Smudged lines; welfare vs freebies
Recently, the Supreme Court raised concerns over the trends of states giving freebies, and doles ahead of assembly elections, and questioned if these practices amount to appeasement, rather than genuine welfare. It took on the political parties and governments that either dole out, or promise freebies and direct cash transfers to woo the voters. It wondered how long this might last, and whether it would hamper the nation’s development, growth, and livelihoods (jobs). The observations of the apex court came during the hearing of a case that involved the state-owned Tamil Nadu Power Distribution Corporation.
The distribution firm aims to provide free electricity to consumers, regardless of their financial status. The three-judge bench, headed by Chief Justice Surya Kant, said that while it was understandable to provide relief to the poor, doing so without distinguishing between those who can afford it, and those who cannot, or those who need it, and those who do not, could lead to economic perils and dangers. The warning is a reminder that the states, and Centre, need to focus on long-term growth, and development plans, rather than short-term electoral gains.
Like most states, and the national regimes, Tamil Nadu has a long history of grandiose announcements that sometimes erase the line between true welfare (subsidies), and doles or freebies. Four years ago, Ashwini Kumar Upadhyay filed a Public Interest Litigation (PIL) in the Supreme Court to challenge freebies. He argued that they unfairly influenced the voters, and even amounted to a form of ‘electoral bribery.’ He wanted the Court to urge the Election Commission to add a clause to the Election Symbols Order, 1968. This would effectively bar the political parties from using the public funds to fund the freebies.
As an explainer to the PIL, the Supreme Court Observer, which privately archives the court’s proceedings, stated that experts had concerns that such practices posed a danger to the economy. The ‘Observer’ referred to an article (June 2022) that was published by the Reserve Bank of India (RBI). It highlighted “a financial crisis (that was) developing in the various states due to Covid-19, and the Russia-Ukraine war,” partly due to free cash and food distributed during the pandemic. There was a widening gap, it added, between the revenues and expenditures, which was exacerbated by the freebies.
“In the 2021-22 financial year alone, State governments’ expenditure on subsidies grew at 11.2 per cent. In highly debt-ridden states such as Andhra Pradesh and Punjab, freebies have crossed two per cent of the (respective) states’ Gross State Domestic Product,” stated the RBI article. Politically, the line between populism (freebies), and upliftment (welfare and development) tends to be thin. India’s rapid growth has coupled with a rise in populism. This leads to a focus on short-term benefits rather than long-term development. The challenge lies in finding a middle ground that addresses the immediate needs, and ensures that the economy can sustain the promises.
For example, the direct benefit transfer scheme, which was launched in 2013, aims to directly transfer subsidies into the beneficiaries’ bank accounts. However, over the years, the facility allows the ruling regimes to push cash into the accounts of the poor, farmers, and women. This can happen via schemes that run for years, or specific ones that are announced just before the elections. The PM-KISAN scheme offers financial support of Rs 6,000 to the small and marginal farmers, and the money is debited to them each year in three installments. But there were no protests; rather, there was a demand to increase the amount.
Critics, however, questioned the Mukhyamantri Mahila Rojgar Yojana, a flagship scheme in Bihar that was launched by Chief Minister Nitish Kumar ahead of the Bihar assembly elections last year. Under it, Rs 10,000 is transferred directly into the bank accounts of 25 lakh women. The objective: Women empowerment through self-employment, and livelihood opportunities. Similar criticisms were echoed this year when the West Bengal Chief Minister Mamata Banerjee increased the amount under the Lakshmir Bhandar scheme from INR 1,000-1,200 by INR 500 each. This initiative provides monthly financial assistance to women from the economically-weaker families.
According to the Opposition, the move was linked to the forthcoming assembly elections, which are expected in April or May. Such issues raise questions over which schemes are truly welfare-oriented, and which ones are aimed to woo the voters before the elections. The latter may be wasteful, and considered by some as transgressing the delicate legal lines. Possibly, the nation needs new codes and guidelines to identify such demarcations. At present, such schemes are not allowed after the Election Commission has announced the election dates. Yet, there are ways out. There are no obstacles if they are launched a few weeks before the dates are expected, or if the schemes are announced by the Centre, but are directed at specific states in the annual budgets.
The Economic Survey (2025-26) warns that while the rapid expansion of unconditional cash transfers (UCTs) across States raises the incomes of the beneficiaries, they pose fiscal risks, and can crowd out public investments linked to growth, unless they are redesigned and better targeted. The aggregate spending on UCTs (notably those for women) was Rs 1.7 lakh crore in 2025-26. The Survey conducted a study that concluded that UCTs can amount to 0.19-1.25 per cent of the respective states’ GSDPs, and 0.68-8.26 per cent of the budgetary expenditures.
Persistent UCTs, especially where the percentage is as high as eight per cent of the annual budgets, create fiscal rigidity, and reduce the ability to invest in infrastructure, human capital, and other growth-enhancing public goods. The Survey urged the states to rethink the UCT design so that the transfers are targeted to the needy, and integrated with the existing welfare schemes. The sixteenth Finance Commission report (2026-31) flagged the rapid rise of UCTs, which accounted for 20.2 per cent of the total subsidies in the 2025-26 Budget Estimates, up from a mere three per cent in 2018-19. During the period, Maharashtra, Odisha, and Jharkhand showed huge jumps in UCT spending.
The Representation of People Act, 1951, which aims to ensure free and fair elections, views pre-election freebies as corrupt practices. Section 123 views “bribery” or “undue influence” as “any gift, offer or promise… to any person… with the object, directly or indirectly of inducing” a voter. However, the Election Commission told the Supreme Court during the PIL in 222 that it had no powers to regulate promises or distribution of freebies by political parties. It stated that the decisions are in the realm of party-specific policies, and need voters’ judgment.
(The author has more than three decades of experience across print, TV, and digital media); views are personal
