<p>New Delhi: The Economic Survey 2026 has pointed out that Unconditional Cash Transfer (UCT) schemes followed by many states is constricting fiscal space, while impacting growth-oriented public spending.</p><p>The Survey has pegged the aggregate spending on UCT, especially the ones targeting women, at Rs 1.7 lakh crore for the financial year 2026.</p><p>“While these schemes provide immediate income support, their growing scale risks increasing expenditure rigidity and crowding out resources for capital investment, including human capital,” the Survey noted. Between FY2023 and FY2026, there has been a five-fold rise in the number of states doling out UCT, despite half of the states being revenue-deficit.</p><p>The combined gross fiscal deficit of states rose from 2.6% of GDP in FY22, to 3.2% in FY25, while the combined revenue deficit increased from 0.4% to 0.7% of GDP, indicating continued borrowing to finance revenue expenditure, according to the Survey. Outstanding liabilities, meanwhile, stood at about 28.1% of GDP in FY25.</p><p>The Survey says the cash in hand for women does provide them immediate income succour, helping them meet health and personal needs. However, their “rapid scale-up and persistence raise concern about fiscal sustainability”, which may in the medium-term impact employment, skill development and human capital.</p>.Economic Survey 2025-26 | Union Govt delivers 122.06 lakh houses under PMAY-Urban till Nov 2025.<p>Such transfers range from 0.19% to 1.25% of GSDP, and can account for as much as 8.26% of total state budgetary expenditure, the Survey noted, citing recent research.</p>.<p>Committed expenditures such as salaries, pensions, interest payments, and subsidies, absorbed about 62% of states’ revenue receipts in FY24, leaving limited fiscal room.</p>.<p>“In this context, higher allocations to UCTs involve clear tradeoffs. Unless deficits widen further, additional spending will crowd out resources for critical social and physical infrastructure. But deficits cannot widen any further without causing further deterioration in the overall financial health of the state,” the Survey noted.</p>.<p>It cites examples from countries such as Mexico and the Phillipines that have liked UCTs to verifiable actions by benificiaries, advising careful reprioritisation within state budgets, rather than steady expansion of open-ended direct cash transfer schemes. </p>
<p>New Delhi: The Economic Survey 2026 has pointed out that Unconditional Cash Transfer (UCT) schemes followed by many states is constricting fiscal space, while impacting growth-oriented public spending.</p><p>The Survey has pegged the aggregate spending on UCT, especially the ones targeting women, at Rs 1.7 lakh crore for the financial year 2026.</p><p>“While these schemes provide immediate income support, their growing scale risks increasing expenditure rigidity and crowding out resources for capital investment, including human capital,” the Survey noted. Between FY2023 and FY2026, there has been a five-fold rise in the number of states doling out UCT, despite half of the states being revenue-deficit.</p><p>The combined gross fiscal deficit of states rose from 2.6% of GDP in FY22, to 3.2% in FY25, while the combined revenue deficit increased from 0.4% to 0.7% of GDP, indicating continued borrowing to finance revenue expenditure, according to the Survey. Outstanding liabilities, meanwhile, stood at about 28.1% of GDP in FY25.</p><p>The Survey says the cash in hand for women does provide them immediate income succour, helping them meet health and personal needs. However, their “rapid scale-up and persistence raise concern about fiscal sustainability”, which may in the medium-term impact employment, skill development and human capital.</p>.Economic Survey 2025-26 | Union Govt delivers 122.06 lakh houses under PMAY-Urban till Nov 2025.<p>Such transfers range from 0.19% to 1.25% of GSDP, and can account for as much as 8.26% of total state budgetary expenditure, the Survey noted, citing recent research.</p>.<p>Committed expenditures such as salaries, pensions, interest payments, and subsidies, absorbed about 62% of states’ revenue receipts in FY24, leaving limited fiscal room.</p>.<p>“In this context, higher allocations to UCTs involve clear tradeoffs. Unless deficits widen further, additional spending will crowd out resources for critical social and physical infrastructure. But deficits cannot widen any further without causing further deterioration in the overall financial health of the state,” the Survey noted.</p>.<p>It cites examples from countries such as Mexico and the Phillipines that have liked UCTs to verifiable actions by benificiaries, advising careful reprioritisation within state budgets, rather than steady expansion of open-ended direct cash transfer schemes. </p>