Sometime back, I had written about the perils of the culture of freebies. This is second in series of thoughts I would like to put out with objective to rekindle the debate that seems to have drown in swarms of freebies that political class of all orientations have indulged in so brazenly for selfish vote bank politics. My hope then was rested on our Hon’ble Prime Minister Modi ji who was the one started the debate on freebie, terming it as “revdi.” That hope is fading as he seems to have drawn into competitive populism, may be out of compulsion of coalition government the BJP had to rely on after the BJP on its own fell short of majority in the 2024 general elections since 2014.
Politics in India needs serious soul-searching. Here below is my two bits.
India’s political economy is entering a dangerous phase where competitive populism is hollowing out both public finances and democratic values. Across parties and states, there is now a bipartisan consensus on one thing alone: ever‑larger “freebies” as the primary instrument of political mobilisation, regardless of what leaders publicly claim about fiscal prudence or reform. This is not just an accounting problem; it undermines social mobility, entrenches dependency, and shifts politics from citizenship to clientelism.
The scale of the freebie state
Over the last few years, explicit subsidies and loosely targeted cash doles have exploded in state budgets. States’ explicit subsidies are estimated to have more than doubled since 2019–20 to well over ₹4 trillion in 2024–25, driven by free or heavily subsidised electricity, transport, gas cylinders, and cash transfers to selected groups such as farmers, women, and youth. A handful of states now dominate this spending: Tamil Nadu alone is estimated to account for roughly one‑third of all explicit subsidies by states, with subsidies in 2024–25 reportedly around ₹1.4–1.5 trillion—close to half its revenue receipts. RBI analysis and independent budget studies show that just five states—Tamil Nadu, Karnataka, Gujarat, Madhya Pradesh, and Chhattisgarh—together make up nearly two‑thirds of all state subsidy spending, with others like Punjab and Rajasthan also in the high‑risk category.
In parallel, several large, election‑driven cash schemes have been rolled out. Maharashtra’s 2024 package, for instance, combined a major women’s cash transfer scheme, concessions on power, and youth‑oriented programmes with a gross cost close to ₹1 trillion, or over 2% of its GSDP, even as the state’s investment needs remain acute. RBI and other analysts have flagged that, across a recent cycle of state elections, pre‑poll populist schemes added tens of thousands of crores in new recurring outlays, much of it financed by borrowing rather than durable revenue reforms. The result is a structural tilt in budgets: subsidies and other current transfers rise faster than revenues, while capital expenditure is constantly squeezed.
In just the past year, pre-poll announcements across states illustrate how deeply entrenched this behaviour has become.
In Karnataka, the expansion of the Shakti scheme—offering free bus travel for women—has been aggressively promoted in the run-up to local elections. While framed as empowerment, the fiscal burden already exceeds ₹4,000 crore and is expected to rise sharply. At a time when state finances are strained, such schemes crowd out capital expenditure and leave little room for investments in mobility, skills, and industrial growth.
In Bihar, before recent assembly election, all major political alliances released manifestos brimming with costly promises: free electricity, subsidised LPG cylinders, smartphones for students, monthly stipends for unemployed youth, and expanded loan waivers. Bihar already struggles with low per capita income, poor infrastructure, and limited fiscal capacity. Yet the election narrative is dominated not by development strategy but by which coalition can outbid the other in consumption giveaways.
Across states, schemes offering direct cash transfers to women have multiplied at an unprecedented pace. Maharashtra, Telangana, Madhya Pradesh, and Odisha have all accelerated women-centric cash schemes ahead of elections—without parallel investments in childcare, skills, workforce participation, or safety that would transform these transfers into engines of empowerment. Instead of building capabilities, governments are building vote banks.
Productive welfare vs vote-buying doles
It is important not to conflate all welfare with waste. A modern democratic state has an obligation to provide safety nets and invest in human capabilities. Programmes like employment guarantees, nutrition support, or targeted income support to small farmers can raise productivity, stabilise consumption, and create long‑term gains in human capital when designed well and financed responsibly. Even cash transfers can be defensible when they replace leaky subsidies, are transparently budgeted, and are linked to broader development objectives.
What has expanded most rapidly, however, is not this kind of productive welfare but politically expedient consumption subsidies and narrow doles. Free power and blanket loan waivers undermine payment culture and distort resource allocation, yet remain staples of manifesto politics. Universal or near‑universal “thank‑you” cash transfers to specific vote banks—women, youth, certain occupational groups—are rarely accompanied by serious investments in childcare, skills, or job creation that would make these groups less dependent on the next round of largesse. Analysts repeatedly warn that such schemes crowd out spending on health, education, and infrastructure; RBI emphasises that rising subsidies are reducing the fiscal space for “productive uses,” even as committed expenditure (salaries, pensions, interest) already eats up over half of state revenues in many cases.
Human capital: the biggest casualty
A second, equally worrying consequence of this freebie‑driven politics is that it diverts attention and money away from India’s most urgent development constraint: human capital. India already faces an acute shortage of genuinely skilled workers across industries, from manufacturing to services, even as millions remain trapped in low‑productivity, informal jobs. School enrollment has improved over the years, but a large share of children either drops out or completes schooling without mastering basic reading, writing and numeracy, and multiple employer surveys suggest that a very significant proportion of graduates—often cited at around 40%—are effectively unemployable for modern sector jobs. This is not a marginal problem; it is the single biggest brake on productivity growth and on the aspiration of becoming a high‑income, innovation‑driven economy.
