State Cash Transfers for Women: A Growing Safety Net with Unseen Trade-offs

In recent years, several Indian states have introduced unconditional cash transfer schemes targeting women. Notable examples include the Ladli Behna Yojana in Madhya Pradesh, the Maiya Samman Yojana in Jharkhand, and the Magalir Urimai Thogai scheme in Tamil Nadu. These programmes typically transfer Rs 1,000 to Rs 2,500 per month to eligible women. The scale of such transfers has grown substantially, with 12 states estimated to spend Rs 1.68 lakh crore in 2025-26, according to a report by PRS Legislative Research. For context, the Union government allocated Rs 86,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in the same period.

Unconditional cash transfers have emerged as a tool for social welfare and women's empowerment, as well as an electoral strategy for political parties. A new study titled 'Unconditional Women Cash Transfer Programmes in India', part of the Economic Advisory Council to the Prime Minister (EAC-PM) Working Paper Series, provides evidence of their positive impact. Examining schemes in Maharashtra and Odisha, the study finds that beneficiaries have improved consumption and savings, leading to higher household welfare. Funds are increasingly allocated to medical, educational, and lifestyle purposes.

While these outcomes are encouraging, the rapid expansion of cash transfer schemes raises important questions. The fiscal burden on state exchequers is significant, and some critics argue that such transfers may crowd out spending on other critical areas like health and education. Moreover, there are concerns about inflationary pressures, as increased cash in circulation could drive up prices for essential goods. Additionally, the long-term sustainability of these schemes depends on consistent revenue growth and political will.

Another trade-off involves the potential disincentive for women to enter the formal workforce. Unconditional transfers, while providing immediate relief, may reduce the urgency for skill development and job-seeking. However, proponents argue that the cash empowers women to make choices and can serve as a stepping stone to greater economic participation.

The spread of these schemes also highlights regional variations in welfare priorities. States with higher fiscal capacity tend to offer more generous transfers, potentially widening inter-state disparities. The study's findings underscore the need for careful policy design to balance short-term welfare gains with long-term economic stability.

In conclusion, unconditional cash transfers for women have become a prominent feature of India's social welfare landscape. While they have demonstrated tangible benefits in household consumption and savings, policymakers must weigh these against fiscal constraints and unintended consequences. A data-driven approach, as exemplified by the EAC-PM study, can help refine these programmes to maximise their impact while minimising trade-offs.