Cash Transfer Schemes in India

Context

The Economic Survey 2025–26 noted that cash transfers form 11–24% of monthly income for female daily-wage workers. Their rapid expansion, however, raises concerns over fiscal sustainability.

 Growing Fiscal Commitment

1. State coverage: States providing unconditional cash transfers to women rose from 2 (2022–23) to 12 (2025–26), according to PRS Legislative Research.
2. Fiscal cost: Such transfers cost around 0.5% of GDP annually, exceeding ₹1.5 lakh crore.
3. West Bengal: Spends about ₹36,000 crore/year to provide ₹3,000/month to 1.3 crore women.
4. Assam: The Arunodoi Scheme has an allocation of around ₹5,000 crore.
5. Combining cash transfers with free electricity, subsidised food and transport may further increase fiscal pressure.

 Significance of Cash Transfers

1. Income Support: Provides immediate financial assistance to vulnerable households.
2. Women’s Empowerment: Increases women’s access to and control over household income.
3. Consumption Support: Helps households meet essential expenses during income shocks.
4. Financial Inclusion: Direct transfers through bank accounts can strengthen formal financial participation.
5. Targeted Welfare: Enables governments to support identified vulnerable groups with relatively flexible assistance.

 Key Concerns

1. Fiscal Burden: Recurring transfers can reduce funds available for infrastructure and human capital.
2. Poor Outcome Tracking: Lack of clear targets makes welfare impacts difficult to measure.
3. Leakage & Exclusion: Weak beneficiary identification can cause fund diversion or exclusion of eligible people.
4. Lack of Evidence: Without regular evaluation, ineffective schemes may continue without clear justification.

 Way Forward

1. Welfare Impact Statement: Assess eligibility, 5-year fiscal cost, leakage/exclusion and measurable outcomes before launching schemes.
2. Impact Evaluation: Use household surveys to measure effects on consumption, debt, health, education and well-being.
3. Independent Audit: Publish anonymised micro-data to enable independent evaluation while protecting privacy.
4. Regular Review: Link continued funding to measurable outcomes, fiscal sustainability and periodic scrutiny.

FAQs

Q1. What is the significance of cash transfers in India?

Ans. They provide income support, improve household consumption and strengthen women’s economic agency.

 Q2. What does a Welfare Impact Statement aim to achieve?
Ans. It would assess a scheme before implementation by identifying beneficiaries, estimating its fiscal cost, anticipating leakage and exclusion, and defining measurable outcomes.

Q3. How can anonymised micro-data improve welfare schemes?
Ans. It allows independent researchers to examine scheme outcomes while protecting individual identities.