Explained : Mathematics Is Catching Up With India’s Freebie Funfare and Its Impact

In the race for short-term attention seeking, the mathematics of populism have always been lucrative in their simplicity: promise immediate relief, win elections, worry about payment later.

For the last few years, this formula has dominated India’s electoral landscape in which state after state has been transformed into laboratories of competitive welfare maximalism. Yet political mathematics, unlike its counterpart rhetoric, eventually demands reconciliation in which both words and numbers need to add up on both sides of the equation.

Maharashtra government’s recent decision to render approximately 6.7 million women ineligible for its flagship Ladki Bahin Yojana—a scheme largely credited for a remarkable post-Lok Sabha elections comeback in the state—represents something more consequential than routine bureaucratic course correction. It is one of the earliest arrivals of a fiscal reckoning that populist politics has long postponed but is no longer in a position to defer.

Even with the current scaled-down version with 1.8 crore beneficiaries, a 6.5 per cent expense on revenue receipt is certain. What is more worrying is that studies pointing to its benefits rely mainly on indirect evidence rather than direct measurables, as seen in the case of Bihar, where benefits are linked to self-help groups encouraging self-employment.

Karnataka: The Template That Changed Everything

Maharashtra’s predicament isn’t a one-off but is demonstrative of how state governments in India are confronting a reality that electoral campaigns conveniently obscured: comprehensive welfare schemes promised during elections cannot coexist with simultaneous pursuit of functional governance, infrastructure investment, and fiscal stability.

Its neighbour Karnataka, the state where the Indian National Congress (INC) effectively used modern welfare populism as a template for countering incumbency, now grapples with consequences that extend far beyond one election cycle.

Its celebrated Five Guarantees—200 units of free electricity, Rs 2,000 monthly assistance to women heads of households, free bus travel for women, Rs 3,000 monthly unemployment allowance for graduates, and Rs 10,000 for every BPL family—consume approximately Rs 52,000 crore annually, roughly 30 per cent of the state’s total revenue receipts.

In its 2023-24 report on state finance, the Comptroller and Auditor General pointed out that for a 1.8 per cent increase in revenue, the expenditure grew by 12.5 per cent. ‘Implementation of the five guarantee schemes without rationalising existing subsidies/financial assistance or the benefits would place pressure on the state’s resources and have an influence on fiscal deficits and debt levels,’ it further added.

The fiscal strain manifests in both immediate and insidious ways. In the budget presented just after the election, new Chief Minister Siddaramaiah slashed the share of capital outlay from 17.67 per cent of the budget to 16.59 per cent. The cascading effect reverberates through sectors dependent on public investment.

The CAG report—released later—revealed that the guarantee schemes caused a shortfall of Rs 5,229 crore in infrastructure outlay. In June this year, facing delayed payments of over Rs 32,000 crore, the state government changed a clause to legalise the delay itself.

The capital expenditure has gone down by one per cent and three per cent respectively of estimated expenditure in the last two financial years. The corresponding figure for the ongoing financial year is expected to be six per cent.

What makes Karnataka’s experience particularly instructive is that incompetence and corruption have little role to play in it. It is a logical consequence of winning a handsome 135 seats in the 224-member assembly in 2023, owing to Five Guarantees, which instead of vote-buying in any traditional sense, represented a sophisticated understanding of alleviating immediate economic distress in the short run whilst mortgaging fiscal flexibility in the long run.

How One Success Reshaped National Politics

INC’s Karnataka success initiated a chain reaction that fundamentally altered India’s electoral landscape. Within months, the formula metastasised across states, transforming every election into an auction where economic prudence became an electoral liability.

Six months after Karnataka, Madhya Pradesh saw the BJP absorbing lessons from the Karnataka debacle and abandoning any fiscal conservatism. The Ladli Behna Yojana—launched in January 2023 with initial payments of Rs 1,000 per month—witnessed a 25 per cent hike in September 2023 ahead of the polls. The BJP’s explicit manifesto commitment to gradually increase the amount to Rs 3,000 by 2028 proved electorally decisive, with it securing 163 seats in the 230-member assembly against INC’s 66.

In Chhattisgarh, an eerily similar script played out. The BJP combined its Mahtari Vandan Yojana promising Rs 1,000 monthly to married women with delivery assurance conveyed through ‘Modi ki Guarantee’.

