15 states have rolled out unconditional cash transfer schemes for women, with an estimated annual outlay of around Rs 1.7 trillion covering nearly 120 million beneficiaries.
Key Points
- Beneficiaries spent nearly 90 paise of every additional rupee received while continuing to accumulate savings.
- Maharashtra beneficiaries recorded an 84 per cent rise in account balances and a 46 per cent increase in monthly spending.
- Odisha's Subhadra Yojana increased beneficiaries' savings by 45 per cent while monthly spending rose by 28 per cent.
Women-centric cash transfer schemes in Maharashtra and Odisha have significantly increased beneficiaries' savings and spending while improving the financial position of other household members, according to a working paper by the Prime Minister's Economic Advisory Council (PM-EAC).
The paper titled Unconditional Women Cash Transfer Programmes in India: Evidence from Maharashtra and Odisha comes as more than 15 states have rolled out unconditional cash transfer schemes for women, with an estimated annual outlay of around Rs 1.7 trillion covering nearly 120 million beneficiaries.
Analysing account-level banking data from Maharashtra's Mukhyamantri Majhi Ladki Bahin Yojana and Odisha's Subhadra Yojana, the study found that Maharashtra's scheme increased beneficiaries' month-end account balances by around 84 per cent, or Rs 6,884, while monthly spending rose 46 per cent, or Rs 1,349.
Odisha's Subhadra Yojana increased account balances by about 45 per cent, or Rs 6,887, and monthly spending by 28 per cent, or Rs 1,920.
'The findings indicate that the cash transfers not only improved beneficiaries' savings positions but also enhanced their consumption capacity. Taken together, the results suggest that recipients allocated a portion of the transfer towards immediate household expenditure while simultaneously retaining a significant share as savings, reflecting improved financial resilience and liquidity,' the report said.
The study estimated a marginal propensity to consume of around 0.90 for Maharashtra's monthly transfers, suggesting beneficiaries spent nearly 90 paise of every additional rupee received while continuing to accumulate savings.
This, the paper said, reflects the significant liquidity constraints faced by low-income households.
Among the study's findings were the spillover effects on other household members. In Maharashtra, relatives of beneficiaries recorded a 23 per cent increase in month-end account balances alongside a 49 per cent decline in spending.
In Odisha, a 10 per cent increase in beneficiaries' account balances was associated with a 1.9 per cent reduction in spending by family members.
The paper argued that these patterns suggest women retained control over the transfers while overall household finances became more resilient.
The paper comes amid a growing policy debate over the effectiveness of unconditional cash transfer schemes, which have proliferated across states in recent years.
Economists Question Long-Term Impact
While proponents argue that such programmes strengthen household welfare and promote economic empowerment, several economists have questioned their long-term effectiveness, citing concerns over fiscal sustainability, limited impact on productive employment, and the risk of crowding out public investment.
The impact also varied across beneficiary groups. Older women tended to retain a larger share of the transfers as precautionary savings, while younger recipients showed a stronger propensity to spend.
Women with lower educational attainment recorded larger increases in consumption, suggesting that the transfers helped ease tighter liquidity constraints.
'The findings suggest that older beneficiaries were more likely to accumulate savings from the transfers in anticipation of possible future medical and other expenses, whereas younger beneficiaries allocated a relatively larger share towards consumption expenditure,' the paper noted.
The study also found changes in spending patterns following the rollout of the schemes. The share of ATM-based education spending rose from 18 per cent to 24 per cent.
Through UPI transactions, lifestyle-related spending increased from 37 per cent to 42 per cent, while medical expenditure rose from 8 per cent to 10 per cent, indicating higher spending on healthcare and discretionary consumption alongside greater adoption of digital payments.
The authors argued that the findings reinforce international evidence showing that directing cash transfers to women generates stronger developmental outcomes than gender-neutral transfers.
They recommended evolving the schemes into a 'cash-plus' model by combining income support with capacity building, digital literacy initiatives, and self-help group linkages, while strengthening beneficiary targeting.
Feature Presentation: Aslam Hunani/Rediff
