How Welfare Competition Works Across States

India's states compete on welfare in a way that has no precise parallel in comparable democracies. Because state governments control significant spending authority over health, education, agriculture, and social assistance; because state elections are frequent and high-stakes; and because India's large proportion of low-income voters is acutely sensitive to material welfare promises, state governments have progressively developed the political practice of outbidding each other — and the central government — with escalating welfare announcements. 

The terminology for this phenomenon has entered official political discourse: Prime Minister Modi criticised what he called "revadi culture" (revadi being a traditional sweet), characterising competing welfare promises as unsustainable populism in 2022. The Supreme Court took up a public interest litigation in 2022 on the question of whether election promises of freebies amounted to corrupt practice under the Representation of the People Act, eventually declining to make such a finding but directing the Election Commission to develop guidelines on the matter.

Representational Image: How Welfare Competition Works Across States

The welfare competition operates at multiple levels. States compete against each other — Tamil Nadu's free mixers and fans (announced by AIADMK in 2011, famously) prompted Congress and BJP state governments to offer similar household goods in subsequent elections. 

AAP's free electricity (200 units per month in Delhi from 2019) prompted BJP's Ladli Behna scheme in Madhya Pradesh, which offered monthly cash transfers to women, which prompted Congress's Karnataka "guarantees" (Gruha Lakshmi ₹2,000 cash transfer + 200 free electricity units + free bus travel for women + free cooking gas). Maharashtra's 2024 election saw the ruling Mahayuti alliance offer the Ladki Bahin scheme (₹1,500 per month to women) — credited by analysts with contributing to its unexpected victory. 

The Delhi 2025 election saw BJP promising to expand AAP's free electricity scheme alongside cash transfers. The escalation is not accidental; it reflects rational electoral competition in a context where voters respond to material welfare promises.

What You Need to Know

• RBI analysis cited in Drishti IAS documented that unchecked subsidies divert funds from infrastructure, healthcare, and education, with annual costs rising by ₹10,000–12,000 crore from new freebie announcements; the RBI Bulletin and multiple State Finances reports have flagged state fiscal deterioration partly driven by non-merit subsidy expansion.
• AFPR (Adhyayan Foundation) research (2025) documented specific fiscal impacts: Karnataka's Shakthi Scheme (free bus travel), Gruha Jyoti (200 units free electricity), and Gruha Lakshmi (₹2,000 cash transfers) placed "heavy burden on the state treasury," prompting the government to increase property taxes in October 2024 and propose further hikes.
• Punjab's debt-to-GDP ratio has deteriorated significantly under AAP government's free electricity and water commitments; Punjab, once India's highest per capita income state, has declined to 19th position in per capita income rankings as of 2024; political analysts attribute part of this to the fiscal cost of welfare commitments without corresponding revenue generation.
• PRS Legislative Research's State of State Finances (2023–24) analysed subsidies as merit goods (education, health) with social return and non-merit goods without clear social benefit; it found that rising non-merit subsidies constrain capital expenditure — the same rupee spent on free electricity for non-poor households cannot be spent on school buildings or primary health infrastructure.
• The Supreme Court in Subramaniam Balaji v. Government of Tamil Nadu (2013) held that election promises of welfare goods are not "corrupt practices" under the Representation of the People Act; political parties can promise what they wish before elections; the court declined to regulate election manifesto promises, though it asked the Election Commission to consider developing guidelines.

How It Works in Practice

1. The competitive escalation dynamic: When a governing party introduces a welfare scheme that produces positive electoral returns, opposition parties promise more of the same or something different but equally material. The winning of Karnataka by Congress on a "five guarantees" platform in 2023 prompted BJP to introduce Ladli Behna in MP (also in 2023) — demonstrating direct cross-state learning. The escalation is rational for each individual political actor even if it is collectively fiscally damaging.

2. Women as the primary target demographic: The most consistent pattern in recent welfare competition is targeting women as the primary beneficiary group. Free bus travel for women; monthly cash transfers to women homemakers (₹1,500–₹2,000 per month); free gas cylinders; gold for marriages — these policies specifically target women voters, who have shown high electoral turnout and significant responsiveness to material welfare promises that address their specific economic vulnerabilities. Maharashtra's Ladki Bahin (₹1,500/month to women) was credited by analysts as a decisive factor in the Mahayuti alliance's 2024 state election win.

