Context

• Since 2020, Unconditional Cash Transfer (UCT) schemes have become an important welfare instrument and electoral strategy in India, particularly for attracting women voters.
• Schemes such as Kalaignar Magalir Urimai Thittam, Lakshmir Bhandar, Gruha Lakshmi and Mukhya Majhi Ladki Bahin Yojana provide direct financial support to women.
• They also partly advance SDG 5.4, which recognises women’s unpaid domestic and care work, however, higher cash transfers do not necessarily ensure electoral success.
• Their effectiveness is influenced by fiscal pressures, targeting errors and perceptions of unfairness, creating significant political costs.

UCTs: Welfare Support and Electoral Strategy

• UCTs provide immediate financial relief without requiring beneficiaries to fulfil behavioural conditions.
• They can improve household consumption, strengthen women’s financial autonomy and recognise unpaid care work.
• States are expected to spend around $18 billion on UCTs in 2025-26, with much of the expenditure directed towards women.
• Their electoral appeal is strong because beneficiaries experience a visible and direct connection with government.
• Yet, elections show that cash benefits alone cannot guarantee voter loyalty, especially when large sections of potential beneficiaries feel excluded.

The Fiscal Cost of Competitive Welfarism

• UCTs create concerns regarding fiscal sustainability and opportunity costs.
• Governments may need to shift expenditure, borrow more or accept larger fiscal deficits to finance recurring transfers.
• This can reduce resources for employment generation, infrastructure, education, healthcare and self-employment programmes.
• Once households become accustomed to regular transfers, withdrawing them becomes politically difficult.
• Political parties may consequently engage in competitive welfarism, promising increasingly generous benefits.
• Welfare can thus become a recurring fiscal commitment rather than a temporary instrument of economic empowerment.

The Problem of Targeting

• Targeted UCTs face a fundamental challenge: identifying genuine beneficiaries.
• Since incomes are difficult to observe among informal-sector workers, governments rely on proxy indicators such as land ownership, electricity consumption and household assets.
• This produces inclusion errors, where ineligible households receive benefits, and exclusion errors, where eligible households are denied them.
• Such errors generate not only economic hardship but also perceptions of governmental injustice and discrimination.

Lessons from Tamil Nadu

• The Kalaignar Magalir Urimai Thittam illustrates the difficulties of targeting.
• Although the ruling party had promised ₹1,000 per month to women-headed households before the 2021 election, fiscal constraints led to eligibility restrictions when the scheme was launched in September 2023.
• Initially, around 1.13 crore women were covered. Following complaints, another 16.94 lakh beneficiaries were added in December 2025.
• The scheme cost approximately ₹13,807 crore in 2025-26.
• Nevertheless, dissatisfaction continued among women who believed they remained unfairly excluded.
• The distribution of advance payments and additional relief to existing beneficiaries could further intensify such grievances.
• In closely contested constituencies, even small shifts in voter preferences can affect electoral outcomes.

Political Costs of Perceived Injustice

• Similar concerns emerged with Lakshmir Bhandar in West Bengal, while Maharashtra’s Mukhya Majhi Ladki Bahin Yojana and Karnataka’s Gruha Lakshmi Scheme faced different inclusion or exclusion-related controversies.
• The key problem is that perceived targeting errors can be politically as damaging as actual errors.
• Citizens may consider themselves deserving even when they fail to satisfy official criteria. Conversely, legally eligible households may be perceived by others as undeserving because they appear relatively affluent.
• Thus, welfare satisfaction depends not only on receiving benefits but also on perceptions of fairness and equal treatment.

Economics versus Politics

• UCTs reveal a fundamental conflict between economic efficiency and political acceptability.
• Economics favours targeting scarce resources towards those most in need.
• Politics, however, often rewards broader inclusion because voters evaluate governments according to both the benefits they receive and those they believe were unfairly denied.
• Therefore, the more narrowly a programme is targeted, the greater its potential exposure to exclusion-related political grievances.
• Targeting improves resource efficiency but simultaneously creates a distinction between beneficiaries and non-beneficiaries.

Conditional Transfers as an Alternative

• Conditional cash transfers and incentive-based welfare programmes can provide a more sustainable alternative by linking benefits with desirable developmental outcomes such as education, healthcare, nutrition and skill development.
• Tamil Nadu’s Midday Meal Scheme demonstrates this approach.
• Since participation is connected with school enrolment, beneficiaries effectively self-select, reducing some targeting grievances while simultaneously promoting education, nutrition and human-capital development.

Way Forward

• Future welfare policies should combine social protection with long-term economic empowerment.
• Governments should:
  • Improve beneficiary identification and grievance redressal.
  • Establish transparent and easily understandable eligibility criteria.
  • Regularly assess inclusion and exclusion errors.
  • Combine cash support with employment and skill development.
  • Expand conditional programmes where behavioural incentives can generate developmental gains.
  • Evaluate welfare schemes for fiscal sustainability and social outcomes.
  • Recognise the political consequences of perceived unfairness.

Conclusion

• UCTs can provide meaningful financial protection and promote women’s economic empowerment, but their electoral effectiveness cannot be taken for granted.
• Cash transfers may generate political support among beneficiaries while simultaneously creating resentment among excluded groups.
• India therefore needs a welfare framework balancing financial protection, fiscal responsibility, administrative fairness and human development.
• The ultimate goal should be to transform welfare from a mechanism of recurring dependence into a pathway towards economic security, capability and genuine empowerment.