You can’t just call giving bicycles to school-going girls a freebie: JP Morgan’s Aziz

Aziz told Moneycontrol in an interview that there has to be an assessment to whom we want to provide subsidies and transfers.

With states including Rajasthan, Chhattisgarh and Madhya Pradesh announcing a slew of measures ahead of assembly polls later this month, the debate over ‘freebies’ has made a comeback with some experts highlighting the fiscal risks associated with them. However, JP Morgan’s Jahangir Aziz is of the view that some of these steps may have a positive impact on the economy.

“You can’t just call giving bicycles to school-going girls a freebie,” said the head of emerging market economics at the US financial services giant, adding that the size of these cash transfers is not large enough to upset the fiscal arithmetic of the country.

“In the absence of MGNREGA, we would be having a difficult time with the pandemic. The fact that two-wheeler sales have been falling, the fact that two-wheeler sales haven’t plummeted is partly because of the MNREGA,” said Aziz.

MGNREGA or the Mahatma Gandhi National Rural Employment Guarantee Act, 2005, provides at least 100 days of assured wage employment in every financial year to every rural household whose adult members volunteer to do unskilled manual work.

Aziz told Moneycontrol in an interview that there has to be an assessment to whom we want to provide subsidies and transfers, adding that these transfers by themselves do not cause the kind of damage people claim it does in political or non-political campaigns.

Several experts and institutions, including India’s central bank, have consistently highlighted the need to distinguish freebies from public or merit goods, which bring larger economic benefits.

Back in September, Prime Minister Narendra Modi told Moneycontrol in an exclusive interview that there is a need to eschew such “financially irresponsible schemes” and warned about the long-term impact of these measures on the economy as well as on society.