Welfare schemes and cash handouts have increasingly become central to India’s electoral playbook, often outweighing pure development narratives, ace global investor Ruchir Sharma said at an interaction in Mumbai on Tuesday (April 28).
Speaking at the Express Adda session hosted by The Indian Express Group, Sharma argued that while economic growth matters, it is only one among several factors influencing election outcomes, unlike the growing prominence of welfare-driven politics.
Ruchir Sharma is Chairman of Rockefeller International, and Founder and Chief Investment Officer of Breakout Capital, an investment firm focused on emerging markets.
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Rise of welfare as an electoral necessity
Sharma noted the growing scale and significance of welfare schemes across states, observing that direct cash transfers and benefits have effectively become a “must-do” for political parties. He also noted that from poll-bound West Bengal to Biharand Andhra Pradesh, election campaigns have seen substantial promises of financial assistance, with some schemes offering thousands of rupees per household.
“It sounds brutal to argue against handouts when you see the ground realities of poverty,” Sharma said, acknowledging that welfare support plays a role in addressing immediate needs. At the same time, Sharma also pointed out a structural improvement in how welfare schemes are delivered.
“I think one interesting change in India that we must acknowledge is that at least now when politicians make promises, the delivery is happening. The leakages have stopped a lot because of digitization and that is a big improvement in India,” he further said.
However, he also flagged concerns over the timing of such schemes, noting that many cash transfers and benefits are rolled out just ahead of elections. “But again its the cynicism for me. These happen just before the election is announced,” he said, describing the approach as driven by political calculation.
Growth vs welfare: A difficult trade-off
From an economic perspective, Sharma cautioned that there is a fundamental trade-off between high growth and expansive welfare policies. Drawing comparisons with East Asian economies like China, South Korea and Taiwan, he noted that these countries prioritized infrastructure investment and industrial growth over large-scale welfare spending during their high-growth phases.
“They followed a brutal form of capitalism, focusing on growth first, with minimal handouts,” Sharma said, adding that such an approach enabled rapid economic expansion.
In contrast, he argued that pursuing aggressive welfare policies while aiming for sustained 9-10% growth may not be feasible. “You cannot go both ways. There is no economic model in the world where handouts and very high growth have gone together,” he said.
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A political and economic balancing act
Sharma also said that India faces a strategic choice, either accept moderate growth alongside welfare expansion or prioritize growth with tighter fiscal discipline. As elections become increasingly welfare-driven, he suggested that policymakers and voters alike will need to grapple with the long-term economic implications of this shift.
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