Facebook-f Twitter Instagram Youtube Linkedin

The Widespread Use of Freebies: Implications for Welfare, Governance, and Fiscal Sustainability in India

Eman Syed

The widespread use of freebies also known as “revdi culture” in the name of welfare has blurred the lines between state responsibility and vote-bank politics. Though popular among voters, such schemes often mask underlying fiscal stress and undermine long-term development, ultimately burdening the very citizens they claim to benefit. This article aims to explore the implications of freebies on the public, highlighting how they distort welfare priorities,  risk equitable development and long-term fiscal health unless reformed through transparency and legal standards.

Understanding the implications of freebies requires revisiting the government’s core responsibility to provide essential public goods such as clean air, sanitation, public roads, and basic education which benefit all citizens equally and form the backbone of welfare governance. However, recent trends show a shift from these universal services to the distribution of private goods like free electricity, cash handouts, and appliances, often under the label of welfare.

The Rationale Behind Freebies and why they work?

The benefits that go beyond the essential duties of the state are termed as “Freebies”. The 2022 Reserve Bank of India Discussion Paper on “State Finances: A Risk Analysis” report,  defines freebies as public welfare measures that do not generate long-term social returns, unlike merit goods such as education or healthcare.

Criteria  Welfare GoodsFreebies  
Objective  Promote long-term human development   Provide short term relief or electoral appeal  
Target  Need- based and universal  Often untargeted or politically driven  
Economic Impact  Increases Productivity and builds capacityIncreases consumptions for short-term offering limited returns  
Fiscal Justification  Aligned with constitutional mandates  Strains Public finances    
Examples  Healthcare, Education, Sanitation.  Free electricity, appliances, cash handouts  

Several Indian states like Karnataka, Delhi, Rajasthan, Punjab, Tamil Nadu, and West Bengal have become noted for their freebie schemes, which predominantly encompass subsidised electricity, direct cash transfers, and complimentary public transport.  

The popularity of freebies is due to the political convenience and psychological interest. They relieve temporary problems and that is why voters tend to value immediate gains over long term returns. However, this approach comes at a cost. According to NIPFP, freebies divert limited public funds away from important issues. For instance, funds used for giving out cash or subsidised electricity instead support schools, hospitals, or public transport systems. Moreover, freebie schemes are inherently evolutionary. For instance, Karnataka’s Gruha Jyoti Scheme (200 units of free electricity) was later modified to introduce a security deposit due to rising fiscal strain. Similarly, in Delhi, the subsidy cap was adjusted. These examples show how pre-election benefits, though politically rewarding, often prove unsustainable and may later require modifications..  

During crises like pandemics or natural disasters, targeted freebies can help people as temporary support. But experts warn that making them a regular practice can reduce public investment and harm long-term development

Critics may argue that “it’s simply the same money collected as taxes,”which ignores the opportunity cost of resources used for such giveaways could instead fund essential long-term investments in infrastructure, education, and healthcare. This results in creation of a cycle of short‑term relief and long‑term burden.  

Why Did Freebies Become So Popular in India?  

Freebies gained popularity in India due to issues of extreme poverty and rising electoral competition. During the 1950’s – 1970’s, schemes like Tamil Nadu’s 1956 mid-day meal and 1967 subsidized rice addressed basic needs and laid the foundation for welfare politics (The Dravidian Model). Over time, political parties began offering material incentives like free TVs, cash transfers, electricity to attract votes. These measures built public trust and political visibility among marginalized groups. What began as a response to genuine social needs is now feared to have evolved into an electoral strategy, raising concerns about long-term fiscal sustainability.

Implications of Freebies:  

  • On the Government:   

Most freebie schemes in India are launched by state governments rather than the central government. As a result, the financial pressure is comparatively higher at the state level, where resources are limited and borrowing capacity is low. When revenue falls short, borrowing increases, which pushes up debt and often forces tax hikes.  

For example, Karnataka’s Shakthi Scheme (Free bus travel), Gruha Jyoti Scheme (200 units of free electricity) and Gruha Lakshmi Scheme (₹2,000 monthly cash transfers for women) placed a heavy burden on the state treasury. In response, the government increased property taxes in October 2024 and proposed further hikes. Similarly, Uttar Pradesh allocated ₹2,700 crore from its state plan fund to distribute free laptops and tablets. Despite advice from the Planning Commission’s 12th Five-Year Plan (2012–2017), to prioritize areas like teacher training, school infrastructure, and health services, the scheme was implemented resulting in a large number of devices remaining undistributed and an overstretched technical support staff. The result was higher costs, inefficient resource allocation, and unmet educational needs (CAG).

Moreover, each new scheme increases administrative costs. To reduce such costs, states often later scale back benefits or introduce stricter eligibility criteria, creating a cycle of unsustainable pre-election promises that gradually weaken public trust and government accountability.  

