Archive · 19 Nov 2025
Indian States' Fiscal Strains Amid Election Promises
Indian states are facing financial trouble because they're promising to spend a lot of money on things like freebies and welfare schemes, especially before elections.
This is making it hard for them to save money for future growth and infrastructure.
Some states are even borrowing money just to pay for everyday expenses.
The tax system isn't helping either, as states aren't getting as much money as expected from the Goods and Services Tax (GST).
Welfare promises by political parties are reshaping Indian states' fiscal landscapes.
Bihar's recent poll campaign promises could cost over ₹41,000 crore, nearly 4% of its GSDP.
Several states are facing fiscal pressure due to election-linked spending and committed expenses.
States' capital expenditure is low, with capex amounting to just 2.7% of GSDP in 2023-24.
GST has not yet become the revenue source expected, with states' tax-to-GSDP ratios declining.
- Who
- Indian states, particularly Bihar, Chhattisgarh, Maharashtra, Odisha, Tamil Nadu, Kerala, West Bengal, Assam
- What
- Facing fiscal strain due to election promises and committed expenses
- When
- In recent years, with the trend continuing
- Where
- Indian states
- Why
- To gain political support and meet citizens' needs
Proponents of Welfare Schemes
Advocates of Fiscal Restraint
Welfare Schemes
Proponents of Welfare Schemes
Help the poor and needy, winning political support
Advocates of Fiscal Restraint
Strain state finances, leading to long-term fiscal instability
GST Revenue
Proponents of Welfare Schemes
Could be improved with better implementation and enforcement
Advocates of Fiscal Restraint
May not reach expected levels due to structural issues
- Bihar's estimated fiscal deficit in 2024-25
- 6% of GSDP
- Bihar's targeted fiscal deficit for 2025-26
- 3% of GSDP
- Share of states' revenue spent on committed expenses in 2023-24
- 62%
- States' capital expenditure in 2023-24
- 2.7% of GSDP
- Estimated share of states' revenue receipts for committed expenses in 2025-26
- 50%
