Maharashtra, cash handouts and an unanswered question about the Lok Sabha elections
On the Political Cycle,
and I discussed the farmer protests in the UK against a proposed change to inheritance laws, and the similarities and divergences in agricultural politics and the image of the farmer across the two countries.
On today’s newsletter: What explains the BJP’s big win in Maharashtra, and why does it have important fiscal-political implications for India?
Plus, lots of links to analysis of the Maharashtra and Jharkhand results, as well as what the success of cash handouts may mean for fiscal policies.
Hand it to handouts
The results of the state assembly elections in Maharashtra (population: >124 million, home to the city of Mumbai) overturn most expectations about the state of Indian politics in 2024. Prime Minister Narendra Modi’s Bharatiya Janata Party had been dealt an unexpected blow in the General Elections earlier this year, losing its simple majority and becoming more reliant on coalition partners – after initially expecting to post an even bigger win than in 2014 and 2019. This was even more acute in Maharashtra, where the opposition INDIA grouping won 30 out of 48 available Lok Sabha Seats, while the BJP-led NDA managed just 17. The results seemed to suggest that the Modi phenomenon had already peaked, and that the Opposition was now ascendant, even if it hadn’t been successful in knocking Modi off his perch.
The verdict in Haryana earlier this year dented that narrative, though the BJP’s success over the Congress was subsequently put down to factionalism in the latter ranks; a perennial, hard-to-tackle issue for Mallikarjun Kharge’s party. Still, Maharashtra was described as the real test: A huge, wealthy state, where the BJP and its principal alliance partners – both of which had previously been factions of the Congress-led Opposition – would be up against an equally unwieldy grouping that had put in a surprisingly strong showing in the Lok Sabha polls and expected the wind to be in its sails.
Even at the peak of the Modi phenomenon nationally, the BJP had never won Maharashtra outright, although it had emerged as the single-largest party in assembly elections in 2014 and maintained that position subsequently. Given the talk of India entering a ‘post-Modi’ era, the expectation was that the BJP’s fortunes would similarly decline. Instead, the party is now within spitting distance of a simple majority, having won 132 seats in this year’s election, just 13 short of the majority threshold hold of 145. It did so with an 89% strike rate, having only contested 149 seats. Its alliance drew in 49% of all votes, almost 15 percentage points ahead of the INDIA grouping’s 34.4%.
That is a huge victory, going against the grain of the general election results earlier this year. Given that reportage and polls suggested a closer fight, not everyone agrees on how to read the results. The verdict in the Nanded, which featured simultaneous Lok Sabha and Assembly elections, was a sign of just how baffling the results were: The Congress won the Parliamentary by-poll that took place due to the death of the sitting MP, but it lost every one of the Assembly seats within the Lok Sabha constituency to the BJP and its allies.
The BJP has taken its massive victory as a stamp of approval for its campaign (‘Ek hai to safe hai’, meaning if we’re together, we’re safe’; ‘Baatenge to kaatenge’, if ‘they’ divide us, we are destroyed) which sought to project Hindu unity, with clear communal overtones in how these slogans were deployed. The Opposition has questioned the validity of the results and the Election Commission’s lack of transparency. Some observors point to additional support from the Rashtriya Swayamsevak Sangh, which appeared to be missing during the Lok Sabha elections, and the BJP’s strategy to build support from among smaller OBC communities in response to a mobilisation from the dominant Marathas. One undoubtedly interesting interpretation is that the BJP has found a way to win, both in Haryana and Maharashtra, without Modi being front and center – a glimpse of what a post-Modi strategy might look like (though CSDS-Lokniti’s survey makes it clear that Modi’s appeal remains key to voter support).
(I’ve collected some of the analysis attempting to understand the results in the links below).
