Women-Centric Cash Transfer Schemes: Empowerment Beyond Welfare

GS Paper II: Welfare Schemes, Inclusive Development, Women Empowerment

Context: An Economic Advisory Council to the Prime Minister (EAC-PM) research paper studied unconditional cash transfer schemes for women in Maharashtra and Odisha.

The study concludes that cash transfers directly into women’s bank accounts create significant positive economic and social outcomes and therefore such schemes should continue with periodic revisions.

Nobel Laureate Esther Duflo’s Insight

“When money reaches women, the entire family benefits.”

The research validates this observation.

About Economic Advisory Council to the Prime Minister (EAC-PM)

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Case Studies

1. Maharashtra: Mukhyamantri Majhi Ladki Bahin Yojana

• Launched: 2024
• Beneficiaries: Women aged 21–65 years
• Benefit: ₹1,500 per month
• Objective:
• • Women empowerment
  • Better nutrition
  • Family welfare

2. Odisha: Subhadra Yojana

• Beneficiaries: Women aged 21–60 years
• Benefit: ₹10,000 annually (in installments)
• Objectives:
• • Financial inclusion
  • Greater participation of women in household decision-making

Key Findings of the Study

1. Household Consumption Increased

Women spent additional income on:

• Food
• Healthcare
• Education
• Household necessities

Increase in Household Expenditure

This represents welfare-enhancing consumption, where expenditure improves family well-being rather than unnecessary consumption.

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2. Savings and Financial Security Improved

Women also saved a significant portion of the transfers.

Behavioural Pattern

Older women

• Saved more for old-age security.

Less educated women

• Spent more on children’s education.

This demonstrates that women allocate resources according to household priorities.

Spillover Effects

The benefits extended beyond women themselves.

Examples:

• As women’s savings increased, husbands spent less on household expenses.
• Other family members could save more.
• Household financial resilience improved.

Spillover Effect: A policy benefiting one individual indirectly benefits others around them.

Digital Financial Inclusion

Since money was transferred directly into bank accounts:

• Women learned digital banking.
• UPI adoption increased.
• Digital payments became more common.
• Women became integrated into the formal financial system.

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Overall Benefits of Women-Centric Cash Transfer Schemes

• Human Empowerment: Direct cash transfers enhance women’s economic independence by providing them with a regular source of income. Financial autonomy strengthens their bargaining power within the household, enabling them to participate more actively in decisions related to household expenditure, children’s education, healthcare, and savings. 
  • As a result, women transition from being passive beneficiaries to active decision-makers in family and community affairs.
• Human Development: Evidence suggests that women tend to spend a significant proportion of their income on improving the well-being of their families. The additional financial resources are primarily invested in children’s education, healthcare, nutrition, and other essential household needs. 
  • Such investments contribute to the development of healthier, better-educated, and more productive individuals, thereby strengthening India’s human capital and supporting long-term socio-economic development.
• Poverty Reduction and Social Protection: Cash transfer schemes serve as an important social safety net for economically vulnerable households. They provide supplementary income, help families meet essential consumption needs during periods of financial distress, and act as an emergency financial cushion against unexpected shocks such as illness, unemployment, or crop failure. 
  • Furthermore, they partially protect poor households from the adverse effects of inflation by improving their purchasing power.
• Financial Inclusion: Direct Benefit Transfers (DBTs) promote meaningful financial inclusion by ensuring that women actively use formal banking services. Instead of merely opening bank accounts, regular cash transfers keep these accounts operational and encourage beneficiaries to engage with the formal financial system. 
  • This facilitates greater adoption of digital payment platforms, promotes savings, improves access to credit and other financial services, and strengthens women’s integration into the formal economy.
• Strengthening Household Financial Resilience: Regular cash inflows improve the financial stability of households by diversifying income sources and increasing savings.
  • This reduces dependence on informal borrowing during emergencies and enhances the household’s ability to withstand economic shocks, thereby improving overall financial resilience.
• Inclusive Economic Growth: As women spend the transferred income on essential goods and services, household consumption increases, stimulating local markets and generating additional demand. 
  • This creates an economic multiplier effect, leading to higher production, increased employment opportunities, and broader economic growth while ensuring that the benefits of development reach vulnerable sections of society.

