The question has acquired urgency as recurring cash transfers, particularly to women, have moved to the centre of state welfare politics, often around elections. The spread of direct cash transfer (DCT) schemes, such as Maharashtra’s Mukhyamantri Majhi Ladki Bahin Yojana, Karnataka’s Gruha Lakshmi, Madhya Pradesh’s Ladli Behna, Tamil Nadu’s Kalaignar Magalir Urimai Thogai, Odisha’s Subhadra Yojana, Assam’s Orunodoi, Jharkhand’s Maiya Samman Yojana, Chhattisgarh’s Mahtari Vandan Yojana, and West Bengal’s Annapurna Yojana, can be directly linked either to their enactment by incumbent governments before elections or to their implementation soon after they were promised during election campaigns.
There are sound reasons for directing income support to women. It can ease financial stress and strengthen women’s control over household spending. Yet their scale and timing also reflect their political appeal. A bank transfer is regular, personal, and easily attributed to the government that pays it. On the other hand, the gains from a better school or a health centre are shared, emerge more slowly, and are harder to convert into political credit. Not surprisingly, cash has proved to be an unusually effective electoral instrument, often encouraging competitive populism. DCT schemes have arguably contributed to higher turnout among women and increased electoral support for the governments or parties that introduced or promised them.
The policy concern is that electoral effectiveness can begin to substitute for policy clarity. Governments usually specify who will receive money, how much, and when. They are less precise about why a particular group was chosen, how the amount was fixed, how long the scheme will continue, what outcome it is expected to improve, or what expenditure must give way to finance it. A transfer may benefit its recipient and still lack a clearly stated public rationale.
The variation in eligibility rules makes this more evident. Maharashtra uses age, marital status and a family income ceiling. Karnataka identifies the woman head listed on a ration card and excludes households that pay income tax. Tamil Nadu adds land ownership, electricity consumption and vehicle ownership to its criteria. Odisha draws on food-security databases and limits the entitlement to five years. Elsewhere, eligibility depends on domicile, government employment, landholdings, or ownership of consumer durables.
The above points to ambiguity about the purpose of the schemes. Are they meant to relieve poverty, compensate unpaid care work, strengthen women’s autonomy, support households facing insecure employment or recognise women as a political constituency? A programme may serve more than one purpose, but governments must still specify which objective takes priority. Otherwise, neither its design nor its performance can be judged coherently.
The scale of spending makes such ambiguity costly. The Sixteenth Finance Commission estimates that unconditional transfers by states increased from ₹73,099 crore in 2018–19 to ₹2.63 trillion in 2023–24 and are at ₹4.14 trillion in 2025–26. Large-group cash transfers alone are projected at ₹.96 trillion, accounting for 47.4 per cent of all unconditional transfers, up from roughly 16 per cent in 2018–19. Social-security pensions have also risen in absolute terms, from ₹44,453 crore to a budgeted ₹1.58 trillion, but their share of unconditional transfers has fallen from 60.4 per cent to 37.9 per cent; the share going to farmers has similarly declined from about 24 per cent to 14.7 per cent. This implies that states are not merely expanding welfare but are shifting their composition towards broad category-based payments that claim an increasing share of fiscal space.
The growing claim on fiscal space is easy to overlook because its opportunity cost is rarely made visible. For example, a beneficiary receives an SMS when money enters her account, but no citizen receives a message saying that a health centre vacancy remained unfilled, a bus fleet was not expanded, or an irrigation project was postponed because the same budgetary space had already been committed. The transfer is recorded as a benefit, while the expenditure it displaces usually disappears from view.
So, what must be done? The solution is not to prohibit all cash transfers or burden poor recipients with elaborate conditions. Some payments may work better precisely because recipients are free to use them according to their own priorities. But unconditionality for beneficiaries should not mean an absence of accountability for governments.
Every recurring scheme should therefore be preceded by a welfare impact statement specifying its objective, eligibility rules, payment rationale, baseline conditions, expected coverage, five-year fiscal cost, financing source, alternatives considered, and risks of exclusion and leakage. It should also identify, in advance, the outcomes against which the scheme will be assessed. Periodic household surveys should then examine effects on consumption, debt, nutrition, health expenditure, schooling, employment, mobility and women’s control over spending. Data must be anonymised and shared for independent research so that the claims can be empirically tested.
States also need a comparable public ledger of transfers and subsidies. Similar schemes are currently scattered across departments and budget heads, making cross-state comparison unnecessarily difficult. India has built an impressive administrative capacity to identify beneficiaries, link bank accounts and transfer money at scale. However, it is striking that the same system cannot tell citizens, in one transparent format, how much each scheme costs, who receives it, how it is financed, and what changed after its introduction.
Evidence cannot remove politics from welfare. Voters may prefer immediate cash to infrastructure that improves lives only years later, if at all. Yet they deserve clarity on trade-offs. Cash transfers can ease hardships from weak schools, poor transport, inadequate healthcare, or scarce jobs, but cannot replace fixing those systemic failures. While electoral politics will continue to focus on who gets how much, public policy must ask what mix of cash support and public services will secure households’ long-term well-being, and make the costs and consequences of that choice transparent.
Kundu is assistant professor of finance at IMI Kolkata; and Nandy is associate professor of economics & public policy at IIM Ranchi. Views are personal.
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