Karnataka Congress Election Freebies Financial Impact And Promised Benefits

The Karnataka state elections in India saw the Congress party make significant financial promises to voters in the form of various "freebies." These guarantees, which the party referred to as its "five guarantees," formed a central part of their election campaign and have raised substantial questions about their financial sustainability and impact on the state's economy. This article examines the nature of these promises, their estimated costs, and the potential implications for Karnataka's fiscal health.

Overview of Congress's Five Guarantees

The Congress party in Karnataka announced five major guarantees as part of their election manifesto, targeting various demographic groups with different forms of financial assistance:

1. Gruhalakshmi Scheme: Rs. 2,000 monthly assistance to women heads of all families. According to the sources, this would benefit approximately 1.28 crore BPL (Below Poverty Line) card holders, with women in these families receiving the monthly payment. The scheme is estimated to cost Rs. 42,960 crore annually according to one analysis.

2. Gruhajyoti Scheme: 200 units of free electricity to all households. This promise alone is estimated to cost the state Rs. 15,498 crore annually, with additional support needed for the debt-trapped electricity supply companies, which could amount to Rs. 21,000 crore including Rs. 13,000 crore raised against guarantees by the state government.

3. Yuvanidhi Scheme: Monthly assistance for unemployed youth - Rs. 3,000 for graduates and Rs. 1,500 for diploma holders. This program is estimated to cost Rs. 896 crore annually.

4. Annabhagya Scheme: 10 kg of free rice per person per month for BPL families. The estimated annual cost for this program is Rs. 5,728 crore.

5. Uchita Prayana Scheme: Free travel for women in state public transport buses. The sources do not provide specific cost estimates for this particular guarantee.

In addition to these five main guarantees, the Congress party also promised several other benefits, including 500 litres of tax-free diesel annually for deep-sea fishing, Rs. 6,000 to all marine fishermen as a lean period allowance, and a program to purchase cow dung at Rs. 3 per kg to establish compost centers involving rural women and youth.

Financial Estimates and Impact

The financial implications of these promises have been the subject of considerable debate, with various estimates provided by different sources:

• One source estimates the total cost of all five guarantees at Rs. 65,082 crore annually, broken down as follows:

  • Gruhalakshmi: Rs. 42,960 crore
  • Gruhajyoti: Rs. 15,498 crore
  • Annabhagya: Rs. 5,728 crore
  • Yuvanidhi: Rs. 896 crore

• Another source suggests that cash payments and power subsidies alone would cost Rs. 62,000 crore per year.

• A third source indicates that the combined promises would amount to Rs. 58,000 crore.

These figures represent a significant portion of Karnataka's state budget. According to one analysis, Rs. 62,000 crore would amount to nearly 20% of the state budget, equivalent in size to the fiscal deficit in the previous financial year (which was Rs. 60,581 crore, or 2.60% of the Gross State Domestic Product).

The burden on the state exchequer is expected to be substantial, particularly as Karnataka is still recovering from the economic hardships of the COVID-19 pandemic and associated lockdowns. Economists have warned that these commitments could derail existing programs and affect planned ones due to lack of funds, while leaving insufficient resources for capital expenditure.

Comparison with BJP's Promises

The competition between Congress and the ruling BJP in Karnataka extended to the realm of freebies, with the Congress promises significantly outpacing those of the BJP in terms of both scope and cost:

• The BJP's main promises included special financial assistance for women, estimated to cost up to Rs. 3,000 per month per family, with total estimated annual expenditure reaching Rs. 54,000 crore.

• Another source indicates that the BJP's two main freebies would impose a burden of Rs. 12,000 crore on the state exchequer, significantly less than Congress's estimated Rs. 58,000 crore.

• The Congress party's six major promises (including the five guarantees mentioned above) were estimated to cost Rs. 25,800 crore for the 200 units of free electricity alone, with additional substantial costs for the other programs.

The stark contrast in the financial commitment between the two major parties highlighted the fierce competition for votes in the Karnataka assembly elections, with electoral victory seemingly becoming the sole criterion rather than pragmatism in many of these promises.

