States could face significant financial strain if they implement the proposed monthly unemployment benefit of Rs 4,000, as suggested by the Maha Vikas Aghadi alliance in Maharashtra.

An analysis suggests that this initiative could result in an average expenditure of 0.7 percent of GDP on unemployment benefits across states, potentially pushing many states beyond the 3 percent fiscal deficit limit set by the finance commission.

Bihar, Uttar Pradesh, and Rajasthan are particularly vulnerable, with the possibility of fiscal deficits exceeding 5 percent. For example, Bihar may allocate 2.2 percent of its GDP to unemployment benefits, which would amount to Rs 48,000 per person or 70 percent of its per capita income.

The upcoming elections have led to a growing temptation for political parties to make similar promises, raising concerns about the sustainability of such financial commitments.