India politicians pin hope on handouts

With election dates announced and a model code of conduct – listing out dos and don’ts – in place, Indian politicians cutting across party lines are now awaiting the dividends of the freebies that they distributed to the voters – from laptops, to bicycles, goats and cows.

When it comes to wooing voters, Indian politicians are egalitarian and do not ignore even those who hold jobs. The federal government hiked the living adjustment allowance (Dearness Allowance) for some 8 million employees twice, once in Septemeber 2013, and then in February 2014. Provincial governments were not to be left behind. They rewarded their staff with a 8-10 percent hike in the allowance. 

Seeking to win their votes, the politcal masters have chosen to be innovative in being generous to the staff. Top bureaucrats and their family members are now entitled to free medical treatment abroad with all-paid return airfare. What is more, even an elective procedure like weight-loss (bariatric) surgery is now free.

And if all that is not enough, the federal government last month set up the seventh pay commission to revise salaries for all its employees. It may be recalled that the sixth pay commission virtually doubled the government’s expenditure on salaries and pensions, ahead of the 2009 parliamentary elections.

Rajeev Gowda, a Congress spokesman and an Indian Institute of Management (IIM) professor who has authored papers on electoral funding, says, “Freebies have evolved over time. From providing public goods and infrastructure, today parties provide private goods including laptops and televisions. Soon we will reach a stage where food will be free and then parties will promise people that they will personally come and cook for them!”

The run up to the upcoming elections have seen freebies – both old and new – being rolled out for the poor.

When freebies rained

Mobile handsets have been given to some 250 million people under the Minimum Rural Employment Gurantee Scheme, together with a recharge facility of Rs 300 ($4.9) per year for the first two years.

Then there is the free tablet scheme for school students, with nine million likely recipients, although the credit for starting the free laptop trend goes to the Uttar Pradesh and Punjab state governments. Punjab also gave away free bicycles to girl students.

For the handicapped, there is now a three percent reservation in federal and state government jobs (as recommended by the Supreme Court). For senior citizens, 10 percent of CSR (corporate social responsibility) funds. For women, there is an exclusive bank. For urban slum dwellers and the rural poor, there is low-cost housing. For the backward community knowns as Jats, there is reservation in government jobs. Members of the minority community can look forward to the recently-approved Equal Opportunities Commission to prevent bias against minorities in recruitment and promotion.

The subsidy queen is without doubt the Tamil Nadu Chief Minister J Jayalalitha, popularly known as Amma (mother) among her supporters.Buoyed by the past success of her Amma Idlis – a traditional breakfast – at Rs 1 ($0.02) and Amma mineral water for the same price, she has now launched “Amma” movie theatres to provide subsidised entertainment and Amma Corporation Hotels for subsidised stay.

She has also distributed thousands of goats and cows, and even spice grinders to the poor.

It is not always easy to tell a sop from a legitimate subsidy. Dr E Sreedharan, the academic director of the Institute for the Advanced Study of India (set up by the University of Pennsylvania) defines sops as a form of non-merit subsidies – largesse that may be distributed between or just before elections.

If merit subsidies, like primary healthcare or education, benefit society and the economy as a whole by enabling life-long productivity, non-merit subsidies merely promote consumption at a point in time. For example, the subsidies on diesel and power which benefit the wealthy are typcially extracted by political pressure but have no economic value.

To be fair, says Gowda, Indian politicians’ belief in freebies may stem from an ideological commitment to doing something for the downtrodden. “This is genuine. But the form it takes is the issue. Over time, politicians have learned to package crucially-needed programmes as electorally saleable sops. They are great for political speeches.”

Jury still out

Just how effective are the handouts? Can they really influence the outcome of an election?

Answers vary from “yes and no” to “perhaps”.

“Politicians believe freebies do make a difference but it is always a complex of factors. The Congress-led United Progressive Alliance assumed it won in 2009 because of MNREGA (rural employment guarantee scheme). But the Congress did not do well in the backward areas of the poor provinces. It swept the urban centres,” says Sreedharan. That, he believes, was because of several years of high growth.

“Between 2004-11, we saw high growth. The mindset was that now we have the framework in place, growth will take place in any case, so we can do the easy and pleasureable thing, which is to distribute largesse. You will become popular and get re-elected. They were not prepared, policy-wise, for the slowdown in growth.”

And that is why the handouts will not work this time around. “You have had slow growth, high inflation and lack of jobs for young people … that will counteract the freebies.”

Sudhanshu Mittal of the opposition Bharatiya Janata Party agrees that freebies succeed only in a context.

“If a sop is part of an issue which is bothering the people and there is some kind of agitation or mass uproar, then it makes a difference, otherwise they may create a feel-good factor but are not decisive. In the past, free power to farmers created an impact because power costs were an issue.”

But freebies often have a shelf life and do not gurantee electoral success in the long run.

As Gowda of Congress points out: “Our state electricity boards have been bankrupted by the offer of free power for farmers. But farmers receive neither adequate quality or quantity of power and governments that gave free power have often been voted out.” 

Sops or subsidies can thus come back and bite the government which distributed them.

Sreedharan warns that non-merit subsidies served to the voters as entitlements either put an unsustainable burden on the economy or dangerously undermine the very concept of rights. Having distributed rice at Rs2.00 ($0.03) per kg for over a decade, as several states have done, they must continue to do so ad infinitum, regardless of the fiscal situation.

Also the government announcing the freebies does not necessarily get the credit for them. Chhattisgarh Chief Minister Raman Singh and Madhya Pradesh Chief Minister Shivraj Singh Chauhan – both of the BJP) –  are generally known to have won successive elections by effectively delivering subsidies announced by the Congress-led federal government. 

Effective delivery is seen as part of good governance, which has become more critical than any other factor.

Desperate times, desperate methods

BJP’s Mittal, however, says there has been a course correction in Indian politicis, despite polilticians’ proclivity to splurge.

“Earlier, politics of caste dominated. Subsequently, there is a premium on governance. So if voters like the government’s performance, they repeat it. If they don’t, they throw it out. In the process of throwing out, they choose the new incument on the basis of who looks competent to govern and who offers a hope factor. [Chief Minister] Akhilesh Yadav was elected in Uttar Pradesh because he offered the hope factor, not because he distributed laptops free of cost.”

He also sees no point in pampering government employees. “The sense of entitlement in the labour class and among government employees is so strong, they see a handout as a historical wrong being rectified.”

Promises are likewise meaningless. “It takes six months before you can be identified with an issue. It’s like product registry … most often, promises made in manifestos just don’t register.”

But when you are desperate, you try anything.

So no one is sure whether sops work or not. Gowda quotes John Wanamaker: “One half of my advertising budget is wasted; I just don’t know which half.”