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Economy 29-Jan, 2025

Women-centric DBT schemes: Empowerment or economic strain?

By: Shantanu Bhattacharji

Women-centric DBT schemes: Empowerment or economic strain?

Source: Pixabay

States are under huge financial pressure due to expansive women-focused welfare programmes, with rising costs threatening fiscal stability. Also, the increasing financial strain has raised alarms about the long-term sustainability of these initiatives.

A surge in women-centric Direct Benefit Transfer (DBT) schemes across states is drawing scrutiny for its fiscal implications. A recent State Bank of India (SBI) report highlights the growing financial strain posed by these programmes, often viewed as politically motivated rather than economically sustainable.

Women-focused DBT schemes now account for more than Rs 1.5 lakh crore across nearly nine states, representing 3-11 per cent of their revenue receipts. Such substantial allocations, while aimed at empowering women, risk destabilising state finances, particularly in states with weaker fiscal positions.

Notably, Odisha stands out as an exception, with strong non-tax revenue and minimal borrowing needs allowing it to absorb the financial impact. However, other states dependent on borrowing to fund these initiatives face heightened fiscal vulnerabilities, threatening their long-term economic stability.

The report characterises the surge in such schemes as a “tsunami” of welfare populism, particularly ahead of elections. While these schemes aim to empower women, they could compromise fiscal health without corresponding revenue growth. Policymakers face the dual challenge of maintaining fiscal discipline while advancing social equity.

Careful financial planning and a balanced approach are crucial to ensure long-term sustainability while addressing gender-focused welfare goals. Analysts say states need to improve tax compliance and explore alternative revenue sources to offset the costs of these programmes. Aligning welfare goals with broader economic strategies, such as enhancing women’s workforce participation and financial inclusion, could create self-sustaining outcomes.

At present, states are grappling with the financial implications of large-scale women-centric welfare schemes. Programmes such as Karnataka’s Gruha Lakshmi, West Bengal’s Lakshmir Bhandar, and Delhi’s Mukhyamantri Mahila Samman Yojana show the growing trend of targeted income support for women. However, as highlighted in the report, the ballooning costs of these initiatives risk undermining fiscal stability.

State-by-State Breakdown

Karnataka’s Gruha Lakshmi Scheme: At Rs 28,608 crore, the scheme accounts for 11 per cent of the state’s revenue receipts. While politically popular, its sustainability in the face of rising fiscal pressures remains questionable.

West Bengal’s Lakshmir Bhandar Scheme: The scheme grants one-time payment of Rs 1,000 per woman costs Rs 14,400 crore annually, consuming 6 per cent of revenue receipts. The state’s weaker fiscal position raises concerns about long-term viability.

Delhi’s Mukhyamantri Mahila Samman Yojana: With a relatively modest outlay of Rs 2,000 crore, the scheme accounts for 3 per cent of revenue receipts but still highlights the fiscal strain on smaller budgets.

The report warns that the growing political appeal of income transfers to women may pressure the Centre to adopt similar programmes, amplifying fiscal risks at a national level. Without corresponding revenue growth or structural reforms, such schemes could add to fiscal deficits and crowd out essential investments in infrastructure and development.

The study has proposed a universal income transfer scheme as a more sustainable and fiscally prudent alternative to the surge in state-level women-centric welfare programmes. Such a scheme, backed by matching grants from the Centre to states, could streamline welfare spending and lower economically distortive subsidies.

Furthermore, it suggests that the current schemes often lead to market distortions by subsidising specific sectors or commodities. A universal income transfer, unlinked to consumption patterns, could minimise these disruptions while preserving social welfare goals. The report urges states to adopt a holistic view of welfare spending, saying states must assess borrowing patterns and long-term financial implications before launching new programmes. Also, strengthening tax bases and expanding income sources are essential to fund welfare sustainably. A coordinated approach between the Union and state governments can balance welfare goals with fiscal prudence.

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