Comeback script: Politics and economics of cash transfers must be debated

The year 2024 is set to go down in history as one of the most remarkable election years in India. Against all predictions, the ruling Bharatiya Janata Party (BJP) fell short of a majority on its own in the Lok Sabha elections. Among the states where it suffered setbacks were Haryana and Maharashtra, which were slated to go for Assembly elections later in the year. A week is said to be a long time in politics. The gap between the Lok Sabha and Assembly elections — first in Haryana, and now in Maharashtra — was certainly long enough for the BJP to bounce back. However, it’s not about the BJP alone. Despite numerous odds, the return of the Jharkhand Mukti Morcha-led alliance to power in Jharkhand is also equally remarkable.

 

While the latest round of the Assembly election results will be analysed for weeks to come, the outcomes in Maharashtra and Jharkhand had something strikingly common. In both the states, the ruling alliances came back to power with a bigger majority. Although multiple factors influence outcomes, in both states the ruling alliances relied heavily on welfare schemes, such as cash transfers to women, which appear to have played a significant role. The Mukhyamantri Majhi Ladki Bahin Yojana in Maharashtra — said to be the brainchild of Chief Minister Eknath Shinde — gives Rs 1,500 per month to eligible women. It was promised to be increased to Rs 2,100 after the elections. In Jharkhand, among other schemes, the Mukhyamantri Maiya Samman Yojana provides Rs 1,000 per month to eligible women. Given that women-centric schemes, particularly cash transfers, seem to be working for the incumbents, more state governments can be expected to adopt such arrangements.

 

While the political salience of such schemes is clear, the fiscal aspect and other possibilities need to be debated. Maharashtra, for instance, made an annual allocation of Rs 46,000 crore for the Ladki Bahin Yojana. The allocation will have to be increased substantially if the sum transferred is increased as promised. For context, receipts of the state, excluding borrowing, are projected at around Rs 5 trillion this financial year. Clearly, an increased outgo on such schemes will affect the government’s ability to spend on development. Moreover, as history shows, electoral gains from welfare schemes are often temporary. Consequently, incumbents would want to allocate more resources with implications for overall fiscal management. Therefore, from the policy perspective, it is worth debating if there is a need to limit such expenditure legally and whether cash transfers should replace spending on other welfare schemes. Politically, it is also worth pondering whether such schemes tilt the balance in favour of incumbents at taxpayers’ cost. To be sure, there are no easy answers but these issues must be widely debated.

 

In terms of electoral outcome, while nothing is permanent in politics, the events of the past five years in Maharashtra have raised several questions that needed to be settled. For instance, irrespective of the legal debate, the breakaway factions of the Shiv Sena and the Nationalist Congress Party have positioned themselves strongly as constituents of the Mahayuti, with potential long-term implications for state politics. Meanwhile, after the Lok Sabha setback in Uttar Pradesh, the BJP under Chief Minister Yogi Adityanath has made a strong comeback by winning seven of the nine Assembly by-elections. The biggest loser, of course, is the Congress. While it will be part of the Jharkhand government, it lost in Haryana last month and its tally is at its lowest in Maharashtra. Priyanka Gandhi Vadra’s election to Lok Sabha in a byelection is no consolation.