Fixing this requires precisely the kind of sustained, large‑scale investment that current fiscal populism is crowding out: better teachers and school systems, foundational learning programmes, modernised ITIs and polytechnics, serious reskilling infrastructure, and expanded higher‑education and research capacity. Instead, huge sums are being poured into schemes that have little or no lasting economic return, designed primarily to deliver immediate electoral gains rather than durable improvements in capabilities. Every rupee tied up in permanent consumption doles is a rupee not available to repair the education pipeline, upgrade skills, or raise the employability of young Indians. In that sense, the culture of freebies is not just fiscally irresponsible; it is a direct assault on India’s prospects of building the skilled workforce without which any vision of a developed India will remain an empty slogan.
In the November-December 2025 edition of Foreign Affairs, Michael Beckley in his essay “The Stagnant Order And the End of Rising Power,” writes “India has youth but lacks the human capital and state capacity to turn it into strength.” This is not entirely true though. The state has capacity to turn demographics advantage into strength. But only if the huge scale of funding required is not diverted to unproductive freebies.
Fiscal erosion and future constraints
The fiscal arithmetic is steadily deteriorating. States’ debt‑to‑GSDP ratios have climbed well beyond prudential benchmarks in several cases, while interest payments grow faster than own tax revenues. Some high‑subsidy states already spend upward of 100% of their revenue receipts on a combination of committed expenditure plus subsidies, effectively financing even routine development outlays with borrowed money. This is classic fiscal profligacy: politically rewarding in the short run, but corrosive over time as rising interest burdens force either higher taxes, sharper cuts in public investment, or both.
Equally worrying is the rigidity this creates. Once a cash dole or free utility entitlement is granted, it is politically close to irreversible. Any attempt at rollback is framed as “anti‑people” and can become electoral suicide, even when the scheme is plainly unaffordable. That leaves future governments—regardless of party—trapped in a narrow corridor of discretionary spending, with very little flexibility to respond to shocks, invest in climate resilience, or upgrade public services. The fiscal state becomes a hostage to decisions taken in one feverish electoral season.
Damage to democracy and social mobility
Freebie politics also reshapes the relationship between citizen and state. Instead of rights‑bearing citizens demanding better schools, safer cities, and functioning courts, politics is reduced to an auction of ever‑larger handouts. Parties that resist or even mildly question this model are quickly branded as “anti‑poor,” which creates a perverse consensus in favour of fiscal irresponsibility. Over time, elections become less about competing policy visions and more about short‑term transactional benefits.
The social consequences are subtle but profound. When public money is poured into recurrent doles rather than quality education, health, urban services, and infrastructure, social mobility slows. The poor are kept afloat, but not enabled to move up—a condition some have described as “welfare without mobility.” Worse, beneficiaries are divided into ever‑narrower patronage groups, deepening social fragmentation. Instead of building broad coalitions for public goods, politics incentivises fragmented coalitions for private or club goods, which is the opposite of what a healthy democracy requires.
A way forward: rules, transparency, and reorientation
Reversing this trend will require both institutional and political responses. On the institutional side, stronger fiscal rules, greater transparency in budgeting subsidies, and independent scrutiny of new schemes—through state‑level fiscal councils—can raise the political cost of irresponsible promises. Clear, publicly debated distinctions between temporary safety nets and permanent entitlements, and between consumption subsidies and investment‑linked support, would help voters see what is being traded off.
On the political side, parties that claim to value reform and social justice will have to make the harder argument: that true pro‑poor policy means high‑quality public goods, not perpetual dependence on cash and freebies. That requires courage and narrative skill, but it is ultimately the only way to align public finances with development goals and restore the link between democratic choice and long‑term societal progress. Without such a course correction, India risks sleepwalking into a low‑growth, high‑debt equilibrium where democracy survives as ritual, but accountability and opportunity steadily erode under the weight of “free” things that future generations will pay for with interest.
The goal of Viksit Bharat sits uneasily atop this architecture of fiscal populism. A genuinely developed India demands sustained investments in education, health, urban infrastructure, research, and green transitions—items that yield returns over decades, not instant electoral dividends. When a rising share of public money is locked into permanent consumption doles and politically untouchable subsidies, the space for such long‑horizon investments shrinks relentlessly. In that scenario, Viksit Bharat becomes less a concrete developmental project and more a rhetorical cover for a status quo where governments trade tomorrow’s prosperity for today’s votes. Put simply, a nation that spends like a patronage machine cannot credibly aspire to become a developed economy; it can, at best, manage stagnation with a thin layer of freebies.
Political parties must revive the narrative that for Viksit Bharat, we need true pro-poor governance, which means better schools, safer cities, stronger health systems, and more jobs—not perpetual dependence on cash and freebies, not dependent Bhartiyas. That requires a fundamental rethink of our electoral incentives—before the incentives reshape our destiny.
(Views are personal)
