribution of cycles , scholarship to girl students , helped to narrow down the gender imbalance in education. Hence if the Welfare State remains within budget constraints, perhaps this debate may peter down.
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