As midterm elections draw closer and Republicans fight to retain control of Congress, President Donald Trump has shifted toward an economic strategy that strongly resembles Prime Minister Narendra Modi’s model of welfare-driven, direct cash assistance. In India, Modi’s approach has already proven politically rewarding, most recently in Bihar, where the direct transfer of ₹10,000 to over 1.5 crore women significantly strengthened the NDA’s electoral mandate. Trump now appears to be adopting similar tactics, using targeted financial transfers as a tool to build voter support.
Trump’s proposal centres on a one-time $1,000 deposit into a tax-deferred investment account for babies born between late 2024 and early 2029. These accounts would be managed by parents or guardians and linked to stock market performance. This mirrors India’s extensive Direct Benefit Transfer system, which has grown rapidly over the last decade. With more than ₹44 lakh crore transferred in 11 years, India is on the path to becoming the world’s largest social security provider by 2026, surpassing China.
The US President’s broader populist framework includes not only the baby accounts but also a proposed $2,000 “tariff dividend” for Americans earning under $100,000 a year. The plan targets the country’s non–non-high-income population and is expected to be rolled out by mid-2026. These direct transfers, however, raise questions about fiscal sustainability in both countries.
In India, nearly 64 per cent of the population is covered under at least one social protection scheme, compared to only 19 per cent a decade ago. This expansion has brought significant social benefits but has also placed pressure on government finances. Nearly nine per cent of India’s 2024–25 Union Budget is devoted to subsidies, including food, fertiliser, and LPG, representing one of the largest recurring expenditure burdens for the government.
Trump faces a comparable challenge. Analysis from the Tax Foundation, a Washington-based think tank, shows that the revenue generated from Trump’s proposed tariffs would be insufficient to cover the cost of $2,000 payments to eligible Americans. While tariffs are expected to bring in roughly $158.4 billion in 2025 and $207.5 billion in 2026, the cost of the dividend cheques is estimated to be between $279.8 billion and $606.8 billion. This gap raises concerns about who will ultimately bear the financial burden. Despite this, Trump maintains that surplus tariff revenue will be used to help reduce national debt, a claim not supported by current projections.
To cover the costs of the $1,000 baby-account plan, Trump also intends to rely on a 1 per cent international remittance tax as part of his proposed “Big Beautiful Bill,” supplemented by additional revenue from corporate and excise taxes.
India’s Direct Benefit Transfer programme, despite its size, has yielded measurable fiscal efficiencies. By eliminating middlemen and reducing leakages, it has saved an estimated ₹3.48 lakh crore between 2009 and 2024. These savings have helped reduce subsidies as a share of the national budget, dropping from 16 per cent to 8.8 per cent over the same period. The ability to save money within a large welfare system gives India a crucial economic advantage, allowing the government to stretch resources further while maintaining public support.
In both countries, direct transfers have become a powerful electoral tool, but they also reveal a shared dilemma: the political benefits of welfare come with long-term financial costs that must be reconciled with economic reality.
