States to spend Rs 1 lakh cr on pre-poll sops to women in FY26: Report

Time of India

4 hours ago

Top 18 states will spend Rs 1 lakh crore on
pre-poll sops to women
this fiscal, Crisil Ratings said on Thursday.
States' spending on social sector schemes will be at an elevated 2 per cent of GSDP (Gross State Domestic Product) in FY26 and is likely to impact capital expenditure, it added.
The social sector spends used to be in the range of 1.4-1.6 per cent of GSDP between fiscals 2019 and 2024, and climbed up to 2 per cent last fiscal, the rating agency said.
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"This fiscal (FY26), the elevated spending will result in high revenue deficit, thereby limiting the flexibility of the states to undertake higher capital outlays," the agency said.
The analysis includes 18 top states accounting for over 90 per cent of aggregate GSDP of all states, and added that social sector spends includes revenue expenditure for welfare of backward classes, women, children and labour, as well as assistance to certain demographics in the form of social security pensions.
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Its senior director Anuj Sethi said the overall expenditure across states will come at Rs 2.3 lakh crore, and of this, Rs 1 lakh crore is towards direct benefit transfers (DBT) to women primarily as "election commitments".
It may be recalled that concerns were raised about the impact of the pre-poll sops to women, and with the electoral success of such schemes, a larger number of governments were feared to announce similar measures.
Crisil said such tendencies will make this a key monitorable factor going ahead.
"Over the past few years, several key states that have gone to the polls have introduced or increased allocations to DBT schemes. With upcoming elections in...(some) states, a rise in DBT, as part of election commitments, is possible and remains a key monitorable," it said.
The agency said the increase in social welfare expenses over FY25 and FY26 is not estimated to be uniform across the states, with half of the analysed states expected to see a significant surge in these expenses, while the remaining are likely to see these spending at relatively stable levels or see a modest increase.
While the social welfare expenses are inching up significantly, there is a wide gap between the rise in revenue expenditure and revenue receipts for the states over the two fiscal, it added.
The overall revenue expenditure is budgeted to log a compound annual growth rate (CAGR) of 13-14 per cent between fiscals 2025 and 2026, while revenue receipts grew a slower 6.6 per cent year-on-year (YoY) last fiscal and are expected to increase 6-8 per cent YoY this fiscal.
Its director Aditya Jhaver explained that a rise in revenue deficit normally results in state governments reducing capital outlay to maintain their fiscal stability.
Last fiscal, capital outlay grew a meagre 6 per cent on-year (as against a CAGR of 11 per cent over 5 years ended fiscal 2024) as revenue deficit ballooned almost 90 per cent on-year, he said.
"If this trend continues this fiscal, it could constrain states' capital outlay, which has a higher multiplier effect and can stimulate increased investment in the economy," Jhaver said.