As the Union Budget 2024 is underway, all eyes are on India's interim budget and the big question: freebies or welfare schemes? Prime Minister Narendra Modi is not in favor of schemes from opposition-led states that offer cash or rewards, labeling them as 'revdis'. The government is considering extending social security to domestic workers and boosting funds for the PM Kisan scheme. But with no clear definition, the debate rages on.

The ongoing discussion revolves around distinguishing between freebies and welfare schemes. This is crucial as the Bharatiya Janata Party gears up for the upcoming Lok Sabha elections, seeking a third term.

Modi has been vocal about his opposition to schemes from opposition-ruled states that offer cash or other perks, criticizing them as detrimental to the country's development. He emphasized the need for caution, stating that those endorsing such practices wouldn't prioritize essential infrastructure projects like expressways, airports, or defense corridors.

However, targeted benefit measures, often seen as welfare schemes, play a vital role in a country with significant income inequality. Balancing these with freebies poses a challenge, with economists offering diverse opinions on what economic reforms are necessary for the nation.

Welfare Schemes in Budget 2024

Expectations are high for the government to introduce some form of social security for domestic workers, including minimum wage, medical insurance, maternity benefits, and provident funds. Analysts predict a potential 50% increase in funds allocated to the PM Kisan scheme. The government is also likely to focus on its flagship housing scheme, PM Awas Yojana.

The Fiscal Threat of Freebies

While offering freebies may seem appealing, it could divert attention from fiscal consolidation efforts. India aims to reduce its fiscal deficit to 4.5% of GDP by FY26 to attract global investors. Without a clear definition, the Election Commission added a new chapter to its Model Code of Conduct in 2014, requiring parties to justify their promises.

Some schemes announced by parties have been criticized by the RBI as economically regressive. The central bank warns against initiatives like free electricity, water, public transportation, and farm loan waivers, as they could distort prices, erode credit culture, and discourage work at current wage rates. Additionally, the RBI has raised concerns about states reverting to the Old Pension Scheme due to its impact on state finances.

As India braces for Budget 2024, the debate between freebies and welfare schemes continues, highlighting the complexities of economic policymaking in a diverse nation.

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