The Freebies and the Public Debt Story of India

In the 1950s, Mr. K. Kamaraj (1903–1975), popularly known as Kamarajar, the then Chief Minister of Madras State (now Tamil Nadu) introduced free mid-day meal and education in schools. And so the culture of freebies took roots in India.

Unfunded electoral freebies severely strain India’s public finances by widening fiscal deficits and inflating the debt-to-GSDP ratio. To finance these recurring, non-merit welfare transfers, states are forced to borrow heavily, which escalates interest burdens and diverts critical funds away from capital expenditure and essential infrastructure.

We must make a distinction between Freebies and Welfare Schemes.

RBI in its 2022 report, defined ‘freebies’ as ‘public welfare measures provided free of charge.’ Freebies often focus on short-term relief. Typically include items such as free laptops, TVs, bicycles, electricity, and water, often used as electoral incentives.

Welfare schemes are rooted in the Directive Principles of State Policy (DPSP), aligned with the goals of social justice and equity and aim for positive societal impact and long-term human development. Examples: Public Distribution System (PDS), MGNREGA, and Mid-Day Meal (MDM) programs.

The critical consideration is moderation. Some examples like Uplifting the Lower Class (e.g. direct cash transfers), Boost education among underprivileged children (Mid-day meal scheme), Boost Industries (e.g. provide women with sewing machines, saris, and cycles), and Enhanced Social Welfare (e.g. free bus passes help women join workforce) are aimed at general upliftment of the nation as a whole. But where it stops getting meaningful is a strategic sagacity.

Public Debt Scenario

Let’s look at the public debt scenario in which freebies have its impact.

India’s total Public Debt (central govt. + state govt.) stands around 197 lakh crores as on 2025-26. By 2027, it is projected that the total public debt of India would surpass 214 lakh crores. This means per capita debt is 1.38 lakh in India.

Currently the Debt : GDP ratio is 56% (Central Government). The target is to bring the ratio to 50% by 2030.

These are not mere data-points. It reflects a growing impact on funding of public services.

Freebies are here to stay but not without its consequences.