Former RBI Governor Urges Government to Reconsider Freebies: Calls for Transparent Discussion on Benefits and Drawbacks

“Freebies” as referred by political parties mean the necessity of providing freebies or welfare schemes by the government. Former RBI Governor D. Subbarao has spoken about this.

During a meeting with the BJP, the former governor stated, “It is the responsibility of the government, under the leadership of Prime Minister Narendra Modi, to educate the people about the advantages and disadvantages of these free benefits.”

He emphasized the need for extensive discussions on how to curb freebies and political parties. “There is a need for extensive discussions on how to control freebies and political parties. The term ‘freebie’ in colloquial language is associated with ‘rewards,’ and it is referred to as ‘reward culture’ to offer them,” he added.

It is the government’s responsibility to provide essential facilities to needy people in countries like India, where the poorest section of society is most vulnerable. Furthermore, it is essential to assess the duration for which these free facilities are necessary.

Subbarao served as the 22nd Governor of the RBI from 2008 to 2013.

Duvvuri Subbarao is a 1972 batch IAS officer from Andhra Pradesh cadre. He served as the 22nd Governor of the RBI from September 5, 2008, to September 4, 2013. After leaving the RBI, he held visiting fellow positions at the National University of Singapore and later at the University of Pennsylvania.

A white paper is a government document that serves as a comprehensive report, guide, research-based paper, or official document. It is issued to propose policies or to present information and analysis on a particular issue or problem. It is bound in a white cover, hence the name.

Historically, governments commonly use white papers to solicit feedback or present new policies or laws. Its use is primarily to inform the public about government initiatives, any plans, or policies, to gather public opinion on any initiative, plan, or policy.

The Chief Election Commissioner also raised questions

Earlier this year, when announcing the dates for assembly elections in five states, Chief Election Commissioner Rajiv Kumar had raised concerns about the freebies (revdi). He had said, “I don’t know why, but governments don’t seem to remember anything beyond 5 years. They only remember to make announcements within the last 15 days, but it’s the prerogative of state governments.”

The PM also believes – the freebie culture will have to be removed

Almost two years ago, Prime Minister Narendra Modi had said, “We will have to remove the culture of freebies from the country. Those who distribute freebies can’t undertake developmental works like building roads and railway networks. They can’t build hospitals, schools, and houses for the poor. PM Modi specifically urged the youth to work against this culture and warned that it will be detrimental for the coming generations.”

“Calling free electricity ‘freebies’ is wrong,” says Arvind Kejriwal

Delhi’s Chief Minister Arvind Kejriwal has stated, “If politicians can get 3,000 to 4,000 units of free electricity every month, then common people should also be entitled to free electricity. Calling it a freebie would be unfair. On one hand, the public experiences inflation, while the impact of policies is minimal.”

Views on Freebies from Experts and Economists

Many experts and economists expressed their opinions on the concept of freebies and subsidies in India, especially concerning the provision of free electricity and its impact on the economy.

K.R. Shanmugam, Director of the Madras School of Economics, highlighted that while political parties can announce freebies as part of their election promises, their implementation should be carefully considered, particularly when the state budgets are running a revenue surplus. He emphasized that subsidizing such freebies essentially amounts to borrowing, ultimately burdening future generations.

Shanmugam further categorized subsidies into good and bad ones, stating that good subsidies do not adversely affect other sectors, whereas bad subsidies have negative repercussions on other areas. He argued that providing free electricity falls under the category of bad subsidies, as it distorts market prices and affects other sectors negatively.

Economist Gauri Ramachandran echoed similar sentiments, stating that the issue of freebies and subsidies has come to the forefront in Sri Lanka’s economy and political discourse. According to her, freebies are not truly free; instead, they impose costs on other taxpayers.

In summary, experts and economists argue that freebies, especially in the form of free electricity, may seem beneficial to certain sections of the population in the short term but have adverse long-term effects on the economy and society as a whole. They stress the need for prudent economic policies and careful consideration of the implications of such populist measures.