Government Freebies Benefits Drawbacks And Policy Implications

Government freebies—defined as goods or services provided by governments to citizens at little or no cost—represent a contentious issue in political and economic discourse globally. In India, this debate has gained significant prominence as state governments increasingly use such schemes to attract voters and provide welfare. This article examines the multifaceted nature of government freebies, exploring their benefits, drawbacks, and policy implications based on available evidence and analysis.

Defining Government Freebies and Welfare Programs

Government freebies encompass a wide range of offerings including free electricity, water, smartphones, healthcare, and direct cash transfers. These programs are often distinguished from traditional welfare projects, though the line between them can be blurry. As noted in the sources, the distinction between a "freebie" (often viewed negatively) and a "welfare project" (generally seen positively) may be "meaningless hair-splitting" in contexts where governments are expected to provide social support.

No government, state or central, has been able to escape the responsibility of providing welfare; indeed, it is usually judged by its effectiveness in doing so. Drawing a distinction between a 'freebie' (bad) and a 'welfare project' (good) in such a context is meaningless hair-splitting. And for the Supreme Court or even the Reserve Bank to seek to outlaw either is an unacceptable transgression into politics. Of course, welfare cannot be given beyond a state's capacity to bear its costs. That is where responsible governance comes in. But the issue is not of whether freebies may be promised or given, but how much welfare is affordable – and drawing a line when political generosity topples over into fiscal profligacy.

The real assumption of our Prime Minister thus seems to be that when he hands out something it is welfare, and when others, especially from Opposition parties, do so it is a 'freebie'. I'm afraid that's not an argument that anyone else can accept. And as the Opposition has been pointing out, aren't Mr Modi's giveaways to corporates in the form of lower taxes, loan waivers and other benefits the biggest freebies of all?

Arguments in Favor of Government Freebies

Proponents of government freebies highlight several potential benefits:

Economic Inclusion and Empowerment

In democratic societies, freebies can act as tools for economic inclusion and empowerment, reducing inequalities in wealth, access to opportunities, and social dignity. When targeted effectively, they can alleviate poverty and improve access to essential services for disadvantaged populations.

Support During Economic Distress

Freebies can provide crucial support during economic downturns or emergencies. For example, various relief measures were implemented during the COVID-19 pandemic to help vulnerable populations meet basic needs.

Direct Benefit and Agency

Some successful programs demonstrate the effectiveness of providing direct benefits to citizens, allowing them the freedom to decide what they need most. The Rythu Bandhu scheme in India, which provided unconditional cash transfers to farmers, exemplifies this approach.

What if I tell you government #freebies - #welfare are a good thing? "When a farmer in Telangana received ₹10,000 in his account just before sowing season, he didn't buy a TV. He bought seeds. And hope." In 2018, India was battling a deep agrarian crisis. Loan waivers weren't working. Protests filled the streets. Then came Rythu Bandhu, an unconditional cash transfer (UCT) that gave farmers the freedom to decide what they needed most.

Social Equity

Freebies can promote social equity by ensuring that basic needs are met across different segments of the population, particularly for poor, rural, and disadvantaged communities.

Advantages of Freebies in a Democracy

In a democratic society, the principle of equity and social justice is as important as political liberty. Freebies, when used judiciously, act as tools for economic inclusion and empowerment. They can reduce glaring inequalities in wealth, access to opportunities, and social dignity.

Criticisms and Potential Drawbacks

Critics of government freebies raise several concerns:

Fiscal Strain

One of the primary criticisms is that freebies can strain government finances. Reckless spending on freebies may lead to fiscal deficits, reducing funds available for essential services like infrastructure, healthcare, and education.

Reckless spending by Indian state governments on freebies have historically attracted voters, but it means trading off a good quality of life. "Freebies are never free...when parties offer schemes, they must be required to make the financing and such trade-offs clear to voters. This would reduce the temptation towards competitive populism," Ashima Goyal, a member of the Reserve Bank of India's (RBI) monetary policy committee, told PTI yesterday (Aug. 21).

Such freebies and subsidies, she said, translate to lower capital expenditure on health, education, and other more important needs. "Reducing the quantum of subsidies by ensuring that only the deserving receive them will free up resources to invest in health, education, agriculture, R&D, and rural infrastructure, which will help create more jobs and reduce poverty on a sustainable basis," a report by the RBI said.

Reckless freebies, on the other hand, hurt state finances by imposing large indirect costs. In this fiscal, various Indian state governments have already announced over 1 lakh crore rupees ($12.5 billion)-worth of welfare schemes and subsidies.

Resource Allocation Trade-offs

When governments allocate resources to freebies, they often must reduce spending in other areas. According to Ashima Goyal, "such freebies and subsidies, translate to lower capital expenditure on health, education, and other more important needs."

Dependency Culture

There are concerns that widespread free programs may create a dependency culture, reducing work incentives and long-term self-reliance among beneficiaries.

Political Motivations

Many freebies are implemented with electoral considerations rather than genuine development goals. This "competitive populism" can undermine good governance and long-term planning.

Targeting Issues

Blanket schemes without proper targeting may benefit those who don't actually need assistance, while excluding the most vulnerable populations.

