Which of the following best describes the primary challenge associated with the implementation of targeted Unconditional Cash Transfer (UCT) schemes?

The difficulty in accurately identifying beneficiaries in the informal sector, leading to inclusion and exclusion errors.

The lack of availability of digital banking infrastructure for direct benefit transfers.

The constitutional prohibition against states providing direct financial assistance to citizens.

The requirement for all UCT schemes to be funded exclusively by the Union government.

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7 September 2026

Political impact of Unconditional Cash Transfer schemes

The topic addresses the governance, economic, and social implications of Unconditional Cash Transfers, which are significant policy instruments for welfare and inclusive growth in India.

Notes

Unconditional Cash Transfer (UCT) schemes are increasingly used as electoral strategies to target women voters.
Examples include Kalaignar Magalir Urimai Thittam (Tamil Nadu), Lakshmir Bhandar (West Bengal), and Gruha Lakshmi Yojana (Karnataka).
UCTs aim to advance SDG 5.4 by recognizing women's unpaid domestic and care work.
Economic Survey projections estimate state expenditure on UCTs at $18 billion for 2025-26.
Critics argue UCTs function as electoral freebies, leading to expenditure switching and reduced funding for productive investments like employment generation.
Targeting challenges arise from the difficulty of measuring informal sector income, leading to reliance on proxy indicators like land ownership or electricity consumption.
Targeting errors include inclusion errors (ineligible households receiving benefits) and exclusion errors (eligible households being left out).
Political costs arise from both actual administrative errors and perceived unfairness by the electorate.
There is an inherent tension between economic efficiency (targeting) and political incentives (broad inclusion).
Conditional Cash Transfers (CCTs) linked to socially desirable outcomes, such as education or school enrollment, are suggested as more sustainable alternatives with lower political costs.

Questions

Analyze the inherent tension between economic efficiency and political inclusivity in the implementation of targeted welfare schemes in India. 150 words

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Critically evaluate the shift towards Unconditional Cash Transfers (UCTs) in Indian social welfare policy. Discuss the associated fiscal challenges and the potential for transitioning toward incentive-based conditional welfare models to ensure long-term developmental outcomes. 250 words

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Prelims

Which of the following best describes the primary challenge associated with the implementation of targeted Unconditional Cash Transfer (UCT) schemes?

Syllabus

Topics

Sources

The political cost of UCT schemes

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