Economic Concerns and Sustainability

The proposed freebies have raised significant economic concerns among various stakeholders:

1. Fiscal Impact: The additional burden on the state exchequer is expected to be overwhelming, potentially doubling Karnataka's fiscal deficit. This could force the state to take on more debt, with one source noting that the debt-trapped electricity supply companies would need Rs. 21,000 crore in support, including Rs. 13,000 crore raised against guarantees by the state government.

2. Opportunity Cost: Critics argue that these indiscriminate freebies would leave huge loans for payment, robbing the state of the opportunity to generate income through capital expenditure. This could have deleterious economic effects, including increased transaction costs and potentially affecting the state's growth rate.

3. State's Financial Position: Despite Karnataka being considered one of India's richer states (the fourth-richest, with an average monthly income of about Rs. 22,000 per person), the concentration of wealth is uneven. The richest five districts, home to about a quarter of the state's population, have a monthly per capita income of nearly Rs. 45,000, while other regions lag behind.

4. Center-State Relations: Karnataka has accused the NDA-led central government of ignoring the state's concerns, having requested Rs. 5,400 crore as recommended by the 15th Finance Commission. The state's share of the center's total budgetary expenditure has reportedly declined to just 1.1%.

5. Sustainability Questions: Analysts indicate that doling out freebies at this scale may not be sustainable for the new government and could result in economic difficulties. There are concerns that Karnataka, which had earned a reputation for financial discipline, might fall into a trap of financial indiscipline due to these indiscriminate freebies drastically increasing revenue expenditure.

Political Context and Reactions

The freebie promises have been a significant point of political contention in Karnataka:

• The exchange between Congress chief Mallikarjun Kharge and Prime Minister Narendra Modi intensified following Kharge's advice to state units to offer financially "doable" guarantees. Prime Minister Modi responded with criticism of the Congress's "unreal promises," which led to Kharge dismissing it as a "cheap PR stunt."

• Karnataka Chief Minister Siddaramaiah and his deputy DK Shivakumar countered the Prime Minister's accusations, stating that the state's financial strength is stronger than that of the country's.

• Randeep Singh Surjewala, AICC general secretary in charge of Karnataka, attempted to downplay the financial impact, claiming that these promises would not entail much since it would not cost more than 15% of the state budget.

• The Congress party's victory in the elections has raised questions about their ability to fulfill these promises without severely impacting the state's finances. The party has already indicated a possible modification to one promise, suggesting that instead of the initially promised 10 kg of additional rice per person per month for BPL families, they would only provide 5 kg in addition to the 5 kg already provided by the Government of India.

The political significance of these freebies cannot be overstated, as they appear to have played a crucial role in the Congress's victory in the Karnataka assembly elections. However, the challenge now lies in delivering on these promises without compromising the state's economic stability.

Conclusion

The Congress party's five guarantees in Karnataka represent one of the most ambitious freebie packages ever proposed by a political party in an Indian state election. While these promises appear to have resonated with voters and contributed to the party's electoral success, their financial implications are substantial and raise serious questions about sustainability.

The estimated costs range from Rs. 58,000 crore to Rs. 65,082 crore annually, representing a significant portion of the state budget and potentially doubling the fiscal deficit. Critics warn that such indiscriminate freebies could derail existing programs, affect planned initiatives, and compromise the state's ability to undertake necessary capital expenditures.

As the new Congress government in Karnataka begins to implement these promises, the challenge will be balancing the desire to fulfill election commitments with maintaining fiscal responsibility. The outcome of this balancing act will likely have significant implications not only for Karnataka's economy but also for the broader debate on freebie politics in Indian elections.

Sources

1. Karnataka: Congress outruns BJP in 'freebies race' by huge margin
2. Politics of freebies enters Karnataka
3. Is Congress's freebie promises in Karnataka weighing heavily on state finances?
4. Challenge for Congress to give out freebies in Karnataka
5. Rs 62,000 crore Congress victory might cost Karnataka this much every year
6. Congress five freebies in Karnataka: How it will affect farmers
7. Freebies promised by Congress in Karnataka may be hard to sustain