A Ceiling on How Much Govt Can Spend on Freebies May be a Step Forward

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Experts say that deciding on what is a welfare scheme or a freebie cannot be a qualitative choice but only an economic cost calculation because welfare schemes cut across age groups and target constituencies.

NEW DELHI — While experts have acknowledged that a value judgement on what constitutes a welfare scheme or a freebie may not be possible, a suggestion that is being mooted is to fix a percentage of government spending or the GDP to put a ceiling on such schemes.

The idea is to fix a ceiling on such kind of spending which requires providing subsidies for goods and services. Within this limit, state and Central governments can design and provide welfare schemes or freebies as they deem fit.

This would require a proper audit of budgets and experts to certify the integrity of budget numbers but which schemes are providing goods and services below cost to the people will be left to the elected governments at the Centre and states.

Experts say that deciding on what is a welfare scheme or a freebie cannot be a qualitative choice but only an economic cost calculation because welfare schemes cut across age groups and target constituencies.

So to argue that free education or nutrition for children is a freebie as compared to subsidised rice or wheat for poor families is a difficult proposition.

This approach recommends doing away with the classification of merit or non-merit subsidies. The constraint will be in the form of a FRBM Act of the budgets of Centre and states on how much they can spend under this head.

Experts have pointed out that the Centre and states are both guilty as far as freebies are concerned. There is the need for institutional checks to ensure that populist spending does not run amok.

The checks were there which have become ineffective over the years, experts contend.

Economists say that a freebie should be decided on the basis of its economic cost. But the needs of populations differ across regions and geographies. — IANS

A suggestion that is being mooted is to fix a percentage of government spending or the GDP to put a ceiling on such schemes regarding freebies. — Graphic courtesy: The Hindu

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