India's cash transfer boom is a new safety net for millions: CRISIL

Crisil says expanding cash transfer schemes are supporting low-income households, but rising state borrowing and fiscal pressures could challenge their long-term sustainability

States’ expanding cash-transfer programmes are emerging as an important support line for India’s low-income households, cushioning consumption at a time of persistent inflation risks and uneven income growth, according to a report released on Tuesday by CRISIL. The report warns, however, that mounting borrowing costs among states could undermine the long-term viability of the programmes.

 

As recently as 2019, only four Indian states offered unconditional monthly cash transfers to residents. By fiscal 2026, that number has risen to 17 states and the National Capital Territory of Delhi — representing a majority of India's 28 states. Punjab, which did not participate last fiscal year, has announced a new monthly transfer scheme set to commence payments from July 2026, signalling that the expansion is not yet complete.

 

The schemes are broadly aimed at women and farmers in both rural and urban areas, with eligibility typically determined by household income — ranging from ₹1 lakh to ₹3 lakh per annum — or landholding size, according to the report.

 

CRISIL said that the median monthly transfer across states stands at ₹1,500, though individual state schemes range from ₹1,000 to ₹2,500. That sum, the report argued, is not trivial for households at the lower end of the consumption ladder.

 

Using the National Statistics Office’s Household Consumption Expenditure Survey 2023-24, CRISIL estimated that a monthly transfer of ₹1,500 could have covered 74 per cent of the monthly expenditure of households in the bottom 20 per cent of the rural consumption distribution and 51 per cent in the urban bottom 20 per cent.

 

In practical terms, the report said, an unconditional transfer of that size could either lift consumption, help households preserve spending during shocks, support savings, or reduce debt burdens. For the poorest households, it can also push spending patterns up the consumption scale. CRISIL said ₹1,500 in additional monthly income could move a household from the bottom 5 per cent consumption bracket to the 30-40 per cent bracket in rural areas, and to the 10-20 per cent bracket in urban areas.

 

The report also pointed to wider welfare effects. Studies cited by CRISIL suggest cash transfers can improve food security, household savings, children’s education, family health and investment in small businesses or farming. It said digital public infrastructure has helped widen beneficiary reach, while unconditional transfers to women have also become politically salient, including by encouraging higher female voter participation.

 

But the fiscal math is becoming tougher. CRISIL noted that states’ debt has been rising since fiscal 2025, with gross market borrowing in fiscal 2026 jumping 15.2 per cent year-on-year to ₹12.4 trillion, faster than the Centre’s 4.3 per cent increase. Of the 16 states currently running cash transfer programmes, 12 recorded double-digit growth in market borrowings during fiscal 2026, a development the report describes as a key pressure point for India's bond market.

 

The report’s larger message is that cash transfers can soften consumption in the short term, but they cannot substitute for stronger income growth. “While cash transfers can provide a short-term buffer, improving income prospects are critical to spur organic growth in domestic demand,” the report said.