Freebie politics - Post-election expenditure in states surges over last 20 years

A recent report by Emkay Research has revealed that over the past two decades, Indian states have consistently increased their spending after elections, largely due to the introduction of welfare schemes and freebies promised during poll campaigns. The analysis of 19 major states shows that, on average, revenue expenditure rises by about 0.3 percent of the state’s Gross State Domestic Product (GSDP) in the year following elections, while capital expenditure increases by around 0.2 percent. Although fiscal deficits have not shown a sharp rise, this spending pattern reflects a growing reliance on welfare schemes that often strain state budgets and limit fiscal flexibility.

Emkay Research, a part of Emkay Global Financial Services Ltd and headed by Seshadri Sen as Head of Research and Strategy, describes this phenomenon as “sticky spending” once welfare schemes are launched, they are rarely withdrawn, and subsequent governments usually add more. As a result, a large portion of state budgets is locked into recurring expenditures such as subsidies, free electricity, cash transfers, and social welfare guarantees, leaving limited scope for long-term investments. Over time, this trend has significant implications for development as states struggle to allocate sufficient funds for infrastructure, education, healthcare, and job-creating capital projects.

The practice of offering freebies as a political strategy is deeply rooted in Indian politics. Many experts trace its modern origins to Tamil Nadu, where Dravidian leaders pioneered populist welfare schemes. In 1967, C.N. Annadurai of the DMK promised 4.5 kilograms of rice for one rupee, setting a precedent for welfare-driven politics. Later, M.G. Ramachandran expanded such initiatives through mid-day meals and social welfare schemes, while J. Jayalalithaa distributed free household items, rice, and color televisions, turning welfare into a core electoral promise. Over the years, similar practices spread across states with Punjab offering free electricity, Delhi providing subsidised power and water, Karnataka implementing direct cash transfers, and Telangana promising free transport and financial aid.

In recent years, many of these welfare schemes have been designed specifically to target women voters. Political strategists view women as a decisive and dependable voting bloc with consistently high turnout rates. Welfare measures like free bus travel, LPG subsidies, financial assistance, and self-help group loans are seen both as empowerment tools and as effective ways to secure electoral support. States like Tamil Nadu, Delhi, and Telangana have introduced free travel for women, while Madhya Pradesh and Karnataka offer monthly cash transfers directly to women’s bank accounts.

Telangana presents a recent example of how this spending model affects state finances and development priorities. After the 2023 Assembly elections, Chief Minister A. Revanth Reddy acknowledged that a major portion of the state’s revenue is already consumed by salaries, pensions, debt repayments, and welfare guarantees, leaving very little for new development projects. The Congress government’s “six guarantees,” which include free bus rides for women, subsidised gas cylinders, and financial support for farmers and women, have substantially increased recurring costs. As a result, funds available for capital expenditure such as infrastructure, industrial parks, roads, and irrigation projects have become scarce, leading to delays or scaling down of developmental programmes.

Economists warn that while welfare schemes provide short-term relief and social support, they can weaken fiscal discipline and crowd out critical investments needed for sustainable growth. States with high revenue expenditure often face insufficient budgets for development, limited ability to launch new projects, and greater dependence on borrowing. Over time, this can slow down infrastructure growth, reduce job creation, and affect public services like education, healthcare, and transport. If this cycle continues, analysts caution that states may find themselves trapped in a pattern of populism-driven spending that satisfies immediate political goals but undermines long-term economic progress.

Emkay Research concludes that unless states strike a balance between welfare and productive investment, the rising cost of freebies will keep narrowing fiscal space and compromise development objectives.