As they headed into a crucial election, the incumbents and the contenders in the just concluded Assembly elections in Madhya Pradesh, Rajasthan, Chhattisgarh and Telangana had a potent ammunition in their weaponry: welfare schemes/doles/“revdi”.
While three out of these four states have seen a change of guard, the welfare schemes of the old regimes are expected to stay. In fact, given that it’s politically fraught for governments to go back on their welfare undertakings, the old schemes will only be fortified by the new ones promised by the party that came to power.
What is the financial impact of these promises on state exchequers that are already reeling under high debt burdens?
To understand the extent of the cash, direct transfers and in-kind support provided by the outgoing governments and the new ones promised by the incoming governments, The Indian Express looks at a representational family — ‘Family X’, an archetypal rural family — in each state. Each of the eight members of Family X, aged between 1 and 80 years, are beneficiaries of one or the other government schemes.
The annual budget of the nine schemes of the outgoing Congress government in Rajasthan comes to around Rs 36,608 crore — more than one-third of the state’s Own Tax Revenue and Own Non-Tax Revenue (what the state generates from its own sources such as state excise duty, stamps, etc).
On an average, Family X now receives a maximum of Rs 2.53 lakh a year — both as one-time and recurring benefits (see graph). But they are only set to get more as the spending on freebies is expected to rise further as the BJP, which came to power, made a string of promises in the polls: a higher MSP (Rs 2,700 per quintal) for wheat, a savings bond of Rs 2 lakh for the girl child under Lado Protsahan Yojana. Additionally, it has also announced Rs 1,200 as direct benefit transfer to schoolchildren from economically weaker sections.
The rise in spending is significant in view of rising public debt in the state.
In 2021-22, Rajasthan’s own tax and non-tax revenue stood at Rs 1,01,350.44 crore. That year, the state’s ‘committed expenditure’, which includes expenditure it is committed to (salaries, pension, and interest payment) and subsidies, stood at Rs 1,47,854 crore. Which means, the state spent more than what it could afford to.
At the end of March 2022, Rajasthan’s public debt stood at Rs 3,53,556 crore, of which 59.36 per cent was payable by 2029. As per the CAG report, the state will have to repay Rs 44,841.10 crore of market loans and pay interest of Rs 55,375.05 crore in next three financial years i.e. up to 2024-25.
A rural family of eight in Telangana, Family X in this case, would, on an average, get Rs 11.71 lakh a year as cash, direct transfers and in-kind support (see graph) — the highest among the four states.
The annual allocation of the Top 5 cash transfer schemes — Dalita Bandhu Scheme, Rythu Bandhu Scheme, Kalyan Lakshmi-Shaadi Mubarak Scheme, Aasara Pensions, and Amma Odi Scheme/KCR Kit Scheme — of the outgoing BRS government in Telangana stands at Rs 1.02 lakh crore, which is almost equal to the state’s own revenue (tax and non-tax). Which means that the government absolutely has no more room for additional expenditure.
But at the end of March 2022, the state’s committed expenditure (salaries, pension, and interest payment) and subsidies stood at Rs 73,779 crore, which is equal to 70 per cent of the state’s revenues.
In its election manifesto, the Congress, which came to power in the state, had promised many more targeted schemes – for farmers and farm labourers, for women, jobless youth and so on, all of which is expected to set the government back further.
The new government thus will have little room to manoeuvre.
Telangana’s outstanding public debt stood at Rs 2,77,489 crore at the end of March 2022. The ratio of outstanding public debt to GSDP increased from 18.42 per cent in 2016-17 to 24 per cent in 2021-22. The state needs to augment its resources to meet the increasing debt repayment burden over the next seven years.
Family X in Madhya Pradesh now receives a maximum of
Rs 2.85 lakh a year thanks to a dozen schemes launched over the last few years. The annual bill for these schemes stands at Rs 30,187 crore.
This is only set to go higher as the BJP, which returned to power in the state, promised a string of schemes in its manifesto — from concrete houses for women to a further subsidy on cylinders and a hike in MSP for wheat and paddy.
The amount the government spends on the existing schemes is one-tenth of the state’s 2023-24 budget (BE: Rs 3.14 lakh crore), and almost a third of its revenue (tax and non-tax) of Rs 1.01 lakh crore.
The state’s public debt has almost doubled in just five years, from Rs 1.38 lakh crore in 2017-18 to Rs 2.64 lakh crore in 2021-22. The state’s debt as a percentage of GSDP — a comparison of what it owes to how much it produces — went up from 19 to 23 per cent during this period. Of the outstanding public debt of Rs 2,33,241.93 crore, over half (50.42 per cent) is payable by 2027-28, an immediate challenge for the new government.
Madhya Pradesh’s committed expenditure (salaries, interest payments, pension payments and subsidies) has increased sharply in the last few years — from Rs 63,743 crore in 2017-18 to Rs 95,869 crore in 2021-22.
In its audit report, the Comptroller & Auditor General (CAG) pointed out that between 2020-21 and 2021-22, expenditure on subsidies went up by a whopping 41%.
On an average, Family X in the state now receives up to Rs 89,000 a year as the outgoing Bhupesh Baghel government had launched a string of populist schemes — from electricity subsidies to unemployment allowances.
Over the last five years, the Chhattisgarh government’s interest payment has doubled — from Rs 3,098.33 crore in 2017-18 to Rs 6,144.24 crore in 2021-22 — due to a continuous rise in public debt, which stands at Rs 82,912 crore in 2022.
The state’s own tax and non-tax revenues already fall short of its committed expenditure, which at Rs 44,199.54 crore at the end of March 2022, is 108 per cent of the states’s own revenues.
The squeeze is only set to get tighter as the newly elected BJP has promised several schemes and cash transfers.
For instance, it has promised the launch of Mahatari Yojna, under which all married women will get Rs 1,000, a scheme that is estimated to cost 7,500 crores per year. The party has also promised paddy procurement at Rs 3,100 per quintal for which it will have to set aside an estimated Rs 25,912 crore (if it buys the same amount of paddy as was bought this year; the BJP has promised to buy more).
The party has also promised to provide LPG cylinders to BPL families at Rs 500, a free trip to Ayodhya for Ram Lalla Darshan and so on.
But the state has to keep an eye on the calendar: it will have to pay 77.07% of the debt within the next seven years.