The once-skeptical promise of freebies in Indian elections has become the most potent tool to mobilize voters, with cash handouts and other goodies playing a crucial role in securing victories. In the latest Bihar Assembly Elections 2025, Prime Minister Narendra Modi's alliance won hands down, thanks in part to a 10,000 rupee cash handout to women voters, a record number of whom turned out to cast their ballots.
However, while these giveaways may be effective in winning votes, they are also becoming increasingly expensive for states. The fiscal pressure on Bihar is already significant, with the deficit or gap between what it earns and spends at 6% of its gross domestic product (GDP). And yet, despite this, the state announced pre-election schemes amounting to 4% of GDP, more than its capital outlay - money that could have been spent in job-creating, long-term assets that would have aided the state's development.
This is not an isolated case. Research from brokerage Emkay Global has found that 21 of India's 29 states have crossed the 3% deficit target, with disproportionate costs imposed by election-driven spending being one of the reasons. This is a worrying trend, as the private sector continues to hold back on investment in new job-creating factories, and the government, forced to slow its own capital spending on infrastructure, turns instead to tax cuts and giveaways to spur middle-class consumption.
The impact of these freebies can be seen in Maharashtra state's deficit, which rose by 0.4% after the launch of the Ladki Bahin financial assistance scheme. The scheme was rolled back once the polls were over, illustrating the unsustainable nature of this trend.
India's central bank has also flagged the rising burden of such subsidies on state-level debt as a key emerging concern. While overall debt of Indian states declined to about 28.5% of GDP by March 2024 compared with the levels seen over the past decade, it remains well above the 20% recommended threshold.
The warning comes as more state elections are looming, including in Tamil Nadu, Kerala, and West Bengal next year. It is unlikely that the freebie wave will be heeded, as the trend continues to gain momentum. The future of Indian politics will depend on finding a balance between welfare economics and responsible governance, lest states sink into debt and fail to invest in their development.
However, while these giveaways may be effective in winning votes, they are also becoming increasingly expensive for states. The fiscal pressure on Bihar is already significant, with the deficit or gap between what it earns and spends at 6% of its gross domestic product (GDP). And yet, despite this, the state announced pre-election schemes amounting to 4% of GDP, more than its capital outlay - money that could have been spent in job-creating, long-term assets that would have aided the state's development.
This is not an isolated case. Research from brokerage Emkay Global has found that 21 of India's 29 states have crossed the 3% deficit target, with disproportionate costs imposed by election-driven spending being one of the reasons. This is a worrying trend, as the private sector continues to hold back on investment in new job-creating factories, and the government, forced to slow its own capital spending on infrastructure, turns instead to tax cuts and giveaways to spur middle-class consumption.
The impact of these freebies can be seen in Maharashtra state's deficit, which rose by 0.4% after the launch of the Ladki Bahin financial assistance scheme. The scheme was rolled back once the polls were over, illustrating the unsustainable nature of this trend.
India's central bank has also flagged the rising burden of such subsidies on state-level debt as a key emerging concern. While overall debt of Indian states declined to about 28.5% of GDP by March 2024 compared with the levels seen over the past decade, it remains well above the 20% recommended threshold.
The warning comes as more state elections are looming, including in Tamil Nadu, Kerala, and West Bengal next year. It is unlikely that the freebie wave will be heeded, as the trend continues to gain momentum. The future of Indian politics will depend on finding a balance between welfare economics and responsible governance, lest states sink into debt and fail to invest in their development.
I'm not surprised to see cash handouts playing such a big role in elections, it's like politicians are trying to buy votes 
. But the real issue here is that these giveaways are taking a toll on state finances. Bihar's deficit is already 6% of its GDP and yet they're still doling out cash and other goodies worth 4% of GDP? It doesn't add up 
. And it's not just one or two states, multiple states are following suit. This trend needs to change because if the private sector isn't investing in new factories and the government can't spend on infrastructure, then where's the real development happening? 
but seriously, this trend of giving out freebies before elections is getting outta hand! it's like they're trying to bribe ppl into voting instead of actually making policies that benefit the country 
and now states are paying for it in terms of debt 
. And what about the long-term effects? Will they be able to afford it when the votes aren't being bought anymore?
. It's all about finding that sweet spot between welfare and responsible governance – too much of one thing and not enough of the other, and you're basically just throwing good money after bad 
.
. states should focus on investing in job creating factories and long-term assets instead of just spewing out money for votes 
it's not even about the voters anymore, it's about who can give out the most freebies 
but seriously, Bihar's deficit is already 6% of its GDP and they're adding another 4% from election schemes? that's like, insane 
what are your thoughts on this? 
. We need to find a better way to balance welfare economics with responsible governance 
.
It's like the government is choosing between welfare economics and responsible governance, and unfortunately, it's always the latter getting shortchanged. 
The private sector needs to start investing in new jobs and factories again, but instead we're seeing tax cuts and giveaways that are just putting more pressure on state debt. 
. We need to find a better balance between welfare and responsible governance 
.
. These freebies might be winning votes now, but it's so expensive for the states in the long run 
. It's like, I get that people want freebies and stuff, but the government can't keep printing money forever 
.
what's the long term plan here? 