8 hours Ago
One of the major concerns in Indian state finances is the prevalence of populist schemes that, while politically attractive, strain public coffers and often fail to deliver long-term economic benefits Elections in India are the bacchanalia of irrational exuberance, loose talk, and mindless populism. Public finance, on the other hand, is an exercise demanding prudence and intelligence. The predicament of democracy is that the same folks who contest elections also manage the exchequer.
The popularity of freebie culture has made matters worse in recent times. Thankfully, the ruling dispensation in Maharashtra has tried to temper its election-time excesses and flourishes with some degree of responsibility. The Bharatiya Janata Party-led Mahayuti government’s pre-poll promises have already resulted in a massive debt.
Maharashtra’s debt is projected to grow to Rs 9.3 lakh crore and revenue deficit to Rs 45,891 crore in 2025-26. This is the reason that the state government chose to ignore the manifesto promises of increasing the stipend of its flagship Mukhya Mantri Majhi Ladki Bahin Yojana from Rs 1,500 to Rs 2,100 per month and a farm loan waiver.
It can be argued that the state government didn’t have a choice, but that’s wrong; politicians always have a choice—to make worse decisions after making the bad ones. For instance, had Arvind Kejriwal’s Aam Aadmi Party won the Delhi Assembly poll again, he would have doubled down on his freebies. This is even though the Delhi government’s debt increased by almost 7 per cent from 2015-16 to 2019-20.
According to the Comptroller and Auditor General (CAG) report of the year 2021, the debt increased by Rs 2,268.93 crore (6.98 per cent) from Rs 32,497.
91 crore at the beginning of 2015-16 to Rs 34,766.84 crore at the end of 2019-20. Similarly, in 2013 the Congress-led United Progressive Alliance (UPA) government under Manmohan Singh came up with the fiscally ruinous and economically disastrous National Food Security Act under the pressure of Sonia Gandhi who, in turn, was guided by the Left-leaning National Advisory Council—a rainbow coalition of unrepentant socialists, pinkish intellectuals, poverty-perpetuating activists, and green extremists.
Gandhi was apprised of the danger of rating agencies downgrading India, but she had her way. The evil that politicians do lives after them. So, the newly elected BJP government and taxpayers still have to suffer the consequences of free commutes to women in Delhi Transport Corporation (DTC) buses.
A CAG report said that DTC’s cumulative losses soared from Rs 25,300 crore in 2015-16 to nearly Rs 60,750 crore in 2021-22. Yet, any decision to end free commute to women will be denounced as anti-women, misogynist, etc. So, soon after taking oath, Delhi’s new Transport Minister Pankaj Singh said that the free bus service for women will continue under the BJP-led government.
Kejriwal’s shadow will continue to darken Delhi’s political economy. To be fair to India’s politicians, we must underline the fact that, despite their myriad shenanigans, they have not been as bad as their counterparts in other (mostly) developing countries. They never twisted economic policy to the extent that it caused monstrously painful disruptions; we never went through anything even close to what Sri Lanka suffered a couple of years ago.
In other words, the Maharashtra government did have a choice: it could have taken the easy path of continuing with the electorally beneficial populist schemes, or trimmed them. It chose the latter—a difficult but noble alternative. It has decided to weed out non-deserving beneficiaries of the Ladki Bahin Scheme.
Its allocation for the Scheme for Rs 2025-26 is Rs 10,000 crore lower than that of the current fiscal. Yet, the state government has to cut more government expenditure, for infrastructure projects are being starved of funds. No fresh outlay has reportedly been mentioned for such projects—not a salutary development in a leading industrial state.
We have to wait for the political fallout, if any, of the Maharashtra government’s decision to go slow on populism. If the Devendra Fadnavis government doesn’t feel uncomfortable politically in the near future, it may garner more courage to become more fiscally prudent. Besides, this can trigger a virtuous cycle among states.
One of the major concerns in Indian state finances is the prevalence of populist schemes that, while politically attractive, strain public coffers and often fail to deliver long-term economic benefits. Measures like farm loan waivers, free electricity, and excessive subsidies frequently lead to financial distress for state governments, increasing their debt burdens. The potential ripple effect of Maharashtra’s decision could be significant.
If other state governments observe that scaling back on populist schemes does not necessarily lead to electoral defeat, they might be encouraged to adopt a more fiscally responsible approach. This could lead to a much-needed shift in Indian politics, where economic sustainability takes precedence over short-term electoral gains. The resulting virtuous cycle could help control excessive spending, improve state finances, and create room for more targeted and effective welfare measures rather than blanket populist giveaways.
In a nutshell, Maharashtra’s experiment with fiscal prudence could play a key role in shaping the future of governance in India. The author is a freelance journalist. Views expressed in the above piece are personal and solely those of the author.
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