Unconditional cash transfers are often welfare-enhancing at the household level but fiscally destabilising at the state level. Discuss with examples.

Unconditional cash transfers (UCTs) give households money without behavioural conditions. Since 2023, women-targeted UCTs have become the dominant State welfare instrument in India — even as the Sixteenth Finance Commission (2026-31) warned that such schemes carry large and untargeted beneficiary bases [1].

Welfare gains at the household level

• Consumption and food security: global evidence reviews find UCTs raise total consumption and the food share of spending, with no increase in "temptation goods" like alcohol and tobacco [2].
• Women's agency: transfers route directly into the woman's own Aadhaar-linked account via DBT — as in Maharashtra's Majhi Ladki Bahin Yojana (₹1,500/month) [3] and Madhya Pradesh's Ladli Behna Yojana (2023) [4] — shifting intra-household bargaining power.
• Reach: Delhi's Lakshmi Yojana (₹2,500/month) covers over 17 lakh women with a ₹5,110 crore Budget provision for 2026-27 [5].
• Flexibility: being unconditional, the money doubles as a shock-absorber for health or education emergencies — though documentation and bank-access gaps still exclude the poorest.

Fiscal destabilisation at the State level

• Recurring revenue expenditure: unlike one-time capital outlay, UCTs create a permanent, politically irreversible claim on State budgets.
• Crowding out: rising subsidy commitments squeeze capital and human-capital spending on schools, hospitals and infrastructure, while States must respect the 3% of GSDP fiscal deficit ceiling [1].
• Weak targeting: the Commission found States classify and report subsidies inconsistently, and urged clear exclusion criteria and rigorous review [1].
• Retrofitted austerity: States respond with beneficiary "rationalisation" drives and eligibility gatekeeping, which erodes predictability for recipients.

The two propositions are not contradictory — cash works for households precisely because it is generous and unconditional, which is what strains the exchequer. The way forward is not withdrawal but discipline: statutory exclusion criteria, transparent subsidy reporting, periodic outcome review, and ring-fencing of education and health budgets. Fiscally anchored transfers can then serve Article 39's mandate of equitable distribution and SDG-5 on gender equality sustainably.