Statsguru: Robust taxes ease burden of freebies on state governments

The evolving dynamics of state-level politics in India highlight the increasing prominence of welfare schemes and subsidies as decisive factors in elections. Often criticised as “revdi culture”, these promises have become central to political manifestos across parties, as seen even in the recent Maharashtra and Jharkhand elections.

 

The compound annual growth rate (CAGR) of aggregate subsidies in states significantly outpaced the CAGR of their own tax revenue (OTR) in the period from 2018-19 to 2023-24. During this period, their combined subsidy bill rose from Rs 1.87 trillion to Rs 4.73 trillion, reflecting a CAGR of 20.4 per cent. Their OTR