Freebies | Is Kejriwal Setting Groundwork for a Welfare State And How Realistic is it?

Is it the win of freebies over issues in Delhi?

Arvind Kejriwal has led his party the Aam Aadmi Party (AAP) to a dramatic landslide win, decimating the all-powerful BJP by winning 62 of the 70 Assembly seats in the recently conducted Delhi Election 2020. However, many are questioning AAP’s policy of subsidizing electricity bill and giving free rides to women availing public transportation saying these freebies have lured people to vote for AAP. Is this true? And if so, how right or wrong is this?

What are the freebies Kejriwal promised to Delhi?

Many are attributing the victory of AAP to the freebies offered by Kejriwal’s leadership. All parties offer freebies during polls, hoping to win over the undecided voters. Sometimes it works, at other times, it doesn’t, but it does raise several pertinent questions:

  • Can state governments afford to offer freebies?
  • How will they raise the required funds?
  • Will other sectors that merit urgent and additional funds suffer?
  • How is AAP funding the freebies?

Delhi CM Arvind Kejriwal when asked the above questions, responded saying sops to the needy were an essential part of a state’s responsibility if offered in measured amounts to the needy. He spoke of how additional money made available through sops helped generate demand through increased spending.

He further added why anyone should have a problem if the freebies were funded through savings from better fiscal management. He is right; it isn’t a problem. However, when one looks at the proposed scale of the promises, and then start adding numbers to the potential cost, it raises the big question – from where will the money come?

What are the freebies?

AAP was ambitious in its 2015 Poll Manifesto with ambitious targets covering schools, health, water, electricity, sewage, roads, security, etc. The 2020 Manifesto carries it forward with additional promises.

Let’s take a look at some of the sops offered that’s going to impact the state budget.

  • Free electricity up to 200 units; 50% discount of tariffs between 201 – 400 units per month. The tenant is now included in the scheme.
  • 24×7 availability of electricity.
  • Free water up to 20,000 litres per month and low rates per litre after that. Over 13 lakh beneficiaries of this scheme.
  • Complete waiver of water arrears to people living in E, F, G and H colonies, while those living in A, B, C and D can avail rebates ranging from 25 to 75 per cent on outstanding charges.
  • 24-hour pure piped water connection to every household.
  • Free bus rides to women and school-going children.
  • Free Teerth Yatras (Pilgrimage) promised for 10 lakh senior citizens over five years.
  • Installation 3 lakh CCTVs to improve safety for women.
  • Increase in hospital beds from 11,353 beds to 26,507 beds.
  • Increase and improve Mohalla Clinics from the present 450 to the promised 1,000 clinics (in 2015).
  • 11,000 Free WiFi hotspots in Delhi.
  • Raising the number of buses to 11,000.
  • Increasing the Metro connectivity to 500 km, making it one of the largest metro networks in the world.

These are besides other 2020 Election Manifesto promises:

  • Building Pucca houses for slum dwellers.
  • Laying underground sewers connecting households.
  • Appointing additional Mohalla and Bus Marshalls.
  • Increasing the number of street lights, improving the road network in and around colonies.
  • Introducing the Delhi Swaraj Bill enabling additional financial powers to Mohalla Sabhas to undertake local civil works.
  • Two crore trees to be planted; Yamuna cleaning and rejuvenation to be undertaken.

Can this be a long term prospect?

Not unless direct and indirect tax collections increase substantially along with consistent growth of GSDP in double digits.

It’s all very well to make tall promises, but fulfilment requires funds and intent. AAP isn’t short of intent as the people have once again reposed their faith in the party by giving it a third term. The challenge is raising the required funds without a corresponding increase in direct and indirect taxes.

The FY 2019-20 Budget shows an expenditure of Rs 60,000 crore (19.5% higher than FY18-19) against estimated receipts (excluding borrowings) at Rs 50,767 crore.

Some of the sector-wise allocation of funds: Education received the highest allocation – Rs 15,133 (+35%), Health- Rs 7,485 crore (+25%), Transport – Rs 5,882 crore (+38%), Water Supply, Sanitation, Housing and Urban Devlp – Rs 5,280 crore (+10%).

In FY20-21, the state government is going to face a major challenge finding money to fund the free sops announced this year. Arvind Kejriwal-led government managed to generate a surplus of Rs 5,236 crore (estimated) in FY19-20. It helped fund part of the freebies, but raising further funds in FY20-21 will be tough.

Raising money to fulfil earlier promises of putting up 1,000 Mohalla Clinics (up from the existing 450) will be a challenge since land acquisition is a significant issue and the capital outlay high.

Then there are new buses, Teerth Yatras, sewer connections, piped water to households, permanent jobs for contract workers, CCTVs, streetlights, etc. These require substantial funding outlays, far more than can be raised by better fiscal management, as mentioned by CM Kejriwal.

From FY13-14 onwards, the GSDP has hovered around 11.5%, so the higher direct and indirect revenues raised by the Delhi government is limited, compared to the cost of promises in the Manifesto.

Freebies as a poll attraction is not a sustainable proposition for any party in the long run. Winning the poll is one thing; fulfilling public expectations is quite another.

Other welfare countries and how it works there

The Nordic countries follow the Nordic Model of Welfare, which focuses on maximizing labour participation for more significant income redistribution and social decision making. Basic income, health and retirement benefits target all sections of society, narrowing the gap between different economic classes.

Canada is another example of free school and college education, healthcare, and old-age care. The country taxes everyone with a vast majority paying between 26 and 33 per cent, with a minimum slab at 15 per cent. It helps build a fund base to support welfare for all.

Arvind Kejriwal’s intent is both sincere and noble, but he has to come out with innovative incentives to draw investments into Delhi. It’s the only way the government can raise revenues to fulfill its promises.

The stakes are high not only for AAP and the people of Delhi but for the nation as well. It’s our capital, after all.

Related Link:

Why AAP Won Again in Delhi?

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Freebies | Is Kejriwal Setting Groundwork for a Welfare State And How Realistic is it?
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Freebies | Is Kejriwal Setting Groundwork for a Welfare State And How Realistic is it?
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Arvind Kejriwal has led Aam Aadmi Party to a dramatic landslide win but many are questioning that the freebies have lured people to vote for AAP. Is this true? Read the article to know.
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