Economy
Cash transfers to women offer a quick fix but mask deeper problems
Summary
- The rising participation of women in the electoral process could partly explain the rush among political parties to promise cash transfers to women. While these schemes could offer greater agency to women, sustaining them may require adverse trade-offs.
Cash transfers to women have become a staple pre-election promise across India. The latest battleground was Delhi, where all three major parties pledged direct payouts to women ahead of the assembly election. Even the Bharatiya Janata Party (BJP), despite its broader opposition to the “freebies" culture, joined the fray—offering cash handouts in an election that saw it return to power after 27 years.
Read this | The battle for Delhi: It is Kejriwal’s suvidha vs Modi’s vikas
Thirteen other states spanning diverse political landscapes have implemented similar schemes—many of which were rolled out just before state elections. If the upcoming BJP government in Delhi keeps its promise, it will join Telangana and Jharkhand in offering the highest monthly payout of ₹2,500.
The rising participation of women in the electoral process could partly explain this rush among political parties. The last two Lok Sabha elections saw higher turnout among women voters than among male voters. By some accounts, pre-poll promises of cash transfers to women may have played a key role in bringing the ruling parties back to power.
Read this | Why political parties are breaking the bank to win over women voters
While some criticize the schemes for their adverse impact on states’ fiscal math, economists feel these offer greater agency to women and can help tide over post-pandemic livelihood crises. However, it is a short-term solution.
“A judicious mix of basic income (cash transfers) and participation income (income earned through participating in economic activity) is crucial for sustainable economic growth," said Lekha Chakraborty, a professor at the National Institute of Public Finance and Policy.
Added incomes
While cash transfer schemes are not the only ones draining states’ finances, they have spread rapidly in the past few years. According to a report by Axis Bank, 20% of adult women are estimated to benefit from the schemes. At a time when economic growth has not trickled down to a large section of the population, particularly women, and high inflation has added to their woes, cash transfers do offer hope.
Cash transfers being offered amount to 10-30% of the average income earned by women who are casual labourers and self-employed. An analysis of state-wise wage data from the 2023-24 Periodic Labour Force Survey shows that in three states, self-employed women—those at the lowest end of the wage scale—can have an added income of over 30% through these transfers.
Those who are not part of the labour market can also end up with significant cash in their hand. This could also improve the bargaining power of women in the labour market.
Fiscal troubles
Income transfers for Indian women aren’t new. Economically disadvantaged pregnant women have been receiving conditional cash to promote institutional deliveries. What is new this time is the scale and the unconditional nature of these schemes.
These schemes also come at a time when several states have a range of other subsidies in place such as farm-loan waivers, cash transfers for farmers and subsidized electricity and gas cylinders.
The Reserve Bank of India in a report in December warned of “incipient stress" due to a sharp rise in expenditure on subsidies and prodded states to contain their subsidies. The fears are not unfounded.
Of the nine states for which data is available, four are spending over 1% of their gross output on cash transfers to women, a Mint analysis showed. The cash outgo as a share of GSDP (gross state domestic product) is the highest in Madhya Pradesh (1.3%), followed by Odisha and Maharashtra (1.1% each).
Long-term solutions
Sustaining cash transfer programmes for women poses financial challenges, as they often strain state budgets. Economists point out that these schemes are typically funded by cutting capital infrastructure spending or expanding fiscal deficits.
According to RBI data, the combined fiscal deficit for all states is projected at 3.2% of GDP in FY25—up from 2.9% in FY24 and 2.4% in FY19.
The concern is that states may have to sacrifice more productive long-term investments. Spending on health and education remains low. ore worryingly, has plateaued. While cash transfers provide women with additional income, bargaining power, and greater agency at home, they do little to address deeper structural challenges hindering India’s overall development.
Also read | Vivek Kaul: Cash transfer politics has an impact not just on ballots but also budgets
“The long-term solution is to build human capital formation through education and health and enhance employment opportunities," Chakraborty added.
