Opinion » Lead

Updated: December 11, 2012 01:19 IST

The promise of unconditional money

Dipankar Gupta
Comment (19)   ·   print   ·   T  T  

Cash transfers limited to a few schemes and without strings attached make for a compelling election strategy

Offering cash transfers before elections is an inspired move. Like birthday gifts, election promises must come brightly packaged, look good for the event even if they collapse in a heap afterwards. By then, another birthday, another election and another promise!

In election campaigns, it is important to get the best promise out first. Performance can catch up, if at all, much later. There are five full years for that and time enough to waffle, dawdle and put up false figures. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was a great promise, so what if it failed to perform in most parts of the country? Its success in a few showcase States like Kerala provided the juice for excuses elsewhere.

Like all good gifts, an election promise must keep up with the times and cash transfer does just that. There is no point in presenting kirpans when Sikhs want economic opportunities. This is why when Akhilesh Yadav traded in his knuckledusters for laptops, it worked wonderfully for him in Uttar Pradesh. Caste and minority consciousness are yesterday’s promises and, as the Congress learnt in U.P., ready for the trash can. What kind of laptops and when, are issues for another day; it is the promise that must draw in the voters now.

The United Progressive Alliance (UPA) proposal for cash transfers comes in a see-through gift wrap. It allows a peek at what it looks like but not what it feels like. This is what makes the cash transfer promise so electorally compelling. What is visible is limited cash transfer, but what is exciting is that it promises much more. For now, cash transfers will concern payments related to pensions, scholarships, and the like. These are low cost deliverables as they are already monetised.

But the dream team for cash transfers, which includes money for food, fertilizer and fuels, will have to wait. Their prices are difficult to control for they have a mind of their own. Also, it is hard to predict how the market will behave once the Public Distribution System (PDS) is dismantled. Wisely then, the UPA is silent about them. Five years from now, the easy victories will be paraded, just as Kerala is put out as MGNREGA’s success story. In this case, once again, those chapters that are not exactly bedtime reading will stay unopened and forgotten.

It worked in Brazil

Also, cash transfer has an international gloss about it. It has worked in Brazil and how. Even the World Bank has certified it as an ace instrument for poverty alleviation. So what if only about 15 per cent of Brazilians live in villages while nearly 70 per cent do in ours? So what if only 6.1 per cent of Brazil’s population earns less than $1.25 a day compared to a crushing 32.6 per cent in India? These complications should not come in the way of a good promise, especially when there is an election round the corner.

The fact that in Brazil it is not cash transfer but “conditional” cash transfer is a little detail that can be ignored. For the record, “conditional” cash transfers are linked to several human development issues which is why they are more than simple anti-poverty programmes. In Brazil, poor families have to satisfy strict conditions before they qualify to receive cash transfers. They must make sure that their children have a high 85 per cent attendance in school and that their nutrition and growth charts are climbing up the right slope. In addition, all children under five must have the full complement of vaccines and no excuses. Mothers too must submit to pre- and post-natal checks. Failure on any of these counts, and the cheque will not be in the mail.

For these “conditions” to be met, it is imperative that adequate medical and school facilities exist. Brazil has moved swiftly in that direction as it devotes above four per cent of its GDP to health and another four per cent to education. In contrast, India spends just one per cent of its GDP on health which is why cash transfers here had better not be “conditional.” Our existing educational and health infrastructures are too weak to bear the additional pressure of “conditional” cash transfers.

Under these circumstances, if “conditional” cash transfers are insisted upon in India then that would drive people to private health and education providers. They would then be the new parasites. Fortunately, the UPA is playing within its limits and is not burning a hole in its pocket. As long as Brazil acts as a convenient metaphor, why step into the kitchen and spoil the party?

Opening bank accounts

Emaciated though our cash transfer scheme is, it nevertheless has a huge task ahead. So far, a little over 200 million Aadhar cards have been issued, but that is a long way from being translated into bank accounts. The Reserve Bank of India is yet to come out with guidelines on this matter, though that might happen any day soon. Yet it will require a fair amount of rejigging as banks will now be required to lower their guard when customers come in to open accounts. Nor is the report of the pilot Kotkasim project encouraging. Though it was near test tube incubated, it failed on practically every front; from the opening of accounts to getting cash in the bank.

And there will be new accounts, millions of them, if the cash transfer scheme is to save face. So far, only about a third of our population has a bank account. In India, sadly, the poorer the State, the greater the pressure on banks. While in developed regions like Delhi, Chandigarh and Goa a bank serves between a manageable 3,500 to 6,500 people, the number jumps to over 21,000 in a place like Bihar. Not surprising then, after hospitals and courts, public sector banks scare people the most.


In the case of cash transfers it is necessary to factor in an added twist. Our people refuse to sit at home: they migrate everywhere in search of work or marital partners, though sometimes the two look alike. It is, therefore, not enough to have bank accounts at one’s address; it is necessary to service people who are constantly on the move. As the Census figures show, upward of 90 million people, in the past decade alone, have changed their residence and the Indian Railways sells over six billion tickets annually.

