Can Social Protection Budgets Actually Deliver? Key Insights from The Financial Express
India’s social protection budget faces scrutiny as states report delays in disbursing ₹1.3 trillion in benefits, raising questions over whether the system can meet its targets amid economic slowdown.
The Union government’s ₹2.4 trillion allocation for social protection schemes in the current fiscal year remains under pressure, with multiple states citing administrative hurdles and digital infrastructure gaps as key obstacles. According to data from the Ministry of Finance, as of June 2024, 32% of the budgeted ₹1.3 trillion for direct benefit transfers (DBT) under schemes like the Pradhan Mantri Awas Yojana (PMAY) and National Food Security Act (NFSA) has yet to be released to beneficiaries. States like Bihar, Odisha, and Uttar Pradesh have reported that only 50–60% of eligible households have received payments, well below the government’s target of 90% coverage by March 2025.
“The delay is not just about funds—it’s about last-mile delivery,” said a senior official in the Ministry of Rural Development, who requested anonymity. “Many states lack the digital infrastructure to verify beneficiaries in real time, and manual verification processes are slowing down disbursements.” The official noted that while the Centre has increased the budget by 15% year-over-year, state-level implementation remains inconsistent. For instance, Madhya Pradesh has disbursed 85% of its allocated DBT funds, while West Bengal has managed only 42%, according to state finance department records reviewed by The Financial Express.
Why the delays matter
The slow rollout of social protection funds comes at a critical juncture. India’s poverty rate, which stood at 21.9% in 2022–23 according to the National Statistical Office (NSO), has shown signs of rising in rural areas due to inflation and job losses in informal sectors. The World Bank projects that without timely interventions, an additional 10–12 million Indians could fall into poverty by 2025. “Social protection is the first line of defense against economic shocks,” said Jean Dreze, economist and member of the National Advisory Council. “If these funds don’t reach people on time, the impact on livelihoods will be severe.”
Experts point to three key bottlenecks: digital exclusion, state-level corruption risks, and coordination gaps between the Centre and states. A 2023 study by the NITI Aayog found that 18% of rural households lack Aadhaar-linked bank accounts, a prerequisite for DBT. Meanwhile, Transparency International India reported that 12% of social welfare funds in 2022–23 were diverted due to “administrative leaks,” primarily in states with weak audit mechanisms.
What happens next?
The Centre has scheduled a high-level review meeting on July 15, 2024, to assess progress. Sources close to the discussions indicate that the government may consider relaxing Aadhaar verification norms for elderly and disabled beneficiaries, as well as fast-tracking funds for states that demonstrate compliance with anti-corruption measures. However, no official announcement has been made.
In parallel, the Supreme Court is monitoring a petition filed by the People’s Union for Civil Liberties (PUCL) demanding expedited disbursements. The petition, filed in May 2024, cites delays in Maharashtra and Rajasthan as “systemic failures.” The court has directed states to submit compliance reports by July 20.
The pressure is further intensified by global comparisons. Brazil’s Bolsa Família program, which covers 14.6 million households, disburses 98% of its budget on time annually, according to the Inter-American Development Bank. India’s performance lags behind even Indonesia’s social assistance schemes, which achieve 87% coverage through a mix of digital and community-based verification.
For now, the focus remains on the July 15 review. Whether the budget will deliver—or if beneficiaries will face further delays—depends on whether the Centre can bridge the gap between allocation and execution.