In India, the concept of offering freebies—subsidized goods, services, and financial incentives—has become a common political strategy, particularly during elections. Political parties, in a bid to appeal to voters, often promise these populist measures, which are framed as solutions to economic inequality and social welfare concerns. However, while these schemes may offer short-term relief, their long-term implications for the nation’s economic health are far more damaging. In this article, we examine why freebies are bad for India’s economy and explore how they undermine fiscal stability, distort markets, and hinder sustainable growth, using concrete examples from across the country.
1. Unsustainable Fiscal Deficits and Debt Burden
One of the most immediate and damaging consequences of freebies is the heavy fiscal burden they place on government finances. The funds required to finance these populist schemes often come from borrowing, leading to escalating fiscal deficits and unsustainable debt accumulation. Take Punjab, for example. The state has long promised free electricity to farmers, along with a slew of other subsidies. The financial strain from these commitments has left the state in a perpetual fiscal crisis. The Punjab State Electricity Board (PSEB), burdened by these subsidies, has incurred significant losses, further exacerbating the state’s fiscal woes. The government’s reliance on borrowing to fund such freebies has pushed the state’s debt-to-GDP ratio to alarming levels. This not only weakens the state’s fiscal position but also undermines its ability to finance infrastructure and development in the future.
2. Resource Misallocation and Developmental Neglect
The allocation of funds for freebies often results in the diversion of resources away from more critical developmental projects such as infrastructure, healthcare, and education. Instead of investing in long-term growth and improving the quality of life, governments prioritize short-term electoral gains. In Tamil Nadu, the long-standing culture of offering freebies, ranging from free bicycles and laptops to gold for women, has diverted significant resources away from infrastructure development. Essential sectors like public health, education, and transportation are underfunded, which has led to underdeveloped infrastructure. Roads are congested, healthcare facilities are inadequate, and the public transportation system remains outdated. The state’s economic growth has been stunted as a result, with infrastructure deficiencies hindering its competitiveness and overall development.
3. Distorted Market Dynamics and Resource Inefficiency
One of the most significant economic distortions caused by freebies is the disruption of market dynamics. Goods and services provided free of charge or at heavily subsidized rates often lead to inefficiencies, overconsumption, and wastage. A prime example of this is the free electricity schemes in states like Delhi and Haryana. These policies encourage overuse of electricity, as consumers are not incentivized to use it judiciously. The result is excessive demand on power grids, which leads to inefficiencies in energy distribution and supply. Similarly, the provision of free water in cities like Mumbai has exacerbated water shortages, as the removal of price signals leads to overconsumption and puts immense pressure on already strained water resources. These inefficiencies not only increase the cost of providing these services but also lead to environmental degradation.
4. Fostering Dependency Over Self-Sufficiency
Freebies may have the unintended consequence of fostering a culture of dependency, discouraging individuals from striving toward self-sufficiency and economic independence. By providing government handouts, citizens may lose the incentive to improve their skills or innovate for better livelihoods. In Rajasthan, for instance, the loan waiver schemes for farmers, although aimed at alleviating debt, often result in a dependency mindset . Rather than encouraging farmers to adopt new agricultural techniques or diversify their income sources, these schemes perpetuate a reliance on government support. Instead of nurturing resilience and self-sufficiency in the agricultural sector, such policies discourage innovation, leading to stagnation in productivity and perpetuating the cycle of poverty.
5. Inflationary Pressures and Economic Instability
Freebies, particularly when funded through borrowing, can have inflationary effects on the economy. When governments spend excessively on such populist measures without a corresponding increase in production or revenue, the result is an inflationary environment. In Uttar Pradesh, the government’s promise of free laptops to students led to an expenditure of over ₹1,000 crore in a single fiscal year. While the initiative aimed to promote education, the burden of financing this largesse through debt contributed to inflationary pressures. As borrowing increases, so does inflation, eroding the purchasing power of the general population. This leads to higher costs of living, especially for lower-income families, further exacerbating inequality.
6. Erosion of Fiscal Discipline and Institutional Integrity
The practice of distributing freebies undermines fiscal discipline, shifting the focus from prudent economic management to populist politics. Governments often prioritize vote-gaining initiatives over sound policy decisions, weakening the integrity of public institutions. In Karnataka, the promise of free bus travel and direct cash transfers has strained the state’s fiscal resources. These schemes, while electorally popular, have diverted funds from crucial areas such as public health, education, and infrastructure. This lack of focus on long-term economic growth undermines the state’s institutional strength, which is essential for fostering a stable economic environment.
The appeal of freebies is undeniable, especially in the short term, when they provide immediate relief to marginalized sections of society. However, the long-term consequences of such populist measures are far-reaching and detrimental to the broader economy. From increasing fiscal deficits to distorting markets and eroding self-sufficiency, freebies contribute to a weakening of India’s economic foundations. Instead of relying on short-term measures that create dependency, the government should focus on policies that foster long-term growth, innovation, and fiscal responsibility. Investments in education, healthcare, infrastructure, and job creation are essential for sustainable development. India’s future growth lies in empowering its citizens, promoting self-reliance, and building robust institutions, not in perpetuating a cycle of dependency through unsustainable freebies. For a nation of over 1.3 billion people, the path to true prosperity lies in a commitment to economic discipline, efficient governance, and policies that create opportunities for all without the temptation of easy, unsustainable handouts.
Dhanya Reddy S
Alma Media School Student
