The Supreme Court of India has recently intensified its examination of the "freebie culture," questioning the sustainability and ethical implications of distributing free goods and services for political gain. This judicial scrutiny, highlighted in multiple recent hearings, focuses on distinguishing between legitimate welfare schemes and non-merit freebies that may drain public resources and distort economic incentives. While the court's primary concern is the misuse of public funds for vote-buying, the discussions have brought the concept of "freebies" into sharp focus, analyzing their definitions, economic impacts, and the role of regulatory bodies like the Election Commission of India (ECI).
The court has expressed concerns that indefinite distribution of free items, such as rations, could create a "class of parasites" and discourage individuals from seeking employment. During a hearing on December 9, 2024, Justices Surya Kant and Manmohan questioned the long-term viability of providing free rations to 81 crore people under the National Food Security Act, urging the government to prioritize job creation. This judicial activism is not new; the court has previously examined petitions challenging excessive freebies, emphasizing the need to prevent the use of public funds as instruments for vote-buying and to maintain electoral fairness.
Defining Freebies vs. Welfare Schemes
A central theme in the Supreme Court's deliberations is the need to differentiate between genuine welfare measures and electoral incentives. The Reserve Bank of India (RBI) defines freebies as public welfare measures provided free of charge, which can include free electricity, water, public transportation, farm loan waivers, and subsidies. However, the court and other bodies have sought to draw a line between essential welfare and mass distribution of non-merit goods that drain government revenue.
Welfare measures are generally understood as essential for maintaining the dignity of life, such as healthcare, education, and social protection. These aim to accelerate human development and contribute to economic growth. Examples include the Public Distribution System (PDS) and state support for education and health. In contrast, freebies are often characterized as the mass distribution of items like laptops, scooters, and household appliances. While these may be offered without cost to the recipient, the court has questioned whether they reduce incentives for work and distort the economic balance.
The Supreme Court has acknowledged that while political parties have the right to offer freebies, the distribution should be done responsibly. In the State of Tamil Nadu case (2013), the court upheld this right but emphasized responsible implementation. However, it also noted that only an individual candidate, not a party, can commit a 'corrupt practice' under the Representation of the People (RP) Act by promising free gifts. A subsequent Public Interest Litigation (PIL) in 2022 led the court to refrain from immediate judgment but to ask the ECI to investigate and make recommendations, highlighting concerns about the long-term sustainability of such promises and their impact on governance.
Economic and Governance Implications
The economic impact of freebie politics on state budgets is a significant point of discussion. Freebies increase public spending, strain fiscal deficits, reduce capital expenditure, and can negatively affect credit ratings and investor confidence. This shift from long-term development to short-term appeasement often weakens the institutional delivery of services and increases administrative inefficiencies, thereby affecting governance.
The debate between 'Revdi culture' (a term used to criticize freebies as handouts for votes) and welfare rights emphasizes the tension between populist measures and legally guaranteed social protections for inclusion and justice. While some freebies, such as free education and healthcare, are considered productive as they build human capital and contribute to long-term empowerment, the court's concern lies primarily with non-merit freebies. Perceptions of these measures also vary; rural voters often view freebies as essential welfare, whereas urban voters may prioritize governance quality and infrastructure.
Regulatory Interventions and Future Directions
The Election Commission of India (ECI) plays a critical role in monitoring political party manifestos to prevent promises that amount to unfair inducements. The ECI issues instructions aimed at ensuring transparency and fairness during elections, discouraging parties from offering freebies that could distort the electoral playing field. The Supreme Court has examined petitions challenging the constitutionality of excessive freebies and has called for clear guidelines to distinguish legitimate welfare schemes from electoral incentives.
To address the challenges posed by the freebie culture, several recommendations have been proposed. These include introducing clear regulations to ensure that freebies are targeted and aligned with long-term welfare goals rather than just electoral promises. Electoral reforms could involve the ECI enforcing stricter rules on the distribution of freebies during election periods. Fiscal responsibility is also urged, with states and the central government needing to adopt policies that ensure welfare schemes are financially sustainable and do not lead to a debt burden. Additionally, public awareness campaigns are suggested to educate the public about the implications of freebies and encourage demand for policies that provide long-term solutions, such as infrastructure development and job creation.
The Political Landscape and Freebie Promises
The issue of freebies has become a central part of Indian political strategy. Opposition parties, notably the Congress and Aam Aadmi Party, have been stridently in favor of delivering freebies to the people, both in kind (e.g., free electricity) and through cash transfers. The Congress party's promises of freebies, framed as "guarantees," in states like Karnataka and Telangana, seemingly helped them win power. Similarly, Congress governments in Rajasthan and Chhattisgarh embarked on populist schemes before the 2023 elections.
In response to the perceived success of these strategies, the ruling party has also adopted similar tactics. Prime Minister Modi, despite initial ideological opposition to freebies, launched a series of "Modi Guarantees," which mirrored opposition schemes. For instance, the "Ladli Behan" scheme was launched in Madhya Pradesh. This shift suggests that the credibility of freebie promises, regardless of the party offering them, has become a significant factor in electoral outcomes.
Legal Challenges and Tax Implications
The legal scrutiny of freebies extends beyond election law and fiscal policy. In a significant development, the Supreme Court denied a tax deduction on expenses incurred by pharmaceutical and allied health sector industries for incentives and freebies provided to medical practitioners. In the case of Apex Laboratories Pvt. Ltd., the court ruled that expenditures on freebies such as hospitality, conference sponsorships, and laptops were not tax-deductible under Section 37 of the Income-tax Act 1961.
The court's reasoning was based on the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, which prohibit medical practitioners from accepting gifts and hospitality from pharmaceutical companies. Since the expenditure was incurred for a purpose prohibited by law, it did not meet the criteria for tax deduction. This ruling underscores the legal risks associated with providing freebies in regulated sectors and reinforces the principle that expenditures related to prohibited activities cannot be treated as legitimate business expenses.
Conclusion
The Supreme Court of India's ongoing scrutiny of the freebie culture reflects a broader concern about the sustainability of populist measures and their impact on the economy, governance, and electoral integrity. By distinguishing between essential welfare schemes and non-merit freebies, the court aims to foster a political environment focused on long-term development and fiscal prudence. The involvement of the ECI and the issuance of guidelines for regulating freebie promises in election manifestos are steps toward ensuring a level playing field. Furthermore, the denial of tax deductions for freebies in the pharmaceutical sector highlights the legal and financial consequences of such practices. As the debate continues, the focus remains on balancing legitimate social welfare objectives with the need to prevent the misuse of public funds and maintain the integrity of democratic processes.