Direct cash transfer boosts food sufficiency, says study

Written by fe Bureau | New Delhi | Updated: May 31 2013, 05:53am hrs
Even as the government grapples with challenges in the expansion of the Direct Cash Transfer (DBT) scheme, a pilot study on the impact of cash transfer has revealed a sharp rise in food sufficiency and higher spending on medicine and education among the beneficiaries.

The study, jointly conducted in the rural parts of Indore, by Unicef and All India Federation of Self-Employed Womens Association (SEWA), has found out that because of unconditional cash transfer to poor families there has been an increase in economic activity and reduction in indebtedness.

The cash grant has led to an increase in own-account work and a relative switch from wage labour to own account farming and small-scale business, the study revealed.

SEWA, with a membership of around 17 lakh, entered into a partnership with Unicef to pilot an unconditional cash transfer (UCT), or basic income grant experiment in the rural areas of Madhya Pradesh two years ago.

Under the collaborative study, in eight select villages, each of the 6,000 individuals received a small unconditional monthly cash transfer of R200 per month in 2011 and R300 per month last year. In case of children, the monthly allowance was R100 and R150 per month in the last two years. The money was directly transferred to beneficiaries accounts in public sector or cooperative banks, which SEWA assisted in opening. The study also included 12 other villages where no cash benefits were given to deserving individuals.

They prove two things. First of all, cash transfers can be organised. Second, when you give the money (transfer it to the beneficiaries account), it is simply not wasted or used for wrong things, Planning Commission deputy chairman Montek Singh Ahluwalia said at the Conference on Unconditional Cash Transfers.

RBI has issued a guideline that banks will open no-frills accounts. Opening a bank account and transacting in a bank will not be a problem (in coming days), Ahluwalia said. The SEWA study has highlighted the problems faced by beneficiaries in opening bank accounts.

The government had launched the DBT scheme officially from 1 January 2013 and it now covers 121 districts spread over 16 states. The programme, which had been supported by Prime Minister Manmohan Singh and UPA chairperson Sonia Gandhi, covers 29 welfare schemes. The government is working on a plan to launch the LPG cylinder subsidy scheme under DBT from July 1 in at least 45 districts.

Besides, the SEWA and Unicef study has found that the beneficiaries food basket expanded with expenditure on meat, fish, eggs, vegetables and fruits, and these families reported low incidence of common illness.

The recipients used the money to reduce existing debt and this has also resulted in a shift to less exploitative sources of borrowings, the study stated. It also said that cash grants to beneficiaries led to a significant increase in savings, even in households with debt.

On increase in economic activity because of cash transfer, the study said many families used cash grants to buy small items for production, such as sewing machines, seeds and fertiliser.