Supreme Court Panel on Political Freebies: Impact on Indian Economy and Elections

The Supreme Court of India has initiated steps to examine the growing practice of political parties announcing freebies during elections, a practice that has sparked significant debate among legal experts, economists, and policymakers. The Court’s decision to form an expert committee to study the impact of these promises has been met with mixed reactions, with some experts terming it a “burial by committee.” The issue centers on the economic and social consequences of freebies, such as free electricity, water, loan waivers, and cash transfers, which are often used as election incentives. While some argue that these measures are essential for welfare and poverty alleviation, others warn of their potential to strain state finances and discourage workforce participation.

The Supreme Court’s involvement stems from a Public Interest Litigation (PIL) petition filed by Ashwini Upadhyay, which seeks to regulate the distribution of freebies by political parties. During hearings, the Court has queried the Central Government on why it cannot constitute a committee to study the issue and has suggested forming an expert body comprising representatives from various stakeholders, including the government, opposition parties, NITI Aayog, the Election Commission, the Finance Commission, and the Reserve Bank of India (RBI). The Court has also emphasized the need for clarity on the funding sources for such promises and the long-term economic implications.

The Supreme Court’s Initiative and Committee Formation

On August 3, 2022, the Supreme Court decided to set up an expert group to study the impact of freebies announced by political parties on the economy. The bench, headed by Chief Justice N.V. Ramana and comprising Justices Krishna Murari and Hima Kohli, directed the Centre, the Election Commission, and other stakeholders to submit suggestions on the composition of the committee within seven days. The Court’s order came while hearing a PIL petition challenging the practice of promising freebies during elections.

The proposed committee is expected to include members from the government, opposition parties, NITI Aayog, the Election Commission, the Finance Commission, and the RBI. The Court’s objective is to take a holistic and comprehensive view of the matter and make recommendations to address the issue. However, the exact powers and limitations of the committee have not yet been specified, and it remains unclear whether the committee will have the authority to veto or regulate freebie promises.

Expert Reactions and Concerns

Many senior law experts and advocates have criticized the Court’s decision to form a committee, describing it as a “burial by committee.” This term suggests that the issue may be delayed indefinitely without concrete action. Senior counsel Rajeev Dhavan questioned how the committee would determine the effect of freebies on elections, raising doubts about the effectiveness of such an exercise. Similarly, senior advocate Sanjay Hegde noted that the committee’s recommendations might not lead to any significant changes unless the Court acts upon them.

There is also confusion regarding the composition and scope of the committee. For instance, some reports incorrectly claimed that the SC-formed panel would function as an “all-India organization of taxpayers” with the power to approve or reject freebie promises. These claims have been debunked, as the Court has not mentioned any such powers or officially designated the committee as a taxpayer organization.

Government’s Stance and Proposals

The Central Government, represented by Solicitor General Tushar Mehta, has supported the idea of forming a committee but also proposed its own version. Mehta suggested a committee comprising the Secretary of the Central Government, Secretaries of each state government, representatives of each political party, NITI Aayog, RBI, Finance Commission, and the National Taxpayers Association. The government’s proposal includes the idea that the Supreme Court should lay down guidelines to regulate freebies until legislative measures are enacted.

Mehta argued that the “freebies culture” has become an art form and is now the primary basis for elections, which could lead to economic disaster. He emphasized that while welfare schemes are necessary, distributing items for free is not the right approach. The government also pointed out that freebies are often announced during political rallies without being included in party manifestos, making it difficult to track or regulate them.

Impact of Freebies on the Economy

The Supreme Court has highlighted several economic concerns related to the distribution of freebies. These include:

Encouraging Unemployment: Free rations and direct cash transfers may discourage people from seeking employment, reducing the labor force.
Misallocation of Resources: States may prioritize freebies over essential services, such as salaries for judicial officers and public infrastructure development.
Fiscal Burden: In states like Punjab, excessive subsidies (amounting to 16% of total revenue) are pushing economies toward bankruptcy.
Political Exploitation: The Court has cautioned against using election-time incentives to sway voters, terming it a violation of free and fair electoral processes.

Past Supreme Court Observations

The Supreme Court has previously addressed the issue of freebies:

2013 Subramaniam Balaji Case: The Court ruled that such matters fall within the domain of legislative policy and are beyond judicial scrutiny. It also noted that such expenditures cannot be deemed unlawful or classified as “corrupt practice,” especially as they aim to advance Directive Principles of State Policy.
2021 Expert Panel Proposal: The SC proposed an expert panel including NITI Aayog, RBI, and political representatives, but no concrete action followed.
2022 Election Freebies Review: The Court flagged concerns about political parties announcing unsustainable schemes without clarity on funding sources.

Advocacy for Freebies

Despite criticism, some argue that freebies serve crucial social functions:

Poverty Alleviation and Social Protection: Free food distribution during the pandemic benefited 800 million people, ensuring basic sustenance.
Welfare Initiatives: Free housing, toilets, and healthcare help the underprivileged escape extreme deprivation.
Improving Infrastructure and Living Standards: Free electricity, water, and sanitation have enhanced quality of life, as reflected in multi-dimensional poverty index reports.
Addressing Socio-Economic Inequalities: Schemes like free electricity for farmers in Punjab address long-standing disparities.
Boosting Human Development: Free education, mid-day meals, and healthcare services enhance literacy, nutrition, and well-being, contributing to long-term economic progress.
Economic Stimulus and Workforce Participation: Free or subsidized public transport for women increases workforce participation and financial independence.
Social Equity and Political Stability: Freebies reduce income disparities, preventing social unrest and ensuring stability.

Election Commission’s Role

The Election Commission of India has weighed in on the debate, stating that freebies can be lifesavers during dire times. However, it has also emphasized the need for transparency and accountability in how these promises are made and implemented. The Commission has suggested that political parties should clearly outline the financial implications of their promises in their manifestos.

Legislative and Regulatory Challenges

One of the key challenges in regulating freebies is the lack of a legal framework. The Supreme Court has noted that the issue requires legislative intervention, but no such measures have been taken so far. The Court has also observed that it cannot directly interfere in matters of legislative policy, as established in the 2013 Subramaniam Balaji case.

Potential Solutions

Several measures have been proposed to address the issue:

Regulatory Oversight: Establishing a body to review and approve freebie promises before elections.
Transparency Requirements: Mandating political parties to disclose the financial impact of their promises in manifestos.
Judicial Guidelines: The Supreme Court could lay down guidelines for regulating freebies until legislative measures are enacted.
Public Awareness: Educating voters about the long-term economic consequences of freebies.

Conclusion

The Supreme Court’s decision to form an expert committee to examine the issue of freebies by political parties marks a significant step toward addressing a critical economic and electoral concern. While the committee’s formation has been criticized as a delay tactic, it also offers an opportunity to develop a comprehensive framework for regulating freebies. The debate highlights the tension between welfare and fiscal responsibility, with valid arguments on both sides. Ultimately, the solution will require a balanced approach that ensures social protection without compromising economic stability.