Column : Beware of the new privy purses

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MK VENU: Nov 29 2012, 03:56 IST

The UPA government has described its plan to roll out direct-cash-transfer-based delivery of various subsidies and welfare programmes—of Rs 3.2 lakh crore a year, beginning 2013—as a game changer. Indeed, a cash transfer programme on such a massive scale has the potential to radically alter the dynamics of India’s current political economy, driven as it currently is by the entrenched vested interests which have taken deep roots over 20 years post the 1991 economic reforms. These vested interests are essentially feeding on the massive increase—over 25 times—in the centrally-sponsored welfare expenditure, which has increased from about R8,000 crore in 1994 to R2,37,000 crore in 2011!

Over the years, we have witnessed a substantial capture of such central funds by newly-empowered elites at the state and district levels to the exclusion of the majority of the very poor. The direct cash transfer programme, if implemented well, could prove to be the biggest assault on the cosy arrangement which enabled the local political and business elites to capture a big chunk of central funds. Indeed, if undertaken properly, it could prove to be the most critical structural reform ever undertaken in recent decades. And what’s more, it is on the expenditure side of the government balance sheet, a long overdue reform.

In terms of its radical potential, the cash transfer programme could have as much resonance as the abolition of privy purses by the then Prime Minister Indira Gandhi. The one big difference is Indira Gandhi had abolished the privy purses held by the

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