Most, however, are convinced that one factor played a big role, not just in Maharashtra but also in Jharkhand, where the ruling JMM-Congress alliance was re-elected despite the high-pitched BJP campaign against ‘Bangladeshi infiltrators’:
“What was common between Maharashtra and Jharkhand? Cash was king when it came to wooing voters. Direct transfers, under whatever name they be, Ladki Bahin in Maharashtra or Mukhyamantri Maiya Samman Yojana in Jharkhand, have helped parties ride back to power.
If PM-Kisan, BJP's belated attempt to counter NYAY, worked in its favour in the 2019 general elections, the focus was more on women with each party seeking to outdo the other. In Maharashtra, Mahayuti promised to increase the Ladki Behin allowance from Rs 1,500 a month to Rs 2,100, as JMM has in Jharkhand - from Rs 1,000 to Rs 2,500.”
Not everyone agrees that the Ladki Bahin Yojana alone explains the BJP-led alliance’s massive victory, but it is now pretty wide consensus both that it played a major role and that we can expect other efforts to replicate the success, especially right before elections. (Note: Maharashtra and Haryana elections had taken place simultaneously five years ago, and there were accusations that the Election Commission’s decision to delay polls in Maharashtra this time were an effort to let the Ladki Bahin Yojana payments have an impact).
That will certainly have an impact on policymaking and fiscal space available to governments in India. And it is something that both politicians and administrations are grappling with.
Reports emerged soon after the Maharashtra result that bureaucrats in Maharashtra were worried about the strain on the exchequer because of the Ladki Bahin scheme. In October, Union Minister Nitin Gadkari had complained that there were no funds for other subsidies in Maharashtra, because all had been allocated to the Ladki Bahin handouts. Madhya Pradesh, which created the model on which the Maharashtra programme is based, continues to see its debt balloon. Earlier in November, Congress National President Mallikarjun Kharge advised state units to be balance their campaign claims against fiscal considerations – a statement that was immediately pounced upon by Modi as proof of the Opposition’s ‘unrealistic promises.’
Modi himself had sought in 2022 to launch a conversation around ‘revdi’ (‘freebie’) policies, calling them an ‘evil’ and a ‘dangerous new trend of trying to buy the people by distributing freebies to them’. What initially might have been a principled – and politically tricky – effort to shape the national discourse around government spending struggled to take hold, not least because Modi conveniently skirted around the question of what exactly counted as a bad subsidy versus a ‘good’ one, given how much the BJP itself relies on these policies. In Delhi (where elections are due in February), Arvind Kejriwal and the Aam Aadmi Party are now attempting to tackle the conversation head on, by making ‘revdi' a key part of their political plank and insisting that voting for the BJP will see people losing their subsidies.
There is an intriguing trade-off here between campaigning and governance that politicians will struggle to tackle, as these schemes become more widespread. The conversation also taps into economist Rathin Roy’s description of India moving towards a compensatory state, one that bears further discussion:
“The focus of fiscal policy in contemporary India has thus shifted due to these two disenchantments. The productivity of public spending is low and exacerbated by corruption and poor targeting; attempts to use technology to address these problems have been largely unsuccessful. In parallel, the growth process has been highly unequalising, not just in terms of who benefits from growth, but also in terms of who participates in it. Hence, general government (Central and state governments) is progressively recusing from its commitments to deliver inclusive growth through productive inclusion, and to use public resources at scale to provide merit and public goods and services.
Instead of financing development objectives, fiscal policy is now increasingly used to compensate those who were promised development.”
Aside from the policy implications of this economic development, one retrospective question jumps out to me: Who within the government or the BJP made the decision earlier this year to not open the purse-strings ahead of the general election – and why?
In an election year, the incumbent government is generally expected to put forward an interim budget without any grand promises, given that they may not be re-elected. Yet, Modi was happy to use that occasion back in 2019 to unveil PM-Kisan, an income-support scheme for farmers that was widely credited with helping the BJP win re-election that year. This time around, the interim budget featured no major ‘populist’ expenditure, and as a result got praise from economic observers for its austerity – a choice that now seems clearly to have affected the party’s electoral performance.