  • On the Citizens   

Economic Perspective  

India has made remarkable progress by battling poverty in the 1940s to become one of the world’s fastest-growing economies. By August 2023, GDP growth reached 7.8%, and Moody’s raised the 2024 forecast to 6.7%, indicating strong momentum and infrastructure growth. However, smaller issues like unfunded freebies can gradually erode fiscal stability and threaten this hard-earned progress due to:  

  1. Dependency and Reduced Productivity  

Freebies, when provided without conditions, can lead to dependency, especially among low-income groups. In extreme cases, citizens expect recurring benefits without contributing to economic growth. For example, in Madhya Pradesh, after the launch of the Ladli Behna scheme (₹1,250–₹2,000 monthly for women), some local observations suggested a preference for assured income over longer working hours or uncertain job prospects.

  • Hidden Fiscal Liabilities  

Although funded through taxpayer money, many freebie schemes exceed budget allocations, leading to rising arrears and debt. Even if citizens “receive back” what they pay in taxes, the mismatch between government income and expenditure eventually becomes a burden on the public itself which is either through increased future taxes, cuts in essential services, or rising public debt through borrowing.  

  • Increase in Inflation

As more money is injected into the economy through cash transfers and subsidies without a proportional increase in production or productivity, these freebies can add to inflationary pressures as stated by RBI. When everyone starts spending more due to increased disposable income, demand can exceed supply, which pushes prices up and indirectly contributes to higher inflation. Rising prices further hurt the poor, ironically undermining the very purpose of welfare measures.   

  • Misallocation of Scarce Resources:   

Excessive subsidies lead to overconsumption of essentials like water and electricity. Meanwhile, long-term development in infrastructure and public services suffers.  

  • Debt Cycle:

Borrowing to fund today’s freebies pushes repayment onto future generations. It delays structural reforms and creates a debt trap, especially for poor states.  

Political Perspective:  

In the political arena, freebies have become a tool of electoral pragmatism, which refers to short‑term measures aimed at winning votes rather than building lasting policy solutions. This “Revdi Culture,” as the Prime Minister labelled it on 16 July 2022, likens such handouts to the festival sweet “Revdi,” offered freely to gather favour. While these schemes may boost a party’s chances at the ballot box, they result in:   

  1. Electoral Manipulation  

As noted by Carnegie Endowment for International Peace (2024), research suggests that in several instances, political parties announce welfare schemes close to elections, which can be perceived as vote-seeking strategies rather than long-term policy commitments. In the 2023 Karnataka Elections, the Congress Party cited various freebies in their Election manifestos. This has been followed by various states like Tamil Nadu, Rajasthan and Punjab.

  • Shift from Governance to Populism and Dependency  

Elections become contests of competitive populism rather than genuine debates on policy, reforms, or leadership vision.  Reports reveal that beneficiaries may feel inclined to support the ruling party in hopes of continued access to benefits, potentially influencing their voting choices. ( Income support and voting with territorial disparities).

  • Undermining Democratic Accountability  

When citizens vote based on personal benefits, leaders face less pressure to deliver good governance or reform resulting in weakened accountability (Socrates).  

  • Public Distrust   

Excessive reliance on freebies, as political analysts argue, may contribute to public skepticism about the credibility of such promises over time.

Social Perspective:  

In terms of social implications, effective welfare must be guided by the principle of equity, providing support based on individual needs to create fair opportunities for all rather than equality, which distributes the same benefits to everyone regardless of their circumstances. While equity-driven policies provide support where it makes the greatest difference,  freebies often work on equal‑treatment approach, offering same benefits regardless of need resulting in:   

  1. Erosion of Equity:  

When schemes are universal, they fail to prioritize the truly needy. This leads to inefficient use of public funds and fails to correct existing inequalities. Example: A person earning ₹1 lakh/month receiving free electricity is not the same as a BPL family receiving it.  

  • Stunted Human Development:  

Freebies like appliances or cash transfers do not contribute to long-term gains in areas that actually empower individuals to move out of poverty permanently. (Venezuelan Crisis)

  • Reinforcement of Gender and Caste Gaps:  

Without thoughtful design, freebies can miss marginalized subgroups (e.g., widows, tribal communities, rural women) or be dominated by vocal vote banks, leaving invisible groups behind  

Are Freebies always bad?  

Not entirely. Freebies do offer short-term relief, especially to disadvantaged communities, and can temporarily improve consumption. However, when used without planning, they result in significant losses.. Reports from the Reserve Bank of India have warned that excessive spending on such schemes leads to fiscal strain, and yet, these warnings are often ignored.  

While the poor may benefit initially, the middle class and future generations bear the cost through increased taxes, reduced public services, or inflation. The real issue is not the idea of giving, but how, why, and to whom. In many cases, freebies emerge as a response to the state’s failure to provide basic, accessible public goods offering short-term fixes where long-term reforms are needed.   

