A recent report by the State Bank of India (SBI) has raised concerns over the financial implications of the increasing number of women-centric Direct Benefit Transfer (DBT) schemes being introduced by various state governments. These initiatives, which involve providing cash transfers directly to women, have garnered widespread popularity, especially in the run-up to elections.

However, the report cautions that while such schemes aim to empower women and address social inequities, they could place a significant burden on state finances. The growing reliance on these programs as a policy tool has the potential to severely strain state budgets, raising questions about their long-term sustainability.

The report highlights the importance of carefully balancing social welfare priorities with fiscal responsibility, urging policymakers to evaluate the economic impact of these schemes while exploring alternative methods of empowerment that do not compromise the financial stability of states.

It stated, "There is a Tsunami of women-centric schemes unleashed by multiple states offering direct benefit transfers (some badly disguised as pure electoral realpolitik, we believe) that can bleed select states' finances."

The report underscores the escalating financial burden posed by women-centric Direct Benefit Transfer (DBT) schemes, revealing that their cumulative cost across eight states has now exceeded a staggering ₹1.5 lakh crore. This expenditure accounts for approximately 3 to 11 percent of these states' total revenue receipts, highlighting the significant fiscal impact of these initiatives.

According to the report, states like Odisha are relatively better equipped to manage these costs due to their higher non-tax revenues and the absence of borrowing requirements. However, many other states are likely to face mounting fiscal pressures, potentially jeopardising their financial stability. The report emphasises the need for a balanced approach, recommending that states carefully assess the sustainability of these schemes within their fiscal frameworks.

It added, "Some states have the capacity to pay for such schemes; for instance, Odisha has higher non-tax revenue, thus no borrowing."

The report provides detailed insights into the fiscal burden of women-centric Direct Benefit Transfer (DBT) schemes across states, illustrating their significant cost implications.

For instance, Karnataka's Gruha Lakshmi scheme, which provides ₹2,000 per month to the female head of a household, has a budget allocation of ₹28,608 crore. This accounts for a substantial 11 percent of the state’s revenue receipts.

In West Bengal, the Lakshmir Bhandar scheme, which offers a one-time grant of ₹1,000 to women from economically disadvantaged backgrounds, costs ₹14,400 crore, constituting 6 percent of the state's revenue receipts.

Delhi’s Mukhyamantri Mahila Samman Yojana, which provides ₹1,000 per month to adult women (excluding certain categories), has a financial outlay of ₹2,000 crore, amounting to 3 percent of the state's revenue receipts.

These examples highlight the significant strain such programs can place on state budgets, reinforcing the need for a thorough evaluation of their long-term sustainability and fiscal impact.

The SBI report highlights the growing trend of income transfer schemes targeted at women and cautions that this may create pressure on the Central government to adopt similar measures. To address this, the report proposes a more sustainable alternative: a universal income transfer scheme supported by matching grants from the Union government to the states.

According to the report, such a model could provide a more balanced approach to achieving the objectives of women’s empowerment while reducing reliance on disruptive market subsidies. By pooling resources and coordinating efforts, this framework could help alleviate the fiscal strain currently faced by individual states.

While acknowledging the electoral appeal and social impact of these schemes, the report underscores the importance of fiscal prudence. It advises states to carefully evaluate their financial health and borrowing capacity before implementing such welfare initiatives to ensure long-term sustainability and stability.

It concluded, "It would be worth taking the course to adopt a universal income transfer scheme (matching grant from centre to states) towards substantially reducing several market-disturbing subsidies."

A comprehensive assessment of welfare spending and its long-term effects on state finances is essential, the report concluded.