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Balancing Welfare Promises and Fiscal Prudence in India



  Nov 07, 2023

Balancing Welfare and Fiscal Prudence



As political parties in various Indian states make pre-poll promises, concerns arise about the long-term fiscal impact. Both major parties in Chhattisgarh, and other states, have offered schemes that could strain state finances, including cash transfers, subsidized amenities, and free education.

National Fiscal Implications

Prime Minister Modi’s extension of the free foodgrain distribution scheme, originally a pandemic relief measure, now takes on a near-permanent status with significant annual costs. This decision sets a precedent not just for state elections but also for the upcoming Lok Sabha elections.

Policy and Fiscal Management Concerns

The increasing trend of these promises highlights a departure from targeted fiscal spending. The challenge lies in balancing welfare support for low-income groups with the need for effective fiscal management. Given India’s development needs and the existing pressure on public finances, unchecked populism may undermine the country’s fiscal health.

The Need for Fiscal Discipline

India’s commitment to containing its fiscal deficit requires careful prioritization of expenditure. The elevation of temporary relief measures to permanent entitlements risks hampering fiscal consolidation efforts and increasing macroeconomic vulnerabilities.

SRIRAM’s


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