As Roshan Kishore wrote, following the Maharashtra results,
“There was absolutely nothing for the underclass in the 2024 interim budget which was not just hawkish on fiscal consolidation but actually cut back on revenue expenditure (if interest payments were to be excluded) even in nominal terms. Revenue expenditure is what matters if you want to swing an election a few months away.
If the 2024 interim budget had been more like the 2019 one, would the BJP have done better? In hindsight, there is more evidence to suggest that it would have. The 2024 Lok Sabha verdict was more against the BJP’s fiscal stance – not its ideological stance.
This is exactly what this column argued after the Lok Sabha results.
“They (voters) believe that they and their peers who do not even have basic economic security despite never-ending drudgery in the name of work deserve better. They know that the government cannot solve all their economic problems. But they expect it to pitch in when things get difficult. And they are upset when it pulls the ground from beneath their feet and talks down to them after doing it. Perhaps, this is where Narendra Modi, the master politician, got it wrong this time when he agreed with the fiscal hawks within his economic policy establishment and did not announce any economic palliatives in the 2024 interim budget”, it had said.”
Kishore draws it out as a divide between fiscal hawks within the administration and more political minded, presumably populist folks. Yet it might also have been just hubris – an assumption that the Ram Temple inauguration and perceived Opposition disarray meant the BJP could preserve fiscal firepower for another moment. (The two situations are not mutually incompatible, and indeed there may be many more explanations). Given how sparse actual reportage on the thinking of Modi, Amit Shah, Nirmala Sitharaman and others in government are though, we have little sense of how this decision was made – and whether there was a reckoning over it.
Linking Out
As always, go read all of the coverage that Kishore and his team have put together.
Vandita Mishra on Ladki Bahin as the sole explanation for the result:
“It smacks of a recourse to the easy answer, a political and analytical cave-in. Two, it unsees and unhears the voices from the ground, including and especially of women voters, the scheme’s targeted beneficiaries, that have raised questions about its adequacy or efficacy.
In my travels through the Vidarbha region in this election, the women voters I spoke to were far less misty-eyed about the scheme than political pundits in Delhi who attribute to it magical properties. Most women voters I met on the Maharashtra ground acknowledged that they had received the cash transfer but immediately followed it up with a question — how far can Rs 1,500 a month go in times when farmers are not getting the proper “bhaav (prices)” for their crops, and when prices of essential commodities are skyrocketing? “Take away this cash and give us lower prices and jobs for our children, instead”, said many. “The government is taking from us and giving it back to us as largesse, it is taking more and giving back less”, others said.”
Suhas Palshikar on broader takeaways:
“In 2014, the BJP had already made inroads in Haryana and Maharashtra. But that success was more about Modi. This time, the BJP’s electoral sweep goes beyond Modi’s persona, signifying a deeper tendency that will be difficult to shrug off — a massive turn toward an aggressive and vicious Hindutva. This success, therefore, portends similar and more assertive Hindutva as the basis of the BJP’s future electoral campaigns. Thus, the Hindutva factor assumes significance in the larger context of how the BJP keeps building its electoral and ideological dominance.”
Girish Kuber on how the BJP maneuvered in Maharashtra:
“In Maharashtra, the Marathas — the most politically powerful group — was up in arms against the BJP, the failure of the saffron alliance in bringing in the Marathas under the reserved category being the primary reason. The new-age Maratha protagonist Manoj Jarange-Patil had successfully mobilised Marathas by branding the saffron alliance as “Brahminical”. The Marathas made their voice heard in the Parliament election where the BJP faced its worst-ever rout in the state. However, soon after, it swung into action and deployed OBC leaders from its fold to counter the Marathas. The gambit worked. BJP leaders had as many as 330 meetings with various OBC factions — all under the radar. Overseeing this low-key, high-impact operation was Bhupendra Yadav who made Maharashtra his home soon after Parliament elections. Also helping the BJP in this endeavour was the RSS, which came out in full force. The result is for everyone to see.”
