Indian States' Women-Centric Cash Transfer Schemes Strain Finances, PRS Report Warns

The trend of Indian states introducing unconditional cash transfer (UCT) schemes specifically targeting women from economically weaker sections has accelerated significantly. According to a report by PRS Legislative Research, the number of states implementing such programs has jumped from just two during the 2022-23 fiscal year to twelve by 2025-26. These schemes typically disburse monthly financial aid directly to eligible women through the Direct Benefit Transfer (DBT) mechanism, based on criteria like income, age, and other factors. For the 2025-26 fiscal year, it is estimated that states will collectively spend approximately Rs 1.68 lakh crore on these women-centric UCT programs, which represents about 0.5% of India's Gross Domestic Product (GDP). States like Assam and West Bengal have notably increased their budget allocations for these schemes by 31% and 15% respectively, compared to revised estimates from the previous fiscal year.

Impact: This expansion of welfare spending, while politically popular, poses a considerable fiscal challenge. The PRS report highlights that six out of the twelve states currently running UCT schemes are projected to have revenue deficits in 2025-26. Critically, when the spending on these cash transfers is excluded, several states show improved fiscal health, indicating that UCT programs are a primary cause of their deficits. For example, Karnataka, which projected a revenue surplus, would fall into deficit if UCT spending were factored in. This growing reliance on cash transfers without corresponding revenue growth could lead to increased government borrowing, potential cuts in other developmental spending, or future tax increases, impacting overall economic stability and investor confidence. Rating: 7/10.

Difficult Terms: Unconditional Cash Transfer Schemes (UCT): Government programs that provide money directly to citizens without requiring them to meet specific conditions or perform certain actions, beyond basic eligibility criteria like income or residency. Direct Benefit Transfer (DBT): A system used by the Indian government to transfer subsidies and welfare payments directly into the bank accounts of beneficiaries, reducing leakages and improving efficiency. Revenue Deficit: A situation where a government's total revenue (from taxes and other sources) is less than its total expenditure, excluding borrowings. Gross State Domestic Product (GSDP): The total market value of all final goods and services produced within a state in a given period, similar to a country's GDP but specific to a state.