Who Pays for it?(Part-II) – The RMLNLU Law Review Blog

By: Prakhar Bajpai


According to Article 266(3) of the Indian Constitution, money out of the Consolidated funds can only be appropriated by law and for the purposes and manner defined by the constitution. Moreover, Article 282 says that governments can make “any” grants for any public purpose. By defining “purpose” as a “public purpose,” the constitution’s drafters were able to more precisely define the broad goals of each of these provisions. From the concomitant of the scheme above, it is clear that the same was designed to promote the “Directive Principles of State Policies” because the general responsibility of implementing the same is on the Union and State. It is widely accepted that the state’s function is to provide “social, economic, and political justice” to its citizens. As a result, to achieve economic democracy, the state is well within its rights to provide universal healthcare, access to drinking water and other basic amenities.

Other nations’ constitutions also contain similar clauses, such as the first one in Article I, Section 8 of the United States Constitution, which states that “the Congress shall have the power to lay and collect taxes, duties, imports, and excises to pay the debts and profit for the common advancement and general welfare of the United States.” In a similar vein, Section 81 of the Australian Constitution mandates that any income or funds produced or received by the Commonwealth Government must be allocated for Commonwealth objectives.


Proponents of freebies say that freebies are necessary to provide the welfare of the poor and will help in the overall development of the nation however antagonists say that freebies of any type make people lazy and burden the state exchequer. This debate has divided the freebies into two parts. The first category includes free or subsidized provisions such as health or food grain. Hence, these are the expenditures that do not positively affect fiscal health in the long run. As a result of their positive externalities, providing these services to the underserved would benefit economic growth. As these are the responsibilities of the different states, as discussed above, however, there has not been any substantial study to suggest whether the stated initial objectives were achieved in line with the larger budgetary cost. Though according to RBI, free electricity, water, public transportation, waivers of pending utility bills, and loan forgiveness for farmers are all to be considered freebies as they “potentially undermine credit culture, distort prices through cross-subsidization, eroding incentives for private investment , and disincentivize work at the current wage rate, leading to a drop in labor force participation.” The problem here lies with the second category of freebies and political parties in India which is often seen flouting the Indian Constitution’s provisions and using them for their benefits and vote bank advantage. As the latter category of freebies includes the gifts that are promised to the public at large. Providing monetary benefits to voters on a monthly basis. Also, is the promise to distribute electronic gadgets without any distinction. Moreover, expanding the freebies horizon to “every” rather than the underprivileged woman clearly states the parties’ intention of expanding their vote bank rather than providing a social obligation.

Affirmative action for underrepresented groups, including women, as well as direct benefits for employability, educational success, sports and cultural activities, are not freebies. Neither is free medical care for the poor or free food for those unable to support themselves. To quote former chief election commissioner OP Rawat, “free power, free cell phones, free laptops, etc. fall in the ambit of freebies.” Therefore, the question is not how inexpensive the freebies are, but rather how costly they ultimately are for the economy, the quality of life, and social cohesiveness.


The solution is difficult, but the problem is very serious. In his book The Ethics of Voting, Jason Brennan claimed that while people are not compelled to vote, they are required to vote wisely if they do. A welfare state requires the sound socio-economic development of the nation as a whole for its continued existence. Freebies are an avoidable burden on the exchanger and a limit needs to be put on such expenditure. According to Articles 270 and 280(1)(b) of the Indian Constitution, FCI is a constitutional body tasked with advising the President on the policies that should guide grants-in-aid of the State revenues from the Consolidated Fund of India and deciding what proportion of the divisible pool should be allocated to the States. The payment of income to states that the Parliament deems to need assistance is provided for under Article 275 of the Constitution.

Grants must be given to a state under the first provision of Article 275 for it to be able to pay for development projects that the Central Government has approved or for the state finances. The commission’s most recent report recommends a 41% state participation in Central taxes for the years 2021 to 26. To support states in offering equal tax rates while preserving a budget balance in the revenue account, the FCI is to suggest conditional or unconditional grants-in-aid.

Grants-in-aid can be broadly divided into three types. One of them is specific-purpose grants, which ensure minimum standards of certain basic services. When the Finance Commission does allocations to various states, they should take this into account. The aids will help in equalizing the standards of basic social services. States with much lower levels of social services might thus be eligible for larger levels of aid. FCI may also take into consideration variables such as a state’s territory relative to its population, economic backwardness, etc. It is undeniable that financial benefits such as reduced tuition or free education, waived exam fees, subsidized food, etc. should be made available to people in Scheduled Castes, Scheduled Tribes, Socially and Educationally Backward Classes of Citizens, and those living in poverty to lift them out of poverty.

There is no definition of “grant-in-aid of the revenues” in the Constitution. It would be futile to claim that this phrase should be interpreted broadly to include any gifts designed to boost the income of the recipient state without any restrictions on how they should be used. The problem has to be viewed from the larger perspective of securing an equitable allocation of resources among the units. It is therefore prudent to view the scope of Article 275 as not open to being violated on the term that grants-in-aid are not defined; grants directed to broad but well-defined purposes could reasonably be considered as falling within their scope. As there is no specific definition, different governments throughout the past half-decade have tried to find for themselves the system or combination of systems that best fit their political, economic, and administrative conditions. Different states compete to underbid each other in lowering taxes, expenditure, and regulation, but when FCI will fix the total amount of state expenditure that could be used for a race to efficiency through laboratories of providing facilities and sanguine democracy, where states will be allowed to provide freebies but only for the welfare of the public at large where FCI will be able to harness their authority, resources, and expertise. In particular, the chronic state of deficit into which some of the states have fallen should be ended, compatible with the condition of not risking the solvency of the Centre, and each state should be so equipped as to be able to have a fair chance of preserving financial balance. The grants must also pass administrative and parliamentary scrutiny.

India is a developing and welfare state and therefore, every state needs a measure of assistance. The establishment of the welfare state in India was historically motivated by the need to offer a corrective mechanism, compensating for disparities brought about by the market. Therefore, grants-in-aid should be based on an evaluation of the ultimate measure of need, which is the sums that are judged to be adequate to balance the state’s finances after accounting for all other types of assistance such as revenue devolution and debt modifications . In enunciating the principles which should govern grants-in-aid of the revenues of the States it is accordingly proposed to limit the grants in aid for the greater welfare by limiting the defining and limiting public welfare to the first category of freebies as defined and discussed above.

Arguably, what, however, is paramount in the Indian politics of freebies is the acute desire to win by any means, and such a desire has been right at the top of some of the party leaders’ minds. Such a political desire to subject others to one’s own self-preservation is obviously anti-liberal. Such a desire involves a nagging motivation to rule primarily by vanquishing and vilifying the principles of free and fair elections vouchsafed by the Indian Constitution. It may be argued that the extraordinary context of freebies could provide the opportunity for innovations that could help in streamlining the grants-in-aid money to the States to translate the spirit of democracy into the free and fair conduct of elections by developing processes that will be people-friendly and transparent and prevent election campaigns from becoming a show of strength in the form of freebies. The partial or total absence of guidelines motivates the parties to even disregard the costs of legitimate development and the risk of putting their own state into debt. Ideally, politics should be organized around the norms of mutual respect, which can only be practiced through the means of deliberation, debate and discussion as the normative foundations around which our politics needs to be organized.

(Prakhar Bajpai is a law undergraduate pursuing from Rajiv Gandhi National Law University, Punjab. He may be contacted via mail at [email protected]).

Cite as: Prakhar Bajpai, ‘Free-Freebies or Paid-Freebies: Who Pays for it?’ (The Rmlnlu Law Review Blog05 October 2022) date of access.