Survey raises concerns over unconditional cash transfers

Survey raises concerns over unconditional cash transfers

It says such programmes may have short-term benefits, but the rapid scale-up and persistence raises concerns about fiscal viability and medium-term growth prospects when not supported by investments in employment, skills, and human capital
In a year when four major States go to the polls, of which only one is ruled by the Bharatiya Janata Party, the Economic Survey 2025-26 has come out strongly against “unconditional cash transfers” (UCT), including to women. It highlighted that while these have short-term gains, they raise concerns about fiscal sustainability and medium-term growth.
Notably, last year’s edition of the Survey had noted that cash transfers and loans to targeted poorer and lower-income households were having positive effects on consumption, allowing these households to fund various basic needs and debt repayments.
Assembly elections will be held in West Bengal, Tamil Nadu, Kerala, and Assam, along with Puducherry this year.
Rising cash transfers
The Survey noted that aggregate spending on UCT programmes, particularly for women, is estimated at about ₹1.7 lakh crore for the current financial year 2025-26. It added that the number of States implementing them increased more than five-fold between 2022-23 and 2025-26, with around half of them estimated to be in revenue deficit.
The Survey further cited a study which estimated that such transfers amounted to 0.19-1.25% of the gross domestic products of States and 0.68-8.26% of their total budgetary expenditures.
“It is argued that cash transfers provide immediate income support, helping women meet unmet health and personal needs,” the survey said. “Some view it as a return for their unpaid contribution to the GDP. However, their rapid scale-up and persistence raise concerns about fiscal sustainability and medium-term growth, particularly when not complemented by investments in employment, skills, and human capital,” it added.
Increasing fiscal burden
The Survey noted that revenue expenditure continues to account for the bulk of State spending, accounting for 84% of total expenditure in 2023-24, albeit somewhat lower than the 86% in 2018-19.
“Within revenue expenditure, however, the composition has undergone a notable shift, with an increasing tilt towards unconditional cash transfers and other committed outlays,” the Survey said.
“As these transfers absorb a rising share of available fiscal space, the scope for expanding productive capital expenditure becomes increasingly constrained, especially in an environment of limited revenues and elevated deficits,” it added.
Fiscal trade-off
The Economic Survey pointed out the trade-off facing States: additional spending by States will crowd out resources for critical social and physical infrastructure, unless States increase their deficits.
However, deficits themselves cannot increase without further deteriorating the financial health of the States.
“These trade-offs are reinforced by programme design: many schemes lack sunset clauses or periodic reviews, increasing rigidity in revenue expenditure,” the Survey said.
“As a result, capital expenditure, whose growth impact is stronger and more durable, often becomes the casualty when fiscal pressures intensify, with adverse implications for medium-term growth.”
The Economic Survey notes that revenue expenditure continues to account for the bulk of State spending