The Government of India has several social welfare and social security schemes for India's citizens funded either by the central government, state government or concurrently.
The Economic Survey of India 2025–26 has sounded a note of caution against unconditional cash transfers by States, which have by now become a standard fixture in the toolkit of parties competing for power. It warns that unconditional cash transfers risk state finances, impacting fiscal sustainability and medium-term growth.
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| Chart - The Hindu |
According to a report in The Hindu, Jharkhand, Karnataka and West Bengal have the largest Unconditional Cash Transfer (UCT) schemes funded by the respective State Governments. The spending on UCTs is more than half the entire spending on education.
According to the 16th Finance Commission (FC) report, almost 44% of State expenditure is tied up in interest payments, pensions and salaries.
An overemphasis on cash transfer schemes is eating into investments needed for other public service sectors such as education and health.
In Jharkhand, Karnataka, West Bengal, and Maharashtra, the spending on these schemes exceeds the entire State spending on health.
UCT schemes are designed with good intentions, offering financial support to women. They help, at least in part, to advance SDG 5.4, which emphasizes recognizing women’s unpaid domestic and caregiving work.
Since 2020, Unconditional Cash Transfer (UCT) schemes have emerged as a key electoral tactic in India, especially aimed at appealing to women voters.
Some scholars have been arguing that such cash transfers function as electoral ‘freebies’ and are a ‘compensation’ for the failure of the state to create opportunities for all.
Conditional cash transfers and other incentive-based welfare programmes offer a more sustainable alternative. Welfare programmes tied to education or other desirable behaviours can achieve developmental objectives with lower political costs. In contrast, UCTs remain inherently vulnerable to inclusion, exclusion, and perceived targeting errors.