Despite the INC government’s impressive welfare record—the Rajiv Gandhi Kisan Nyay Yojana providing Rs 5,700 crore annually to farmers, along with tribal welfare initiatives and education subsidies—the BJP secured 54 seats in the 90-member assembly against INC’s 35.

What differentiated BJP and INC victories in 2023 and 2018 elections respectively were guarantees of welfare delivery. Despite INC’s performance on welfare, it was seen as under-delivery of stupendous promises made in 2018. That is where naming the BJP’s manifesto as ‘Modi Ki Guarantee’ proved crucial, since it played on the success of Direct Benefit Transfers at the central level.

For voters, INC’s welfare was here to stay and the BJP had come to build upon it. That’s the big lesson the Chhattisgarh debacle offered to the war rooms of the opposition. The time for competitive populism had arrived.

The 2024 Lok Sabha Elections: The Inflection Point

Ahead of Lok Sabha elections, the INC and its INDI Alliance partners sensed that yesterday’s generosity becomes today’s baseline expectation.

The BJP had not fully grasped this reality, which explains why it promised only enhanced allocation under existing schemes, whilst INDI Alliance members offered direct cash transfers. The BJP-led NDA barely held the fort, with the BJP’s tally falling from 303 in 2019 to 240 in 2024.

Prime Minister Narendra Modi and the BJP largely avoided the immediate, quantified welfare promises that had characterised the previous few state elections. The campaign emphasised governance achievements, infrastructure development, national security, and aspirational messaging around ‘Viksit Bharat’.

In hindsight, this was a loophole utilised by the opposition. For instance, in Uttar Pradesh, caste consolidation, reservation-related misinformation, and regional variations intensified the election. The NDA’s direct cash transfer promise could have made a significant difference in staving off election-related misinformation.

With the Samajwadi Party explicitly promising enhanced welfare including increased monthly assistance to women and youth unemployment allowances, the BJP lost substantial ground, falling from 62 seats in 2019 to just 33 in 2024.

Perverse Incentive Structure And BJP’s Strategic Recalibration

Post-2024 debacle, the BJP drastically recalibrated its strategy and altered the narrative around itself. In Maharashtra, the Mukhyamantri Mazi Ladki Bahin Yojana single-handedly flipped the Lok Sabha script, with Maha Yuti securing 235 out of 288 seats.

Before Maharashtra, the party had already pulled off what observers called a miracle in Haryana, where it defied all projections based on farmers’ protests and anti-incumbency sentiment as insurmountable obstacles. The October 2024 elections defied every conventional prediction through welfare maximalism. Against the run of play in exit polls, the BJP won 48 seats against Congress’s 37.

Post-election forensics identified enhanced welfare promises, particularly Rs 2,100 monthly assistance to poor women under a promised new scheme, as the critical differentiator. Even in a state witnessing sustained agrarian protests, immediate cash transfers proved more politically potent than policy redressal of underlying agrarian grievances.

That competitive populism transcended partisan boundaries became evident in Jharkhand’s November 2024 elections. Whilst the BJP came up with financial assistance of Rs 2,100 per month under the Gogo Didi Yojana, the Hemant Soren-led Jharkhand chapter of the INDI Alliance enhanced the allocation under Mukhyamantri Maiya Samman from Rs 1,000 to Rs 2,500.

The differentiator was delivery timing. By crediting the amount the night before polling, the Soren government signalled reliability matching—if not exceeding—the Modi government at the centre.

Jharkhand’s monthly per capita income is less than Rs 10,000. Rs 2,500 per month represents a 25 per cent increase in disposable income—huge for a state whose earning-age men mostly live outside.

Despite the BJP’s aggressive campaign focusing on governance failures, alleged corruption, and demographic anxieties, the alliance secured 56 seats in the 81-member assembly against NDA’s 24. In Delhi, the party made up for the Jharkhand loss with the help of Rs 2,500 under the Mahila Samriddhi Yojana.

The accelerating force behind this wave of welfare schemes was the 2024 Lok Sabha elections, whose result created perverse incentive structures where fiscal responsibility became electoral suicide. States that exercised restraint or attempted rationalisation faced voter punishment, whilst those promising maximum welfare regardless of fiscal sustainability secured victory.

