The Growing Practice of Distributing Freebies to Voters During Elections Is Putting a Strain on the State Economy: A Study

The proliferation of electoral freebies, ranging from free electricity to cash transfers, waiver of loans, free food grains, subsidised fuel, and guaranteed government jobs has become one of the most controversial fiscal and democratic issues facing India. The study looks into the cost (economic impact) on the state exchequer caused by the competitive freebie culture, creating the scenario based on data from the Reserve Bank of India (RBI), PRS Legislative Research, Comptroller and Auditor General (CAG), National Institute of Public Finance and Policy (NIPFP) and various state budget documents from 2019 to 2025. The study reveals that in many high-freebie states, debt to GSDP has been skyrocketing and far exceeded the FRBM limit of 20 per cent, as capital expenditure has been steadily pushed out and the quality of fiscal deficit has declined. Unconditional cash transfer (UCT) schemes targeting women alone would cost around Rs 1.7 lakh crore in the FY 2025-26. The paper builds on comparative state-level data to create a Freebie Fiscal Stress Index (FFSI) and attempts to make sense of its implications for sustainable development. Policy recommendations are provided, based on the FRBM framework, advice from the FRBM 15th Finance Commission and best practices experience in social protection targeting.