Ballot to budget: The economic impact of cash transfer politics

Cash handouts are likely to prove sticky as a policy option and reduce our space for fiscal reforms

- VIVEK KAUL

The political lesson being learnt from recent assembly elections in Maharashtra and Jharkhand, and before that in Madhya Pradesh, is that cash transfer schemes for women can be a real game-changer when it comes to winning the electorate over. This raises several interesting points.

First, the political party or alliance in power gets an added advantage while going into an election. It can announce and implement a cash transfer programme just a few months before the polls and reap the benefits when people vote. The opposition in the state can only hope to match the scheme or announce bigger and better cash transfers if it comes to power. But, as the old cliché goes, a bird in hand is worth two in the bush.

Second, while politicians of the ruling National Democratic Alliance (NDA) may not admit to economic hardships being faced by a significantly large section of India's population since the pandemic, their revealed preference is different. The launch of cash-transfer schemes in Madhya Pradesh and Maharashtra, and the domestic cooking gas subsidy offered to below-poverty-line families in Haryana, is a sort of admittance of distress. Their actions speak louder than their lack of words.