The logic was inexorable: promise more than your opponent or lose. Governance became reduced to transfer maximisation, with policy complexity subordinated to headline numbers on monthly assistance schemes.

By mid-February 2025, the Delhi election was over and the next one on the horizon was the Bihar Assembly election, scheduled to be held in November 2025. The nine-month window provided enough opportunity to gauge how bad the inevitable ‘bad economics’ had become.

The Fiscal Walls

Karnataka’s predicament, which initially crept through umbrella budget cuts, started showing cracks down to the last mile. For instance, under the Shakti Scheme providing free bus travel to women, Rs 11,748 crore were spent for 650 crore tickets, yet the government is yet to pay Rs 4,000 crore to transport corporations.

Other states confront similar pressures with varying degrees of severity. Tamil Nadu, despite a relatively stronger fiscal position, finds its comprehensive welfare architecture consuming increasing revenue shares. The state’s free bus travel for women, free and subsidised electricity costing Rs 16,000+ crore annually in 2025-26, comprehensive student welfare including free bus passes and educational materials, marriage assistance, and various subsidies consume substantial fiscal commitment at a time when reducing fiscal deficit and debt-to-GSDP ratio should have been the priority.

Meanwhile up north, Punjab has emerged as the red light warning of competitive populism. Three decades of various power and tax concessions to farmers and industries, along with free facilities like electricity and public travel for women, have rendered its exchequer with more than Rs 4 lakh crore of public debt.

For instance, the power subsidy (for free electricity) for only the ongoing financial year is expected to hit over Rs 20,500 crore, whilst free bus travel takes out another Rs 700 crore—an amount expected to only increase manyfold.

The piling up of debts over decades has left Punjab with the tag of second-most indebted state in India, with a debt-to-GSDP ratio around 46.6 per cent, 26.6 per cent more than the recommendation for states under the FRBM Act. The state’s interest payments consume nearly 22 per cent of revenue receipts, further constraining its ability to launch new initiatives.

Under reeling debt, Punjab has become hesitant to implement its populist promise of restoring the Old Pension Scheme.

The fear is exacerbated by what happened to Himachal Pradesh, where the INC’s poll promise of restoring the Old Pension Scheme for 1.35 lakh employees costs 450 per cent of its own tax revenue. Further, to meet its ten guarantees, the INC government ramped up its borrowing, taking its debt to Rs 1.05 lakh crore. Interestingly, nearly three-quarters of this loan is being used for paying off existing debt.

In Jharkhand, the situation has worsened to an extent that to address it, Hemant Soren may need to make difficult choices. Just after the result, the government had to arrange more than Rs 11,697 crore to meet its promises. In the 2025-26 budget, 12.63 per cent of the Rs 1.45 lakh crore budget was allocated for the Maiya Samman Yojana and free electricity—more than the sum given to departments like Agriculture, Road Transport, and Rural Development.

The delays in payments are commonplace, and seeking assistance from a friendly coalition partner at the centre by compromising electoral mathematics is on the horizon. Every rumour related to a change of JMM’s coalition partner in Jharkhand is rooted in how welfare schemes have left state finances in distress.

The Inevitable Alternative Reality Confronting Fiscal Wall

To assume that the distress is coalition-specific is wrong. Even NDA-ruled states, despite electoral success through welfare promises, are undertaking significant modulation as fiscal constraints become undeniable.

In Madhya Pradesh, as of January 2026, the Ladli Behna Yojana scheme provides Rs 1,500 monthly to approximately 1.27 crore women beneficiaries. Following an increase implemented, it costs Rs 22,860 crore to the state exchequer—Rs 4,000 crore above the allocation of Rs 18,669 crore in FY 2026.

The issue, along with many other poll promises, forced the government to divert over Rs 18,000 crore from capital income towards its revenue expenses.

The electoral promise of Rs 3,000 monthly has been postponed to 2028—a casualty of fiscal mathematics that even a BJP government committed to welfare delivery cannot ignore. At the promised Rs 3,000 level, the scheme would consume over Rs 45,000 crore annually in a state with total revenue receipts of around Rs 2.9 lakh crore.

Resultantly, the government has been stretched thin to adjust and rationalise to an extent that no new names have been added for the last 28 months, which is a tacit statement of its willingness to course-correct. Maharashtra’s Fadnavis government tightening e-KYC rules should also be seen in this context. Every cancelled project in other departments forces public scrutiny of the viability of free cash transfers.

