List of Contents
- What are freebies?
- What is the aim behind ‘Trickle down economics’ and Tax cuts?
- What are the impacts of Trickle down policy and tax cuts?
- How the distribution of freebies are reducing inequality?
- What are the Supreme Court’s observations on the distribution of freebies?
- How fiscal federal setup is aiding the distribution of freebies?
- Sharing is Caring:
Source: The post is based on the article “End this asymmetrical conflict over ‘freebies’” published in The Hindu on 20th August 2022.
Syllabus: GS 2 – Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes.
Relevance: Distribution of freebies.
News: Recently, the Supreme Court recommended constituting an expert committee to study the issue of ‘freebies’.
What are freebies?
|Read here: PM’s ‘revdi’ remark: We need to disentangle good subsidies from bad|
What is the aim behind ‘Trickle down economics’ and Tax cuts?
Trickle-down theory along with Reagan tax cuts believes in providing maximum tax cuts to higher income earners and corporations. This is because of the expectation that any benefit provided at the top would trickle down to the poor in the form of job creation, higher output, and infrastructure development.
For example, in India, neo-liberal schemes of the post-1990s such as the Special Economic Zones (SEZs), Software Technology Parks of India (STPI), and Bio Technology Parks (BTP).
What are the impacts of Trickle down policy and tax cuts?
-In reality, ‘trickle down’ yielded some positive results, but it also widened inequality, diminished inclusive growth. This is highlighted in the recent World Inequality Report 2022 also.
-Since the government is reducing taxes for well-offs, it is forced to rely more on indirect taxes than direct taxes. This includes taxes on fuel and food (rice, milk, cereal) on which the poor spend a major portion of their income. This further increases the financial burden on the poor.
How the distribution of freebies are reducing inequality?
States such as Tamil Nadu address this inequality through social welfare measures (derided as freebies). For instance,
The free bus pass provided for women has a) Saved family’s fuel cost, b) Encouraged more women to join the workforce, and c) Aid in the creation of economically stable families and women’s empowerment.
Free mid-day meals have a) Encouraged socially backward parents to send their wards to school at least for the meals, b) Kept child labour under control, and c) imparting education.
A paper published in Oxford University Press lauded the introduction of free colour television in villages. As it has a) Reduced domestic violence, b) Enabled women’s empowerment as women have been able to connect with the outside world through visual media, c) Ensured self-respect as women and children do not visit the homes of rich who own TV sets.
What are the Supreme Court’s observations on the distribution of freebies?
In R.K. Garg vs Union of India (1981), and BALCO employees Union vs Union of India (2002), the Court held that the wisdom of economic policies is not subject to judicial review.
In S. Subramaniam Balaji vs State of Tamilnadu (2013), the court dismissed the petition which challenged the free gifts schemes (colour television, mixer grinder, laptops) of the T.N. government. The Court observed that the distribution of gifts relates to the implementation of directive principles of state policy.
|Read more: The ‘freebies’ debate|
How fiscal federal setup is aiding the distribution of freebies?
India adopts ‘cooperative federalism’ where the Union and State cooperate to legislate and frame policies in their respective domain. So, social welfare measures (freebies) may differ from State to State or region to region.
For example, in the desert regions of Rajasthan it could be free drinking water, in Kerala, it could be something else.
Thus, it is for the respective legislature/executive to formulate the social welfare measures for that region. So, forming a central committee by the court might not address the socio-economic diversity of the nation.