The HinduGS-2GS-3

The cost of unconditional cash transfers

Dipa Sinha, Vijay Ram S.10 August 2026

AI generated · reviewed by TIE

This is an opinion piece by two economists, Dipa Sinha and Vijay Ram S., built around State spending data. Their argument is that as more and more States hand women a fixed sum of money every month with no conditions attached — an unconditional cash transfer, or UCT — that spending is starting to eat into what the same governments spend on schools and hospitals. The background you need is small: Delhi launched such a scheme on 1 August, joining the States and Union Territories that already run one. The authors are careful about one thing, and it shapes the whole piece. They accept that the money is spent sensibly, because studies show it goes on food, health and education. Their worry is about arithmetic, not about how poor households behave.

Where this sits

GS2Welfare schemes for vulnerable sections; issues relating to development and management of health and education
GS2Government policies and interventions for development in various sectors; issues arising out of their design and implementation
GS3Government budgeting; State fiscal space and the composition of public expenditure
EssayWelfare state, rights versus doles; compensation versus capability

Points discussed

Delhi joins the UCT list
On 1 August the Delhi Chief Minister launched the Lakshmi Yojana, giving eligible women ₹2,500 a month with nothing asked in return. With this, Delhi joined the list of States and Union Territories that already run such a scheme for women.
The money is spent well
Evaluations of these schemes find that the money women receive is mostly spent on useful things — food, health and education. The authors state this plainly, so their objection is never about how the money is used.
A thirty-fold spread across States
As a share of total State expenditure, spending on these schemes ranges from over 10% in Jharkhand to less than 0.3% in Himachal Pradesh. That spread means these schemes are not one policy but a very wide spectrum of fiscal commitment.
Committed spending leaves little room
According to the 16th Finance Commission report, almost 44% of State expenditure is tied up in interest payments, pensions and salaries. This indicates States do not have much space to finance new initiatives or invest in necessary infrastructure.
Larger than health, half of education
In Jharkhand, Karnataka and West Bengal — the States with the largest schemes — spending on UCTs is more than half the entire spending on education. In those three plus Maharashtra, it exceeds the whole of State spending on health.
Social spending flat, then falling
The 16th Finance Commission shows States' social sector revenue expenditure has stayed stable as a proportion of total revenue expenditure since 2011-12, but has declined as a proportion of GDP since 2020-21. Spending capacity rose without a commensurate rise in social spending.
Lists shrink as costs bite
Beneficiary numbers have been reducing in Maharashtra and Madhya Pradesh in the name of rationalisation, and Delhi has required a recommendation from a local MLA or MP before rollout. The usual access barriers — missing documents, reaching a bank, errors in digital records — also remain.
Compensation, dole, or a fair share
Some scholars read these transfers as compensation for the state's failure to create opportunities for all, and their timing just before elections has led others to call them a dole. The authors close by reading recent protests demanding better facilities and accountability as a sign that people now want a fair share in resources.

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