3. The merit goods/freebies distinction: Not all welfare competition is fiscally damaging or developmentally counterproductive. Free school meals, public health services, maternal health support, clean water, and sanitation — all represent welfare that the market would underprovide and that generates measurable human capital returns. The welfare competition debate conflates these developmentally sound public goods with genuinely unsustainable consumption subsidies (free electricity for non-poor households, universal farm loan waivers that don't address underlying agrarian distress). Economist N.R. Bhanumurthy and ORF research both note the need to distinguish these categories.

4. Fiscal consequences: States that commit to large-scale non-merit subsidies without corresponding revenue-generating investments face fiscal stress. Revenue deficits — spending more on current consumption than revenue receipts — leave states with less for capital investment. The 16th Finance Commission's explicit provisions for "off-budget borrowings" disclosure and caps on state deficits at 3% of GSDP represent an attempt to impose fiscal discipline on states that use off-balance-sheet mechanisms to fund welfare commitments beyond their FRBM limits.

5. Central government's own welfare competition: The central government is not exempt from welfare competition. PM-KISAN (₹6,000 annual cash transfer to farmers, 2019), PM Garib Kalyan Anna Yojana (free food grains extended for five years at a cost of ₹11.8 lakh crore), and multiple other central schemes represent the central government's own participation in the welfare competition — using its larger fiscal base and central scheme machinery to contest the electoral terrain on which state governments operate.

What People Often Misunderstand

• Not all "freebies" are fiscally irresponsible: Public health, free school meals, maternal and child nutrition support, and subsidised public transport for working poor are developmentally sound investments that the market underprovides; conflating these with untargeted consumption subsidies for non-poor households misstates the policy debate.
• Welfare competition reflects market failure as much as political failure: In a country with no universal social protection system, weak labour market protections, and large unorganised sector employment, state-provided welfare fills a genuine gap; the question is not whether to provide welfare but how to design it for sustainability and genuine impact.
• The Supreme Court declined to regulate manifesto promises: Despite the perception that "freebies" are legally problematic, the Supreme Court has held that election promises do not constitute corrupt practice and has not mandated the Election Commission to restrict them; they remain a matter for political competition and voter choice.
• Not all welfare competition outcomes are negative: Karnataka's free bus travel for women has measurably increased women's labour force participation and educational access in the state; Delhi's free electricity has reduced energy poverty for low-income households; the fiscal and developmental impacts are mixed, not uniformly negative.
• The fiscal impact varies enormously by scheme design: A means-tested cash transfer to women below the poverty line has very different fiscal and developmental implications from a universal free electricity subsidy for all households regardless of income; the "freebies" label obscures these differences.

What Changes Over Time

The 16th Finance Commission's introduction of fiscal discipline criteria — 3% GSDP deficit cap, off-budget borrowing disclosure requirements, and rationalisation of subsidies as conditions for some grants — represents an institutional attempt to create fiscal guardrails for welfare competition without prohibiting it. 

The RBI's State Finances: A Study of Budgets series, published annually, provides comparative state-level fiscal data that creates public accountability for state governments' welfare spending decisions. The Maharashtra 2024 election result — where the Ladki Bahin scheme was credited with reversing opposition momentum — has set a model that multiple states are expected to follow in 2025–2026 state elections, including Delhi (2025) and Bihar (2025).

Sources and Further Reading

• AFPR — The Widespread Use of Freebies: https://afpr.in/the-widespread-use-of-freebies-implications-for-welfare-governance-and-fiscal-sustainability-in-india/
• Drishti IAS — Balancing Freebies and Welfare: https://www.drishtiias.com/daily-updates/daily-news-analysis/balancing-freebies-and-welfare
• ORF — Freebies and Welfare Schemes: Setting a Framework: https://www.orfonline.org/research/-freebies-and-welfare-schemes-setting-a-framework-for-the-debate-in-india
• ETV Bharat — The Freebies Competition in Indian Politics: https://www.etvbharat.com/en/!opinion/the-freebies-competition-in-indian-politics-a-deepening-crisis-enn25021403439
• Business Today — The Economics of Election Freebies: https://www.businesstoday.in/magazine/deep-dive/story/the-economics-of-election-freebies-410621-2023-12-23

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