Arrival of freebies: Case study of Balaji vs Tamil Nadu judgment, 2013

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By Rahul Kumar Dubey

New Delhi, September 8: State capital expenditure is estimated to have a wider multiplier impact on the economy since state projects are primarily directed by the regional economy. Nevertheless, some states’ spendings imply that they have cut back on capital spending since they decided to invest more in subsidies, freebies, and old pension schemes, which are though short-term expenses for the government but do not generate any long-term advances.

Such states furthermore spent less on the advancement of machinery, education, healthcare, and roads and ports, which could have generated assets of financial gains in future. Because of the extensive announcement of freebies, several states would have gone bankrupt if they had not been a part of the Union.

If the practice of freebies is not intervened with, some state governments would find themselves in a similar situation to Greece or cash-strapped Sri Lanka if this tendency persisted.

For illustration, the government of Delhi offers free Wi-Fi, free water amounting to 20,000 litres per month, free electricity up to 200 units, and half-subsidies for up to 400 units, amidst the city’s fiscal deficit, which is approaching Rs. 18,767 crores in 2021–22, with the city’s financial health indicators further taking a jolt.

Since the GNCTD has spent Rs. 15,800 crores on free power, the development activities would definitely endure the burn as a result of the absence of returns as the money that was spent on the power subsidies could have been used to create assets and for other objectives that would have yielded returns on investment to assist the economic advancement and development of the city.

Since these freebies are not time-bound nor for a specific target demographic, the diminishing revenue inflows are problematic.

In accordance with the figure above, revenue expenditures instead of capital expenditures account for the majority of the Delhi government’s overall spending. The figure demonstrates the significant distinction between revenue and capital outlays. The revenue spending has moved two-fold since 2015 during the Aam Aadmi Party’s rule, whilst the capital expenditure has only climbed by a scant 15.85%.

Additionally, in the same lines, the Punjab government battled with a lack of funds and was unable to pay its employees’ salaries for the month of August, despite six days into September. It must also be noted that a number of freebies were promised by the Punjab government before to the elections. Furthermore, the states promising freebies and continuing on with business as usual are gravely concerned since the GST compensation regime has ended.

After Delhi, several states have also also joined the freebie trend, and West Bengal is one of them, along with Rajasthan, Andhra Pradesh, etc.  From 2015–16 to 2019–20, West Bengal’s debt soared by a record 140.50%.

Nevertheless, the West Bengal government has conveniently overlooked the state’s financial distress. West Bengal would be deeply in debt by the end of the current fiscal year, totalling Rs. 6 lakh crores.

The forecasted debt burden as of March 2023 is Rs 5,86,438.05 crore, which is greater than the debt goal specified by the 15th Finance Commission. Since the TMC government took office in 2011, Bengal’s total debt load, which was at Rs 1.92 lakh crore at the time, has climbed by more than 205 per cent.

It’s all the consequence of reported financial mismanagement, populism, and a tendency to give freebies.  When it comes to spending quality, West Bengal spends almost 90 per cent of its revenue on poor expenditure that do no yield benefits to further fuel capital investments.

Following the rampant announcement of freebies, the Supreme Court recommended creating a specialised panel composed of people who can “dispassionately” study the issue in light of how critical freebie culture is.

The Centre claimed that these freebies were paving way to an “economic disaster” in conjunction to “distorting the informed decision of voters”, while the Centre, as argued by Solicitor General Tushar Mehta, stated that it “substantially and in principle” supported ending the practice of giving freebies to voters.

Nevertheless, the Supreme Court sent a number of petitions to a three-judge bench, asking for a judicial order pertaining to political parties who make “wild” promises of generosity to also disclose in their election manifestos how they intend to pay for them.

The reference signifies a shift in the court’s own position from the 2013 decision in Subramaniam Balaji v/s Tamil Nadu, which ruled that making promises in election manifestos does not constitute a “corrupt practise,” as defined by Section 123 of the Representation of the People Act, according to the Balaji case ruling from the Supreme Court’s Division Bench (RP).

The court stated that it desires an open discussion before the three judges on the subject of if an “enforceable” judicial order could prohibit political parties from making and dispersing “irrational freebies.” The Supreme Court is increasingly concerned that the freebies promised by political parties to win elections might empty the public coffers.

(Author is an assistant researcher with Public Policy Research Centre)

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