The most heartening development in recent times has been the manner in which the more sensible among the current crop of political leaders are engaging in a direct dialogue with the people on how to deliver subsidies most efficiently to the poor. What better method can you adopt than to directly ask the potential beneficiaries how they would prefer to receive certain subsidies from the government. This debate for long had been confined to conferences organised by globetrotting economists in the World Bank or UNDP circuit.
Now we have a crop of relatively young politicians who are directly discussing this with the people. The late YSR Reddy attempted an ambitious cash transfer programme by depositing money to be paid under NREGA to over a million bank accounts of farmers in Andhra Pradesh. Other states are also attempting similar programmes.
Last week, the Bihar chief minister Nitish Kumar engaged in a frank discussion with the elite of Patna, which had gathered for the release of the Hindi version of NK Singh?s book, The Politics of Change, a compilation of articles written by him over the years in The Indian Express. The book titled Parivartan Aur Rajniti kicked off an intense discussion among those gathered on the real meaning of economic reforms. Of course, the consensus clearly was that development solutions for the other India must necessarily emerge from the political economy. There must be a meeting ground between good politics and good economics. This is best done when solutions are implemented after a direct dialogue with the people?the intended beneficiaries.
An example of this was given by NK Singh, who has been advisor to the Bihar CM on economic policy matters. During the campaign for the last general elections, Singh said, Nitish Kumar engaged in a direct dialogue with the people, asking them whether they got all the subsidised food, kerosene or fertilisers promised to them. They said no. What if the government stopped delivering those items and instead paid cash into their bank accounts? The crowd approved of it loudly.
So Nitish Kumar has since begun implementing direct cash transfer scheme in various social sector projects in Bihar. Nitish said he had successfully implemented cash transfer for girls going to high school and college by transferring Rs 2,000 per head for a bicycle, and some extra cash for books and uniforms. ?I decided there was no point in the government procuring bicycles and then supplying to these girls. That would have bred too much bureaucracy,? Nitish said. Similarly, the Bihar CM spoke about similar cash transfer schemes that were indeed implemented for Mahadalits, the very poor among the dalits.
The audience then asked Planning Commission deputy chairperson Montek Singh Ahluwalia why the Centre would not allow total flexibility to states, enabling them to deliver subsidies in the best possible way. Montek said the Centre was happy to do that if there was a political consensus on allowing cash transfer as a preferred mode of delivery. Montek argued there still appeared to be some opposition to cash transfer as a preferred mode of delivering social benefits. He said a recent survey done among the poor in slum colonies of Delhi showed 40% of the respondents were opposed to direct cash transfer as a mode of delivery. However, 60% were in support, though in a somewhat lukewarm manner. The Delhi government under Sheila Dixit has been toying with the idea of transferring cash to the poor on a bigger scale.
The residual diffidence over cash transfer as a mode of delivery of benefits to the poor will go away once its efficacy is demonstrated on a wider basis. The demonstration effect is gradually taking roots in many states. It is bound to become a widespread movement in due course.
The most interesting aspect to note is cash transfer might succeed more in very backward states like Bihar and Uttar Pradesh, which have intense caste politics. Nitish Kumar is actually using the mode of direct cash transfer and technology to bypass the system, which is manned by the middle and upper caste in Bihar.
It is the same system that blocks the delivery of existing social sector benefits. Nitish?s effort is already causing some frustration among the middle and upper castes. That is a calculated risk he has chosen to take.
This problem does not exist to the same extent in southern states like Kerala, Tamil Nadu and Karnataka, where human development indices are relatively robust. Additionally, the empowerment of women and socially backward groups has ensured that the system, which delivers various subsidies, runs fairly smoothly. Therefore, the real laboratory for the direct cash transfer method will be states like Bihar and Uttar Pradesh, where it is also bound to have profound impact on politics.
The idea of conditional cash transfers started to gain currency in 1997, when there were only three countries in the world with this experience: Bangladesh, Mexico and Brazil. The Brazilian government gives a monthly stipend of about $10 per child attending school, to a maximum of three children, to all families below a certain per capita income.
In India, one fundamental criticism against cash transfer is that it is used for just consumption and has little bearing on growth. There is a danger of ?crowding out? investment in growth.
However, even if cash transfers are used for consumption, they may have positive multiplier effects on local economies. There can?t be a strict dividing line between consumption and productive uses.
mk.venu@expressindia.com