The welfare promise and the database challenge of cash transfer schemes

Can opaque database rationalisation derail the gains from women cash transfer schemes? Sanjeeb Mukherjee finds out

A few weeks ago, a working paper by the Economic Advisory Council to the Prime Minister (EAC-PM) found that women-centric cash transfer schemes in Maharashtra and Odisha significantly boosted beneficiaries’ savings and spending, while also improving the financial position of other members of their households. 

The paper, Unconditional Women Cash Transfer Programmes in India: Evidence from Maharashtra and Odisha, found that Maharashtra’s Mukhyamantri Majhi Ladki Bahin Yojana increased beneficiaries’ month-end account balances by around 84 per cent, or ₹6,884, while monthly spending rose 46 per cent, or ₹1,349. Odisha’s Subhadra Yojana lifted balances by about 45 per cent (₹6,887) and spending by 28 per cent (₹1,920). 

The findings reinforce a growing body of evidence showing that regular cash transfers to women generate measurable gains across a range of socio-economic indicators. 

A few years earlier, a National Bureau of Economic Research working paper, Maternal Cash Transfers for Gender Equity and Child Development: Experimental Evidence from India, by Jeffrey Weaver, Sandip Sukhtankar, Paul Niehaus and Karthik Muralidharan, based on a large-scale randomised evaluation, found that households receiving cash transfers recorded a 9.6-15.5 per cent increase in calorie intake for mothers and children, alongside improvements in dietary diversity and nutrient consumption. Gender disparities in food consumption also narrowed. 

The researchers also found significant improvements in children’s functional development, although anthropometric indicators did not improve on average. 

Earlier still, an Observer Research Foundation paper, Cash Transfers as an Instrument for Poverty Alleviation and Women’s Empowerment in India by Sunaina Kumar, concluded that targeted unconditional cash transfers, though modest in size, help shield women from shocks such as disease outbreaks and climate-related events. On their own, however, they are insufficient to lift women and their families out of poverty. 

Another study, Study of Cash Benefit Transfer Schemes in Women’s Accounts in Different States by Hansraj Thakur, publish­ed in the International Journal of Research and Innovation in Social Science (IJRISS), similarly concluded that state cash transfer programmes strengthen women’s economic empowerment and expand their role in household decision-making. 

Several other studies point in the same direction: Periodic cash trans­f­ers to women generate multiple cascading benefits that extend well beyond the direct recipients. 

Yet the story of cash transfers is no longer just about outcomes or fiscal costs. Increasingly, states that have run these programmes for a few years are undertaking large-scale pruning of beneficiary databases in the name of rationalisation. 

Recently, Maharashtra removed about 9.2 million beneficiaries from the Mukhyamantri Majhi Ladki Bahin Yojana. Reports also suggest that the number of beneficiaries under Madhya Pradesh’s flagship Mukhyamantri Ladli Behna Yojana has fallen by around six million since the scheme’s launch. 

In Maharashtra, beneficiaries were removed after being identified as government employees, taxpayers or individuals who failed to complete KYC requirements. Similar reasons have been cited for pruning beneficiary rolls in Madhya Pradesh and other states. 

The tightening is not confined to one scheme. In Maharashtra itself, reports said women farmers cove­red under a parallel direct benefit tran­s­f­er programme have seen their mon­­­thly assistance cut by 67 per cent. 

In West Bengal, the state’s new BJP government has renamed the previous Mamata Banerjee government’s Lakshmi Bhandar scheme as Annapurna Yojana, and doubled the monthly payout to ₹3,000 from ₹1,500. At the same time, reports suggest that around three million beneficiaries could be dropped following the special intensive revision of electoral rolls. 

In Delhi, which is yet to roll out its own women-centric cash transfer scheme, reports indicate that only one member per family will be eligi­ble, alongside several other conditions. 

These waves of deletions and database rationalisation — which critics argue are often algorithm-driven, opaque and arbitrary, with weak grievance redressal mechanisms — raise difficult questions on the cash scheme’s  long-term implications for women’s empowerment and the institutional soundness of welfare programmes. 

“The immediate benefit of cash transfer schemes is undeniable. But if we take a longer-term macro view, several questions arise,” Dipa Sinha, economist and faculty member at Azim Premji University, told Business Standard. She said governments increasingly portray beneficiary deletions as efficiency gains achieved through de-duplication and e-KYC verification, even though many exclusions later turn out to be erroneous. 

“Officially, these are described as efficiency gains. But there is very little evidence of proper manual verification. There have been cases where pensioners have been mar­ked as dead even though they are alive, or shown as having migrated when they have not. Sometimes the problem is simply a spelling error or inconsistencies in dates of birth across documents. These do not mean the beneficiary is fraudulent or duplicated; they reflect errors in the system,” she said. 

She argued that the muted public response to such deletions is itself revealing. “People may be disappointed when a monthly payment stops, but they do not necessarily feel outraged that a right has been taken away because these transfers are viewed as a dole rather than an entitlement,” Sinha said. 

She added that local officials often reinforce this perception by telling beneficiaries they should simply be grateful for receiving something free. “In that sense, these schemes may provide temporary welfare, but they do not empower people. Nor do they build capabilities that enable citizens to improve their lives or hold the State accountable.” 

In a chapter in the recent book Realising Rights: A Handbook of Welfare in India, Sinha argues that some scholars believe the shift in governance from inputs and proce­s­ses to outputs and outcomes, through direct benefit transfers and cash transfers, has weakened the everyday practice of citizenship by making the state more distant, opaque and less accountable. 

Devashish Deshpande, vice-pre­sident and senior technical advisor at the Centre for Effective Governance of Indian States (CEGIS), said the DBT architecture was designed to curb leakages by digitising and linking beneficiary databases. While it has largely achieved that objective, it has also created new vulnerabilities, several of which have been flagged by the Comptroller and Auditor General (CAG). 

According to Deshpande, beneficiary list manipulation can occur through multiple channels. Local collusion, incorrect Aadhaar and bank details, and multiple Aadhaar-linked registrations within the same family, or by the same individual, can allow ineligible beneficiaries to receive payments. 

Given these risks, governments periodically undertake one-time verification drives. But such exercises have limitations compared with robust, real-time monitoring systems.

 

Deshpande said the sequence has become familiar across states. Welfare schemes are often launched shortly before elections, leaving little time for comprehensive beneficiary verification. Governments prioritise rapid enrolment. Following the election, however, they begin reassessing the programmes through both fiscal and administrative lenses. 

“After elections, reality strikes. Governments have to consider both the financial sustainability of the scheme and whether benefits are reaching those who actually deserve them,” Deshpande told Business Standard. 

He also pointed to a broader shift towards welfare rationalisation. Several states are developing family ID databases to map the benefits received by households over their life cycle. “The idea is to understand who is receiving which benefits and whether multiple schemes are serving the same family while others may be excluded. The thinking is that if a household is already receiving benefits under multiple parallel programmes, does it necessarily require another,” he said. 

“There is a principled aspect — you do not want ineligible beneficiaries, including government employees or others who should not qualify, receiving benefits. But there is also the practical issue of money. Both considerations operate simultaneously,” he added.