How freebies in election campaigns increase post-election spending in states

A team of the Election Commission of India’s ‘flying squad’ searches a vehicle ahead of the Lok Sabha elections in Chepauk, Chennai, to check and stem the huge flow of freebies (File photo) | Photo credit: B Jothi Ramalingam

The state, which already reported a fiscal deficit of 6 per cent of its GDP in FY25, has introduced a slew of pre-poll measures including free electricity, enhanced pensions, education grants and a ₹10,000 grant for women. According to Emkay Research, this pre-election wealth wave amounts to “~₹40,000 crore (4 percent of GDP for FY26), which is more than the state’s capital expenditure.”

The NDA’s landslide victory was made possible by a record women’s turnout, with the report noting that “one of the key drivers of this record turnout was the ₹10,000 subsidy to women, which once again proves that freebies/populist spending is now an inseparable part of the state’s electoral dynamics”. The women entrepreneurs scheme alone accounts for ₹27,700 crore (2.5 per cent of GDP), by far the largest component of the social security bill for FY26.

Other major plans include free electricity for up to 125 units per household, adding ₹7,400 crore (0.7 percent of GDP), and the sharp hike in social pensions, from ₹400 to ₹1,100 per month, costing the state another ₹4,600 crore (0.4 percent). Scholarships and subsidies to construction workers together contribute ₹1,500 crore, while the announced increase in allowances for medical interns is not allocated a budget.

These commitments come at a time when Bihar’s fiscal health is already under severe pressure. Although the state has budgeted a fiscal deficit of 3 percent for FY26, the report notes that this relies on “a barely credible assumption of 22 percent nominal GDP growth,” which artificially lowers the deficit ratio. Data available until August shows that the FY26 deficit has already reached 27 percent of the FY25 fiscal figure, indicating a likely overshoot.

Revenue expenditure has increased steadily, from 22.3 percent in FY24 to 24.1 percent in FY25P, and is expected to rise further as social security schemes continue. Capital expenditure, meanwhile, appears to be declining to 3.7 percent of GDP in FY26BE, although the decline is more optical due to the inflated GDP denominator.

Bihar’s situation reflects a broad national trend. States that went to the polls in 2023 and 2024 saw their budget deficits rise sharply, from an average of 2.5 percent in the election year to 3.5 percent in the election year, and remained high the following year.

Chhattisgarh’s deficit rose from 1 percent to 5.3 percent during the elections, while Rajasthan and Madhya Pradesh saw their deficits rise above 4 percent and remain high.

“The FD/GDP ceiling of 3 per cent for states is now the floor,” Emkay warns, adding that with Tamil Nadu, Kerala and West Bengal heading for elections, the wave of freebies is unlikely to subside.

Published on November 19, 2025