The Supreme Court’s recent observations on the culture of “freebies” have reopened a long-simmering national debate: where should India draw the line between welfare and populism? Hearing a plea linked to Tamil Nadu’s proposal to provide free electricity irrespective of consumers’ financial status, the Court underscored a fundamental concern — that indiscriminate largesse may undermine economic development and fiscal stability. The bench’s remarks reflect a broader anxiety shared by economists, policy planners, and even sections of the political class: that competitive populism among states is distorting priorities, shifting scarce public resources away from infrastructure, job creation, and long-term growth. Welfare has always been a pillar of India’s social contract, but when benefits cease to be targeted and become universal entitlements untethered from need, they risk weakening the very developmental foundations they aim to strengthen.
India’s federal structure encourages states to innovate in welfare delivery, and many schemes have had transformative effects. Midday meals improved school attendance, rural employment guarantees provided safety nets during agrarian distress, and subsidised food grains have prevented hunger for millions. Yet the expansion of benefits into politically attractive giveaways — free electricity, loan waivers, consumer goods, and transport — has raised concerns about fiscal sustainability. Several Indian states already face high debt-to-GSDP ratios, with interest payments consuming a growing share of revenues. When budgets are stretched, the trade-off becomes stark: money spent on universal subsidies is money not invested in power infrastructure, health systems, skilling, or industrial corridors. The Supreme Court’s caution that most states are revenue-deficient yet continue to expand freebies is, therefore, less a moral critique than an economic warning.
The electricity sector offers a particularly telling example. Free or heavily subsidised power, especially when extended beyond the poor to all consumers, distorts pricing signals, encourages wasteful consumption, and erodes the financial health of distribution companies. India’s discoms already carry mounting losses due to under-recovery of costs, transmission inefficiencies, and delayed subsidy payments. When tariffs are suppressed for political reasons, the burden shifts elsewhere — often to taxpayers, future consumers, or the banking system. More critically, underfunded utilities struggle to invest in modernisation, renewable integration, and reliable supply. The paradox is evident: policies intended to provide relief today can compromise the quality and sustainability of power tomorrow. Targeted support for vulnerable households is defensible and necessary, but universal giveaways risk creating a cycle of fiscal stress and service deterioration.
Beyond fiscal arithmetic lies a deeper question about work culture and economic incentives. The Court’s rhetorical query — who will work if the state provides everything free — may appear exaggerated, yet it reflects a legitimate concern about the long-term impact of entitlement-driven politics. Evidence from welfare economics suggests that well-designed safety nets do not reduce labour participation; in fact, they can enhance productivity by reducing insecurity. However, poorly targeted subsidies can blunt incentives, encourage dependency, and crowd out public investment in job-creating sectors. India’s demographic dividend makes this distinction critical. With millions entering the workforce each year, the real priority must be expanding employment opportunities, strengthening manufacturing, and investing in skills — not substituting income through perpetual subsidies. Welfare that empowers people to work is fundamentally different from benefits that make work optional.
The political economy of freebies, however, cannot be ignored. In a competitive electoral landscape, promises of free services have become powerful campaign tools, often framed as social justice measures. Voters, facing rising costs of living, welcome immediate relief, while the long-term fiscal consequences remain abstract. This creates a classic collective action dilemma: each state feels compelled to match or exceed others’ giveaways to remain electorally viable, even when such policies strain finances. The Supreme Court’s intervention, therefore, serves as a reminder that governance must balance electoral responsiveness with fiscal prudence. Transparent accounting of subsidy costs, independent fiscal councils, and clearer distinctions between welfare and populism could help restore this balance. Equally important is shifting political discourse from short-term giveaways to long-term public goods — quality education, healthcare, infrastructure, and employment.
Ultimately, the debate is not about ending welfare but about refining it. India cannot and should not abandon its commitment to supporting the vulnerable. But assistance must be targeted, time-bound where appropriate, and aligned with the goal of enabling self-reliance. Free electricity for the poorest households may be justifiable; free electricity for all is not. Loan relief during extraordinary distress may be necessary; routine waivers erode credit discipline. The Supreme Court’s remarks should therefore be seen not as judicial overreach but as a call for policy clarity. In a nation aspiring to sustained high growth and inclusive prosperity, public spending must prioritise capability over consumption. The true measure of welfare is not how much is given away, but how effectively it empowers citizens to stand on their own.