EMEs embracing cash-transfers

Written by Raj Kumar Ray | Updated: Feb 17 2014, 06:09am hrs
The 10 years of the UPA regime witnessed a flurry of welfare schemes with the government transferring cash directly to beneficiaries in some of them, including in flagship rural employment guarantee scheme, MGNREGS. However, India is not alone as other emerging market economies such as Brazil, Mexico, South Africa and Chile also have similar schemes and some of them are pretty successful. A report of the International Labour Organization, which attempted a comparative analysis of the various cash transfer schemes across various EMEs, reveals some interesting facts about the success rate.

MGNREGS is perhaps the scheme with the largest coverageclose to 50 million or 26% of rural households availed the scheme since 2006. The 100-day job scheme, coupled with the widows pension and maternity benefits schemes, has cost the exchequer $6 billion or 0.3% of GDP. That's quite a remarkable feat but it still leaves a major chunk of the population out.

Mexico's two cash transfer schemes covered 25% of the population with the government spending $5 billion or 0.4% of GDP since 1997. South Africa too had its success with two-thirds of the elderly and more than half of the children are covered by cash-transfer schemes. But the most successful is perhaps Brazil's Bolsa Familia scheme that has covered 13 million households or 26% of population at a cost of $10.75 billion (0.53% of GDP).

While India needs to take lessons from some of the EMEs, the main problem, as CAG has pointed out in case of MGNREGS, is in implementation. If the poorest states did not benefit the most from MGNREGS, its time to introspect what is going wrong and how to fix the leakages in welfare schemes. Tax-payers' money can't be squandered off for winning elections.