A transfer payment is a one-way payment to a person or organization which has given or exchanged no goods or services for it.
- This contrasts with a simple “payment,” which in economics refers to a transfer of money in exchange for a product or service.
- Generally, the phrase “transfer payment” is used to describe government payments to individuals through social programs such as welfare, student grants, and even Social Security.
- However, government payments to corporations—including unconditional bailouts is not commonly described as transfer payments.
- A certain amount of spending on transfer payments to provide safety nets to the most vulnerable segments of the population is not only desirable but even necessary.
- The problem arises when such transfer payments become the main plank (freebies) of discretionary expenditure, the spending is financed by debt, and the debt is concealed to circumvent the FRBM targets.
- The more States spend on transfer payments, the less they have for spending on physical infrastructure such as, for example, power and roads, and on social infrastructure such as education and health, which can potentially improve growth and generate jobs.
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