Unconditional Cash Transfer Schemes in India

Context

Unconditional cash transfers provide direct financial support without attaching mandatory conditions to their use. International experience shows that cash assistance can also influence education, health, nutrition and household welfare.

International Evidence

1. Mexico – Progresa: Transfers were provided to female household heads, subject to children’s school enrolment and regular health check-ups. School enrolment increased by 3.4%–9.3%, while child illness fell by about 12%.
2. Brazil – Bolsa Família: Benefits were linked to vaccination, health check-ups, school attendance and registration in the national registry. The programme accounted for around 12% of the reduction in the Gini coefficient between 2001 and 2007 and cost about 0.5% of GDP.
3. South Africa – Old Age Pension Scheme: Pensions received by grandmothers were associated with improved nutrition among girls.
4. Kenya – GiveDirectly: Cash support increased local demand, generating positive spillover effects for non-beneficiary households.
5. Philippines: Greater control of income by women was associated with the disappearance of inequality within households in food consumption.

EAC-PM’s “Cash Plus” Approach

The Economic Advisory Council to the Prime Minister (EAC-PM) has suggested gradually combining unconditional transfers with complementary support.

1. Continue cash transfers alongside voluntary capacity building, digital literacy and linkages with Self-Help Groups (SHGs).
2. Strengthen beneficiary targeting through multi-dimensional verification while ensuring that genuine beneficiaries are not excluded.
3. Review transfer amounts periodically to reflect changes in inflation and household expenditure patterns.
4. Connect transfers with outcome-based indicators, such as improvements in child nutrition.
5. Strengthen digital financial infrastructure, including wider adoption of UPI.
6. Add educational components for younger beneficiaries and precautionary savings mechanisms for older beneficiaries, particularly for medical needs.
7. Use longitudinal tracking to assess long-term outcomes and empowerment.
8. Promote the sharing of successful State-level practices.

Examples from Indian States

1. Mukhyamantri Majhi Ladki Bahin Yojana, Maharashtra: Provides ₹1,500 per month to eligible women.
2. Subhadra Yojana, Odisha: Provides ₹10,000 annually in two instalments.

Unconditional Cash Transfer Schemes FAQs

Q1. What is an unconditional cash transfer?
Ans: It is financial assistance given to eligible beneficiaries without imposing mandatory conditions on its receipt or use.

Q2. How is a conditional cash transfer different?
Ans: A conditional transfer requires beneficiaries to meet specified requirements, such as school attendance or health check-ups, whereas an unconditional transfer does not.

Q3. What does the “Cash Plus” model mean?
Ans: It combines cash support with complementary measures such as capacity building, digital literacy and SHG linkages to support longer-term empowerment.

Q4. Why is multi-dimensional verification suggested for welfare transfers?
Ans: It can improve beneficiary identification while reducing the risk of excluding genuine beneficiaries.

Q5. What is a Gini coefficient?
Ans: The Gini coefficient is a measure of inequality. A reduction in the coefficient indicates a decline in inequality.

Q6. Why is longitudinal tracking useful for cash-transfer schemes?
Ans: It enables policymakers to assess the long-term effects of transfers and determine whether they contribute to sustained empowerment.

Q7. Why should cash transfers be linked with outcomes?
Ans: Outcome-based assessment shows whether financial support is producing the intended results, such as improvements in child nutrition, rather than measuring only the amount transferred.