Survey raises concerns over unconditional cash transfers, Pg13

Key Highlights:

• The Economic Survey 2025-26 raises concerns about the fiscal sustainability of unconditional cash transfers (UCT), especially to women.
• Aggregate spending on UCT programs is estimated at approximately ₹1.7 lakh crore for the current financial year.
• The number of States implementing UCT schemes has increased more than five-fold between 2022-23 and 2025-26.
• UCTs are estimated to be between 0.19-1.25% of States' GDP and 0.68-8.26% of their total budgetary expenditures.

Detailed Insights:

• Last year's Economic Survey noted the positive effects of cash transfers on consumption for poorer households, enabling them to meet basic needs and repay debts.
• The current survey highlights that while UCTs provide immediate income support, their rapid expansion poses risks to fiscal sustainability and medium-term economic growth.
• A significant portion of State spending is allocated to revenue expenditure, with an increasing share directed towards unconditional cash transfers.
• The survey emphasizes the trade-off between UCTs and productive capital expenditure, as increased spending on transfers may limit resources for infrastructure development.
• Many UCT schemes lack sunset clauses or periodic reviews, creating rigidity in revenue expenditure and potentially affecting long-term growth.

Key Concepts Involved:

• Unconditional Cash Transfers (UCT): Direct payments to individuals or households without any specific requirements or conditions.
• Fiscal Sustainability: The ability of a government to maintain its spending and debt levels without risking economic instability.
• Revenue Expenditure: Government spending on day-to-day operational expenses, including salaries, subsidies, and social programs.