Economic Survey Flags Fiscal Risk of State Cash Transfer Schemes

• The Economic Survey 2026 warns that state-run unconditional cash transfer (UCT) schemes pose significant fiscal and economic risks.
• UCT spending for women is estimated at Rs 1.7 lakh crore for FY26, with the number of implementing states increasing fivefold between FY23 and FY26.
• These transfers account for 0.19% to 1.25% of GSDP and up to 8.26% of total state budgetary expenditure, raising fiscal sustainability concerns.
• The survey highlights that UCTs may undermine state finances, displace growth-enhancing public spending, and potentially impact female labor force participation.
• States' combined gross fiscal deficit rose to 3.2% of GDP in FY25, with committed expenditures consuming 62% of revenue receipts, limiting fiscal room for other investments.

Why It Matters: Economic Survey warns state cash transfer schemes risk fiscal health and long-term growth by crowding out vital investments.