India’s political landscape is witness to an innovative private-public partnership model. The upgrades are rapid and arrive with every election. It enables nationalisation of costs and personalisation of political power. People pay taxes. Government collects them. The politicians choose a section of voters to please. As in George Orwell’s farm, all are equal but some are more equal. Like in stock markets, derivatives deliver returns.
This is the electoral republic of vote benefit transfers. To appreciate, reflect on the headlines. The buzz is about a high turnout of voters led by women at the first phase in Bihar. This validates the grand idea of political parties.
The woman voter is effectively the ‘X Factor’—X because it is a silent vote, or maybe because the X chromosome has been scientifically proven to be more resilient. The resilient gender, though, does not figure in ticket allocations—women account for less than 15 percent of MPs and less than 20 percent of MLAs. Sure, there is the promise of a 33 percent quota.
Be that as it may, states are designing names for the monthly allowance of between Rs 1,000 and Rs 2,500, subject to conditions. Bihar became the 15th state to woo the X Factor! The cost of cash benefit transfers to women is now over Rs 2 lakh crore.
Bihar derives its name from vihara, Sanskrit for monastery. Its approach merits meditative attention. Typically, states pay women a monthly allowance. In Bihar, the electoral calculus called for a bigger bang. The BJP-JD(U) combo devised the CM’s employment scheme. The cash transfer of Rs 10,000 to 75 lakh women was dressed as the first instalment of a potential Rs 2 lakh kitty. As of now, Bihar has 179 schemes listed on DBT Bharat. A rattled RJD is offering Rs 30,000 if elected.
Neelkanth Mishra, chief economist at Axis Bank, points out electoral sops are funded by expenditure switching. Mishra estimates, “Bihar spends around 2.9 percent of the state GDP on welfare schemes, the highest among all states.” Voters know freebies are a free-now-pay-later gimmick, but like the Roman emperor Vespasian, they feel ‘pecuina non olet’—money does not stink.
It is not just women, the youth too must be wooed. In a state that runs on migrant remittances, employment is a slogan. The NDA promises to create one crore jobs in five years. The RJD upped the ante—a government job for each of 2.3 crore households. The math—2.3 crore x Rs 20,000 in Bihar’s budget of Rs 3 lakh crore is mind-numbing. Why must schemes wait for polls is an uncontested debate.
Ironically, perverse politics is enabled by systemic reforms. States are able to design and execute audacious schemes thanks to GST collections and the predictable availability of funding. Add systemic ease. Thanks to Aadhaar-enabled payments, governments can initiate instant transfer of cash to beneficiaries. All that is needed is registration of a code with National Payments Corporation and beneficiary details.
The Union government has 328 schemes vested with 56 ministries listed on DBT Bharat operating on the NPCI platform. There are 7,065 code listed on NPCI for state and central schemes. Ease of delivery has perverse consequences. Unsurprisingly, the borrowings of states are higher and fiscal deficit is likely worse at over 3 percent. Madhavi Arora, economist at Emkay Global, cites the cause as “weak revenue mobilisation” worsened by “election-led focus on freebies/subsidies.”
India’s governance is gripped by a strange psychosis. The architecture of governance is focused on addressing consequences that hurt political interests, whereas there is little effort to address the causality that shackles people and the economy. This explains—in part, at least—the need for a flood of acronym soups in government of India documents. India spends Rs 5.41 lakh crore on centrally-sponsored schemes and runs the world’s largest programmes for food security, health insurance, rural jobs, rural housing, midday meals, and personal accident insurance.
The national rural employment guarantee law was enacted in 2005. Two decades later, India spends over Rs 86,000 crore on the MGNREGS, and yet, the biggest issue in election after election is employment. In a nation where government jobs find lakhs of applicants, paradoxically, as per 2023 data, nearly 9 lakh posts were vacant at the Centre; the states have nearly a million posts vacant. There are over 1.04 lakh schools with just one teacher; Andhra Pradesh has the highest number of single-teacher schools.
This winter session, the government will move a new bill to set the stage for a Rs 1-lakh-crore bailout of state electricity boards, but this reality isn’t halting free power. There are 35 different schemes listed on DBT Bharat for agriculture and farmers’ welfare, and yet, the sector is perennially in distress and farmer suicides haunt headlines. India is the fourth largest economy, and yet, it must give 81 crore people free food because half the workforce survives on a sixth of national income. Primary preventive health care is inadequate, and hence, there’s health insurance for 51 crore people.
Thanks to the rich vote harvest, states are borrowing more and spending less on critical services such as police, lower judiciary, health, and education. What could be the next electoral innovation to woo voters—air purifiers for Delhi, dehumidifiers for Mumbai, free wifi for students, Zomato or Swiggy coupons, weekend Airbnb deals? The brazen disregard for the long-term consequences of underspending on state capacity should chill the collective conscience; yet, all it triggers is a collective shrug.
Mao said power flows from the barrel of the gun. In India, power grows from the taxpayer’s pocket.
Read all columns by Shankkar Aiyar
Shankkar Aiyar
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India
(shankkar.aiyar@gmail.com)