Freebies: BPL families, farmers, women are intended beneficiaries of most states’ schemes
India Today
Amid freebies debate, state government schemes such as loan waivers and free electricity have helped BPL families, farmers, and women.
Subsidised sarees here, smartphones there; cash incentives to push women empowerment in some places and loan waivers and free electricity for identified households in still other places. These are just a few of the many schemes, now also being labelled as freebies, being run by various state governments at the moment.
A June 2022 Reserve Bank of India paper offers a context to the ongoing freebie debate. It says: “In the recent period, state governments have started delivering a portion of their subsidies in the form of freebies.”
The report further adds that the “provision of free electricity, free water, free public transportation, waiver of pending utility bills, and farm loan waivers are often regarded as freebies, which potentially undermine credit culture, distort prices through cross-subsidisation eroding incentives for private investment, and disincentivise work at the current wage rate leading to a drop in labour force participation.”
The paper highlights that freebies spawn economic inefficiencies. However, it adds that targeted ones “with minimal leakages” may benefit the poor. The rollout therefore must carefully weigh costs and benefits.
An analysis of the list of recent schemes given at the end of the RBI paper alongside inputs from India Today reporters spread across the country shows that most of the welfare schemes have three intended beneficiaries: below the poverty line (BPL) families, farmers, and women.
The Rs 500 crore scheme in Jharkhand, for instance, to give dhoti/lungi and saree at a discounted price of Rs 10 twice a year to 57 lakh families is meant for BPL families. The source of Jharkhand’s burgeoning subsidy burden, however, lies elsewhere. The state has earmarked a whopping Rs 6,655 crore in 2022-23 to offer subsidies to farmers and poor households for electricity consumption.
The RBI report red-flagged the situation in Jharkhand by highlighting that the state’s announced freebies amounted to nearly 27 per cent of its own tax revenue and 1.7 per cent of its GSDP. Other states with high subsidy burdens include Andhra Pradesh and Punjab, it says.
