Arun Kumar

Political parties are outdoing each other promising free electricity and water, laptops, cycles, mixies, etc.. Implementation of these promises will have economic implications that are not negative in the present circumstances. Disdainfully these are called `freebies’ and characterized as fiscally imprudent. The well-off and businesses get `freebies’ euphemistically called `incentives’. Since 2006, the Union Budget estimates them to be between Rs.4 and Rs.6 lakh crore each year. If the well-off who don’t really need `freebies’ can get so much, why can’t the marginalized (especially the women and the young) get a fraction of it?

Trickle-Down has Not Delivered

The uncivil living conditions of the poor justify what they are offered. During the pandemic, 90% said that they could not buy one week of supplies. Delhi socio-economic survey of 2018 projected to all India level suggests that 90% of families spend less than Rs.10,000 per month. When images of destitute millions walking back to their villages were beamed into homes the rulers could no more be in denial and poverty could not be treated as a mere statistic.

The patience of the marginalized sections has worn thin. Since independence, they have sacrificed believing in the wider good of the nation. They gave up land for cities, roads, factories and dams. However, they largely became landless workers and slum dwellers. Their kinship, culture and lives got ripped apart.

Now they resist displacement for development – whether in Narmada valley, Koodankulum, Jaitapur, Jagatsinghpur, or for the bullet train or dams in Uttarakhand. In 1992-93, a top government economist cynically argued that for the first half of its term, the government should push what businesses need and subsequently pay lip service to the poor. Can the political system build credibility like this?

No matter which political party has come to power, the gains of development have hardly trickled down, especially after 1991. So, people no more believe the rulers’ promises of the betterment of their lives in the long run. For a civilized existence, the poor need electricity, water, education, medical facilities and productive jobs to take care of their family. They need it now and what better, if it is `free’. The politicians are responding to this to lure them.

Arun Kumar

Development Undermined by Black Economy and Poor Governance

Whatever the government has been giving has been undermined by the black economy which leads to policy failure and poor governance. Expenditures have led to weak outcomes; further reducing the trickle-down and worsening the plight of the poor.

The black economy is like digging holes and filling them – that is, activity without productivity. It lowers the growth rate compared to the potential of the economy. It is concentrated in the hands of 3% who gain at the expense of the rest. Since it is a negative-sum game, the losses of the marginalized are far greater than the gains of the few. The cost of the `freebies’ offered is a fraction of what the poor lose.

When in opposition, political parties raise the issue of corruption, like in the case of Bofors, 2G spectrum, Rafael and recent Banks related scams. But, when in power these parties behave no differently since they and their financiers benefit from the black economy. Now, electoral bonds enable bribes to be paid in white. All this leads to a widespread sense of social injustice and legitimizes illegality. If loot is widespread, why can’t the poor at least get essentials?

Economic Impact of Rising Inequalities for the Disdain

The growing inequalities fostered by the lack of trickle-down and growing black economy has led to a shortage of demand and to slower economic growth. Pre-pandemic, the rate of growth fell by 4%, so on a GDP of Rs. 200 lakh crore, the loss is Rs. 8 lakh crore per annum. Its impact is mostly on the impoverished unorganized sector which employs 94% of the workforce.

The `freebies’ cost is a fraction of this loss. Further, what the marginalized get helps buoy demand that prevents the rate of growth from declining further. Free education and health are anyway justified because they are cases of merit want and increase the productivity of labour. The World Bank recognized in the 1980s that the current policies marginalize the poor and a `safety net’ (`freebies’) is needed. As the crisis has deepened, it has now suggested Universal Basic Incomes (UBI) which would cost many times more than what `freebies’ cost currently. 

Conclusion

In brief, the marginalized do not trust that they would benefit from general development. They want the basics of life now and better, if free. Direct taxes can be used to finance them. Globally the rich recognize that they need to pay more taxes for societal harmony. But, the Indian rich, 30,000 of whom have left the country recently don’t agree. The marginalized have nowhere to go and are entitled to a civilized existence here and now. `Freebies’ not only partly fulfil that but also keep a lid on societal disruption which would be far more expensive.

First published in the Times of India, Marginalized Deserve a Civilized Life: Call it by Whatever Name on February 18, 2022.

About the Author

Arun Kumar, Malcolm S. Adiseshiah Chair Professor at the Institute of Social Sciences, New Delhi