The cost of unconditional cash transfers, Pg7

Key Highlights:

• Delhi Chief Minister launched the Lakshmi Yojana on August 1, providing an Unconditional Cash Transfer (UCT) of ₹2,500 per month to eligible women.
• This scheme fulfills a central promise made by the ruling party during the Assembly elections.
• Concerns regarding the increasing fiscal burden of such schemes have been raised by the Economic Survey and the 16th Finance Commission report.
• Some states are introducing restrictive criteria, such as requiring MLA/MP recommendations, to manage beneficiary numbers.
• In several states, UCT spending significantly exceeds the entire state spending on education and health.

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Detailed Insights:

• Delhi has joined other States/UTs that have implemented UCT schemes for women.
• Evaluations indicate that money received by women through UCTs is primarily spent on essential needs like food, health, and education.
• Persistent barriers to accessing these schemes include lack of necessary documents, limited bank access, and errors in digital records.
• A key concern is whether the financing for UCT schemes is diverting funds from crucial public services such as education and health.
• The proportion of state expenditure on UCT schemes varies widely, from over 10% in Jharkhand to less than 0.3% in Himachal Pradesh.
• The 16th Finance Commission report notes that approximately 44% of state expenditure is committed to interest payments, pensions, and salaries, limiting fiscal flexibility.
• While social sector revenue expenditure has remained stable as a proportion of total revenue expenditure, it shows a declining trend as a proportion of GDP since 2020-21.
• In states like Jharkhand, Karnataka, and West Bengal, UCT spending is more than half of the total education budget.
• Scholars suggest that cash transfers might be seen as 'compensation' for state failures or as 'doles' due to their timing near elections.

Key Concepts Involved:

• Unconditional Cash Transfer (UCT): Direct financial aid provided to individuals or households without specific conditions on its use.
• Fiscal Burden: The financial strain or cost imposed on a government or economy due to expenditures, often referring to debt or spending on welfare schemes.
• 16th Finance Commission: A constitutional body in India that recommends the distribution of tax revenues between the Union and states, and among states.
• Economic Survey: An annual document presented by the Government of India that reviews the country's economic development over the past year.