In ‘Tamil Nadu Power Distribution Corporation Limited v. Union of India’ case, court stated that without drawing any distinction between beneficiaries, freebies would hamper the long-term economic development.
About freebies
- RBI defined freebies as “a public welfare measure such as that is provided free of charge”.
- As per RBI, freebies can be distinguished from public or merit goods such as education which have wider and long-term benefits.
Concerns related to freebies
- Fiscal Burden: Combined gross fiscal deficit of States rose from 2.6% of GDP in FY22 to 3.2% in FY25. (Economic Survey 2025-26)
- Derails Development: Instead of investing in infrastructure and job creation, money is spent on short-term gains. (Economic Survey 2025-26)
- Undermines Sustainability: E.g., CAG report flagged free electricity to groundwater depletion (Punjab Case).
- Weakens Institutions: E.g., Loan waivers & free power weaken banks, DISCOMs.
Way forward
- Subramaniam Balaji v. Tamil Nadu (2013): States should work to open avenues for employment (welfare) instead of giving non-merit freebies.
- The judgment stated that Freebies cannot be considered bribery or corruption and courts cannot tell the government how to spend public money.
- Election Commission of India (ECI): Via orders of 2014 and 2022, it required political parties to explain the rationale and funding mechanisms behind their promises.
- Economic Survey 2025-26: Deliver more durable gains in incomes and productivity than an ever-expanding set of open-ended transfers.
- E.g., Cash transfers linked to school attendance and health check-ups in Mexico’s Progresa or Brazil’s Bolsa Família.