Only states with revenue surplus must give out freebies and subsidies, according to KR Shanmugam, the director of the Madras School of Economics. In 2021-22, however, only 11 of the 28 Indian states recorded surplus revenue.

Shanmugam also calls for a distinction to be made between good and bad subsidies.

Frameworks for Evaluation

Several analytical frameworks can help evaluate the effectiveness and appropriateness of government freebies:

PESTLE Analysis

This framework examines Political, Economic, Social, Technological, Legal, and Environmental factors:

SWOT Analysis

SMART Framework

For freebies to be effective, they should be:

• Specific: Clearly defined objectives and beneficiaries
• Measurable: Outcomes should be trackable
• Achievable: Aligned with government capacity
• Relevant: Aligned with broader development goals
• Time-bound: Temporary or phased rather than permanent

Many freebies ignore this.
R – Relevant | Must be aligned with broader goals like education, health, skill development—not just electoral gain. | T – Time-bound | Should be temporary or phased. Permanent freebies lead to long-term dependency. |

Case Studies and Examples

Several examples illustrate the varied impacts of government freebies:

Rythu Bandhu (India)

This unconditional cash transfer program for farmers demonstrated how direct benefits can address specific needs. Farmers used the funds for agricultural inputs rather than non-essential items, showing that trust and agency can lead to positive outcomes.

Fast forward to 2025:
1. ₹2,80,780 crore allocated to UCTs in India (0.9% of GDP, 11% of social sector spending).
2. 23x increase in a decade, outpacing even flagship programs like #MGNREGA and food subsidies.
3. 54% of funds now flow to women-centric schemes, giving financial independence to millions of low-income households.

Why is this shift happening? Because trust works. When we stop telling people what to do with aid and simply give them agency, outcomes improve. Local economies grow. Dignity is restored. But here's the challenge: 10 crore people are still excluded, migrants, street dwellers, trans communities, often invisible to our systems. The next step? Moving from safety nets to springboards: cash that not only supports consumption but enables investment, entrepreneurship, and resilience.

MGNREGA (India)

The Mahatma Gandhi National Rural Employment Guarantee Act guarantees 100 days of wage employment per year to rural households. It represents a welfare approach focused on creating employment opportunities rather than simply providing free goods or services.

Corporate Benefits

The debate over freebies extends beyond citizen benefits to include corporate incentives. As noted in one source, "aren't Mr Modi's giveaways to corporates in the form of lower taxes, loan waivers and other benefits the biggest freebies of all?"

State Government Schemes

In the current fiscal year, various Indian state governments have announced over 1 lakh crore rupees ($12.5 billion) worth of welfare schemes and subsidies, highlighting the scale of freebie implementation in some regions.

Policy Recommendations

Based on the analysis, several policy recommendations emerge:

Targeted Implementation

Freebies should be targeted toward poor, rural, and disadvantaged populations rather than blanket schemes.

When They're Good: - Targeted (for poor, rural, disadvantaged). - Time-bound and measurable. - Complement long-term capacity building (e.g., free skill training, healthcare). - Used during economic distress or disasters (e.g., COVID relief).

When They're Bad: - Blanket schemes without targeting or fiscal planning. - Politically motivated without development linkage. - Used to distract from governance failures. - Lead to "freebie culture", eroding economic discipline and merit-based systems.

Time-Bound Approach

Programs should have defined timeframes rather than becoming permanent entitlements.

Direct Benefit Transfers

Implementing Direct Benefit Transfers (DBTs) can increase transparency and reduce leakages.

Governments should: - Use Direct Benefit Transfers (DBTs) for transparency. - Evaluate freebies with cost-benefit analysis and fiscal impact assessment. - Link to performance or conditionalities (e.g., school attendance, health checkups). - Encourage community participation in deciding needs over political top-down models

Cost-Benefit Analysis

Governments should evaluate freebies using rigorous cost-benefit analysis and fiscal impact assessments.

Conditionalities

Linking benefits to specific conditions (such as school attendance or health checkups) can enhance effectiveness.

Community Participation

Involving communities in decision-making about needs can lead to more appropriate and effective programs.

Fiscal Responsibility

Only governments with revenue surpluses should implement large-scale freebie programs. In 2021-22, only 11 of 28 Indian states recorded revenue surplus.

Distinguishing "Good" vs. "Bad" Subsidies

As KR Shanmugam suggests, making distinctions between different types of subsidies can help allocate resources more effectively.

Conclusion

Government freebies represent a complex policy tool with both potential benefits and drawbacks. When designed and implemented thoughtfully—with proper targeting, timeframes, and fiscal considerations—they can contribute to social equity and economic inclusion. However, when driven primarily by political motivations without proper planning, they can strain government finances and undermine long-term development goals.

The debate over freebies ultimately hinges on balancing immediate welfare needs with sustainable fiscal management. Rather than a simple binary of "good" or "bad," government freebies should be evaluated based on their design, implementation, and outcomes. Moving forward, policymakers should focus on creating programs that provide immediate relief while building long-term capacity and self-reliance among citizens.

Sources

1. Are Government Freebies Bad or are they, in fact, good?
2. Are Freebies Good or Bad? Let's Analyse in 360 Degree Dimensions
3. Freebies vs welfare projects: What is the difference?
4. Government freebies cost Indians their quality of life
5. Government freebies - welfare are a good thing