In cash we trust: The rise of direct transfers in election playbooks

On the face of it, Indian voters exercise their choice freely. But how do they arrive at that choice?

Political parties and their candidates mount intense, expensive campaigns, including tours, posters, social media blitzes and door-to-door outreach to persuade voters they are the best option. Promises of development and infrastructure are standard. Though rarely acknowledged openly, caste and religion continue to exert an outsized influence. Economic growth and jobs remain central themes.

Yet in recent elections, cash transfers have emerged as the decisive lever. They cost little to promise, and can be funded by the exchequer if a party comes to power.

The MK Stalin-led Dravida Munnetra Kazhakam (DMK) government in Tamil Nadu transferred ₹5,000 each to 13.1 million women under its Kalaignar Magalir Urimai Thogai (women’s rights grant) scheme. It already pays ₹1,000 per month under the scheme introduced in 2023.

Rival All India Anna Dravida Munnetra Kazhakam (AIADMK) led by Edappadi Palaniswami has countered it with a promise to double the monthly grant and also pay up to ₹10,000 per family. AIADMK has also promised cash grants to unemployed youth, free power to some sections and cash gifts for festivals.

Mamata Banerjee-led Trinamool Congress in West Bengal has promised to raise payouts under already existing cash transfer schemes while challenger Bharatiya Janata Party has said it will pay women ₹3,000 per month if voted to power.

One of the earliest big-ticket freebies which, it could be argued, tilted elections favourably was made by the DMK in the mid-1960s when it promised 4.5 kg of rice for Re 1. The pledge was prompted by a prevailing shortage of rice which shot up prices by over 10 times to ₹0.85 per kg between 1966 and 1967.

Free or low-priced grain has been a campaign instrument ever since. NT Rama Rao used it effectively in the 1980s and DMK’s M Karunanidhi in the 1990s. Over the years Tamil Nadu continued to set the freebie trend with television sets, kitchen blenders and other gadgets. But unlike regular food supply, these were one-time costs.

Promises such as free power offered by several states, notably Punjab, and cash transfers had bigger implications for public finances. The Maharashtra, Haryana and Bihar state elections in 2025 really ramped up cash transfers, especially those targeting women.

The success of Nitish Kumar in Bihar and Shivraj Chouhan in Madhya Pradesh in building a loyal following of women voters has inspired almost all political parties to prioritise them in their manifestos. Offering cash to women is electorally a low-hanging fruit as direct transfers offer immediate financial empowerment without getting into messy emotional issues such as caste and religion.

Women voters, political parties believe, also display long-term loyalty. That loyalty, however, comes at the cost of wrecking state budgets.

When Annadurai swept to power in 1976 on the promise of cheap rice, the fiscal burden soon forced a scaling back of the scheme. He promptly cut it down to a manageable Re 1 per kg instead of 4.5 kg.

Politicians of various hues—MG Ramachandran, who broke away from DMK to found AIADMK, MK Karunanidhi of DMK, Telugu Desam founder NT Rama Rao of undivided Andhra Pradesh—have since relied on freebies but have also kept an eye on state finances before embarking on political adventures. That caution has now been thrown to the winds.

The 16th Finance Commission (FC) estimates that expenditure on subsidies has increased from about ₹4 trillion in 2018‑19 to nearly ₹10 trillion in 2025‑26. Much of it was driven by cash transfers that originated as poll promises. Unconditional cash transfers by states have increased from ₹3,000 crore in 2018‑19 to a whopping ₹4.14 trillion in 2025‑26.

As a percentage of the combined output of the 21 states, the subsidy rose from 2.2% in 2018‑19 to 2.7% in 2023‑24. It rose to 3% in 2024‑25 as per the revised estimates but budget estimates of 2025-26 put it at 2.7%. The FC said large cash transfers have grown from 3% of all revenue subsidies in 2018‑19 to 20.2% in 2025‑26.

Madhya Pradesh (7.6%), Karnataka (7.1%) and West Bengal (6.6%) spent the highest percentage of their total revenue expenditure (TRE) on general cash transfer schemes in 2023-24.

A sudden spike in cash transfers is clearly visible in states that went to polls recently. Large group cash transfers, which comprised just 0.8% of TRE in 2023-24, jumped to 13% of TRE in 2025-26. Odisha, which had no cash transfers in 2023-24, spent 5.1% of TRE on such doles in 2025-26.

Maharashtra’s share jumped from 0.6% to 6.2% during the same period. All three states elected new assemblies in 2024 and this is the first time the impact of the poll promises are reflected in their budgets.

Industries and farmers in many states, even those that have large young populations, are already complaining of shortages of labour. It also creates friction in interstate migration as workers can’t carry state-given benefits with them. States such as Odisha and Jharkhand are net labour suppliers to the rest of the country while their southern counterparts such as Kerala are net labour importers.

Despite language and distance barriers, workers stood to gain economically if they moved out of their home state. The quantum of that gain is diminishing now with unconditional cash transfers. It adds to the family surplus as the central government pitches in with free grain, medical insurance and subsidised fuel. That means labour importing states will have to cough up much more to attract workers.