When Prime Minister Narendra Modi attacked the ‘revadi (freebie) culture’ a few weeks ago, his obvious target was the Opposition parties ruling in states — the DMK in Tamil Nadu, the TRS in Telangana, the TMC in West Bengal, the AAP in Delhi, the Congress in Rajasthan, and so on. It was a new type of artillery discharged by him against the parties he had been ceaselessly shelling for corrupt and slothful governance, dynastic politics, and minority appeasement.
His salvo was a part of the BJP’s relentless aggression for the conquest of the remaining India. It was aimed to discredit Opposition governments by denouncing them for overstretching their financial capacity to spend on schemes that fetched them votes but no gains to the economy. It was aimed to arouse public fears of a financial collapse of the Opposition-ruled states — to convey to their voters that these parties were leading them into a financial abyss they would not know how to climb out of! They were unfit to govern and deserved to be replaced with the BJP, which never spent money on schemes for electoral gains and which alone knew how to use public finances entirely, fully, and completely for economic growth!
Modi freebie salvo boomeranged
Modi had not expected his ‘revadi culture’ salvo would boomerang on him. Normally Modi invents a catchphrase and repeats it over and over again to hammer it into public consciousness, to make people start believing in its ‘truth’. But he has not repeated the catchphrase of ‘revadi culture’ since he first used it at the time of inaugurating the Bundelkhand Expressway on 16 July.
The reason was a fierce cannonade from the parties he had shelled. They shouted back to him, “What about the six thousand rupees to every small and marginal farmer under the PM Kisan-Samman Yojana? Is that not a revadi for votes? And a subsidised house to the homeless under the PM Awas Yojana, a free toilet to those who do not have one under the PM Shauchalaya Yojana, two free gas cylinders to lower-caste families under the PM Ujjwala Yojana and free rations to the poor under the PM Garib Kalyan Yojana? Did not the BJP profit by mobilising the votes of the labharthi — the beneficiaries of those schemes — in its favour in the Lok Sabha elections in 2019 and in the Uttar Pradesh Assembly elections earlier this year? Were those not free revadis to tempt voters?”
Although Modi fell silent, BJP leaders made attempts to defend him by saying that while the Opposition governments’ schemes were “wasteful expenditure”, the Modi government’s schemes produced “public goods”. For instance, they said, a house and gas cylinders in the woman’s name catalysed women’s empowerment.
That invited fresh cannonade from his targets. The AAP said its free bus travel scheme for women too catalysed women’s empowerment, for it encouraged them to join the workforce and increased their savings. The DMK said even a colour television set catalysed women’s empowerment as they did not have to go to others’ homes to watch TV, and thus gained dignity and had more information and awareness about the affairs of the state and the country to play their role as better informed citizens.
It is clear. The war between the Centre and the states to decide what is a freebie and what is not is never going to end.
There are five reasons.
Centre not passing on money to states
1) The definition of a freebie is not easy and simple, as the above examples show. Even the Fifteenth Finance Commission (2021-26) headed by N K Singh avoided defining it, though the Central government had specifically asked it to do it. The expert committee set up by the Supreme Court for regulation of freebies too is going to get itself into a labyrinth groping for a definition.
2) The states have sovereign rights to design their schemes. They have every right to claim that they know their people, their problems and aspirations best, so they alone can devise schemes that would best suit their needs.
3) The states have been saying that if their finances are stretched, it is not because of their ‘welfare schemes’ (which is how they describe what Modi calls ‘revadis’), but because the Centre has not been passing them the money they are entitled to.
The states have been at war with the Modi government on the sharing of the Union government tax revenues. They say the Fourteenth Finance Commission (2016–21) and Fifteenth Finance Commission (2021–26) gave the states over 40 percent share in the central taxes, but the Centre has been giving them much less. During the past three financial years, the Centre has given them only 29 percent. No wonder, they say, the states have to borrow from the market to fund their ‘welfare schemes’, a situation into which the Centre has driven them and then it blames them for ‘profligacy’!
What the states find more unfair is that while the Centre has been giving a smaller-than-recommended share to them, it has been filling its own coffers with collections of more and more cesses and surcharges. The Centre does not share these collections with the states.
“Money goes from the States. They take our money and tell us how to live,” Tamil Nadu’s Finance Minister @ptrmadurai tells @Shilpa Nair why he calls the Union government a ‘coloniser’.
Catch the full interview on https://t.co/vzmKgW4w1l. pic.twitter.com/9dvkpVS9P3
— South First (@TheSouthfirst) August 19, 2022
States bound to fight tooth and nail
4) The states are going to resolutely resist any attempts by the Centre to put more curbs on financial borrowing by them with an intention to stop ‘freebies’.
Some states have been borrowing through their public sector undertakings (PSUs) or special purpose vehicles (SPVs) to get past the Fiscal Responsibility and Budget Management (FRBM) Act, which does not allow the state governments to borrow if their fiscal deficit exceeds 3 percent of the GSDP.
The Centre has been dropping hints that it would stop states borrowing through PSUs or SPVs. Some public finance experts partisan to the Modi government have been talking of amending the Constitution to make provisions for stopping the flow of a state’s share of central taxes if it did not follow the fiscal prudence rules. The states are bound to fight such provisions tooth and nail.
5) The states cannot afford to have no ‘welfare schemes’ because there are vast masses of people who need government support for their survival, for they do not have decent, regular income.
This is because the model of economic growth pursued by the Central government is primarily designed to help business groups set up enterprises to create employment, and this model is not working, as the enterprises are replacing human labour with more and more automation, software, and robots. India is witnessing, what even big industrialist Anand Mahindra has been forced to admit, a “jobless growth.”
The country’s unemployment rate has remained 7–8 percent in the Modi years. In June 2022, more than 40 percent of the country’s youth (20–24 age group) were jobless. That means around 150 million youths. About 10 million workers who were laid off by the manufacturing sector during the pandemic have not been taken back. Most urban workers (for example, gig workers) have casual, low-wage jobs, with no paid leave, medical reimbursement, accident insurance, provident fund, or pension.
There is a serious risk of the accumulated anger of the jobless and the casual workers with no job security exploding against the system. Mahindra warns: “With one of the largest youthful populations in the world, it is easy to imagine the potential for social unrest if jobs don’t grow along with the youthful population.”
The spectre of ‘social unrest’ arising out of joblessness, poverty, and inequality is what drives both the Centre and states to design and fund populist schemes or freebies. They are necessary in their eyes to ward off the danger of an upheaval. The ‘revadis’ are the means by which they can keep the marginalised classes happy and keep getting their votes, while continuing to serve the business classes. They are the means by which they can create an illusion of inclusion for the marginalised to camouflage their exclusion.
Modi’s slogan Sabka saath, sabka vikas is but a smart title to that grand illusion.