Freebies and Their Many Hazards, Tamil Nadu’s Competitive Populism and the National Trend
In Tamil Nadu, a fierce electoral battle is unfolding not just through political rallies, but through the State’s political and economic corridors. A recent disbursement of ₹1,000 each to 1.31 crore women beneficiaries, which includes three months of the Magalir Urimai Thogai and a newly minted “Summer Special” allowance of ₹2,000, marks a significant escalation in what economists call “competitive populism.”
While the Tamil Nadu Chief Minister has promised to double the monthly entitlement to ₹2,000 if returned to power, the Opposition AIADMK leader has countered with even more expansive promises, including free bus travel for all men and a matching monthly cash grant.
This bidding war mirrors a broader national trend where State-level fiscal prudence is increasingly traded away for direct benefit transfers to secure electoral mandates. As the State gears up for the 2026 Assembly elections, the sheer scale of these cash transfers raises fundamental questions about the sustainability of public finances and the long-term health of the developmental agenda.
The Volume of Freebies
Tamil Nadu has often been lauded for its focus on human capital, such as the mid-day meal scheme and subsidised essential commodities. However, the current shift towards direct cash transfers to a non-targeted population represents a departure from productive welfare towards a consumption-led drain on the exchequer.
The fiscal arithmetic of these promises is sobering. Currently, providing ₹1,000 per month to 1.31 crore women beneficiaries costs the exchequer approximately ₹15,720 crore annually. If this amount is doubled to ₹2,000, the annual burden will surge to over ₹31,000 crore, accounting for nearly 9 per cent of the State’s total revenue expenditure.
This massive allocation comes at a time when Tamil Nadu’s total outstanding debt is expected to reach ₹9,29,959 crore by March 31, 2026, with a revenue deficit estimated at ₹41,635 crore for the 2025-26 fiscal year.
The economic paradox is particularly sharp in a State like Tamil Nadu, where the multidimensional poverty level is estimated at just 2.2 per cent by NITI Aayog. In such a setting, a near-universal cash transfer scheme covering the majority of households cannot be justified.
When a State provides monetary support to 1.31 crore individuals, representing roughly 70 per cent of households, it ceases to be a safety net and becomes a State-funded electoral instrument, diluting resources for the truly poor. Furthermore, the debt-to-GSDP ratio is now pegged at 26.12 per cent, pushing the State closer to the fiscal limits mandated by transparency norms.
Do Freebies Guarantee Electoral Victory?
This freebie trend has become a national affliction. Karnataka, Telangana, Maharashtra, Bihar, Andhra Pradesh, and Madhya Pradesh have also entered this race to woo voters through direct benefit transfers.
However, evidence suggests that hefty freebies do not necessarily translate into electoral success. The 2024 defeat of the YSRCP in Andhra Pradesh, despite its massive “Navaratnalu” welfare basket, and the lacklustre performance of the Congress in Karnataka during the 2024 Parliament elections despite implementing “Five Guarantees” costing ₹52,000 crore annually, prove that voters are increasingly discerning.
In Tamil Nadu, while revenue expenditure for 2025-26 is proposed at ₹3,73,204 crore, the capital outlay is only ₹57,231 crore, illustrating a stark imbalance between consumption and investment.
Voters may appreciate freebies, but they also notice when infrastructure decays, when public services deteriorate, when the economy stagnates. The electoral evidence is mixed at best, and the fiscal costs are clear.
The Hidden Costs
The hidden cost of this competitive populism is ultimately borne by the taxpayer. To fund these mounting welfare bills, the government has been forced to hike property taxes, electricity tariffs, and registration fees over the last three years. This creates a regressive cycle where the State extracts money through essential utility hikes only to redistribute a portion of it as a political gift.
Such a model erodes the purchasing power of the middle class and increases the cost of living. The same families that receive cash transfers often pay more in higher taxes and tariffs, netting little real benefit while the State’s finances deteriorate.
When revenue expenditure outpaces revenue growth, the first casualty is capital outlay. This leads to decay in public infrastructure that will take decades and significantly higher costs to rectify. With committed expenditure (salaries, pensions, and interest payments) already consuming 62 per cent of revenue receipts, the fiscal space for new development is rapidly shrinking.
