On 1 August, the Delhi government launched the Lakshmi Yojana, an unconditional cash transfer (UCT) of ₹2,500 a month for eligible women. This makes Delhi the latest State or Union Territory to run such a scheme. Studies over the last two years, including the Economic Survey and the 16th Finance Commission report, have raised concerns over the growing fiscal burden these schemes place on State finances.

How large is the fiscal burden, compared to education and health spending?

Expenditure Ranges From 10% to Under 0.3% of State Spending: UCT schemes account for 10.03% of total State expenditure in Jharkhand and 7.84% in West Bengal, compared with just 0.97% in Goa and 0.26% in Himachal Pradesh.
44% of State Spending Already Locked In: according to the 16th Finance Commission report, almost 44% of State expenditure is tied up in interest payments, pensions, and salaries. This leaves States little room to finance new initiatives or infrastructure.
Social-Sector Spending Has Fallen as a Share of GDP Since 2020-21: States' social-sector revenue expenditure has stayed a stable share of total revenue expenditure since 2011-12. But as a share of GDP, it has been declining since 2020-21 — spending hasn't grown even as States' capacity to spend has grown.
Over Half of Education Spending in the Three Largest Schemes: in Jharkhand, Karnataka, and West Bengal, spending on UCT schemes equals 78.99%, 73.59%, and 54.05% of entire State education spending, respectively.
UCT Spending Exceeds the Entire Health Budget in Four States: in Jharkhand, Karnataka, West Bengal, and Maharashtra, UCT spending exceeds the State's entire health budget — reaching 207.30% of the health budget in Jharkhand and 184.70% in Karnataka.

Why are these schemes still expanding despite the fiscal strain?

"Rationalisation" Cuts Beneficiary Numbers in Maharashtra and MP: reports show beneficiary numbers have been falling under "rationalisation" in these two States. Delhi, meanwhile, added restrictive eligibility rules — such as requiring a local MLA or MP's recommendation — even before its own scheme rolled out.
Money Is Mostly Spent on Food, Health, and Education: evaluations show women mostly spend UCT money on these essentials, even though barriers like missing documents, limited bank access, and digital record errors remain.
Framed by Some as Compensation for State Failure: some scholars argue these transfers compensate for the state's failure to create opportunities for all. Critics reject this framing, pointing to the transfers' timing just before elections to call them a "dole."
Seventeen States and UTs Have Expanded Schemes Since 2023: from Karnataka's Gruha Lakshmi Scheme (₹2,000 a month, 2023) to West Bengal's revamped Annapurna Bhandar (₹3,000 a month, 2026), most large States now run one.
Monthly Payouts Range From ₹1,000 to ₹3,000: Chhattisgarh's Mahtari Vandan Yojana and Tamil Nadu's Kalaignar Magalir Urimai Thogai both pay ₹1,000 a month, while West Bengal's newest scheme pays ₹3,000.

Conclusion

The authors conclude that household-level benefits aside, the fiscal trade-offs of unconditional cash transfers need honest public discussion. As these schemes expand, the pressure they place on already resource-constrained States' health and education spending cannot be dismissed as an unreasonable concern.

Mains Angle

GS Paper III — Indian Economy: Government budgeting; issues related to direct and indirect farm and welfare subsidies; effects of subsidies on fiscal health of the economy. Also touches GS Paper II — Governance: welfare schemes for vulnerable sections and issues in their design and implementation.

Practice question: "Unconditional cash transfer schemes for women have expanded rapidly across Indian States since 2023. Discuss their fiscal implications for State finances, particularly for health and education spending, and suggest measures to balance welfare objectives with fiscal sustainability. (250 words)"