The Economic Survey 2025 26 has raised concerns over the growing use of unconditional cash transfers by Indian states and their potential impact on public finances. According to the survey, the rapid expansion of these programs has significantly increased state welfare spending and contributed to rising revenue deficits. The total expenditure on unconditional cash transfers is estimated to have reached over one lakh seventy thousand crore rupees this year, placing a strain on state budgets.
The survey warns that the persistence of these transfers may crowd out investment in critical areas such as infrastructure health and education. Without sufficient fiscal space states may find it increasingly difficult to fund growth enhancing projects while maintaining these payouts. This could have long term implications for economic development and employment generation.
Another concern highlighted in the survey is the potential impact on sovereign borrowing costs. Weak fiscal discipline at the state level can influence overall government finances and affect interest rates on government bonds.
While unconditional cash transfers provide immediate relief and help boost disposable income for many citizens they may not be sustainable in the long term without accompanying measures that promote productivity and economic growth.
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