Unconditional cash transfers putting State finances at risk, the Economic Survey 2025-26 has warned, highlighting growing pressure on State budgets due to rising welfare spending. The Survey flagged concerns over the long-term fiscal impact of such programmes.
According to the Survey, total spending on unconditional cash transfer (UCT) schemes during the 2025-26 financial year is estimated at around ₹1.7 lakh crore. Unconditional cash transfers putting State finances at risk was noted as a key challenge, especially as several States continue to expand welfare coverage.
The Survey pointed out that a large share of UCT spending targets women-centric schemes. While these programmes improve financial security and social outcomes, the report cautioned that unchecked expansion could limit States’ ability to invest in infrastructure, health, and education.
It said many States are funding cash transfers through higher borrowings or by cutting capital expenditure. This trend, the Survey noted, may weaken long-term economic growth and fiscal stability.
The Survey called for better targeting of beneficiaries and stronger monitoring of outcomes. It also suggested aligning welfare spending with revenue capacity to avoid structural fiscal stress.
Economists quoted in the report said cash transfers should complement, not replace, productive public investment. A balanced approach, the Survey concluded, is essential to protect State finances while supporting vulnerable groups.
