New Delhi, April 19 : Disapproving the politics of freebies to woo voters, economist and Chairman of 15th Finance Commission NK Singh on Tuesday said that apart from fiscal consequences it distorts expenditure priorities of the governments. “The economics of freebies is invariably wrong,” Singh said. “It is a race to the bottom. Indeed, it is not the road to efficiency or prosperity, but a quick passport to fiscal disaster,” the former Revenue Secretary said. Speaking at the Annual Day function of Delhi School of Economics, Singh said that there is need to distinguish between the concept of merit goods and public goods on which unexceptionally, expenditure outlays has overall benefits. Citing the case of Punjab, the former bureaucrat said that considering the cost of freebies and other factors impacting state’s debt ratio there is going to be an additional impact of 3% of GSDP (gross state domestic product). “As we know, the debt to GDP of Punjab is already at 53.3% for 2021-22, which would worsen on account of these new measures. There are other states equally like the case of Rajasthan, where it will have around 1% additional impact on the state’s debt to GDP which stands at 39.8% for 2021-22,” he said. “These are illustrations because governments across the political spectrum are now being increasingly attracted to this new slogan of freebie politics,” he added. Singh noted that freebies like free power, free water or other kinds of free consumption goods distract outlays on environmental and sustainable growth, renewable energy and more efficient public transport systems. Moreover, this affects agricultural practices which do not depend on extensive use of water and fertilisers. “Freebies lower the quality and competitiveness of the manufacturing sector by detracting from efficient and competitive infrastructure enabling high factor efficiencies in the manufacturing sector,” he stated. NK