For instance, the cancellation of 903 projects worth over Rs 19,000 crore was attributed to preventing misallocation of funds, which in popular discourse acquires a whole different meaning and comparison.

Learning from these experiences, the NDA took a calculated approach in Bihar. In the run-up to the election, it allocated a one-time payment of Rs 10,000 to women with built-in accountability mechanisms. The sum went only to women registered with the Jeevika Didi project.

These Self-Help Groups worked as reinforcers of the government’s intent of providing Rs 10,000 as seed money for starting a small business. The next instalment of Rs 2,00,000 is tightly linked to the presentation of scalability of the business model established with the earlier payments by the members of these projects.

Both the Jeevika Didi project and seed cash are similar in structure and implementation mechanism to Assam’s Orunodoi scheme, which was started during Covid to provide Rs 830 monthly support to 1.8 million beneficiaries. In two successive iterations, the number of beneficiaries as well as the sum allocated has increased.

‘Orunodoi is a journey of inclusion and empowerment. From 18 lakh to 28 lakh to 38 lakh beneficiaries. From Rs 830 to Rs 1,000 to Rs 1,250 per month. A growing commitment to support, dignity and self-reliance,’ said Assam Chief Minister Himanta Biswa Sarma in October 2025.

Simultaneously, there is a sense of unease about such a drastic increase in numbers, which explains why, rather than continuing with unchecked populism, the government has decided to run a thorough audit of the scheme. In its notification for Orunodoi 3.0, the Assam government released specific exclusionary criteria, making 11 classes of citizens ineligible for the scheme.

The timeline for exclusion was 31 December 2025. ‘The Government of Assam has issued a strict directive to enforce the exclusion criteria under the Orunodoi 3.0 scheme, warning that ineligible beneficiaries who do not opt out by 31 December 2025, will face disciplinary action and recovery of benefits,’ read an official notification.

The Wall, Finally, Has a Face

These course corrections signal a fundamental recalibration in which unhinged populism is breaking through fiscal constraints. What India is witnessing is not the collapse of welfare politics, but the end of its illusion of costlessness.

The survival of competitive populism always rested on cost being deferred to future budgets, future governments and future growth. Apparently, revenue receipts are finite, borrowing—if not being done by USA in Dollars—has limits, and capital expenditure, the easiest head to cut for populist governments, has begun to bleed visibly into growth outcomes, employment generation, and state capacity itself.

When buses do not get paid, infrastructure projects are shelved, contractors remain unpaid, and pension liabilities crowd out discretionary spending, voters begin to experience welfare not as generosity but as fragility. Delays, exclusions, audits, ledger recalibrations and legal adjustments to careless spending are no longer administrative footnotes, but a part of the story.

Readjustment with Social Changes Is Needed

This story is now visible to the class targeted by welfare, contrary to the era between the 1960s and late 2000s. When welfare populism first gained mainstream headline in Indian politics through the 1960s, those seeking welfarism did not have much to lose if fiscal mathematics went haywire. That is because of less and less interaction with the outcomes of capital expenditure like infrastructure.

Having two meals a day at the time when the Prime Minister appealed to skip a meal was good enough. The governments ensured that expectations remained at physiological needs of Maslow hierarchy. To put it simply, very few beneficiaries cared whether a village in UP or Bihar had a pucca road or not. Two-time meals acted as a small assurance of a good future when party cadres used to reverberate ‘Gareebi Hatao’ in villages.

By the time parties took welfarism to competitive populism, this class had changed. They now live close to cities, go there for daily jobs, come back in the evening—by bikes. A damaged road or upward fuel price—one of the consequences of reckless welfare—pinches them as well. A teenage villager in Bihar going to the city to arrange raw eggs for her mother who just opened a shop with Rs 10,000 also needs good roads to sustain the benefits of cash transfer.

This reality must be reckoned with. Populism fails not because it’s immoral, but because it’s unsustainable. Schemes tied to self-employment, skilling, women’s collectives, or verifiable outcomes don’t reject welfare—they discipline it.

The next phase of Indian politics will be defined by which parties learn this fastest—and which continue to mistake arithmetic for ideology.