Parties must beware lure of cash transfers
The AAP government had many welfare schemes, and the new government will find it difficult to change strategy drastically and withdraw these totally
After 27 years, the Bharatiya Janata Party (BJP) has regained office in Delhi. Among the factors that may have drawn voters to the party, is the party’s promise to continue with the welfare schemes of the Aam Aadmi Party (AAP) government and implement new ones, including certain targeted cash transfers. But the new government must be cautious here; in the enthusiasm to deliver on election promises and show that it can do welfare better than the AAP, it could go overboard.
With a clear majority for the BJP, it will have the option to cherry-pick welfare schemes. The AAP government had many, and the new government will find it difficult to change strategy drastically and withdraw these totally. The poll promises of all three main political parties also had different freebie proposals, and more ideas of what to give to the people, and the BJP can now pick from these as well.
But the new government will do well to question if the freebies have been effective. The first AAP government focused on education and health by improving the government school system in Delhi and creating mohalla clinics. In its second term, it lost track of these objectives, and amid the continuous battle with the Union government, its focus shifted away from people’s needs. To compensate, it started rolling out more and more freebies; its election promises were no different. In the competition to give more, the BJP and the Congress also promised endless cash transfers.
While cash transfers have long been used as a tool to win electoral support in India, they can have powerful adverse effects on socio-economic demographics. This time, the manifestos of the three contesting parties promise employment, free health insurance, free electricity, water supply, free education, subsidised LPG, and direct benefit transfers ranging from ₹2,100 to ₹2,500. Apart from the fiscal burden, there are other social, cultural, and economic consequences associated with cash-based incentives.
In its election promise, the BJP offered one-time financial assistance of ₹21,000 to pregnant women. This is an example of a well-meaning initiative that could have unintended consequences. Given the high prenatal and postnatal costs due to inadequate public health care and expensive private hospitals, this scheme could encourage early pregnancy to claim the financial benefit, ultimately leading to a reduction in female labour force participation as women may be forced to leave their jobs for pregnancy and childcare. Therefore, there is a need for caution in drafting the relevant policy, so that the promised benefits don’t derail the long-term objectives of increasing employment and providing a better living standard for the people.
Some promises of the AAP and the Congress that the BJP would do well to steer clear of are money to girls for marriage and “unemployment benefits” since the unintended consequences can be more damaging than the short-term benefits. The AAP had offered ₹1 lakh to aid marriage expenses of the daughters of auto, taxi, and e-rickshaw drivers. While the intention was to lower families’ financial burden, it could inadvertently encourage prioritising marriage over education, since there is no guarantee that the scheme will continue long enough for young girls to complete their education and then get married. Additionally, the money could be used for dowry. If the BJP wishes to support young girls in their marriage, the policy must first enable them to be independent financially post-marriage and not play into social pressures.
The Congress promised ₹8,500 per month for one year to all unemployed youth. Ironically, this is higher than Delhi’s urban average wage of ₹5,015 per month. This could unintentionally increase voluntary unemployment among the poor, as many may prefer the unemployment allowance over lower-paying jobs. While the new government should focus on improving wages, cash transfers could increase the unemployment rate among Delhi’s youth. This could have a particularly negative impact on women, who may be expected to remain unemployed and stay at home, thereby shouldering the burden of domestic care.
Given the low levels of women’s employment in Delhi, these schemes could undermine the skilling of youth and hinder women’s empowerment further. The promises need to be thought through, and the realisation that there are vulnerable people who may face unnecessary pressure resulting from these promises.
While some schemes have adverse economic implications, there are other schemes that could have positive benefits for the economy and its citizens. The BJP has also promised free education to students which is a positive step towards building a skilled workforce. Similarly, Congress promised to provide apprenticeships to young jobseekers to bridge the skills gap.
The underlying problem with most cash-based incentives is that they offer short-term relief to long-term structural issues. While these incentives may win votes for political parties, they can potentially undermine true human development. Political parties must strike a balance between political objectives and the long-term economic growth.
Shabana Mitra is a senior fellow with ICRIER. The views expressed are personal
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