More Stories

Informist, Tuesday, May 5, 2026

 

NEW DELHI – State governments' cash transfer schemes and the central government's welfare schemes can support Indian household consumption in the financial year 2026-27 (Apr-Mar), according to economists at Crisil. These factors can cushion household consumption amid rising inflation risks from high energy prices due to the war in West Asia and unfavourable weather conditions due to the El Nino climate pattern.

 

"Given their rising scale and scope, cash transfers by states may be emerging as a new buffer for India's household consumption," economists at Crisil said Tuesday. According to the report, 17 states and Union Territories have announced that they will transfer cash every month during FY27 to eligible individuals, mainly women and farmers, in rural and urban areas as compared to just four in 2019. "While the quantum of cash transfers varies across states (ranging from INR 1,000 to INR 2,500), the median amount handed out each month is INR 1,500," according to the report.

 

"For households in the bottom 20% consumption segment, a monthly cash transfer of INR 1,500 could have covered 74% of monthly expenditure in rural areas and 51% in urban areas in 2023-24," per the report. The report compared median cash transfers across states with monthly per capita expenditure in low-income households using the Household Consumption Expenditure Survey, the latest being for FY24. It considered only unconditional cash transfers and excludes cash transfers conditional on outcomes such as educational attainment.

 

These schemes have become an additional source of income for low-income households, providing a "high propensity to consume", Crisil said. Studies have suggested that cash transfers have wider positive consequences for family welfare and "moving up the consumption hierarchy can lead to increased consumption of discretionary goods and services or access to better quality essentials", per the report.

 

Other than the cash transfer schemes by state governments, there are welfare schemes by the central government for low-income households, such as free foodgrain, cash transfer to farmers under the Pradhan Mantri Kisan Samman Niddhi, and rural employment under the Viksit Bharat--Guarantee for Rozgar and Ajeevika Mission (Gramin) scheme.

 

While more states are rushing to provide cash transfer schemes to support the Indian population, it is increasing the pressure on the pockets of the state governments, according to the report. "...the fiscal costs of states are increasing, evidenced from their rising debt since fiscal 2025," Crisil said.

 

The states' gross market borrowing rose 15.2% on year to INR 12.4 trillion in FY26. Their borrowing has been growing at a much faster rate than that of the central government. The Centre's gross market borrowing grew only 4.3% in FY26. "Of the 16 states giving cash transfers, 12 recorded double-digit growth in market borrowing fiscal 2026," per the report.

 

Economists at Crisil also noted that while cash transfers can provide a short-term buffer, improving income prospects are critical to spurring organic growth in domestic demand.  End

 

Reported by Shweta

Edited by Rajeev Pai

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.