Making sense of the ‘freebies’ issue


  • Prime Minister Narendra Modi warned youth not to get carried away by the ‘revari culture’, where votes are sought by promising ‘freebies’.
  • A public interest litigation was soon filed at the Supreme Court (SC) in which the petitioner argued against the promise of ‘irrational freebies’ by claiming that these distort the electoral process. It has been reported that during the hearing, the Chief Justice of India remarked that ‘freebies’ were a serious issue and asked the Central government to take a stand on the need to control the announcement of ‘freebies’ by political parties during election campaigns.
  • The Court also suggested that the Finance Commission could be involved to look into the matter and propose solutions.

What are freebies:

  • Freebies refer to goods given to someone free of charge. In electoral context, it refers to promises by politicians to give away for free ‘club goods’ such as televisions and gold chains, thus luring the voters.
  • The basic argument is that these are a waste of resources and place a burden on already stressed fiscal resources.
  • Also, the procurement of such freebies are often done out of taxpayers’ money or black money, instead of the legitimate wealth and resources of individual electoral candidates. So it is also an ethical issue of misuse of national resources and/or funneling of black money into the electoral system, thus unduly affecting voters.

Freebies vs Welfare entitlements of citizens:

  • There is often confusion on what constitutes ‘freebies’, with a number of services that the Government provides to meet its constitutional obligations towards citizens also being clubbed in this category.
  • However, welfare schemes such as free or subsidised rations under the Public Distribution System (PDS), cooked meals under the midday meal scheme, supplementary nutrition through anganwadis, and work provided through the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) etc should not be termed as freebies.

Importance of welfare measures during the pandemic:

  • For instance, is the distribution of free foodgrain during a pandemic that devastated lives and livelihoods at a time when godowns of the Food Corporation of India (FCI) had over 100 million tonnes of rice and wheat, was a moral obligation of the government of the day, and not freebies.
  • Indian government is implementing the ‘world’s largest food security programme’ by distributing free foodgrain, through the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) to around 80 crore ration cardholders.
  • PMGKAY prevented starvation during the novel coronavirus pandemic. It can be argued that coverage under the PMGKAY must be expanded to include non ration card holders as well, as there are many who are excluded from ration lists but are in need of subsidised or free food grains. Even before the COVID19 pandemic, there have been studies which showed the poverty-reducing effect of the PDS. Subsidised foodgrains distributed under the PDS not only contribute to ensuring basic food security but also act as an implicit income transfer allowing the poor to afford commodities that they otherwise could not.
  • PDS also plays an important role, whereby public procurement at minimum support prices (MSPs) is one of the main instruments of support to farmers. The PDS allows foodgrains to be available for cheap for consumers while assuring remunerative prices to farmers.

PDS and MGNREGA benefits as poll promises:

From around 2005, PDS increasingly became a political issue, with State governments expanding coverage and reducing prices. Lower prices in the PDS became electoral issues in the southern States even earlier. Gradually they were included in the poll promises of almost all political parties. This ultimately led to the National Food Security Act (NFSA) being passed by Parliament unanimously in 2013.

About PDS and NFSA:

  • NFSA provides a legal right to persons belonging to eligible households to receive foodgrains at a subsidised price. It includes rice at Rs 3/kg, wheat at Rs 2/kg and coarse grain at Rs 1/kg — under the Targeted Public Distribution System (TPDS).
  • It ensures food security- 75% of the rural population, as well as 50% of the urban population, are legally entitled to receive subsidised foodgrains through the TPDS, according to the Act.
  • Public distribution system (PDS) is an Indian food security system through which the government distributes foodgrain and other welfare goods to the beneficiaries.
  • Under the PDS, currently wheat, rice, sugar and kerosene are being allocated to the States/UTs for distribution. Some States/UTs also distribute additional items through the PDS outlets such as pulses, edible oils, iodized salt etc.

‘Freebies’ vs human development needs:

  • Other welfare schemes that are repeatedly berated as adding to the ‘subsidy’ burden of the state also contribute to human development and protection of the basic rights of the people to nutrition, work, etc., essentially the right to life with dignity.
  • MGNREGA, for instance, has been a lifeline for many during the pandemic and earlier. At a time when there are few employment opportunities, working under MGNREGA can guarantee some assured wages.
  • Similarly, midday meals in schools have been proven to contribute to increased enrolment and retention in schools and addressing classroom hunger.
  • A number of other schemes such as old age, single women and dis abled pensions, community kitchens in urban areas, free uniforms and textbooks for children in government schools, and free healthcare services play a critical role in providing social security and access to basic entitlements in our country.
  • A discussion on whether eggs will be served in the midday meal programme, how many days of work will be provided under the employment guarantee scheme, schemes for access to free medicines, or at what price subsidised grain will be given under the PDS are positive signals of electoral democracy responding to the needs of the majority of people.