Alok Deshpande digs in further on the OBC tactics:
“One main feature of the BJP’s game plan was the creation of more than 20 sub-corporations that reached out to small OBC communities, estimated to be around 350. OBCs comprise around 38% of the overall state population, as per the Maharashtra State Backward Class Commission report.
The first step was taken in August 2023 when the Maharashtra Finance and Development Corporation issued notifications for creating these sub-corporations. These bodies that come under the state OBC Department are meant to provide financial aid to those in need from the specific communities for educational, business or other purposes. The sub-corporations are also meant to undertake activities aimed at the economic development of the community members.”
Neerja Chowdhury on Modi’s role in the campaign:
“The Maharashtra outcome points to the evolution in the BJP’s electioneering beyond Prime Minister Narendra Modi throwing his weight behind its campaigns. As in Haryana, so also in Maharashtra, Modi addressed only a few rallies compared to the blitz he used to mount in state battles earlier. He was not over-exposed (neither, for that matter, did Rahul Gandhi play a proactive role). The battle was less about the national leadership of parties and more about the state leaders, institutional mechanisms, and an organisational machinery, used to winning election after election, that the BJP under Modi and Shah has put into place.”
Rahul Verma on surprising results over the last few years:
“There is another way to read the poll outcomes of the past one year. The results are defying expectations and the parties confident of being ahead seem to lose ground at the end of extended campaigns. Is it a story of confidence turning into over-confidence (and in some cases, arrogance), eventually leading to the loss of votes and seats? Many thought that the Congress would retain Chhattisgarh and regain Madhya Pradesh in 2023. The BJP expected to increase its majority in the 2024 Lok Sabha, and the Congress, a return to office in Haryana. The results turned out to be different.”
Yogendra Yadav on the puzzle:
“For me, the final place to resolve an electoral riddle is the sample survey based post-mortem of the final verdict by the CSDS. Sadly, the very detailed and otherwise invaluable analysis by the Lokniti-CSDS team carried out in The Hindu (November 25) does not help us answer the big question. Their own pre-poll survey had projected a 4 percentage points lead for the Mahayuti. Even after weighing it to 14 percentage points as per the actual results, this analysis does not bring out any striking factor in terms of satisfaction with the Mahayuti government, preference for a “double engine” government, popularity of leaders or the reach of welfare schemes that could explain such a big outcome. Even the Ladki Bahin scheme can at the most explain a 2 or 3 percentage points advantage to the Mahayuti. In this analysis, you do not find any of the one-sided patterns of public opinion associated with a wave election.”
“Just as the Congress began to gain confidence, the BJP reshaped its platform to focus less on the Prime Minister.
If Modi is no longer the most important campaign issue, then how does it matter how much Rahul Gandhi attacks him? Modi may or may not have a communal agenda and he may well facilitate Adani’s business dealings, say voters, but that is not what this election is about.”
“Brand Modi is diminishing. The Bharatiya Janata Party lost the only state, Jharkhand, where it projected Prime Minister Narendra Modi as its face. On the face of it, Congress leaders should be jubilant. After all, they have waited for this moment for a decade. But they aren’t. It’s sinking in them now that Brand Modi and Brand Rahul are not inversely linked. Even if the former is fast losing its sheen, it’s not boosting the Opposition leader’s brand value. His much-celebrated love-versus-hate narrative isn’t resonating even with the Muslims any more…
So, what are Rahul Gandhi’s options today? He must pass the baton…
What Rahul Gandhi can, therefore, do is step back and bring sister Priyanka Gandhi Vadra to the front. Let her emerge as the party’s face till the 2029 Lok Sabha election, at least. Here are four reasons why he should do it.”
