Context: In this episode of the Perspective Prog. Based on 'Freebies Culture & Economy'. Supreme Court has said that there is a need for an apex body consisting of members from the Niti Aayog, Finance Commission, ruling and opposition parties, the RBI and other stakeholders, for suggestions on how to control freebies by political parties during campaigns. 

• Hearing a plea against the practice of political parties promising freebies during elections, the apex court bench, headed by CJI N V Ramana, said this panel is required to determine the pros and cons of freebies as these have a significant impact on the economy.  
• Prime Minister Narendra Modi has also raised his concerns about the practice of using freebies for votes at the cost of long-term development. Recently PM Modi had flagged this issue while pointing to mounting dues of power distribution companies as a looming crisis. 
• According to a study based on the data of major financial assistance/ cash transfers, utility subsidies, loan or fee waivers and interest-free loans announced by the states in their latest budget speeches the expenditure on freebies range from 0.1 - 2.7 per cent of GSDP for different states.

What are freebies?

• In general, Freebies are a waste of resources and place a burden on already stressed fiscal resources. For instance, free distribution of goods such as televisions and gold chains. Ironically the definition also includes free or subsidised rations under the Public Distribution System (PDS), cooked meals under the mid-day meal scheme, Work payments under MGNREGA also come under freebies.

Foodgrain distribution

• Pre-Pandemic: In the mid-2000s, state governments started expanding coverage and reducing the prices of PDS products. Lower prices in the PDS became electoral issues in the southern States.  This ultimately led to the National Food Security Act being passed by Parliament unanimously in 2013. The NFSA expanded the coverage of the PDS to about two-thirds of the population.
• Even before the COVID-19 pandemic, there have been studies which showed the poverty-reducing effect of the PDS. Subsidised foodgrains distributed under the PDS not only contribute to ensuring basic food security but also act as an implicit income transfer allowing the poor to afford commodities that they otherwise could not.
• The products under PDS are procured at minimum support prices (MSPs) from farmers. It is one of the main instruments of support to farmers.
• During Pandemic: The Prime Minister has repeatedly campaigned about the Government implementing the ‘world’s largest food security programme’ by distributing free foodgrain, through the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) to around 80 crore ration cardholders.
• The scheme kept many away from the brink of starvation during the novel coronavirus pandemic.

What is the performance of other schemes?

• MGNREGA has been another scheme which has been a lifeline for many during the pandemic and earlier. At a time when there are few employment opportunities, working under MGNREGA can guarantee some assured wages.
• Similarly, mid-day meals in schools have been proven to contribute to increased enrolment and retention in schools and addressing classroom hunger.
• Schemes such as old age, single women and disabled pensions, community kitchens in urban areas, free uniforms and textbooks for children in government schools, and free health-care services play a critical role in providing social security and access to basic entitlements.

Why these should not be considered freebies?

• Calling the above schemes ‘freebies’ will make a view that the poor are unproductive and dependent on charity. Hence, it is important to recognise that most welfare schemes contribute to improving human development outcomes, which also results in higher economic growth in future.

How rich is getting freebies?

• Around Rs 1 lakh crore is the revenue forgone annually as a result of ‘major tax incentives for corporate tax payers’. Corporate tax rates have been reducing and Budget documents show that in 2019-20, the effective tax rate (tax-to-profit ratio) declined as profits increased.
• The freebies that the rich get all the time through low tax rates and exemptions are considered ‘incentives’ instead of freebies. Hence, the government need to view both rich and poor alike in democratic India.