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Over the past few weeks, both the Bharatiya Janata Party as well as the Supreme Court of India have simultaneously taken up a rather unusual issue in the context of Indian politics: they have attacked the expansion of state welfare.
Speaking in Uttar Pradesh in July, Prime Minister Modi, for example, allegorically criticised certain forms of welfare, calling them “revdi” or sweets distributed in return for votes. At around the same time, the Supreme Court heard several rounds of arguments in a public interest litigation filed by a BJP leader asking to outlaw the “promise of irrational freebies” and “private goods” made by parties during election campaigns in order to “lure voters in their favour”. The Modi government has supported the petition, arguing that some kinds of welfare harm the economy.
Out of their lane
This is an odd situation for the Supreme Court to be in. Fiscal policy, including welfare, is squarely in the political domain. The idea that these policy decisions can be directed by an unelected body is curious even for India, where judicial overreach into legislative and executive domains has been the norm for decades.
What forms of welfare the Union and various state governments will undertake is a decision purely for elected politicians to take, after considering factors such as voter interest and fiscal resources. In fact, balancing the demands of various sections of the country is precisely the reason politics exists. The judiciary should not, to borrow a phrase from the US Supreme Court, step into this political thicket.
Equally unusual is the fact that the Modi government has quite suddenly taken an anti-welfarist stance. The BJP owes its incredible success since 2014 to turbocharging certain forms of welfare. The Modi government has concentrated precisely on the distribution of private goods that the Supreme Court PIL seeks to ban, with Modi personally associating himself with schemes like gas cylinder distribution. (I’ve even written about it in a previous India Fix.)
The rise of the welfare state
Rather than any top-down curbs on democratically elected governments, it might be instructive to try and understand why welfare schemes, and especially what the Supreme Court PIL is disparaging as “freebies”, are so popular with Indians.
The welfare state is quite new as far as forms of governments go. Economist Thomas Piketty traces it to the Western world during World War I, when increased taxation powered “the rise of social welfare expenditures related to education, health care, retirement pensions, and other transfers”.
Part of this was driven by notions like equality but, as Piketty points out, it was also driven by the fact that governments realised that a trained workforce was a “factor in national power”. In fact, it was the United States’ great lead in education that propelled them to superpower status in the twentieth century. Public goods and services like health and education were unique in that not only did they benefit the direct recipient, they had immense knock-on benefits for society as a whole.
Naturally, post decolonisation, many developing nations also followed the Western world’s lead on welfare. By the 1980s, economist Adam Tooze writes, using data from a 1983 World Bank report, “China had secured a basic provision of food, health care and education for practically everyone.” Notably, the World Bank singled out India as a laggard at the time even though, in the 1950s, it was slightly ahead of China on per capita GDP.
Since then India has slipped further, even falling behind smaller neighbours such as Bangladesh and Nepal on critical development indices. This failure means a lack of a trained, healthy workforce. As a result, India performs abysmally when it comes to formal employment, with the agricultural sector still being India’s largest employer.
As a response, Indians seem to have, well, given up. Rather than concentrate on state welfare that builds societal capacity, such as health and education, Indian politics has pivoted to welfare in the form of private goods and, in a large number of cases, direct cash. As pointed out earlier in the piece, the Modi government is, in fact, the flagbearer of this new trend, which economists Abhishek Anand, Vikas Dimble and Arvind Subramanium call “new welfarism” and economist Rathin Roy calls the “compensatory state”.
In effect, the Indian state is not interested in delivering classic welfare in the form of health and education, which have been the bedrock of development for every rich country today. Instead, it is simply transferring cash to India’s poor as a stopgap, interim measure. Cash is fine in the short term, but it cannot replace a public school or a government hospital. In effect, as Roy puts it, “public finance is now to be used to compensate for this failure, not to address it”.
From the point of view of this voter, this is hardly ideal. Classic welfare, in the form of, say, a wide network of competent public hospitals, would obviously have far more of an impact on her life than the current alternative: government-backed health insurance, which places her at the mercy of poor-quality, urban-centric private healthcare while still forcing her to pay substantially for medical care. However, if she has come to believe that the former is really not an option, given the weak capacity of the Indian state, it is logical for her to vote for a party that at least promises the latter.
Therein lies the nub of the issue of so-called freebies. There is little doubt that measures like cash transfers are not ideal, and that classic, capacity-building welfare should be the Indian state’s priority. But it must also be understood that the former exists as a symptom of the failure of the latter. Attacking so-called freebies without fixing the Indian state is treating the fever not the disease.
Congratulations for reaching the end. Some news: The India Fix will be taking a short break. But I’ll be back in September.