Why in the News
Data analysis argues that unconditional cash transfers (UCTs) to women, now offered by several states, crowd out spending on education and health. The concern is set against the 16th Finance Commission’s award period.
What is an unconditional cash transfer?
- Definition: A UCT is a direct income payment with no work, attendance, or behaviour condition attached, unlike a conditional transfer.
- Scale: Multiple state schemes now pay women a monthly sum, adding a large recurring liability to state budgets.
Why does the fiscal cost matter?
- Crowding out: A fixed budget spent on cash leaves less for schools, primary health, and capital works.
- Recurring liability: UCTs are hard to withdraw once given, locking in expenditure across future years.
- Federal finance link: The 16th Finance Commission decides tax devolution, so states leaning on cash transfers face tighter room for development spending.
Conclusion
Cash transfers deliver immediate relief but compete with human-capital spending. The unresolved question is whether states can sustain them without hollowing out education and health budgets.
Matching Previous Year Question
“[2022, GS2, 10 marks] Reforming the government delivery system through the Direct Benefit Transfer Scheme is a progressive step, but it has its limitations too. Comment.”