Welfare Politics in Indian states: Too much, too soon, with too little?

The recent state elections were marred by political parties making excessive, often unrealistic promises, especially in the lead-up to the polls, leading to undesirable outcomes.

About Welfare Politics

• In politics, welfare refers to a range of government programs that help people and families with basic needs or maintain a standard of living. 
• Welfare programs are funded by taxpayers and provide benefits such as food stamps, vouchers, or direct payments to recipients. 
• Welfare programs are often based on the principles of:
  • Equality of opportunity
  • Equitable distribution of wealth
  • Public responsibility for those who are unable to meet their basic needs.

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Welfare Politics vis-à-vis Identity Politics

Social Protection and Welfare Politics in India

• Social Security as a Human Right:
• Recognized by the United Nations Declaration of Human Rights and emphasized by the ILO’s 2012 Recommendation for all nations to establish a “social protection floor.”

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• India spends relatively low on social  protection, as highlighted in the ILO’s World Social Protection Report, 2022.Informal employment constitutes 90% of  India’s workforce, making social security crucial to address vulnerabilities.
• Expansion of Social Protection:
  • Despite initial reluctance, social protection  measures have expanded steadily, influenced by political-economy considerations.
  • Social welfare expenditures increased from  1.2-1.3% of GSDP in 2017-18 to about 1.6% in 2022-23 across 11 states (Crisil report, 2023).
• Women-Centric Welfare Schemes:
  • Women-focused schemes are increasingly  central to India’s welfare architecture. Examples include:
    • Delhi and Himachal: Cash transfer  schemes for women.
    • Tamil Nadu: Kalaignar Magalir  Urimai Scheme (Rs. 1,000/month for women above 21 with household income < Rs. 2.5 lakh).
    • Madhya Pradesh: Ladli Behna Scheme (Rs. 1,250/month for poor women).
    • Congress-ruled states: Mahalakshmi (Telangana) and Gruha Lakshmi (Karnataka) programs.
  • Cash transfers to women have proven economic and social benefits, including improved household consumption and potential empowerment.
• Evolution of Political Welfare Schemes:
  • The central government initially resisted welfare expansion (e.g., opposition to MGNREGA). However:
    • 2019: PM-KISAN income transfer scheme for farmers launched.
    • 2020: During COVID-19, MGNREGA and the National Food Security Scheme were expanded.
    • Free cereal distribution continues for 800 million households under the National Food Security Act.
• Trends in Political Competition and Welfare Stability:
  • States with higher political competition (e.g., Rajasthan, Chhattisgarh) continue or modify existing welfare schemes, ensuring stability.
  • States with low political competition (e.g., Gujarat) are less proactive in introducing new programs.
• Challenges in Social Protection Framework:
  • Most schemes lack legal backing and remain administrative in nature.
    • Example: Women’s income transfer schemes often reflect paternalistic views, treating women as passive beneficiaries in male-headed families. 
  • Absence of legal guarantees raises concerns  about the stability of such schemes.
  • Groups with low political leverage (e.g., the  very young and the elderly) are losing out on existing protections.

Key Issues with Welfare politics

• Temptation of Populism:
  • Politicians often mobilize votes by making excessive promises, particularly to the poor.
  • There has been a demographic shift in poverty:
    • In 1990, 90% of the poor lived in  low-income countries.
    • Currently, 75% of the poor live in  middle-income countries, which has fueled demands for higher living standards.
• Welfare State and Freebies:
  • Pre-election promises by political parties in  Indian states promotes Revdi culture which included free gas cylinders, smartphones, scooters for women, enhanced cash transfers, farm loan waivers, free food packets, and free electricity for farmers.
    • Revdi culture is a term used to describe the distribution of freebies to voters during election campaigns. 
• Challenges in Delivery:
  • There are significant resource constraints that  make fulfilling these promises unsustainable.
  • For instance, Himachal Pradesh, Telangana,  and Karnataka faced fiscal crises after elections due to over-promising welfare schemes.
• Targeting Problems:
  • Exclusion errors result in the genuine poor being left out of welfare programs.
  • Inclusion errors lead to non-poor individuals benefiting unnecessarily, which strains limited resources.
  • Voluntary surrender of subsidies has proven ineffective; for example, only 10.3 million out of 247.2 million LPG customers surrendered subsidies in 2021 despite government appeals.

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Freebies vs. Welfare Programs

Unintended Consequences of Welfare politics

• Corruption and Black Marketing:
  • Scarcity of subsidized goods and services creates an environment where bribes, commission payments, and black-market practices thrive.
  • A 2016 study by the National Institute of Public Finance and Policy (NIPFP) found that nearly 40% of food grains distributed under PDS were diverted and sold on the black market.
• Perverse Incentives:
  • Politicians may be incentivized to make even more excessive promises, driven by vested interests and the demand for black-market premiums.
  • In Himachal Pradesh, the ruling government promised free electricity to farmers and cash transfers to women before the 2022 state elections. It led to financial crises, with the state failing to meet its obligations in timely payments.
• Impact on Productive Investments:
  • Excessive spending on unsustainable welfare programs diverts resources from critical sectors such as education, healthcare, and infrastructure.
  • In Telangana, the government introduced Rythu Bandhu, a scheme providing direct income support to farmers which led to a backlog in critical services.
• Erosion of Trust in Politics:
  • Persistent gaps between promises and delivery erode public trust in political parties.
  • This lack of trust undermines the credibility of sincere governance efforts.
  • In Himachal Pradesh (2024), after the ruling party made ambitious promises like free electricity and cash transfers to women, the state faced fiscal difficulties, and many of these promises remained unfulfilled. 

Economic and Governance Concerns

• Fiscal Stress:
  • Programs like the Pradhan Mantri Garib Kalyan Anna Yojana, which provides free food grains to 810 million people at an annual cost of Rs. 2 trillion, resemble universal basic income schemes.
  • Such programs strain fiscal resources, leaving little for capital expenditure essential for long-term inclusive growth.
• Difficulty in Identifying the Poor:
  • The dominance of the informal sector makes income assessment challenging.
  • With only about 100 million taxpayers, income tax data is insufficient for identifying the poor accurately.

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Way Forward

• Targeted Welfare Mechanisms:
  • Welfare programs should be designed to accurately identify and deliver benefits to those who genuinely need them.
  • There needs to be a balance between avoiding exclusion errors and preventing inclusion errors.
• Fiscal Discipline:
  • Political parties should refrain from making unrealistic and unsustainable promises, particularly during elections.
  • Focus should be on resource-efficient and impactful welfare initiatives.
• Public Awareness:
  • Campaigns should encourage voluntary surrender of subsidies by non-poor beneficiaries.
  • For instance, public appeals like the one by Prime Minister Modi for surrendering LPG subsidies need to be strengthened.
• Accountable Governance:
  • Corruption and inefficiencies in service delivery must be addressed to build public confidence.
  • Investments in critical sectors such as education, healthcare, and infrastructure should be prioritized.

Conclusion

While welfare schemes have increased social protection, their administrative nature and lack of legal guarantees pose challenges to sustainability. A balanced, legally-backed framework is essential to ensure inclusivity, stability, and long-term empowerment of vulnerable groups.