Are Freebies and Welfare Schemes Different

Are Freebies and Welfare Schemes Different

Sub: Schemes

Sec: Economy

Why in News

• The growing trend of freebie-driven politics has sparked debates on its economic and social implications. While some argue that such schemes are essential for welfare, others believe they impose unsustainable fiscal burdens on state governments. The Supreme Court has also taken cognizance of this issue, referring it to a three-judge bench for review.

About Welfare Schemes:

• Welfare schemes aim to improve human capabilities and ensure social security.
• Examples: Midday meal schemes, Public Distribution System (PDS), and child development programs.
• Legal entitlements: The National Food Security Act (2013) transformed key welfare schemes into legal rights.

What Are Freebies?

• Freebies are often one-time or non-essential incentives offered to voters.
• Examples: Free electricity, cash transfers, and LPG subsidies.
• Often criticized for being fiscally unsustainable and politically motivated.

Economic and Social Impact:

• Positive Aspects

• • Cash transfer programs help women gain financial independence.
  • Free food programs enhance nutrition levels, reducing long-term healthcare costs.
  • Increases consumer spending, stimulating economic growth.

• Negative Aspects

• • Increasing subsidy expenditure strains state budgets.
  • Freebies may discourage workforce participation and skill development.
  • Revenue Deficit Concerns: Example: Delhi’s revenue surplus dropped from ₹14,457 crore (2022-23) to ₹3,231 crore (2024-25) due to rising welfare expenditures.

Supreme Court’s Role:

• In 2022, petitions challenged the constitutional validity of freebies in elections.
• In S. Subramaniam Balaji vs Government of Tamil Nadu (2013), the Court ruled that such expenditures are legislative decisions aligned with Directive Principles of State Policy.

Revenue Deficit:

• Revenue deficit is excess of total revenue expenditure of the government over its total revenue receipts.
• It is related to only revenue expenditure and revenue receipts of the government.
• Alternatively, the shortfall of total revenue receipts compared to total revenue expenditure is defined as revenue deficit.
• Revenue deficit actually indicates that the government’s own earning is inadequate to meet normal functioning of government departments and provision of services. Revenue deficit results in borrowing.
• The revenue deficit includes only such transactions which affect the current income and expenditure of the government.
• Revenue deficit = Total Revenue expenditure – Total Revenue receipts