Mental health is increasingly recognized as a vital component of human development, social equity, and economic productivity, yet it remains under-prioritized within public policy in many developing contexts, including India. This study examines how psychological well-being can be strategically integrated into social welfare programmes, with a special focus on Bihar, a state facing severe mental health infrastructure and workforce deficits. Drawing on secondary data from government reports, policy documents, WHO sources, and peer-reviewed literature, the study analyses national and state-level frameworks, resource gaps, and implementation challenges. Evidence indicates that although India has progressive policies such as the National Mental Health Programme (NMHP), District Mental Health Programme (DMHP), and the Mental Healthcare Act (2017), less than 2% of the health budget is allocated to mental health, and treatment gaps remain high. Bihar exemplifies these disparities, with extremely low ratios of psychiatrists, psychologists, and social workers, alongside limited district-level coverage. The paper highlights emerging progress through institutions like BIMHAS and digital models such as telepsychiatry under the VKN-ECHO framework, demonstrating that scalable and cost-effective solutions are possible. It argues for a multi-sectoral and preventive approach that links mental health with welfare sectors such as education, women’s empowerment, employment, and poverty alleviation. Strengthening governance mechanisms, increasing dedicated funding, promoting community-based outreach, and leveraging digital innovation are identified as key strategies. The study concludes that embedding psychological well-being into social welfare policy can enhance resilience, productivity, and social inclusion, ultimately repositioning mental health as a public good and a foundation for inclusive and sustainable development in India.