The issue of ‘freebies’ has bounced back, when the Supreme Court of India on August 3, 2022, recommended constituting an expert committee comprising representatives of the beneficiaries, Union and State governments, the Finance Commission, NITI Aayog and the Reserve Bank of India to study the issue of ‘freebies’.
- The Court seems to toe the line of critics that ‘freebies’ stress States exchequers, drawing them in debt traps.
- On the other hand, those in favour of freebies argue that in a stratified society where capital in different forms (intellect, wealth, caste) gets accumulated in the hands of a select few, the poor and the marginalised become victimised.
- Here, ‘social welfare measures’ that are otherwise ridiculed as ‘freebies’ act as a shock absorber.
On ‘Trickle down economics
In the famous Reagan tax cuts, or Reaganomics, associated with ‘Trickle down economics’ there was a maximum cut given to higher income earners and corporations in the expectation that any benefit provided at the top would trickle down to the poor in the form of job creation, higher output, and infrastructure development.
While ‘trickle down’ yielded some positive results, it also widened inequality, diminished inclusive growth, and was criticised by economists such as Nobel Laureate Joseph E. Stiglitz.
Indian Scenarios
In India, neo-liberal schemes of the post-1990s such as the Special Economic Zones (SEZs), Software Technology Parks of India (STPI), and Bio Technology Parks (BTP), (where there were incentives in the form of tax holidays, subsidised power, and waiver of stamp duty), were seen as a result of ‘trickle down economics’, including the recent cut in corporate tax from 30% to 18%.
World Inequality report, 2022
- World Inequality Report 2022 says that the top 1% of India held 22% of the total national income as of 2021, and the top 10% owned 57% of the income.
- In another instance, a research paper, ‘Wealth Inequality, Class and Caste in India, 1961-2012’, states that India’s upper caste households earned nearly 47% more than the national average annual household income, thus making India one of the most economically and socially stratified countries in the world.
- Further, 93% of the top corporate board members and 61.8% of micro, small and medium enterprises (MSME) are owned by upper castes (MSME data March 31, 2022) — so, freebies in the form of incentives benefit the upper caste elites.
Differential tax burden
- The Union government seems to rely more on indirect taxes than direct taxes.
- While direct taxes such as corporate taxes were slashed from 30% to 18%, indirect taxes have gone up manifold between 2014-21 — these include taxes on fuel and food (rice, milk, cereal) on which the poor spend a major portion of their income, imposing a financial burden on the poor, in turn leading to high inflation and resulting in inequality and lower growth.
- States such as Tamil Nadu address this inequality through social welfare measures (derided as freebies).
- For example, the Tamil Nadu government’s free bus pass for women has not only saved families fuel cost but has also encouraged more women to join the workforce, in turn leading to economically stable families and women’s empowerment.
- Free mid-day meals (now extended to free breakfast) have encouraged socially backward parents to send their wards to school at least for the meals, resulting in keeping the evil of child labour under control and, more importantly, imparting education.
- These measures have resulted in a higher graduate enrolment ratio for T.N. (at 52%) which is double the national average at 27% and also higher than that of the United States at 41%.
Television and Domestic Violence
- A paper published in Oxford University Press’ The Quarterly Journal of Economics (2009) has lauded the introduction of free colour television in villages as it has resulted in a decrease in domestic violence and also enabled women’s empowerment (women, who are largely indoors due to customary practices/household duties, have been able to connect with the outside world through visual media).
- It has ensured self respect, as women and children are able to watch TV in their houses rather than visit the homes of those who are rich and own TV sets.
- Further, elitist corporate tax reduction (30% to 18%) has resulted in a revenue loss of ₹1.84 lakh crore to the Union government for 2019-20 and 2020-21; there is an expected loss of ₹1 lakh in 2021-22, surpassing the cost of some of the major freebies put together (free colour TV — ₹750 crore; free bus pass for women — ₹1,250 crore; mid-day meals for children — ₹1,823 crore).
A fiscal federal setup
India adopts ‘cooperative federalism’ where the Union and State cooperate to legislate and frame policies in their respective domain. Constitution Benches of the Supreme Court have been consistent in their cautioning courts not to embark on policy matters.
Recent Posts
- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)