October 23, 2022

Class Contestations on ‘Freebies’

Sanjay Roy

IT has been almost an untold convention held by the pink papers and mainstream media that an expenditure from government exchequer that flows to the poor directly or indirectly are to be termed as ‘populist’ in political discourse and recently as ‘freebies’ in the context of ‘economic prudence’. A mirror image, in the lens of class, is the huge applaud the same media shower on policies that propose tax cuts or subsidies to capitalists. These esteemed perceptions are being backed by an RBI study on state finances and a follow up paper by the SBI that raises red alert on announcements of freebies in the eve of elections this year.

If we appreciate the fact that in capitalism the role of government is primarily to create conditions for the process of reproducing capitalist accumulation by protecting and defining property rights and providing infrastructure human and physical as well as of legal transactions and trade, then the greater part of the revenue should come by taxing those who appropriate the surplus produced by unpaid labour of the working mass. But that has not been the case, instead taxes are paid both by the rich and poor in various forms of direct and indirect taxes. At the same time the greater burden of producing and reproducing the future stream of labour increasingly being shifted to the realm of private, makes that also a sphere of capital accumulation. Food security is being threatened by dismantling PDS, health service and education are increasingly being privatised and now the neoliberals even tend to argue that people should pay for safe drinking water!

Moreover, the current context has a political angle to it apart from the usual gargling of market mantra and a related pathological allergy of the elite towards transfer of revenue to the poor. This is perhaps the implicit admission and consequent discomfort of the ruling party at the centre on the fact, that such transfers have provided some breathing space to the poor in the face of neoliberal onslaught and going to be deeply entrenched in the matrix of entitlement which would make it difficult for any political party in ignoring them in days to come. Ironically the prime minister of India and the media did take great pleasure in discussing the effectiveness of targeted central schemes that helped gathering popular support in past elections for the BJP and also in UP assembly polls. But similar welfare schemes initiated by the states are now termed as ‘freebies’ and there seems to be a concerted move in building rationale to restrict such expenditures for states to one per cent of GSDP or of state tax revenue. This would be a gross violation of the federal structure of our country.


Both the documents have been unable to define ‘freebies’ although fingers are pointed to expenditures allocated for the poor. The SBI paper seems to suggest that ‘freebies’ refer to those provisions that do not differentiate between those who can afford to pay and those who can’t, erasing the line between who should and shouldn’t be beneficiaries while welfare or entitlements refer to those provisions that are targeted to people who are not able to pay for it. First of all, the State is supposed to ensure that its citizens are not being deprived of adequate food, health, safe drinking water, education and basic housing and that is not because of some paternalistic morality but more importantly to ensure the supply of the future stream of a healthy labour force. These provisions should be universal in nature and it is not at all accepted by any universalistic principle of building social identity, that people should be distinguished by their capacity to pay for basic services such as water, education or health service. Unfortunately, the market mantra and the acceptance of exclusion of the poor from these services as a consequence, has gained so much strength within the elite and policy makers of our society that even such basic universal provisions tend to appear as something out of the world. The bottom line is taxing the rich to mobilise resources is unacceptable to neoliberals and hence rising inequality is acceptable but universalising certain basic provisions is not.

Secondly, it has been argued that most of these transfers are targeted to immediate relief which might increase the welfare of the poor but it would not increase State capacity that ensures long term gains derived from building infrastructure and so on. True indeed in some states the five-year average of revenue expenditure to total expenditure has crossed the ninety per cent mark and revenue expenditure to capital outlay also show a rise in the recent past and that has happened also for states where own tax revenue as a per cent of GSDP has increased during the reference period. But then how to spend and where to spend and what contributes to fiscal vulnerability and what priorities are acceptable, should be the prerogative of democratically elected governments and the political sanctions articulated through democratic processes and institutions. It is the people of the state who have to take a call which are more important choices and how they impact long term goals of development. Roads and ports do build capabilities for future growth but so also the health of children, empowerment of women, provision of drinking water and so on also contribute to the creation of healthy and equitable societies.

Provisions of social entitlements increase purchasing power of poor households by reducing ‘committed expenditures’. Simple fact is compression of wage equivalent of ‘necessary labour time’ has to be compensated by increasing social provisions for such ‘necessaries’, otherwise the system becomes dysfunctional. Thirdly, those who are so anxious about fiscal prudence and state expenditures for micro-welfare measures are also answerable on the count of privileges granted to big corporates in the form of tax concessions, capital finance subsidies, special treatment on price determination and enormous leverage enjoyed by these companies using public sector banks mediated through a complex labyrinth of ‘related party transactions’. For most companies in India equity to debt ratio has been on an average 1:4 and for low risk sectors debt amounts to be 10-12 times of equity, while in case of Adani Infra this ratio goes up to 1:107.


Despite the fact that state expenditure on long term development is a matter of concern if the revenue expenditure eats up a larger share of state’s income but most of the governments in a neoliberal regime seem to have implicitly committed to a low tax regime. For the state governments introduction of GST in any case reduces the discretion of altering relative tax burden on different segments and classes of people on the one hand, while on the other hand central transfers being increasingly tied to particular schemes, leave little choice in use of funds transferred to the states. In such a context universal welfare schemes and rights based entitlements face a general shrinkage in allocation of funds. More and more governments are relying on targeted schemes focusing on different segments and interest groups that may give positive electoral pay offs. But this is not the story of state governments alone. Several central schemes bear similar features and over time new schemes with changing target groups come up while the older ones silently dropped out. It is also important that the pressure from below to introduce some relief schemes for the common mass in exchange of votes has become one of the major modes of articulation of electoral voice particularly for the vast majority of workers and poor people who are hardly left with any institutional voice to raise their collective concerns in a market driven regime.

In such a scenario it is important to protect the expenditures that in some way or the other protect the poor from being excluded in regard to necessary consumptions. But it is also equally important to note that such a process of micro welfare schemes always refers to segments of citizens and are mostly confined to their consumption needs. There seems to be a conscious denial of rights of various categories of workers and a conspicuous silence on the part of most of the governments on issues related to their workplace, wages, incomes and conditions of work. For most bourgeoisie parties, collective voice of the toiling mass in the realm of production is considered to be far more ‘dangerous’ even if negotiations with individual citizens for some relief is tolerable to an extent.