Free cash everywhere! States' election win pitch with Maha freebies comes with big budget burden

The Delhi government’s ambitious plan to provide ₹1,000 per month to women over 18 years of age under the Mukhya Mantri Mahila Samman Yojana (MMMSY) is projected to cost ₹4,560 crore annually, according to the finance department. With the city’s subsidy bill nearing ₹11,000 crore, officials have raised concerns that implementing the scheme from FY 2025-26 could result in a budgetary deficit.

A draft proposal for the scheme, submitted by the Women and Child Development Department, estimates that approximately 38 lakh women in Delhi would qualify for financial assistance. However, the finance department has cautioned that a revenue deficit could lead to central government intervention, potentially limiting Delhi’s financial autonomy.

Fiscal challenges amid rising expenditure

Delhi’s finance department highlighted that the city’s government, unlike other states, cannot raise market loans and must rely on the costlier National Small Saving Fund for borrowing. The additional expenditure from MMMSY and other commitments, such as a ₹2,500 crore grant to the Delhi Jal Board, could increase revenue liability by ₹7,000 crore in FY 2025-26.

The department’s communication to Chief Minister Atishi noted that anticipated revenue growth would likely fall short of covering incremental liabilities and normal expenditure increases. “There is a serious possibility of significant revenue and budget deficits and cash imbalances,” it warned.

CM Stresses Implementation Feasibility
In response, Chief Minister Atishi has said that it is premature to conclude whether MMMSY can be implemented within the current fiscal year. The 2024-25 budget allocated ₹2,000 crore for the scheme, and Atishi emphasized that implementation timelines could vary. “It is too early to decide whether MMMSY shall be implemented in FY 2024-25 or not,” she stated.

Sources in the administration told TOI that the current year’s allocation might suffice, given higher-than-expected revenue collections. “Revised estimates passed in the assembly are ₹1,700 crore higher than the budget estimate,” a source said, dismissing concerns about a revenue deficit.

Political implications of cash handouts
Cash handouts to women voters played a significant role in the recently concluded Maharashtra state assembly elections, reflecting a growing trend in Indian politics. Ahead of the elections, the BJP-led coalition announced a ₹1,500 monthly financial assistance program for 2.5 crore women. This initiative was included in the state budget to boost voter support, particularly in rural and economically disadvantaged areas.

The strategy appeared to have paid dividends. The BJP and its allies secured a commanding victory, overturning losses from the April-May parliamentary elections, where opposition parties had made significant inroads. Analysts believe the cash handout program not only addressed immediate financial needs of underprivileged women but also served as a targeted political tool to bridge the electoral gap.

Observers note that such schemes highlight India’s socio-economic inequalities and underscore the political value of targeting underprivileged groups with financial assistance. However, they also raise questions about the long-term fiscal impact of such measures on state budgets.

with TOI inputs