State cash transfers and Centre welfare benefits may support household spending, Crisil says

Crisil said monthly cash transfers by many states, along with the Centre’s welfare support, could help protect household spending in the current fiscal year. Crisil also flagged inflation risks linked to high energy prices and El Nino. Crisil said these schemes may soften the impact on low-income families even if price pressures rise.

Representative image

Crisil said more than half of India’s states now provide monthly cash transfers, making them an added income stream for poorer households. Crisil said these families tend to spend a larger share of any extra income. The monthly support differs by state, ranging from Rs 1,000 to Rs 2,500. The median monthly transfer is Rs 1,500.

Cash transfers by states and Centre welfare benefits

According to Crisil, 17 of 28 states and the Union Territory Delhi will offer monthly cash transfers this fiscal. Crisil contrasted this with 2019, when only four states provided such support. Crisil said the schemes often target low-income households. Crisil said income limits vary across states, ranging from Rs 1 lakh to Rs 3 lakh per year.

Crisil listed key Centre welfare benefits for low-income households. These include free foodgrain, cash support to farmers under PM Kisan, and rural jobs under the VB-G RAM G scheme. Crisil said state transfers, when added to these measures, can act as a cushion. Crisil said this is important when inflation risks remain elevated.

Cash transfers and inflation risks from high energy prices and El Nino

Crisil said the impact of Rs 1,500 a month can be significant for the poorest consumers. For the bottom 20 per cent consumption segment, Crisil said Rs 1,500 could cover 74 per cent of rural monthly spending. For urban areas, Crisil said the same amount could cover 51 per cent. Crisil said these estimates relate to 2023-24.

Crisil said households may use cash transfers in several ways, depending on need and preference. Crisil said use can vary by economic situation, age, and other choices. A household may raise consumption, or keep spending steady during stress. Crisil said stress could come from higher inflation or job loss, or households may save or repay old debt.

Cash transfers and state borrowing pressures in fiscal 2026

Crisil said rising state debt levels since 2025 show growing fiscal costs. Crisil highlighted fiscal 2026 borrowing as a bond market concern. Gross market borrowing by states rose 15.2 per cent year-on-year to Rs 12.4 lakh crore. Crisil said this was faster than the Centre’s borrowing growth in the same year.

Crisil said the Centre’s gross market borrowing grew 4.3 per cent in fiscal 2026. Crisil added that, among states giving cash transfers, 12 recorded double-digit growth in market borrowing in fiscal 2026. Crisil said this borrowing trend matters because it raises funding needs. Crisil said it can also influence bond supply and yields.

Crisil said cash transfers can offer a short-term buffer for consumption. Crisil added that stronger income prospects are still needed for durable growth in domestic demand. Crisil said transfers can lift spending patterns, especially for low-income groups. Crisil said, "Rs 1,500 in additional monthly income can improve the consumption profile, Crisil said.\"

With inputs from PTI