Expenditure on welfare schemes will see an increase

- The focus on welfare programs also increased during the recently concluded assembly elections

The national debate in the last few weeks has largely focused on how political forces are eyeing the 2024 Lok Sabha elections. While the viability of alliances and their chances of winning are still emerging, it is worth discussing what a potentially close contest would mean for economic management. It is too early to draw definite conclusions, but some clues can be gleaned from the recently concluded assembly elections and the upcoming assembly elections. Meanwhile, the focus on welfare programs has increased. For example, in Karnataka, the Congress made several promises, including the promise of free bus services for women. These promises proved effective. Elections are to be held in Rajasthan in December, the Congress government there has taken a new initiative in this direction. The Ashok Gehlot government last week passed the Minimum Income Guarantee Bill after several announcements including cheaper gas cylinders.

Under this, the state government will provide a minimum income guarantee. This will be done through work or cash transfer to the eligible population. As for employment, the government will provide an additional 25 days of work in rural areas after the completion of maximum working days under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA). Similarly, every adult in urban areas shall be employed at minimum wages for at least 125 days in a financial year. If the state authorities fail to provide employment within 15 days of application, the applicant will be entitled to unemployment allowance. A portion of the population who are old, disabled or widowed etc. will also be given pension which will be increased by 15 per cent annually.

Certainly it is difficult to oppose cash transfers to segments of the population that are not in a position to work, for example the elderly and the disabled. The employment part is also focused on providing employment which is essential for survival. For example, MGNREGA helped families immensely during the pandemic. But in urban areas it may be relatively difficult to provide work and even 125 days of employment may not be enough. However, in terms of economic management, the point is that governments do not stop at just providing aid to the disadvantaged.

For example, many states provide free or heavily subsidized electricity to select consumers. Many states have started providing old age pension, which means that the government will help a select few at the expense of the entire state. The central government is also providing income support to all landowning farmers. It is also providing free food grains to around 81 crore eligible beneficiaries. All these expenses are not necessary and this process complicates financial management. Looking at the trends of the states, it can be said that the coalition willing to form the next government at the center can make more announcements in this direction. Its consequences will not be positive fiscal management.