Potential costs of electoral promises

The impact of political parties electoral promises on the economic health of a State are apparent. An average voter needs to analyse the potential impact of promises considering what neighbouring Sri Lanka and Pakistan.

Let us consider three freebie promises by prominent political parties in Karnataka:

Congress manifesto 2023: Gruhajyothi: 200 units of free electricity per month; Gruhalakshmi: ₹ 2,000 to female head of families per month.

The BJP manifesto: Gruhini Shakthi: ₹1,000 per month per landless female farm worker; free bus pass for female students.

How do these influence the economic health given that the Karnataka Fiscal Responsibility Act, 2002 (KFRA) says that fiscal deficit shouldn’t exceed 3 per cent of GSDP.

Congress’ Gruhajyothi

With 1.79 crore households in Karnataka, the Congress promise of 200 KWHs (units) of electricity per household per month, amounts to electricity bill of ₹ 1202.50 per month or ₹14,430 per household per year or ₹25,830 crore for all households per year. With Karnataka GSDP of ₹23.33-lakh crore, fiscal deficit of ₹60,531 crore for 2023-24, this financial burden of ₹25,830 crore will exceed the provision of KFRA as the fiscal deficit will exceed 3 per cent of GSDP.

This measure will put immense stress on the State’s finances.

Congress’ Gruhalakshmi

This scheme provides ₹2,000 per month per BPL family head (i.e. woman) for all BPL families. Currently there are 1.28 crore BPL families and provision of ₹2,000 per month per BPL woman-headed family imposes a prohibitive cost of ₹30,720 crore per annum. In Karnataka State budget 2022-23, revenue deficit was ₹14,699 crore. This scheme will increase the revenue deficit to ₹45,419 crore hitting the State’s capital expenditure.

Further there is no space on Revenue expenditure since committed expenditure as a percentage of revenue receipts is nearly 90 per cent (Medium Term Fiscal Plan 2022-26).

BJP’s Gruhini Shakthi

In the FY 2024 Budget, the BJP Government announced ₹1,000 per month for each landless female farm worker under the Gruhini Shakthi scheme. Karnataka has 77,58,600 rural households and 8.4 per cent of the rural households are landless.

Thus for 6,51,722 landless rural households, with one female landless farm worker per landless rural household, provision of ₹12,000 per year, costs ₹782 crore.

An additional grant of ₹1,000 crore for free bus pass to 30 lakh women working in the organised sector and ₹350 crore for free bus Pass to eight lakh girl students of schools and colleges, adds to ₹2,132 crore.

The Congress’ promises raises the fiscal deficit rises to ₹1.17-lakh crore forming 5 per cent of GSDP violating the 3 per cent norm of KFRA jeopardising the State’s economy almost doubling the fiscal deficit.

The BJP’s promises add to ₹62,663 crore forming 2.69 per cent of GSDP is well within limits of KFRA.

Electoral promises often results in bad economics. It is time our political parties kept in mind the States’ financial health before making electoral promises.

The writer is former Director, Institute of Social and Economic Change, Bengaluru

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