Why neoliberal India is raging against ‘gifts’

The perils of “gratuitous culture” are fiercely back in the mainstream public debate. A recent report by the RBI Bulletin regarding the sustainability of public debt at the state level and observations made by the Supreme Court in response to public interest litigation have fueled pro-neoliberal voices. Traditional critics of “handouts” believe that vote-hungry politicians are straining state finances by funding such spending. In this exasperated but unbalanced discussion, the fundamental question of the role of the welfare state and the sordid collapse of economic reforms in the creation of social wealth, combined with the slowdown in public investment that requires “gifts”, is absent.

The main ever-present argument against freebies is that it only promotes current consumption and does not improve the productive capacity of the economy. However, this statement does not include the social impact of these programs on the lives of marginalized sections.

The RBI report views public welfare measures provided free of charge by the state as “free” and not a good, as such expenditure has no economic benefits. Thus, it designates common programs such as electricity subsidy, interest subsidy on agricultural loans, financial assistance to parents of girls, to female students, to the female population for the improvement of the means of subsistence. , maternity benefit schemes, support for self-help groups and the self-employed. population, among other things, as “gifts”. Such expenditures constitute an investment in the human capital of future generations.

Surprisingly, if not shockingly, the Bihar government’s Mukhya Mantri Balika Cycle Yojana, and a similar Haryana government program for Dalit students, are also categorized as ‘gifts’. These programs can influence the retention rate of girls and Dalit students and contribute to the capacity development of the younger generation.

These “gifts” improve the well-being of socially and economically vulnerable citizens of nations, who have barely benefited from three decades of market-oriented reforms. Economic growth in the post-reform period excluded a large population and widened gender and caste disparities. The specific assistance provided to populations of women, Scheduled Castes (SC) and Scheduled Tribes (ST) ensures a dignified life and the overcoming of socio-economic barriers. Such financial assistance has a multi-level multiplier effect that cannot be captured by a cost-benefit analysis.

The welfare state is responsible for looking after citizens, especially the most vulnerable among them. Article 38 of the Constitution directs the State to ensure social and economic justice. Thus, a blind critique of welfare schemes as “populist” measures by market worshipers based on a utilitarian prism is a myopic and elitist perversion. The comparison of the states of India to the Sri Lankan crisis is exaggerated. The indispensability of financial aid to vulnerable groups emerges from economic stagnation thanks to neoliberalism.

The development trajectory of economic reforms characterized by jobless growth has failed to disrupt the reality of social injustice and economic inequality. Instead, the indiscriminate privatization of public assets has prevented a large population from accessing the necessities of life. Therefore, social protection schemes act as distributive mechanisms in a stagnant economy with large disparities.

Social protection schemes, including the Employment Guarantee Scheme (MNREGS), were considered ‘free’ when introduced. These same diets proved beneficial during the pandemic, when the economic model adopted in 1991 failed to respond.

This debate on gifts also raises the question of the federal state. As proponents of fiscal austerity scrutinize states, similar social measures taken by the Union government have gone unscrutinized. State governments have an advantage in providing such welfare measures by assessing local needs more effectively than the Union government. The “free” is complementary to investments in social capital, such as health and education.

The story of fiscally irresponsible states implementing such programs is also problematic. State governments initiated and successfully implemented many programs that have since become national programs, such as the midday meal program. An unbalanced critique of state governments undermines the federal structure and creative welfare policy at the state level. The wholesale intervention of the judiciary erodes the powers of elected executives who are accountable to the voters.

It should not be forgotten that the beneficiaries of the social protection system are also taxpayers and that the tax burden on them is heavy. Social spending is the right of every citizen of the modern state. Nevertheless, the prevailing resistance to “handouts” is firmly rooted in class roots. Tax breaks and soaps to the upper middle class and businesses aimed at stimulating consumption are called fiscal stimulus. The increase in non-performing assets (NPA) with banks is mainly due to corporate payment defaults. The cancellation of these loans, new equity injections and dishonest concessions to corporations and the upper middle class go unnoticed in the mainstream discourse supported by the corporate media. These concessions are never labeled as “freebies,” and the effect of such policies on efficiency and productivity is barely assessed.

The current “free” debate, dominated by the privileged, fails to treat a voter as someone inclined to a “populist” regime and to portray welfare regimes as a public evil. Decisions about the public provision of social assistance should not come from a group of officials without an answer to the people. Even when one adheres to the principle that social investment should be preferred to such consumption through long-term “gifts”, at least for the transition period, such support is necessary for the proper functioning of society. and economy.

Reducing VIP benefits, wasteful spending, and socializing corporate profits are enough to support these temporary reliefs, along with proper and fair allocation of resources to states by the Union government, to improve health. of state finances. Voters are the best judges of the underlying economic stagnation and the need for short-term measures such as “gifts” and economic growth with a fair and equitable redistribution mechanism. Any further intervention in this matter would undermine the democratic process and the people.

(Harikrishnan is senior researcher at UGC; Gourishankar Hiremath teaches economics at IIT-Kharagpur)

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