India's election-season freebies, from subsidies to goats, raise questions about fairness

NEW DELHI – Just before village council elections, Southern Tamil Nadu state Chief Minister J. Jayalalitha went all out to gain favor with rural voters. Schoolgirls received laptops. Farm workers got cows and goats. Homemakers were given spice grinders and fans.

The price tag for the giveaway, which started in 2011 and continues today: 20 billion rupees ($322 million) in a state of about 70 million people.

Freebies are a fact of life in Indian politics, and items like livestock are only part of it. All three parties seen as the front-runners in upcoming elections have enticed voters with subsidies on electricity, cooking gas or grain.

The largesse could give sputtering growth a short-term boost, but there are growing concerns that the subsidize-everything mentality they represent will damage government finances and the economy. Growth is expected to be less than 5 percent in the 2013-14 fiscal year, far below the 8 percent rate the country averaged in the past 10 years. A crisis of confidence stemming from erratic government policymaking is partly to blame by deterring business investment.

India's Election Commission said this month it plans to require political parties to explain how they will pay for any "welfare measures" announced in the run-up to the vote, to be held by May.

Economists have taken issue with a slew of new subsidies announced by the government, which is headed by the beleaguered Congress party. An expansion of India's cooking gas subsidy will cost nearly $805 million, straining public coffers.

"If you are subsidizing 97 percent of the population, you are basically subsidizing people who are paying for it themselves," Raghuram Raj, India's central bank governor, said in a recent televised interview.

Campaign-season goodies are a beloved tradition in India, a country of 1.2 billion people and the world's biggest democracy. Some 270 million people — nearly 22 percent of the population — live in poverty here, making giveaways particularly resonant for voters.

Last July, the Indian Supreme Court ruled the giveaways were not technically corrupt, but "distribution of freebies of any kind, undoubtedly, influences all people. It shakes the root of free and fair elections to a large degree."

But many voters welcome the giveaways as the cost of living skyrockets.

"It is a good gesture!" said Soymyajit Singh, a 20-year-old university student who got a free laptop in October under a program organized by Akhilesh Yadav, chief minister of northern Uttar Pradesh state. "Everyone needs a computer. But how many of us can afford it?"

The laptop swayed Singh's vote. While his family staunchly supports the opposition Bharatiya Janata Party, Singh says he will cast his ballot for Yadav's Samajwadi Party.

In Tamil Nadu, Jayalalitha defended her giveaways by saying they were welfare measures aimed at improving poor people's standard of living.

Jayalalitha is among the politicians who have hopes of becoming prime minister this year. If no one party dominates elections, regional parties such as hers will play a key role in cobbling together a coalition government in New Delhi.

The most costly freebies for the government have subsidies rather than direct giveaways. In recent weeks, the Congress party and other political blocs have pressed for sweeping subsidies, often in dramatic fashion.

Sanjay Nirupam, a Congress leader in western Maharashtra state, launched a hunger strike and threatened to set himself on fire to press his demands for government subsidies that would lower electricity bills in Mumbai by 20 percent. He called off his hunger strike after four days after the party leader in his state assured him the plan would come under serious consideration.

In New Delhi, the Aam Aadmi Party, or Common Man Party, cut electricity bills in half this year for poorer households. The party rose to power the Indian capital Delhi last year on a wave of populist promises and an anti-corruption campaign, and leader Arvind Kejriwal is widely considered to have his eye on the national stage.

The Bharatiya Janata Party promised grain at cheaper rates for the poor in central Chhattisgarh state, where the party has been in power for years. The party leader, Narendra Modi, is considered a top candidate for prime minister in the upcoming national vote.

Nationally, the Congress party pushed for an $805 million plan that allows families to buy more subsidized cooking gas cylinders. The government approved the expanded subsidy following demands by Rahul Gandhi, the likely Congress candidate for prime minister.

Analysts say the giveaways may be a time-honored practice, but the government is hard pressed to pay for them. At the end of September 2013, India's long-term external debt was $305.5 billion. India will have to pay back a short-term debt of $172 billion by March 31, according to government statistics.

In New Delhi, though Aam Aadmi is lowering the electric bills of poor households, it is not making up the difference. New Delhi state has no cash surplus and had a fiscal deficit of 29 billion rupees ($471 million) in 2012-13.

Private distribution companies have told Kejriwal's government that they are running out of money to pay generation companies. The Business Standard newspaper reported that the companies are already sitting on losses worth 110 billion rupees ($1.7 billion). The suppliers have warned residents to be prepared for 8 to 10 hours of daily power cuts in parts of the city if the new government doesn't raise electricity rates and lend them money to buy power from state-run utilities.

India followed a socialist-patterned economy until 1991, but the progress of reforms has been unsteady. And sometimes the government has been forced to raise prices on items such as grain soon after giving out a slew of subsidies because it needs the money.

Even when the government is offering freebies, as the Congress party is now, that doesn't guarantee votes. The party's stock is low, battered by corruption scandals and inability to unblock bottlenecks in crucial sectors like land, power and food.

"What helped the Congress party in the last election in 2009 was a reasonable economic growth," economist Surjit Bhalla said. "What will hurt them the most in the next elections is a lack of growth in the past five years."