Increase in Assam’s share: 16th FC worried over rapid rise in state-level unconditional cash transfer

Staff Reporter

GUWAHATI: The 16th Finance Commission, headed by noted economist Dr. Arvind Panagariya, has expressed serious concern regarding the rapid rise in state-level unconditional cash transfer.

The report of the 16th Finance Commission was laid in the Lok Sabha on February 1, 2026. The report warned that uncontrolled and unconditional cash transfers risk causing ‘fiscal rot’ and ‘capital expenditure starvation’ in states.

However, after two successive finance commissions, i.e., the 14th and 15th, where Assam’s ‘Inter-se shares’ (share transfer between the state and the central governments) had declined, the 16th Finance Commission has reversed the trend. Assam’s ‘inter-se share’ has been increased from 3.12 percent (15th FC) to 3.28 percent in the 16th FC. Assam is among the limited number of states that secured an increase in this share under the 16th FC.

Several cash transfer schemes have been underway in 21 states in the country, including Assam. The 16th FC report said, “This trend is significantly reshaping how states spend on subsidies. Across 21 states, large cash transfer schemes involve direct payment to beneficiaries without performance benchmarks or conditions on how to use the money.”

The report further said, “If states continue to allocate a rising proportion of revenue expenditure to large-group unconditional cash transfers, they will not only impose a significant burden on the states’ budgets but also destabilize their finances in the long run.” The 16th FC encouraged prioritizing capital formation and human capital investment over open-ended cash support. “Cash transfers have been increased significantly, rising from 3 percent to over 20 percent of total state subsidies in just seven years. Growing reliance on cash handouts could destabilize state finances. It calls for periodic and rigorous reviews of subsidies, rationalization of the beneficiary base, and clear sunset or exit closure,” the report said.

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