Election Freebies or sops, such as free electricity, water, and farm loan waivers, have become an integral part of Indian elections in recent years. These offerings are made by political parties as part of their electoral promises.

Impact of such freebies on state budgets:

Expenditure side:

  • A huge drain on state resources: For example, in Maharashtra, the farm loan waiver during the financial year 2020-21 resulted in an outgo of Rs 45,000-51,000 crore.
  • Lack of specific outcome targets: The absence of accountability for the money spent, such as in Telangana, where 35% of revenue receipts and almost 63% of the state’s own tax revenue were committed to finance populist schemes centered on freebies.

 Revenue side:

  • Negative impact on state-owned enterprises: Subsidy payments by governments were estimated to comprise 16% of Discom revenues at an all-India level in 2021-22, leading to losses in PSU’s.
  • Low tax collections: Due to the provision of free electricity, water, and other benefits, there is no realization of tax on these services.

Political implications: Competitive manifestos leading to impractical and unimplementable promises, resulting in a degeneration of political agenda and wastage of resources.

Sub-national bankruptcies:

  • The burden of debt: For instance, Punjab’s debt-to-GDP ratio reached 53.3% in 2021-22 due to the high subsidy burden.
  • Creation of a never-ending cycle of freebies: Populist measures countered with more populist measures lead to financial strain.
  • Social inequalities: As observed in Rajasthan, a small percentage of the population captures a significant portion of the benefits, leading to disparities.
  • Expenditure towards servicing interest costs: Andhra Pradesh spent approximately 13% of its budget of 22,000 crores on interest payments.

Measures to mitigate the negative impacts:

  • Strengthening Election Commission: Bringing freebies under the Model Code of Conduct (MCC) and regulating manifestos by the ECI.
  • Demand-based freebies: Prioritizing Directive Principles of State Policy (DPSPs) or merit goods like the Public Distribution System (PDS), education, and health to promote prosperity.
  • Improving transparency: Ensuring that the benefits reach the actual beneficiaries, such as ensuring farm loan waivers reach only actual farmers.
  • Revising FRBM act: Imposing limits on expenditure for loan waivers, free electricity, and water to maintain fiscal discipline.
  • Outcome-based budgeting: Holding departments accountable for their work, as seen in Jharkhand, where responsibility for debts is fixed.
  • Educating the public: Raising awareness about the effects of freebies and the need for fiscal discipline through citizen groups and public campaigns.


The Finance Commission Chief, N.K. Singh, has warned that political competition over such sops can lead to fiscal disasters. Thus, it is crucial to address this issue before it becomes a norm in Indian elections.

Legacy Editor Changed status to publish March 4, 2024