Roads, bridges, schools, hospitals, and public transport—the very infrastructure that underpins economic growth—are starved of funds while consumption subsidies expand.
The Moral Hazard
Beyond the balance sheet, there is a looming cultural and sociological crisis. The proliferation of sops for non-deserving populations fosters a dependency syndrome that undermines the dignity of labour. When people can receive cash without working, the incentive to seek employment diminishes. This is not a judgment on the poor; it is a recognition of basic human behaviour.
This freebie menace creates an environment where political parties are judged not on their vision, but on their bidding price. The taxpayer, whose interest payments alone now account for 21 per cent of revenue receipts, will be the first to suffer when the fiscal cliff is finally reached and the State’s creditworthiness is downgraded.
The Need for Safeguards
No political party seems willing to stop this menace, and there is every possibility of this competitive bidding intensifying. The only way to halt this slide is through institutional and judicial safeguards. Parties must be made to disclose how they propose to fund the freebies they promise.
The Supreme Court must take cognisance of this escalating crisis and frame stringent measures to stop political parties from providing unproductive and economically unsustainable freebies. Just as there are limits on individual candidate spending, there must be a fiscal cap on the promises made by parties.
We are heading towards a scenario where the State’s primary function becomes debt servicing and subsidy distribution. While protecting the vulnerable is an imperative, the current trajectory of indiscriminate cash transfers is a recipe for long-term disaster.
Conclusion: A Call for Accountability
Awareness among voters and proactive intervention by the judiciary are the only shields left. If we do not demand accountability now, future generations will be burdened by the mounting debt of today’s handouts.
The freebie culture is not just bad economics; it is bad politics. It undermines the dignity of labour, distorts electoral choices, and threatens the fiscal sustainability of states. Tamil Nadu’s experience is a warning for the entire nation. The question is whether we will heed it before it is too late.
Q&A: Unpacking the Freebie Debate
Q1: What is the scale of Tamil Nadu’s cash transfer commitments?
Currently, providing ₹1,000 per month to 1.31 crore women beneficiaries costs approximately ₹15,720 crore annually. If doubled to ₹2,000 as promised, the burden would surge to over ₹31,000 crore—nearly 9% of the State’s total revenue expenditure. This comes when Tamil Nadu’s outstanding debt is expected to reach ₹9,29,959 crore by March 2026, with a revenue deficit of ₹41,635 crore.
Q2: Why are near-universal cash transfers problematic in Tamil Nadu?
Tamil Nadu’s multidimensional poverty level is estimated at just 2.2% by NITI Aayog. Providing monetary support to 1.31 crore individuals (roughly 70% of households) means it ceases to be a safety net for the truly poor and becomes a State-funded electoral instrument. It dilutes resources away from targeted welfare for the most vulnerable.
Q3: Do freebies guarantee electoral success?
Evidence suggests not. The 2024 defeat of YSRCP in Andhra Pradesh despite its massive “Navaratnalu” welfare basket, and the Congress’s lacklustre performance in Karnataka despite implementing “Five Guarantees” costing ₹52,000 crore annually, prove voters are increasingly discerning. While freebies may attract votes, they don’t guarantee victory when infrastructure decays and public services deteriorate.
Q4: What are the hidden costs of competitive populism?
To fund welfare bills, governments hike property taxes, electricity tariffs, and registration fees—creating a regressive cycle where the State extracts money through essential utility hikes only to redistribute it as political gifts. This erodes middle-class purchasing power and increases living costs. Capital outlay suffers, leading to infrastructure decay. Committed expenditure (salaries, pensions, interest) already consumes 62% of revenue receipts.
Q5: What safeguards are needed to address the freebie menace?
Political parties must be made to disclose how they propose to fund their promises. The Supreme Court should frame measures to stop unproductive, unsustainable freebies, perhaps imposing fiscal caps on party promises similar to limits on individual candidate spending. Without such institutional and judicial safeguards, we risk a scenario where the State’s primary function becomes debt servicing and subsidy distribution, burdening future generations.
