J'khand polls: How poverty, promises shaping out in fiscally-strained state

The electoral battle in Jharkhand is intensifying as alliances are formed ahead of the assembly elections

The electoral battle in Jharkhand is intensifying as alliances evolve ahead of the Assembly elections. Currently, the coalition of Jharkhand Mukti Morcha (JMM) and Congress governs the state, with Hemant Soren back in the chief minister's seat. The Bharatiya Janata Party (BJP) — the principal opposition in the state — aims to improve its performance after losing to the JMM-Congress combine in 2019, following a five-year rule from 2014 to 2019. This year, the BJP has allied with the All Jharkhand Students Union (AJSU).

  To attract voters, purse strings are being loosened. The JMM-led government has launched the Mukhyamantri Maiya Samman Yojna (MMSY), providing ₹1,000 per month to eligible women aged 21 to 50. Last month, the state Cabinet lowered the minimum age limit to 18. Currently, 4,815,048 women are registered, with 4,536,597 receiving benefits. The government plans to increase payouts to ₹2,500 per month in December to further enhance this initiative. This increase, aimed at countering the BJP's proposed ‘Gogo Didi Yojana’ which promises ₹2,100 per month to women, is expected to hit the state exchequer by Rs 9,000 crore a year.

  However, financing these initiatives poses challenges, as Jharkhand generates only about 30.8 per cent of its revenue receipts from its own tax collections. Additionally, the state's finances are strained by a comprehensive pension scheme that provides universal coverage, lowering the qualifying age for old-age pensions from 60 to 50 years for marginalised groups, including Dalits, Adivasis, and women. The state government supplements central pension amounts, contributing an additional ₹240.4 crore to ensure all eligible individuals receive ₹1,000 a month. 

Besides pension, the state's ability to invest in development is also limited by other committed expenditures such as salaries and interest payments that consumed a bit over one-third of its revenue receipts in FY24 (Revised Estimates).

  Despite these pressures, Jharkhand allocates a larger portion of its economic resources to generating capital assets compared to other states. Capital expenditure (capex) is set to increase to 7.89 per cent of the state economy in FY25, nearly tripling from 2.91 per cent in FY15. For comparison, other states had a capex-gross state domestic product (GSDP) ratio of around 4.9 per cent in FY24, while Jharkhand's was 7.57 per cent. Capex-GSDP ratio shows the proportion of a state's total output that's accounted for by capital expenditure.

  Interestingly, the state has continued to remain revenue surplus for years, except in FY15 and during the Covid-19 pandemic in FY21. The fiscal deficit (the difference between its revenue and expenditure) is projected to fall to 2 per cent in the current financial year from a peak of 5.2 per cent in FY21, stabilising since the pandemic. 

However, the debt-to-GSDP ratio (a lower ratio reflects the state's ability to pay back debt without accumulating additional debt), has remained high, exceeding 30 per cent since the pandemic year of FY21 when it had peaked at 36 per cent. It was already on the rise before the pandemic, coming in at 30.4 per cent in 2019-20, up from 27.4 per cent in the previous year.

It is a bit complicated to gauge why debt is so high in the state which is revenue surplus and has kept fiscal deficit under check.  It seems the past accumulation of debt, particularly in the pandemic year and a year before that, resulted in high indebtedness of the state.  

 

  The government estimates that the debt-to-GSDP ratio will be around 27 per cent in FY25, though this figure should be viewed cautiously; a similar estimate last year was later revised to 30.6 per cent. Moreover, according to a 2022 Reserve Bank of India report, Jharkhand ranks among the top 10 states with the highest debt-to-GSDP ratio.

  Despite a complicated fiscal position, the BJP has laid out five key initiatives in its campaign aimed at attracting voters in Jharkhand. Among these promises, the party pledges that all families will receive one LPG cylinder for ₹500, and two free cylinders during major festivals. Additionally, unemployed graduates and postgraduates would receive ₹2,000 per month for two years, while the BJP aims to create 500,000 employment opportunities over the next five years. Furthermore, the party has committed to fill 287,000 vacant government posts in a timely manner, although these initiatives may exert additional pressure on the state's finances, if implemented. 

Both the political groupings are yet to announce their formal manifestos for the state.

 

While unemployment has been a focal point of the BJP's campaign, a look at the state's current unemployment rate shows that it is around 1.3 per cent for the 2023-24 period (July-June), according to data released by the Periodic Labour Force Survey (PLFS). This figure is significantly lower than the national average of around 3.2 per cent and has improved from 1.8 per cent in the previous year. 

While Jharkhand boasts a low unemployment rate of 1.3 per cent, it grapples with a different challenge: poverty. A NITI Aayog report released in 2023 reveals that the state ranks second in multidimensional poverty, with 28 per cent of its residents living in deprivation, just behind its parent state Bihar’s 33.7 per cent. 

Inflation is another hot topic among voters. In a welcome turn, overall inflation has dipped to 3.8 per cent in the first six months of the current financial year, below the national average of 4.6 per cent, down from 5.7 per cent in the

previous year. 

Yet, food and beverage inflation has surged to 8.9 per cent in September, outpacing the national rate of 8.4 per cent. Despite this spike, Jharkhand's average food and beverage inflation of 6.7 per cent from April to September has still managed to stay below the national trend.