CEA Nageswaran backs freebies, but with a catch: 'Attach some conditions'

Chief Economic Advisor (CEA) V Anantha Nageswaran has weighed in on the debate around freebies and welfare spending, saying the discussion should focus on whether such schemes genuinely help people and whether governments can afford them, rather than becoming an emotional argument.

Welfare is a democratic obligation

Nageswaran said welfare spending is a reality not just in India but also in developed nations.

"To an extent, welfare expenditure is there in developed countries, and they are also battling with it. They have given promises on pensions, social security, unemployment insurance, and health benefits. You take many G7 countries, they're also grappling with it," he said while speaking to ANI's Smita Prakash. 

According to Nageswaran, a welfare society is an obligation of a democratic government. "So in principle you cannot say there should not be any welfare benefits from the government," he said.

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However, he stressed that governments must consider affordability and whether welfare spending comes at the cost of other investments that could benefit people even more.

"The question is always affordability for the governments, and whether it is coming at the cost of other expenditure you can incur, which will benefit the people even more than what you are giving as a freebie," he said.

Are you really helping people?

Nageswaran argued that the debate should be broken down into practical questions.

"Are you really helping the people with this or could you have helped them differently? That is the question you need to ask," he said.

He suggested that welfare benefits should be targeted towards people who genuinely need support and questioned whether schemes should be universal or open-ended.

"Do you want to limit these benefits to a certain segment of the population that deserves this? Without this, they will not be able to survive. You have to get them to a particular level where they can compete," he said.

The CEA also suggested linking welfare benefits to outcomes that improve people's lives. 

"You need to show some improvement in your children's education. You have to put them through the schooling, then I'll give you this. You have to be by the end of next year, you should show me some diploma in some skill, then I'll give you this," he said.

"So are you at least attaching some conditions which enhance the overall quality of the population. So these are all the questions that are we need to be asking, and that is the direction in which we should be going," he added.

Taxpayer Vs beneficiary is the wrong lens.

Addressing concerns often raised by taxpayers about welfare spending, Nageswaran said it is not useful to frame the issue as one group paying for another.

"But this question of X paying Y in terms of taxes, and that is why, therefore Y is spending, and why should X be paying. I don't think that's the right way to look at it," he said.

Drawing comparisons with developed countries, he pointed to fiscal transfers within nations such as Switzerland.

"Take Switzerland, one of the richest countries in the world. There are some cantons which are not as rich as the other cantons, and there is a transfer mechanism that happens," he said.

Nageswaran noted that labour mobility and resource transfers between regions are common in many advanced economies and argued that similar dynamics exist within India.

Labour mobility benefits the economy.

When asked about concerns raised by some southern leaders over migration and resource sharing, Nageswaran said labour mobility benefits the country.

"It's good for the country that there is labour mobility. It does adjust the labour because once you reach a particular level of income, you don't want to do certain jobs," he said.

He added that the labour movement not only meets workforce requirements but also provides income opportunities and contributes to social stability.

"So I don't think we should be looking at this debate in this manner — X is paying Y and Y is living off X. That is how it has been the case in many developed societies today, and even now in their societies this model of transfer continues," Nageswaran said.