Power, Mao Zedong famously said, flows from the barrel of a gun. In India’s political landscape, power flows from the barrel of electoral sops. The new instrument of endearment is cash transfers. The three-vowel acronym IOU now arrives with explicit guarantees. The political class has engineered a constituency of ‘beneficiaries’ to power electoral viability.
The discourse in the campaign across five states going to polls this winter illustrates the phenomenon. Four of the five states going to polls are among the less industrialised and more populous states. Parties pay the obligatory obeisance to creating employment, the trinity of bijli-sadak-pani (electricity-roads-water) and development. The polls, though, are reduced to a contest of competing promises, of freebies and cash transfers.
The old approach of wooing voters across segments has given way to targeted promises. The woman voter has emerged as a game changer. States are racing to up the ante with promises for the affection of women voters. In Madhya Pradesh the promise of Rs 1,500 to women by the Congress saw the Shivraj Chouhan regime hike cash transfer under the Ladli Behna scheme from Rs 1,000 to Rs 1,500 and promised to raise it further to Rs 3,000 per month. In Rajasthan the Ashok Gehlot government has promised an annual allowance of Rs 10,000 to women. In Telangana K Chandrasekhar Rao has promised Rs 3,000 a month to women from eligible households.
There is also the top-up strategy. Under this, schemes already run by the Union government are topped up with funding by the states. Over 45 percent of India’s working age populace—who are engaged in agriculture and are living on a sixth of the national income—are a core constituency. In 2018, Telangana and Odisha formulated a scheme to supplement the income of farmers under the Rythu Bandhu and KALIA schemes. The idea was adopted nationally as the PM Kisan Samman Nidhi, creating an entitlement of Rs 6,000 per year payable to farmers.
The political compulsion to ramp up compensation is manifest in data—more than half the households in over 15 states depend on agriculture. Unsurprisingly, there is a race in the run up to the polls in Telangana. The Congress party promised to hike Rythu Bandhu payment to Rs 15,000 and pledged Rs 12,000 for agricultural labourers. Not to be outdone, the KCR regime in Telangana has promised to hike the Rythu Bandhu payment to Rs 11,000 and eventually to Rs 16,000 a year. In Maharashtra the SS-BJP-NCP regime has instituted a top up scheme called the Namo Shetkari Mahasamman Yojana to enable additional payment of Rs 6,000 to eligible farmers.
The expansion of cash transfers is visible in the registration of over 7,000 codes by states on the National Payments Corporation portal. Topping up central allocations and subsidies is a recurring theme. Earlier this year, the Union government cut the unit price of cooking gas by Rs 200. Poll-bound states are topping up the subsidy on cooking gas cylinders. The Gehlot government in Rajasthan is offering cylinders at Rs 500, the KCR government in Telangana at Rs 400 and the Chouhan regime in Madhya Pradesh at Rs 450.
The sops parade is kaleidoscopic and cacophonous—parties compete to outbid the other team and are free to add and amend promises. It is instructive to note that political parties rarely quantify the cost of new promises. The challenge of implementing poll promises is visible on state budgets—Karnataka, for instance, had to set aside Rs 52,000 crore to pay for its guarantees issued before the elections. Political parties, though, are unfazed. The urge to spend and the surge in expenditure are perhaps emboldened by the consistent rise in goods and services tax (GST) collections.
The annual GST revenue collections have shot up from Rs 7.18 lakh crore in 2017-18 to over Rs 18.10 lakh crore in 2022-23. Collections for the first half 2023-24 are up 11 per cent at Rs 9.92 lakh crore, averaging around Rs 1.6 lakh crore a month. Indeed, GST revenues of the states for the first half of this year were up at Rs 4.22 lakh crore as against Rs 3.68 lakh crore in 2022-23. A second treasure trove with the states is fuel taxes—they recovered over Rs 3.2 lakh crore last year.
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The fact is that there are no free lunches. The cost of freebies and cash benefits are typically met through additional taxation which voters must pay in GST or fuel prices, and through additional borrowings which push up inflation and interest rates. Allocations clearly trigger dilution or denial in delivery of essential services—the unfilled vacancies in health, education and police are a testimony to this. The non-development expenditure of state governments has shot up from Rs 10.63 lakh crore in 2020-21 to over Rs 14.18 lakh crore. This is bound to rise with raucous rhetoric.
At best, electoral sops provide the paracetamol effect. The need for cash transfers and freebies is essentially the price of unattended issues. There is a deafening silence on policy design by states—on the liberation of agriculture or unshackling the factors of productivity. The GDP of India is a sum-of-pieces equation. Yet, state governments get a free pass on economic issues. Typically, the discourse in every election season focuses on the consequence of policy failings. The need to address the cause is waylaid as parties propel the promise parade.