The BJP had accused the JMM-led government of letting Muslim “infiltrators” overrun Adivasi regions, undermining the interests of the state’s indigenous communities. A campaign video even showed skull-cap wearing men and women in burqas invading a bungalow of a JMM supporter. The Election Commission of India asked the party to take down the video, which it said violated the model code of conduct.
The BJP’s divisive campaign appears to have left voters unimpressed. In Santal Pargana, the region bordering West Bengal, where the party’s infiltration narrative took shape, its tally dropped from four seats in 2019 to just one in this election.
Ayush Tiwari on the BJP’s stunning win in a UP by-poll and allegations of police coercion.
“Scroll travelled to Kundarki to investigate the allegations.
In five villages we visited, most Muslim voters said that they could not cast their votes in the bye-election, pointing to obstruction and intimidation by police officials, who allegedly turned away Muslim voters from the polling stations.”
SC Garg on the impact of ‘revdi’ schemes:
“Will expanding cash handout schemes cause a fiscal crash for states? I don’t think so.
Primarily because the states operate under the hard budget constraint of their fiscal deficits not exceeding 3% of their GSDP. This makes sure that new cash handout schemes must be accommodated within this limit, or some other expenditure e.g. capital expenditure is slashed.
Cash handout schemes can improve administrative efficiency and development if the governments link these with desirable developmental outcomes; for example, by linking Ladli Behan payouts to improvement in nutrition and health indicators of the recipient women and their children.
In times to come, the Union and state governments should transform their existing welfare expenditures into well-designed and development-outcome linked cash handout schemes. Fertiliser, water, and electricity subsidies can be replaced with cash transfers to farmers linked to prudent fertiliser, water, and electricity use. Food subsidies can be replaced by food coupons/cash transfers linked to improvement in nutrition standard of family.”
“It is already a nationwide phenomenon! 14 states have already launched similar schemes for adult women whose family incomes are below Rs. 250,000… These 14 states are a mixed bag in terms of economic performance over the last 5 years. The fiscal deficit of most states in the country has worsened since 2019 because of COVID-19, fiscal profligacy, and changes in devolution. Every state in this list, except a couple, has fared worse than the national average on deterioration of their fiscal position. Barring 4, all other states have seen a reduction in revenue receipts as a percentage in these 5 years. Most of these states are spending more, earning less and worsening their fiscal deficit where they can afford to do so. Other states seem to be cutting their capex spends (which would have generated real employment and multipliers in future) or cutting other regular spends (likely to be health and education) to support this. Maharashtra, for example, will have its revenue deficit grow 5x in the past 2 years and a contraction in capex spending for the second year in a row.
SBI’s Namrata Mittal & Varnika Khemani on state welfare measures:
The costs associated with welfare schemes are significant, given the states’ aggregate annual deficit runs under 3% of GDP. To quantify, we expect States’ fiscal deficit to rise by 30-50bps in coming years. Many of the states may find funding challenges, may not be able to implement its promises in entirety or may have to spread it over multiple years. There has also been a reduction in state capex. And we do sense that political compulsion may lead to a compromise in capital expenditure- which is a loss of potential growth of the states.”
AK Bhattacharya on the policy implications of the success of handouts targeted at women:
“With the power of women in reaping electoral dividends now being recognised in these Assembly elections, it is likely that the Union government’s budgetary outlays will also reflect a bigger increase in the allocation for programmes that benefit women. But as recent elections have shown, electoral benefits are secured only when there is cash transfer to the intended beneficiaries. The forthcoming Budget may, therefore, give a big push to cash transfers for women. Of the four groups of Indians that the Modi government nurtures, the youth, the poor, and the farmers have already benefitted from cash transfer schemes in recent years. It is now the turn of women to get bigger cash transfer schemes from the Centre. For those in the government committed to the idea of fiscal prudence, the challenges have got a little more difficult.”
Excellent compilation - clear analysis of the short-term and the long-term implications for India's politics and sustainable development of states.