Reforms for responsible welfare

As economist Raghuram Rajan warns, overspending on freebies without proper financial backing can harm the investment environment and limit the government’s ability to handle future crises. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, was introduced to control such populist spending, but is often ignored. To maintain financial discipline, India must adopt practical reforms to curb the liability culture.  

  • One important reform India can implement is to enforce greater transparency and accountability. This means political parties must disclose the funding sources and economic impact of their proposed freebies and welfare schemes. This would help voters make informed decisions and promote responsible policymaking by offering a future cost breakdown. For example, if a party promises free electricity, it should also explain how it plans to fund it.  
  • Any policy, regardless of its nature, should prioritise equity over equality. This means providing subsidies to only those who truly need them, ensuring that resources are used efficiently and do not unintentionally benefit the wealthier sections of society.  
  • The Supreme Court of India has repeatedly raised concerns regarding the misuse of public funds through pre-election freebies (Ashwini Upadhyay vs. Union of India, 2022). While the Court did not impose the blanket ban, it stressed the need for a clear legal framework to regulate fiscally unsustainable promises. Amending election laws such as the Representation of the People Act to regulate pre-election promises would help prevent misleading or financially unsustainable commitments. Additionally, setting up independent expert committees including representatives from NITI Aayog, The RBI, and the Finance Commission can help review, correct, and monitor such policies to maintain fiscal responsibility.  
  • To ensure fiscal discipline, governments should introduce expenditure ceilings which refer to spending limits on welfare schemes based on a state’s GDP to ensure budget control.

Additionally, inclusion of sunset clauses will result in temporary schemes to automatically end unless reviewed and renewed, preventing long-term fiscal strain.

  • Public awareness must be initiated so that citizens understand the long-term consequences of unplanned freebies. Voter education is essential to help people differentiate between genuine welfare schemes aimed at social upliftment and short-term populist measures that strain public finances.  
  • Lastly, global experiences offer important lessons. Countries like Sri Lanka and Venezuela have shown how freebies can lead to severe fiscal crises and economic collapse. On the other hand, positive examples like Conditional Cash Transfers (CCTs) from Latin America such as Brazil’s Bolsa Família or Mexico’s Prospera where support is tied to education or health outcomes gives an important lesson to integrate in India.

Towards Responsible Welfare and Fiscal Sustainability

In conclusion, even as India climbs global ranks in GDP and technology, the financial strain of freebies cannot be ignored. What may seem like minor and a popular measure often grows into significant budget pressures,threatening long-term growth and diverting funds from critical public services.

To ensure responsible and inclusive progress, future welfare policy must be grounded in three key principles:

  • Equity – ensuring that benefits reach those who need them most, rather than being uniformly or politically distributed;
  • Transparency – mandating clear disclosures of the fiscal cost and funding strategies behind welfare promises;
  • Sustainability – aligning policies with long-term development goals rather than short-term electoral gains.

Only through such reforms can India shift from short-term populism toward meaningful, fiscally sound, and inclusive growth.

BIBLIOGRAPHY

  • Government of Karnataka. (n.d.). Shakti Yojana [Shakti Scheme].

Yuvakanaja.https://yuvakanaja.karnataka.gov.in/591/shakti-yojana/en 

  • Government of Karnataka. (n.d.). Gruha Jyothi Scheme. Department of Energy,Government of

Karnataka .https://cescmysore.karnataka.gov.in/53/Gruha%20Jyothi%20Scheme/en 

https://www.fortuneindia.com/macro/5-ways-to-resolve-the-unfinished-agenda-of-freebies/11448 9fortuneindia.com 

  • NIPFP Authors. (2024). Rationalisation of explicit subsidies at state level (Final draft, March 2024). National Institute of Public Finance and Policy.

https://nipfp.org.in/media/medialibrary/2024/08/REPORT_Subsidies_final_draft_dated_March_2 024.pdf 

  • Bradlow, K. & Fisher, L.(n.d.). Income support and voting with territorial disparities. Social

Science & Economics Review. https://doi.org/10.1093/ser/mwaf035 

  • Nampoothiri, H. R. (2023, September 6). Impact of freebies on Indian economy.Metrovaartha.

https://english.metrovaartha.com/economy/policy/impact-of-freebies-on-indian-economy english.metrovaartha.com 

PRICE — People Research on India’s Consumer Economy.

https://www.price360.in/articles-details.php?url=freebies-dont-offer-a-longterm-solution-but-let-u s-not-ban-them price360.in 

  • “Examining the Economics of Electoral Freebies” [PDF]. (2024).

SSRN.https://download.ssrn.com/2024/11/4/5008647.pdf 

Leave a Comment

Your email address will not be published. Required fields are marked *

Subscribe
Subscribe