Economic Multiplier Effect

• The economic multiplier effect refers to the process by which an initial increase in government expenditure generates multiple rounds of income, consumption, and production across the economy. 
• When the government transfers money directly to households, the recipients spend a significant portion of that income on goods and services. 
  • This expenditure becomes income for producers, traders, and workers, who in turn spend a part of their earnings, thereby creating a chain reaction of economic activity.

Illustration:

Government transfers ₹1,500 to a woman
⬇️
She spends the money on vegetables, groceries, school supplies, or healthcare.
⬇️
Local shopkeepers and service providers earn higher incomes.
⬇️
To meet increased demand, wholesalers and manufacturers increase production.
⬇️
Factories purchase more raw materials and hire additional workers.
⬇️
Employment, household incomes, consumption, and overall economic output increase.

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Challenges

• Fiscal Sustainability: Large-scale cash transfers increase the fiscal burden on state governments.
• Crowding Out Effect: Higher expenditure on welfare may reduce government spending on:
  • Schools
  • Hospitals
  • Infrastructure
  • Capital expenditure
• Targeting Errors: Many deserving beneficiaries remain excluded due to identification errors.
• Dependency Concerns: Continuous unconditional transfers may discourage labour force participation if not complemented with employment opportunities.
•  Inflation Erosion: If transfer amounts remain unchanged while inflation rises, the real value of assistance declines over time.

Other Government Initiatives for Women’s Economic Empowerment

DAY-NRLM

• Promotes Self-Help Groups (SHGs)
• Supports livelihood generation

Mission Shakti (2022)

Two pillars:

• Sambal (Safety & Protection)
• Samarthya (Empowerment)

Lakhpati Didi Scheme (2023)

Provides skill training to SHG women to help them earn ₹1 lakh or more annually.

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Way Forward

• Adopt a “Cash Plus” Model for Sustainable Empowerment
  • Cash transfers should not function as standalone welfare measures but should be integrated with complementary interventions that enhance women’s long-term economic capabilities. The government should combine direct cash assistance with:
    • Digital literacy programmes to enable women to use banking services, UPI, and other digital financial platforms.
    • Skill development and vocational training to improve employability and income-generation opportunities.
    • Financial literacy initiatives to promote savings, investment, and responsible financial planning.
    • Linkages with Self-Help Groups (SHGs) to facilitate access to credit, entrepreneurship opportunities, and community support networks.
• Periodically Revise Cash Transfer Amounts: The value of cash transfers should be regularly revised in line with inflation and rising living costs. 
  • Periodic indexation will ensure that beneficiaries do not lose purchasing power over time and that the schemes continue to provide meaningful financial support.
• Strengthen Beneficiary Identification and Targeting: Governments should improve beneficiary databases by leveraging digital technologies, Aadhaar-enabled verification, and regular socio-economic surveys. 
  • This will help ensure that assistance reaches genuinely deserving women while minimizing exclusion and inclusion errors.
• Balance Welfare Expenditure with Fiscal Sustainability: While cash transfer schemes play an important role in promoting social welfare, governments must ensure that such expenditure remains fiscally sustainable. 
  • Welfare spending should be balanced with adequate investments in infrastructure, education, healthcare, and other capital expenditure that drive long-term economic growth.
• Establish Robust Monitoring and Impact Assessment Mechanisms: Governments should undertake regular monitoring and independent evaluations of cash transfer schemes to assess their effectiveness, efficiency, and socio-economic impact.
  • Evidence-based assessments will help identify implementation gaps, improve policy design, and ensure optimal utilization of public resources.
• Promote Women’s Economic Independence Beyond Income Support: Cash transfers should gradually serve as a pathway toward self-reliance rather than long-term dependence. 
  • Policies should encourage women’s entrepreneurship, facilitate access to formal employment, expand livelihood opportunities, and strengthen market linkages so that beneficiaries can achieve sustainable economic independence.

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