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Many of these declarations are election promises: parties may not win, the winning party may undercut them, or warnings to limit beneficiaries and costs. Nevertheless, the current number of promises is very high, especially for a state where there is an urgent need for infrastructure development and employment generation.
Bihar Assembly elections are scheduled to be held in two phases on November 6 and November 11, the results of which are expected on November 14. Major alliances include the ruling National Democratic Alliance (NDA) led by the Bharatiya Janata Party (BJP) and the Janata Dal (United), and the Grand Alliance led by the Rashtriya Janata Dal (RJD) and the Indian National Congress. A new party, Jan Suraj Party, founded by political strategist Prashant Kishor, has also joined the race, making the contest triangular this year.
Bihar’s per capita net state domestic product (NSDP), a measure of income, is fair 69,320 per annum at current prices – lowest in India. Between FY23 and FY25, the state recorded a growth of 8.6-12.8% in gross state domestic product (GSDP), bringing the compounded average annual growth rate (CAGR) since FY12 to 6.1%, in line with the national figure. However, given Bihar’s low income and GSDP base, this increase is inadequate.
The state continues to experience large-scale migration for work, reflected in its highest dependency ratio – 66.3 children and elderly per 100 people aged 15–64 – and lowest labor force participation rate of 29.1%. Government data from e-Shram portal shows Bihar leads the country in registrations with 2.26 million New entries in the last year.
However, instead of addressing these structural issues, political parties have focused on quick solutions to gain an edge in the elections. RJD leader Tejashwi Yadav has promised a government job for every household in Bihar, yet details on how these jobs will be created are absent. State, which has planned capital outlay of approximately Promises of Rs 40,000 crore have been seen which could cost between 600 crore more Rs 30,000 crore every year.
financial extravagance
These promises made to women, unemployed youth and the elderly threaten to worsen Bihar’s already fragile situation.
Under Nitish Kumar’s nearly 20-year rule, the state’s finances had improved, with the revenue expenditure-to-capital expenditure (revex-to-capex) ratio declining between FY 2007 and FY 2018. However, it has since increased again. A high revex-to-capex ratio indicates low-quality spending that prioritizes short-term consumption and maintenance over long-term asset creation and employment. Cash-transfers threaten to worsen this ratio, as has been seen in other states during recent elections.
Bihar’s fiscal situation is already under pressure. The state had targeted a fiscal deficit of 3% of GSDP in FY24 and FY25, but ended FY24 at 4.2% and FY25 at over 9%. Despite missing the target significantly, the FY26 budget still keeps the target of 3%.
According to MK Global, this came about due to extremely unrealistic revenue projections. Moreover, going into the elections, the ruling party has already announced a number of freebies and subsidies, which could cost up to 3.1% of GDP.
“While fiscal data from states is generally volatile, with large gaps between budget estimates, revised estimates and actual figures, Bihar leads the way – and with huge subsidy announcements ahead of the elections, its fiscal performance is set to deteriorate going forward,” said Emkay Global in a study of state finances last month.
spend the retreat
The cash-transfer trend follows the pattern of previous state elections, where failure to offer free electricity or direct transfers to women was seen as a political mistake.
A mint Analysis ahead of the Delhi elections in February showed that at least 13 states across different political scenarios had often announced or implemented similar plans just before the elections. Questions were then raised about sustainability, and early trends suggest states are now looking to curb costs.
An analysis by Emkay Global of 11 states that announced cash transfers to women showed that six of them are now rationalizing their spending. One such case is from Maharashtra, where the list of beneficiaries has reportedly been cut to cut costs after the elections.
“Recently, customer-based spending in the form of cash transfers is becoming popular, and such freebies will certainly be in sync with capital spending,” said Lekha Chakraborty, a professor at the National Institute of Public Finance and Policy. “The ‘use case’ of the budget as a tool is important here – for me, cash transfers are just a short-term tool whereas job creation and infrastructure investment spending are long-term,” he said.
The offer of freebies by all parties, including the new Jan Suraj Party, is sure to put pressure on Bihar’s financial position. “It is difficult to cut welfare/freebie programs once they have started,” said MK Global.
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