Song of Election Freebies and Rising Debt of Indian States
Song of Election Freebies and Rising Debt of Indian States
In the recent elections of three states, political parties have done the work of distributing freebies to middle class people which includes especially women
In the recent elections of three states, political parties
have done the work of distributing freebies to middle class people which
includes especially women. The announcement of such schemes before the
elections in the states has benefited the ruling parties. Maharashtra is the
latest example of this. The BJP had promised to give women INR 1,500 per month
just before the Maharashtra assembly elections. The scheme was included in the
state budget. Its purpose was to provide financial assistance to 2.5 crore
women. Especially women from rural and poor areas had to benefit from it. The
impact of the scheme is clearly on the election results. The BJP and its allies
won a major victory. Earlier, he was damaged in the Lok Sabha elections. All
political parties promised to give from INR 1,000 to INR 2,500 to women every
month under the scheme in the Mukhyamantri Mahila Samman Yojana (MMMSY). The
BJP got victory after 27 years in Delhi Assembly. At the same time, the Finance
Department says that this scheme will cost INR 4,560 crore every year. This
will cost a lot on the budget of the Delhi government.
Ultimately, free schemes can give electoral success, but
their increasing cost can cause threat to the state’s long -term economic
health. This can be a big bet for the state governments, which can challenge economic
stability at the cost of political gains
The RBI has quoted the CAG data in its report as saying that
the expenditure of state governments on subsidy is continuously increasing. In
2020-21, 11.2% of the total expenditure on subsidy was spent, while in 2021-22
spent 12.9%. According to the report, the highest expenditure on subsidy has
increased in Jharkhand, Kerala, Odisha, Telangana and Uttar Pradesh.The government of Gujarat, Punjab and
Chhattisgarh has spent more than 10% of its revenue expenses on subsidy.It has been said in the report that now the
state governments are giving free instead of subsidy where they are not earning
any money. Free electricity, free water, free travel, bill waiver and debt waiver,
all these are ‘Freebies’, on which the state governments are spending.However, some states whose debt can be more
than 30% of GSDP by 2026-27. Among them, the condition of Punjab will be the
worst. By that time, the Punjab government may have more than 45% debt of
GSDP.At the same time, the debt of
Rajasthan, Kerala and West Bengal is expected to be up to 35% of GSDP. (Refer
Table-1)
There is no indication that political parties in India will
decrease in distributing freebies. In such a situation, despite achieving a
fast economic growth rate, the state is not able to reduce the debt burden.
Assessment of the financial status of the major states of the country shows
that during the current financial year 2024-25, the debt burden on them will
remain 31-32 percent against their GDP. These states had 32 percent debt of the
total GDP during the last financial year.
The Economic Research Agency Crisil said in a report
released. According to the report, this year, 13 percent of the total revenue
will be spent in paying interest of debt, which is quite dangerous. The Finance
Commission says that more than 10 percent of the total revenue should not be
paid to repaying the debt. Crisil prepared the report on the budget of
Maharashtra, Gujarat, Bihar, Karnataka, Tamil Nadu, Uttar Pradesh, Telangana,
Rajasthan, Madhya Pradesh, Kerala, West Bengal, Punjab, Haryana, Jharkhand,
Goa, Odisha, and Chhattisgarh. The report states that 95 percent of the loan on
all the states of the country is on the said states.
In democracy, voters have the power to block or allow the
trend of freebies. There is a need for consensus between regulating irrational
freebies and ensuring that voters are not affected by irrational promises.
