06 Aug Revdi Culture – A slang for underprivileged or a Genuine concern for development
Freebies like free power and a monthly stipend to women are among promises made by parties and this is common in elections in state after state. Earlier this month, the PM said it’s time to stop this practice and called it the ‘revdi’ culture hurting the country, its development and well-being. Election Commission of India (ECI) cannot regulate policy decisions regarding the “offering/distribution of any freebies either before or after the election”.
Impact of such freebies on state budgets:
- Expenditure side.
- Revenue side.
- Negative impact on state-owned enterprises.
- Low tax collections: due to Free electricity, free water, free rides etc., there is no realization of tax on these.
Debate on Government Intervention in form of freebies/welfare measure:
Basically, all contemporary debate can be divided into two segments
- Those who advocate government
- Those who are against government intervention.
Against government intervention
Scholars associated with Neo-Liberal School like Fredrich Hayek and Robert Nozick argue against any kind of government intervention.
- Building on the wok of Classical Economist Adam Smith, who had given the Idea of “Invisible Hand”, the Neo-liberal scholars argue that the Market is like a nervous system capable of receiving unlimited stimulus.
- Basically, they argue that there is no need for any government intervention in any sphere of socio-economic development of society. The Market forces are capable of that.
- That is why, father of Neo-Liberalism Hayek has termed Planning as “Road to Serfdom”.
In favor of Government Intervention
Countering the argument of Neo-liberal scholars there are various scholars who argue in favor of state intervention.
- Scholars like Naom Chomsky, have criticized the “policy of no-intervention”, arguing that the state not only works as a policy planner but it carries out various activities that build the capacity of individuals to better enjoy the available resources. Thereby increasing the overall socio-economic status of the entire
- Similarly, Indian-American economist Amartya Sen has argued that the state is an important tool to realize the “Equality of Capability”, which is more significant than “Equality of Opportunity” and even “Equality of Resources.”
- For example, by providing free and quality education and health to all citizens, the state basically ensures that everyone can have the ability to compete at equal footing.
- Moreover, Raghu Ram Rajan, in his book “the Third pillar – how market and state leave people behind”, has argued that there are places where market forces fail and the state has to provide services to ensure dignity of individual and equal chance to development.
- To determine if it is possible to restrict the distribution of freebies by political parties using public funds, Supreme Court’s direct union government should engage the finance commission.
- The Supreme Court has decided to set up an expert group with representation from Niti Aayog, Finance Commission, Election commission, RBI and political parties to study the impact of freebies on tax payers and economy, and recommend measures to regulate it.
Measures to mitigate the negative impacts:
- The Finance Commission (an independent authority) can consider the state’s debt, when allocating funds to other states and use that information to determine if the state’s economy would remain resilient over time in the face of subsidies.
- Increasing the effectiveness of the Election Commission of India (ECI) by adding giveaways to the Moral Code of Conduct (MCC) and controlling manifestos.
- Increasing transparency to make sure it reaches the intended recipients. A agricultural loan forgiveness, for instance, only applies to genuine farmers.
- Modifying the FRBM Act by putting a cap on the amount that can be spent on loan waivers, free power, and water.
Thus, it is evident that the presence of freebies could be good economic stimulus provided that sad state of affairs of the Indian economy. However, excessive freebies that too when economy is running well could be counterproductive.