The coffers are empty, there is a lot of debt on the head… yet why are state governments wasting so much money on women?

These days, the trend of schemes providing direct cash transfers to women (Unconditional Cash Transfers) has grown rapidly in the country. This is a competition in which almost every state wants to participate. According to a recent study by PRS Legislative Research, the trend, which existed in just two states two years ago in 2022-23, has now spread to 12 states by 2025-26.

The expenditure on these schemes is staggering. According to one estimate, state governments are going to collectively spend ₹1,68,040 crore on these schemes this year. This huge amount represents 0.5% of the total gross domestic product (GDP) of these states. Just two years ago, in 2022-23, this figure was less than 0.2% of GSDP.

These schemes are being implemented in different states under populist names. Whether it's the Griha Lakshmi Yojana in Karnataka, the popular Ladli Behna Yojana in Madhya Pradesh, or the Ladki Behna Yojana in Maharashtra, all aim to provide direct financial assistance to women voters.

Political parties are calling this a major step towards women's empowerment and are actively using it to reach out to voters ahead of elections. The impact is visible; beneficiaries are happy, but this happiness comes at a significant cost, directly from the state treasury.

Increasing pressure on the coffers, states are in a revenue deficit
The PRS report highlights another, and perhaps most worrying, aspect of this trend. This massive expenditure is occurring at a time when many states are already grappling with financial constraints. According to the report, six of these 12 states have projected a revenue deficit for 2025-26.

A revenue deficit simply means that a state's revenue receipts fall short of meeting its daily expenses. This deficit indicates that states are borrowing even to meet their regular expenses, such as salaries, pensions, or interest payments.

To understand how this is impacting, consider the examples of Karnataka and Madhya Pradesh. The report states that if the expenditure on these cash transfer schemes were excluded, Karnataka's treasury would have a revenue surplus of 0.3% of GSDP. However, due to the expenditure on these schemes, the state is now in a revenue deficit of 0.6% of GSDP. Similarly, these schemes have reduced Madhya Pradesh's revenue surplus from 1.1% of GSDP to just 0.4%.

Election Year, Increased Allocations, and RBI Warning
The pace of this expenditure is accelerating, especially in states where elections are approaching. For example, Assam and West Bengal, where assembly elections are due next year, have significantly increased the budgets for these schemes. Compared to the previous financial year, Assam has increased its allocation by 31%, while West Bengal has increased its allocation by 15%. Jharkhand has also increased the monthly payment under the 'Chief Minister Maiya Samman Yojana' from Rs 1,000 to Rs 2,500 in October 2024.

This growing financial burden is not going unnoticed. The Reserve Bank of India (RBI) has already warned states about the increasing expenditure on subsidies, farm loan waivers, and such cash transfers. The RBI believes this could worsen the states' financial health and lead to a shortage of funds for other essential development projects, such as building roads, schools, and hospitals.

States are already burdened with debt.
This new expenditure on cash transfers comes at a time when their total outstanding debt is already high. According to the PRS report, the total outstanding debt of states remains higher than pre-pandemic levels. By March 2025, the total debt of states was 27.5% of GSDP, while the FRBM Review Committee had recommended a limit of 20%. Only three states, Gujarat, Maharashtra, and Odisha, have met this 20% target.

On the other hand, states like Punjab (46%), Himachal Pradesh (44%), and Arunachal Pradesh (42%) are burdened with debt far higher than their GSDP. Consequently, this new annual expenditure of ₹1.68 lakh crore, which does not directly create any assets (non-asset creating), could further exacerbate the economic challenges of the states.

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