Welfare politics and procedural issues pose risks to fiscal discipline

In the olden days, the word of the supreme ruler was law, and they could order disbursal of funds to whoever, for whatever, and whenever they liked. This is not so any longer for chief ministers, and even prime ministers, in rule-bound democracies. Now, their powers are circumscribed by the Constitution. Discretionary powers are limited to the contingency fund established in the nature of an imprest to meet unforeseen expenditure. The legislature has to authorise even such expenditure post-facto under Articles 205 or 206. Some states, for example West Bengal, use the contingency fund sparingly — the last transfer to this fund was in 2021-22 to the tune of ₹180 crore.  

Except for money ‘charged’ on the consolidated fund, for example governors’ salaries and interest payments, all other expenditure, according to the Constitution, can be incurred by state governments only after authorisation by the legislature.  In the understandable rush to get ‘popular’ schemes implemented before elections, have these rules been given short-shrift by some, for example, in West Bengal? 

Welfare schemes, particularly women-specific ones, have become very popular with parties in power in poll-bound states. One example is Assam, which introduced Orunodoi in 2020 offering ₹830-1,100 monthly to women heads of households. Then there is Ladli Behna in Madhya Pradesh launched in March 2023, paying ₹1,000-1250 per month; Majhi Ladki Bahin scheme in Maharashtra in August 2024, offering ₹1,500 monthly to women aged 21-65: Maiya Samman in Jharkhand in August 2024, offering ₹1,100 monthly, later increased to ₹2,500 right before elections; and Mahila Rozgar Yojana in Bihar launched months before the 2025 election, offering Rs 10,000 in immediate assistance and a provision for up to ₹2 lakh in financial support. 

The incumbent governments in all the four states of Madhya Pradesh, Maharashtra, Jharkhand and Bihar won the elections with a larger number of seats than before: In Madhya Pradesh, it increased its tally from 109 to 163 seats out of 230; in Maharashtra, from 161 to 236 seats out of 288; in Jharkhand, the JMM-Congress-RJD alliance improved its count from 47 to 56 seats; and in Bihar, the NDA increased its tally from 125 seats in 2020 to 202 out of 243.   

Assam is going to polls soon, and we will know the outcome in a couple of months. Some wonder whether the ability to announce such schemes has turned ‘anti-incumbency’ into ‘pro-incumbency’ in elections. 

With such empirical regularity, it is to be expected that parties in power in other states will also find it difficult to resist the temptation of introducing such schemes or enhancing their benefits. Particularly West Bengal, where the Trinamool Congress (TMC) government had introduced  Lakshmir Bhandar — or Goddess Lakshmi’s treasury — in February 2021, providing financial assistance to women from economically weaker sections. It provided women in the age group of 25-60 years and enrolled in ‘Swasthya Sathi’ ₹1,200 every month in SC/ST households and ₹1,000 per month to others. Launched a month before legislative elections at end-March 2021, it coincided with the TMC increasing its tally from 211 in 2016 to 215 out of 292 and romping home to power.  

With the state going to polls in late April 2026, the TMC government in its Interim Budget presented on February 6 announced an increase in beneficiaries from 22.1 million to 24.2 million, and an additional amount of ₹500 per month per beneficiary retrospectively from February 2026.  The government proposed an additional annual allocation of ₹15,000 crore for 2026-27.  Strangely, there is no mention of the additional allocation needed in 2025-26, which could be upward of ₹2,000 crore.  

There was also the announcement in the West Bengal Budget of a new scheme, ‘Banglar Yuba Sathi’, or Friend of Youth, from August 15, 2026 entitling youth aged 21-40 years a monthly assistance of ₹1,500 till they get employment or up to five years, whichever is earlier. There was an allocation of ₹5,000 crore in the Budget for this scheme. Not even a week had passed, when the chief minister announced that the scheme would start from April 1 instead of August 15. Reportedly, there are eight million 

applicants, and the annual outgo on this scheme will be ₹14,400 crore, and not ₹5,000 crore.  

Furthermore, there was the long-pending issue of dearness allowance (DA) of state government employees and pensioners. The government had repeatedly argued against this payment on grounds of financial crisis. The Supreme Court did not accept the argument, and, on February 5, ordered the state government to release the first instalment of arrears by March 31. The Interim Budget for West Bengal had no mention of this DA case.   

On March 15, at 4 pm, the Election Commission announced legislative elections in West Bengal in two phases — on April 23 in 152 constituencies and then on April 29 in 142 constituencies. At 2:40 pm, the chief minister increased the allowances for Muezzin and priests by ₹500 per month, and after 25 minutes, at 3:05 pm, she announced that the state government would start paying the pending DA arrears to the state government employees and pensioners from March this year. Where will the money come from? What does it do to the 2026-27 and even the 2025-26 Budget?  

The social, economic and moral justification of welfare schemes vis-à-vis long-term development is a controversial issue. But the procedural part is straight and simple. Are the new or revised schemes costed properly? If not, what will it do to the Budget figures? How does a state government announce a scheme and start implementing it with finances from the consolidated fund of the state without the prior approval of the legislature?  What happens to legislative oversight? What happens to the integrity of the Budget?   

When the new outlays are large, it may not even be possible to manage the problem with reappropriation. With the nonchalant way we have started treating the public accounts committees, will the Comptroller and Auditor General’s objections make any difference to the way governments function? We need to pay greater attention to these procedural issues if we want to avoid the current financial indiscipline ballooning into a fiscal crisis in some states.

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The writer is a member of the West Bengal legislative Assembly and former chief economic adviser to the Government of India