Making welfare delivery an electoral issue is the need of the hour. It is important to recognise that most welfare schemes contribute to improving human development outcomes, which also results in higher economic growth in future.

A turning point in crypto regulation, led by Europe


While India’s central bank wants a ban on crypto currencies, any legislation for the “regulation or for banning crypto” can be effective only after significant international collaboration.

About Cryptocurrency:

  • It is a digital or virtual form of currency that uses cryptography to secure transactions.
  • Cryptocurrencies don’t have a central issuing or regulating authority, instead use a decentralized system to record transactions and issue new coins.
  • It is supported by blockchain technology that leverages decentralized peer-to-peer network of nodes or computers to anonymise transactions.

Regulation of cryptocurrency in India:

  • In 2018, RBI banned banks and other regulated entities from supporting crypto transactions. Then an Inter-ministerial committee recommended banning all private cryptocurrencies.
  • In 2020, Supreme Court struck down the ban on the trading of cryptocurrency as unconstitutional following which Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was introduced with stringent regulatory provisions proposed by RBI. Under this, a plan to ban private digital currencies favours RBI backed currency (ODC over bitcoins and other private crypto).
  • In a recent union budget 2022, the finance minister announced a 30% tax on income from virtual digital assets.
  • Additionally, she also proposed a Tax Deduction at Source (TDS) on payment made in relation to the transfer of virtual digital assets at 1% above a monetary threshold.
  • However, government later clarified that this does not legitimise transactions in private cryptocurrency in India and that the government is working on a regulatory mechanism.

About crypto assets :

  • Crypto is an Internet native asset not limited by geographical boundaries. To transfer crypto, one only needs a steady Internet connection and some elemental knowledge of crypto services.
  • Further, crypto assets are not issued or controlled by any enterprise. There are a little over 19 million bitcoins in circulation at present, out of the total capped supply of 21 million bitcoins. Any of the estimated 75 million crypto wallet holders could be owning these bitcoins, or their fractions (called satoshis or sats).

How then can such a seamless financial asset be regulated?

Regulation of Markets in Crypto Assets and European Standards:

  • A global consensus is emerging on a framework to regulate the crypto industry. European Parliament and Council, the legislative arms of the European Union, came to a provisional agreement on long awaited regulations on crypto, namely, the Regulation of Markets in CryptoAssets, or MiCA.
  • Europe is the global yardstick on technology regulations. For example, the General Data Protection Regulation, or GDPR 2016, marked a turning point on consumer data protection and privacy not just in Europe but the world over.

MiCA proposals:

  • Now, Europe is showing us the path to regulate crypto assets. MiCA proposes to regulate crypto asset services and crypto asset issuers. By regulating these entities, Europe intends to provide consumer protection, transparency, and governance standards, regardless of the decentralised nature of the technology.
  • For instance, under MiCA, crypto asset service providers will be liable in case they lose investors’ assets, and will be subject to European market abuse regulations, including those on market manipulation and insider trading.
  • MiCA  also sets specific regulations for stablecoins, rightly demarcating them from other crypto assets. Under the proposed rules, issuers of stablecoins — asset referenced tokens is the term it uses — are subject to a greater degree of compliance and declaration.
  • As per MiCA, stablecoin issuers must maintain reserves to cover all claims of the coins, and should implement a process for immediate redemption if and when holders seek one. The recent collapse of TerraUSD, an algorithmic stablecoin that had no adequate reserve and relied mainly on the demand supply balance with its sister coin, Luna, had caused significant losses to retail and institutional investors. Had MiCA been implemented, this could have been avoided.

Way Forward: the road ahead for India:

  • Central government has repeatedly said that it only intends to curb use of private digital cryptocurrency and crypto assets, which are volatile in nature and may cause threat to national financial system. But government also wants to encourage the technology underlying crypto, that is, digital currency based on Blockchain technology. The official digital currency is therefore seen as a solution.
  • However, government may also examine allowing private cryptocurrency and crypto assets while regulating them stringently. This can be done in line of Europe’s MiCA model.
  • Crypto issuers, traders and exchanges can be made responsible for investor interest through a global inter-governmental agreement.
  • Business malpractices like insider trading and market manipulation in crypto sector can be made illegal and the crypto service providers and middlemen held responsible for the same.
  • The crypto issuers must also be required to maintain reserves as a certain minimum percentage of the value of the cryptocurrency and crypto assets issued by them.


A successful decentralised system of digital currency and virtual assets can benefit the financial system but it requires a measured regulatory policy response from the government instead of a heavy handed approach.


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