Populist well -being schemes that push state finances to an edge

It is projected that states will spend about 2% of their combined gross domestic product (GSDP) or RS 6.4 Lakh Crore ($ 76.67 billion) in social welfare schemes in the current fiscal year, and this is much more than its expense in some of recent years. Social welfare spending increased as states launched several schemes, such as monthly income for women and free trips in state businesses. This expense is expected to remain high in the near future, given the commitments assumed by the States in the period prior to the Assembly and the general elections in recent years.

This increase in welfare schemes has had a cost. He has harmed the capacity of states to spend on the creation of infrastructure and other development works, said a report by the Crisil qualification agency, after analyzing budgets of the 18 main states, representing approximately 90% of the aggregate GSDP.

Welfare spending is an important component of the center and states budgets. The center passes large in a wide range of well -being schemes, including the Rural Employment Guarantee scheme of Mahatma Gandhi (MGGS), Jal Jeevan Mission, PM Kisan, PM AWAS YOJNA and PM POSHAN. MGNSGS receives the highest assignment. For the current prosecutor, the center has assigned RS 86,000 million rupees ($ 10 billion). Jal Jaevan Mission, PM Kisan, PM Awas Yojna and PM Poshan together get more than RS 2.30 Lakh Crore ($ 26.90 billion). The general expenditure in the social welfare schemes of the center is greater.

The expense of the states in welfare schemes will result in a high income deficit and will limit its ability to carry out greater capital disbursements, warned the qualification agency. As a percentage of GSDP, the expense in these schemes was at a level similar to the last prosecutor and stood at 1.4-1.6% between fiscal years 2019 and 2024, Crisil said.

The states intensified the expense of income in schemes for women, children, labor and backward classes in the period prior to the general elections and the assembly. Many states have introduced income transfer schemes to women, where the target group obtains RS 1,000-2000 per month. Some states introduced free trips for women in state transport buses.

The senior director of Crisil’s qualifications, Anuj Sethi, said: “It is estimated that social welfare spending in fiscal year 2025 and 2026 increases by approximately 2.3 rupees ($ 26.90 billion) of a prosecutor’s level 2024. The increase of RS 1.3 Lakh Crore ($ 15.17 billion) is mainly for financial/ medical assistance to back Social security to select focal groups, which supports the necessary expenses for socio -economic development. “

It is not estimated that the increase in social welfare expenses during fiscal years 2025 and 2026 is uniform in all states, with approximately 50% of the analyzed states that are expected to see a significant increase in these expenses, while the rest are expected to see these expenses at relatively stable levels or see a modest increase.

Since social welfare expenses increase significantly, general income expenses are budgeted to register an annual compound growth rate (CAGR) of 13-14% between fiscal years 2025 and 2026, Crisil declared. In comparison, the growth of income income was slower: it grew around 6.6% in the last fiscal year and this prosecutor will increase in the year. This mismatch in the growth of expenses and income will ensure that the income deficit remains high.

Crisil’s director of qualifications, Aditya Jhaver, said: “The increase in income deficit usually results in state governments that reduce capital disbursement to maintain their fiscal stability. The last prosecutor, capital disbursement grew a little 6% to year (if an execution rate, which has a higher multiplier effect and can stimulate a greater investment in the economy.”

Although the allocation of funds to social welfare schemes is crucial for socio -economic development, an increase in such assignments without a corresponding increase in income income can affect the credit profiles of the long -term states, which underlines the importance of maintaining fiscal prudence, Crisil said.