Indian states are going to increase their spending on social welfare schemes. It is estimated that these states will spend about 2 percent of their Gross State Domestic Product (GSDP) or Rs 6.4 lakh crore in 2025 much more than the previous year’s spending. Several states have introduced schemes such as monthly income for women and free travel in government-run buses. These welfare schemes have increased the expenses of the states. This has raised concerns as this level of spending is expected to impact India in many ways. Will India Be Able to Beat China Economically? Notably to beat China economically India will have to take visionary steps beyond just spending on social welfare. According to a report by rating agency Crisil spending huge amounts on welfare schemes has reduced states’ ability to spend on infrastructure development and other development works. Crisil analysed the budget of 18 major states which account for nearly 90precent of the total GSDP. The central government on the other hand also spends huge amount on several welfare schemes such as Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) Jal Jeevan Mission PM Kisan PM Awas Yojana and PM Poshan. The central government has allocated Rs 86000 crore for MNREGA that too only for this year. What Kind Of Warning Is This? Crisil has warned that increased state spending on welfare programs particularly those targeting women children and marginalised groups will widen their revenue deficits. This surge in spending consistent with previous years at 1.4 to1.6 percent of GSDP between FY19 and FY24 will likely curtail states capacity for capital investment. The rise in expenditure is attributed to pre-election initiatives including income support schemes and free public transportation for women. What Is Needed To Defeat China? To overtake China economically India has to take concrete and far-sighted steps rather just spending on social welfare schemes. Focus on productive investments India should focus on creation of world-class infrastructure like roads railways ports power digital connectivity. These developments will reduce logistics costs and boosts industries. Investments in education healthcare and skills development is also needed to create a skilled and healthy workforce. India has to work on increasing public and private investment in research and development. This will promote innovation. Notably China has invested big in this. Development of manufacturing sector Chinas robust manufacturing sector significantly contributes to its economic growth. Indias economic progress requires bolstering initiatives like Make in India by streamlining manufacturing establishment offering tax benefits and enhancing global supply chain integration. Emphasis on exports China has an export-oriented economy. India also needs to expand its export base in high value-added goods and services. Policy stability A stable policy environment is essential to attract investors. Improving the ease of doing business will automatically reduce red tape. Financial discipline Both the states and the Centre must keep the fiscal deficit under control. This will reduce debt and increase revenue.