States' populism trap

Bihar goestothe polls on November6 and 11, marking the beginning ofacrucial electoral cycle.

- AMARENDU NANDY

Eleven more states will hold elections over the next two years. The spectacle of pre-election giveaways and populist promises will capture the headlines, asit always does. What will matter more, yet draw less attention, is the steady erosion of states’ fiscal discipline.

The deepening fault line ofsub-national fiscal drift beneath India’s political economy is now hard to ignore. Evidence of competitive populism is mounting. Press reports put pre-election doles across eight states over the past two years at %67,928 crore. Significantly, women-centric schemes have become the new normal, often enabling the ruling party to defy anti-incumbency. In Madhya Pradesh, the Ladli Behna Yojana helped the Bharatiya Janata Party (BJP) overcome four-term anti-incumbency, with vote shares rising by 7.53 percentage points. In Jharkhand, the Maiya Samman Yojana proved equally decisive forthe Jharkhand Mukti Morcha (JMM). A PRS report estimates that nine states cumulatively budgeted over’ trillion in 2024-25 largely for unconditional cash transfers to women — an unprecedented scale of fiscal outlay tied directly to electoral cycles.

‘Arguably, these commitments have blurred the line between welfare and political patronage, embedding populism in state finances. Development economics supports well-designed conditional transfers, especially to women. The issue is not cash transfers perse. It is their current architecture — being largely unconditional, universal, and effectively permanent — that creates enduring fiscal claims without efficiency gains, shifting states’ spending from productive investment to recurrent giveaways. The spiral of competitive populism, between incumbents and the Opposition, and among states, also raises the floor of fiscal profligacy.