When passing economic judgements, the way things are presented matters a lot. For example, today, the buzz is around freebies where state governments have been chastised for giving free sewing machines, cycles, or power to different sections of society putting fiscal balances under pressure.
But when there is something like the performance-linked incentive (PLI) scheme, in which companies need to show a certain level of performance to claim the benefit, it is applauded. Similarly, the reduction of the corporate tax rate is taken to be positive as it spurs growth and is not deemed a 'freebie' - notwithstanding that such concessions have not led to higher investment.
The issue is really all about terminology and communication. If one looks at, say, the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY), a free food scheme that benefits over 800 million people, there has never been a complaint against such an expense. But when it comes to the public distribution system (PDS) - really the same concept - there has always been criticism about wrong targeting. But if 800 million people get benefits from free food, it means they require it. So, PDS or food subsidy is necessary.
A rose by any other name would smell as sweet. But this does not seem to hold in economics. The moment a government scheme is called a subsidy, it is frowned at. It is applauded if it's an 'incentive' or tax. When free bicycles are given by states, it is not unproductive as the cycle industry (mainly in Bihar) benefits from this outlay. The same holds with sewing machines (made popular in Tamil Nadu). Hence, if the schemes were called 'women' or 'girl' empowerment schemes with the prefix of a leader, it could have passed the 'test'.
An argument made is that free power has led to farmers running their pump sets for too long and lowering the ground-level water. But, then, the 14 industries provided with PLI also have emissions that affect the climate.
There is also a stigma attached to farm loan waivers, less umbrage on non-performing asset (NPA) write-offs. In fact, loan waivers are from taxpayers' money, while NPA settlement is effectively based on deposit money where savers keep getting a lower interest rate, and borrowers pay more on loans due to banks being forced to balance lending with deposits.
If NPAs were low, then fewer provisions would be made, and banks would operate on lower spreads, and thus pass on the benefit of interest rate to both savers and borrowers. But governments bear the brunt of criticism here when the budget is used for settlement. If the same set of farm loans were settled through asset reconstruction companies (ARCs) or bad banks, the emotion would be different.
More recently, a debate on service charge by restaurants has come up. A charge for a service, if acceptable, can then be extended to all services. One visits malls, supermarkets and banks for various dealings. If a restaurant can charge this amount, so should we be open to other suppliers having a service charge.
Restaurant associations have challenged the Central Consumer Protection Authority's (CCPA) July 4 guidelines prohibiting restaurants from automatically levying service charges, which the Delhi High Court will be hearing in November. They have argued that service charges go to the staff. But don't they all get salaries or wages? Unbundling labour costs and pushing it on customers sound unethical.
It is also argued that everyone knows what they are in for when they enter the restaurant and can desist from revisiting if services are not good. This logic can be applied by other services, too, if the argument is accepted. The government has rightly said that the hospitality industry can include all these charges in the regular menu rates. Hence, here too, terming the cost as 'service charge' opens the door for debate. The airlines already have been imposing a convenience fee above the fare. Clearly, we need more transparency here.
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