Axis Bank CEO and managing director Amitabh Chaudhry said that the freebies that the various state governments are doling out could have a detrimental effect on the country’s GDP growth and development.
“We cannot ignore that in election after election, a lot of freebies are being promised and it is in a way constraining the budget of the state governments to spend money on development. And we should be cognizant of that,” Chaudhry told Moneycontrol in an exclusive interaction at the Davos World Economic Forum, 2025.
The Karnataka government has been under pressure to keep its promises of free electricity and free bus rides for women in the state. It has been trying to shore up the revenue as the state struggles to spend for development purposes. However, these freebie promises have been credited for the success of Congress in the state assembly elections in 2023.
Seeing the success, since then, most state assembly elections saw political parties promising freebies.
“We have some elections coming up soon. Again the parties are talking about more freebies. This constrains the state government from doing capex for development. If you want the growth to come back, state governments play an important role in getting the urban development going,” Chaudhry said.
According to the Axis MD, the role of urban development in a state’s economic growth and investment atmosphere cannot be discounted.
However, Chaudhry is hopeful that the central government and the Finance Minister will take into account these events and could restrict the various state governments’ profligacy.
“They had also put a lot of conditions around the contribution of central government to state government around what state governments need to do before central give them the money. I am sure they will look at some of those things and see how they can spur the state government to spend their share quickly, faster, so that growth can be supported,” Chaudhry added.
The country’s GDP growth has been slowing down over the last couple of quarters with the full year growth now projected to grow at 6.4 percent. The upcoming union budget is expected to have a fe capex measures that is expected to spur the investment cycle to kickstart the growth.
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