Cash Transfer Schemes – Boon or Bane?

10/03/2026

Important questions for UPSC Pre/ Mains/ Interview:

What are Cash Transfer Schemes?
What is Universal Basic Income (UBI)?
Why are states introducing women-focused cash transfer schemes?
What are the advantages of cash transfer schemes?
What is the legal perspective on welfare promises?
What are the challenges and criticisms of cash transfer schemes and how can it be addressed?

Context

Recently, the Government of Punjab launched the Maa Satkar Yojana on International Women’s Day which has a Budget allocation of ₹9,300 crore, covering 97% of women in Punjab and provides ₹1,000 per month for women and ₹1,500 per month for Scheduled Caste women.
The scheme has revived the debate on whether cash transfer schemes are beneficial welfare policies or fiscally unsustainable “freebies.”

Q1. What are Cash Transfer Schemes?

They are government welfare programs that provide direct financial assistance to beneficiaries, usually through bank accounts with the aim to reduce poverty, provide social security and support vulnerable groups.
In India, these schemes are implemented via Direct Benefit Transfer, supported by the JAM Trinity, which links bank accounts (Jan-Dhan), identity (Aadhar), and Mobile numbers to ensure efficient delivery.

Q2. What is Universal Basic Income (UBI)?

Some cash transfer schemes resemble the concept of Universal Basic Income which ensures regular cash payment to every citizen with no conditions attached and universal coverage.
The idea has been discussed by thinkers such as Thomas More, Thomas Paine, and Martin Luther King Jr. and even the Economic Survey of India 2016–17 examined UBI as a possible future welfare model for India.

Q3. Why are states introducing women-focused cash transfer schemes?

Several Indian states have introduced schemes (like Ladli Behna Yojana, Lakshmi Bhandar Scheme, Lado Lakshmi Yojana) that provide direct financial assistance to women.
Reasons for such schemes
1. Women often have lower participation in the labour force.
2. They face wage discrimination and limited ownership of assets.
3. Cash transfers help provide independent income and social security.
4. These schemes aim to strengthen women’s financial autonomy and household decision-making power.

Q4. What are the advantages of cash transfer schemes?

Reducing Gender Inequality and Feminization of Poverty: Cash support can reduce income gaps and improve women’s financial independence.
Recognition of Unpaid Care Work: As per Time USe Survey, women perform 84% of unpaid care work and spend around 305 minutes daily (men – 88 minutes) on unpaid work. Cash transfers help recognise this invisible labour.
Improving Household Welfare: Evidence shows that women often use income for children’s education, healthcare and nutrition. This improves overall social development indicators.
Efficient Welfare Delivery: Direct cash transfers reduce corruption, leakages and intermediaries. This makes welfare delivery more transparent and efficient.

Q5. What is the legal perspective on welfare promises?

In Subramaniam Balaji v State of Tamil Nadu, the Supreme Court of India ruled that:
1. Welfare promises in election manifestos are not illegal.
2. However, governments must ensure financial transparency and sustainability.
The Election Commission of India later required political parties to disclose the financial implications of such promises.

Q6. What are the challenges and criticisms of cash transfer schemes and how can it be addressed?

Challenges	Way Forward
1. Fiscal pressure: Large-scale cash transfer schemes increase government expenditure and may widen the fiscal deficit, especially in states with high public debt.	Ensure fiscal sustainability: Governments should design schemes within responsible budget limits and ensure long-term financial sustainability.
2. Limited long-term economic impact: Cash transfers are revenue expenditure and do not create productive assets such as infrastructure, industries, or irrigation systems.	Balance welfare with productive investment: Governments should combine welfare transfers with investment in infrastructure, agriculture, and industrial development.
3. Dependency concerns: Regular financial support may discourage labour participation or reduce incentives to seek employment.	Link transfers with skill development and employment: Welfare programs can be connected with skill training, entrepreneurship, and livelihood opportunities.
4. Opportunity cost: Spending heavily on cash transfers may reduce public investment in sectors such as education, healthcare, infrastructure, and industrial growth.	Prioritize balanced public spending: Governments should allocate resources carefully to ensure both social welfare and long-term development.
5. Risk of ineffective use of funds: Lack of financial awareness may lead to unproductive use of the transferred money.	Promote financial literacy: Governments and institutions should provide financial education and awareness programs for beneficiaries.

Conclusion

Cash transfer schemes can be powerful tools for reducing poverty, promoting gender equality, and improving household welfare. However, their long-term success depends on careful design, fiscal sustainability, and integration with broader development policies. A balanced approach that combines social welfare with investments in skills, infrastructure, and economic growth can ensure that such schemes promote inclusive development rather than fiscal populism.