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Column : Making cash transfers work

Jan 14 2013, 00:35 IST
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SummaryCritics think the poor will drink away the cash they get —govt’s conditionalities suggest it shares the view.

In this month, the government of India plans to roll out its cash transfers scheme in some 51 pilot districts. The ruling party expects this scheme to be a game-changer in the next general elections. The government also expects big savings to the exchequer in terms of cutting out the operational costs and plugging the leakages in social spending. The announcement of the scheme and the implied policy drift has met with a great deal of criticism and opposition, the latest one coming from a group of prominent social activists and academics who have issued a statement strongly opposing a wholesale shift of the modus of social spending to cash transfers.

Ironically, what is common between the government’s script of the cash transfer scheme and its opponents is their mistrust of the poor. Both seem to believe that the poor will drink away their cash or spend it irresponsibly. The government displays its mistrust by imposing conditionalities and through them engineer the so-called responsible behaviour, while the opponents do so by upholding ‘in-kind transfers’ such as grain or bricks as opposed to cash.

What is wrong with the conditionalities that the government seeks to impose? They immediately bring into the picture a bureaucratic procedure to approve and monitor compliance, which in turn paves the way for monitors or certifiers at the muscle-end of the bureaucracy. This then produces a system of patronage at the street-level through the political party channels. This is a recipe for erosion of the welfare benefit or subsidy itself. Consider the latest proposal with respect to food and kerosene subsidies. The government will transfer two months’ subsidy directly to the beneficiary’s bank account. After this, if the beneficiary does not lift her grain or kerosene from the ration shop, the cash transfer will be discontinued. In the first place, without the banking infrastructure fully in place, the implementation of this model is bound to be disastrous. Further, to insist that the beneficiaries should buy only from the ration shop and not in the open market completely takes away the choice that the cash offers.

There are equally serious problems with the ‘in-kind transfers’, supported enthusiastically by those who oppose cash transfers. It is a matter of common knowledge that in our country, the quality of any food item or fuel or any other good supplied to the poor has a way of becoming sub-standard. It is like the way

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