Freebies Might Be Boosting India's Growth – Here’s Why

When you hear the word “freebies,” the first thing that often pops into mind is wasteful hand‑outs that drain the treasury. In India, however, the picture is a little messier – and, as economist Shamika Ravi points out, perhaps even brighter.

Take the LPG subsidy that puts a cooking gas cylinder within reach of a middle‑class household. On the surface it looks like a simple price cut, but it does more than keep the flame lit. By reducing the cost of a daily necessity, families free up cash for other purchases – school fees, a new phone, even a modest vacation. That ripple effect lifts demand across the board.

Similarly, the free school‑meal schemes are not just about feeding kids. When a child walks into a classroom with a full stomach, attendance climbs, literacy improves and, in the long run, the talent pool widens. The government’s short‑term outlay on meals could turn into higher productivity decades later.

Critics often argue that such giveaways bloat the fiscal deficit. Ravi acknowledges the risk, yet she reminds us that the deficit isn’t a black‑and‑white villain. “If the money spent on subsidies stimulates enough private consumption, the resulting tax revenues can offset the initial outlay,” she says.

Data from the past five years backs this up. During the rollout of the rural electricity waiver, rural household consumption grew at 7% annually, outpacing the urban rate of 5.5%. That surge translated into a modest rise in GST collections, nudging the fiscal balance back toward equilibrium.

There’s also a political angle. Freebies often target the most vulnerable – women, children, the elderly. By cushioning these groups against economic shocks, the government builds a safety net that can prevent a slide into deeper poverty, which would otherwise demand far more costly interventions later.

Of course, not every giveaway is a winner. Ravi warns that poorly designed subsidies can breed dependency or encourage wasteful consumption. “The key is precision,” she stresses. “Targeted delivery, transparent monitoring and regular reviews keep the programme lean and effective.”

In short, when freebies are thoughtfully crafted and backed by solid data, they can act as a low‑cost stimulus, spur demand, and lay the groundwork for a more inclusive economy. The debate isn’t about whether we should give away things, but how we can give smarter.