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20th August 2022 (6 Topics)

End this asymmetrical conflict over ‘freebies’


Recently the Supreme Court of India recommended constituting an expert committee to study the issue of ‘freebies’. This could impact the economic freedom of States and the ‘Idea of India’.

What is the judiciary's opinion about the issue?

  • Earlier the Constitution Benches of the Supreme Court have been consistent in their cautioning courts not to embark on policy matters.
  • But now the Court seems to conform with the critics that ‘freebies’ stress States exchequers, drawing them into debt traps.

On ‘Trickle down economics’:

  • Schemes like Special Economic Zones (SEZs) and Bio-Technology Parks (BTP), (where there were incentives in the form of tax holidays, subsidized power, and waiver of stamp duty), including the recent cut in corporate tax from 30% to 18% are seen as a manifestation of ‘trickle-down economics’, expected to benefit poor. But it does not seem to work like that.
  • Despite some positive results, the ‘trickle-down economics’ was criticized by Nobel Laureate Joseph E. Stiglitz for widening the inequality and resulting in diminished inclusive growth.

Present Status of wealth distribution in India:

  • The World Inequality Report 2022 says that the top 1% of India held 22% of the total national income as of 2021, and the top 10% owned 57% of the income.
  • According to a research paper, ‘Wealth Inequality, Class and Caste in India, 1961-2012’, freebies in the form of incentives have benefited the upper caste elites, as 93% of top corporates and 61.8% of MSME are owned by upper castes.
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