Despite PM, RBI warnings, Niti Aayog has no study on freebies' impact on states: RTI

An RTI response has revealed that despite repeated warnings from the Prime Minister, senior government officials and the RBI, Niti Aayog has not conducted any study on the fiscal sustainability or long-term economic impact of state-funded 'freebie' schemes.

In the middle of an intense national debate on the fiscal sustainability of state-funded "freebie" schemes, an RTI response has revealed a critical gap in government-backed policy research. Niti Aayog, the central government’s top public policy think tank, has disclosed that it has not conducted any study, assessment or analysis on the financial or long-term economic impact of such schemes announced by state governments.

The disclosure came in response to a Right to Information (RTI) application filed by India Today, seeking details of any research undertaken by Niti Aayog on the fiscal implications of cash transfers and welfare sops. In its reply, the think tank said that after "due examination", it did not have any direct or indirect information related to the query, and advised the applicant to visit its official website.

The revelation is significant given that concerns over "freebies" have been repeatedly raised at the highest levels of government. In April, 2022, during a meeting chaired by Prime Minister Narendra Modi, senior bureaucrats warned that unchecked populist spending during elections could push some states towards severe fiscal stress, drawing parallels with the economic crises in Sri Lanka and Greece.

Months later, PM Modi publicly sharpened his criticism, warning against what he described as "revdi culture". Speaking in Uttar Pradesh’s Jalaun district in July 2022, he said distributing freebies for votes was very dangerous for the country’s development, reiterating similar concerns at another event in Jharkhand’s Deoghar.

The Reserve Bank of India has also echoed these concerns. In its report State Finances: A Study of Budgets of 2024-25, the RBI noted that several states have rolled out measures such as farm loan waivers, free electricity, free public transport, allowances for unemployed youth and direct cash transfers to women. The central bank cautioned that such spending "could crowd out the resources available with them and hamper their capacity to build critical social and economic infrastructure."

Against this backdrop, Niti Aayog’s admission assumes added importance. According to its own annual reports, the think tank has completed 34 studies since 2022 and approved 32 new research projects during the same period. However, none of these studies deal with the fiscal sustainability or long-term economic consequences of state freebie schemes, despite the issue being flagged repeatedly by the Prime Minister and top officials as a potential economic risk.