Investing.com — Analysts say Bharatiya Janata Party’s decisive victory in elections in Maharashtra, a key Indian state would boost political stability and will be a positive sentiment for the market.
The win also highlights the growing trend of populist schemes across India, with cash transfer programs, particularly those targeting women, playing an increasingly pivotal role in electoral politics. Analysts believe these schemes will remain a significant driver of domestic consumption.
The BJP’s Rs 1,500 per month income transfer scheme for women has been highlighted as a key factor behind its return to power in Maharashtra. The program, which has enrolled around 25 million women, which is roughly one-third of the state’s female population, entails an annual expenditure of Rs 460 billion, roughly 1.1% of Maharashtra’s GDP.
The trend isn’t limited to BJP-ruled states. In Congress-governed Jharkhand, a Rs 1,000 per month transfer scheme targeting women was introduced earlier this year, also considered a key factor for the party’s comeback to power in the state.
Other welfare promises, including subsidized cooking gas, free electricity, and expanded health insurance coverage, are gaining momentum, with 14 states now running similar programs. Of these, 11 were initiated in the past two years, signaling a sharp uptick in direct benefit transfers.
Collectively, such schemes account for 0.7-0.8% of India’s GDP annually, according to Jefferies.
However, the rising costs associated with these populist measures are raising fiscal concerns.
“Maharashtra’s fiscal deficit will exceed targets set for the state at 3%, and that the state will have to cut capex to meet the targets,” Macquarie analyst wrote in the note.
Jefferies analysts pointed to the fact the most populous and poorer states of UP and Bihar are yet to launch such schemes.