Transfer Payments
General Economics Intermediateअंतरण भुगतान
Definition
Transfer payments are government expenditures where no goods or services are received in return. They include subsidies, pensions, social security benefits, grants to states, and welfare payments (MGNREGA wages, PM-KISAN). Transfer payments redistribute income but do not directly add to GDP.
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Why Transfer Payments Matters
Understanding transfer payments is essential for anyone following government finances, preparing for competitive exams, or analysing India's economic policy. This concept directly affects how the government allocates resources and plans its fiscal strategy.
In the context of India's Union Budget 2026-27, with a total size of Rs 53.47 lakh crore, terms like transfer payments help citizens and analysts evaluate whether the government is on the right fiscal path. The numbers in the budget are only meaningful when one understands the underlying concepts.
For UPSC aspirants, transfer payments is frequently tested in both Prelims and Mains, particularly in Paper III (Economic Development). For CA and MBA students, this concept appears in public finance and macroeconomics courses.
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