It is likely that some banks will manage to overcome these problems, and do well or passably well in places like Delhi and Goa even if they flop elsewhere. Delhi and Goa will then become the “new Kerala” as far as the banking sector is concerned. Like MGNREGA again, success in a limited sector will help cloud failure in large parts of the country.

Crores and crores

The stark truth in India is that roughly Rs.3.5 trillion is spent every year in subsidies and it is anybody’s guess what proportion of this lines undeserving pockets. It cannot be denied either that the poor should have bank accounts or that our economy should be less cash driven than what it is today. Cheques are rarely issued, which is why the intermediaries with their scissor hands are ever ready to take their cut. So if the promise of cash transfers strikes a bell, remember it tolls for so many.

Given the complications of a “conditional” cash transfer, it is a great election move for the government to promise cash transfers, but only in a limited fashion. Care must be taken that those in power are not overly persuaded by their own promises and begin to behave rashly. A hasty decision to abandon the Public Distribution System (PDS) or give money only to the women of the family, Brazilian style, would be extremely unwise.

The PDS may not have the whitest shirt, but its performance is not all bad. Different studies, such as those conducted by the National Federation of Indian Women and the Self Employed Women’s Association (SEWA), have come up with contradictory conclusions. While the former unilaterally support the PDS, the SEWA research is guarded in this regard as some women prefer cash transfers, but there are others who are not so sure.

Nor would the UPA do itself a favour if cash transfers were made to the woman’s account, bypassing her husband. If it did that, cash transfers would meet with the same fate as the Women’s Reservation Bill did in Parliament. In Brazil, the woman gets the cash and if the man wants a booze for the buck he has to take his missus to the liquor store. This takes away much of the sparkle from the boys’ night out. This is also why 85 per cent of cash subsidies are spent on food in Brazil.

That the UPA has not spelt out any condition in its cash transfer scheme is a well plotted election strategy. If it delivers in a limited way to a limited population it can draw enough goodwill to shout down the many Kotkasims that are bound to occur.

But by then it’s party time again: another election and another round of promises on the house.

(Dipankar Gupta is a former professor of Jawaharlal Nehru University.)

More In: Lead | Opinion

May be then finance minister announced these schemes in his budget-
speech and this is not an election gimmick. But what about the question
which the author asked in the last? How is government going to ensure
that the amount transferred in the account will be used for the
constructive purposes and not on the liquor. Government need to ensure
about this first. But without this, it sounds only election gift.

from:  Abhishek
Posted on: Dec 7, 2012 at 20:36 IST

It is most unfortunate that the author of the article make the statements like election gift, Brazil, etc, etc. When Finance Minister Pranab Mukherjee in his 2011-12 budget speech clearly highlighted that government is contemplating to present cash transfer scheme in the case of Fertilizer, Kerosene and gas. Also, the government discussed the Food security Bill in which PDS is part -- which is expected to be introduced in this session. In this system government has to define BPL and ration cards will be issued to eldest lady in the family. This includes several schemes that are functioning under different names under different ministries. The subsidy part to Fertilizer -- direct cash transfer to farmers and not to industries or retail outlets -- was proposed by me in 2009 to PM through a letter. Later received response accepting this from the ministry of chemicals & fertilizers. It is neither election gift nor Brazil model.

from:  Dr. S. Jeevananda Reddy
Posted on: Dec 7, 2012 at 15:30 IST

I have a feeling that whatever government does is too little too late. It never fulfills the aspirations of people in general but lavishes only on the rich and privileged who to my knowledge are cunning useless people who help create grid-locks to suppress unfortunate and struggling individuals. The posture of the governments is Take it or Leave it. This attitude is amply supported by money bags. What we witness is religious or so called cast groups propped up by money bags to spread tyranny and injustices. Those who are at the receiving end of benefits always remain in favor of any kind of injustices. What I witness is right from the top the leaders don’t exhibit any sense of commitment or respect fro decency. Of course some of the people maintain positive and progressive outlook but they are way too ineffective in the dominant scenario narrated above. Just as individuals are marked for fixing, the tyrants and their accomplices have to be marked if we need to effect any change in the country. Unfortunately money bags are not thinking and doing the right in the country.

from:  jayaram
Posted on: Dec 7, 2012 at 12:04 IST

A highly instructive and insightful article. Thanks Prof. Gupta for
high-lighting some of the nuances of the scheme and how it is likely to
end up being just another election ploy. Another "cash for votes"

from:  Vaibhav
Posted on: Dec 7, 2012 at 08:03 IST

Cash transfer to reimburse subsidies on PDS supplies will not be
attractive to the poor because he has to purchase at the market
price and get it reimbursed through the bank account.The villager
has to go to the town and get it from the bank. Even in cities ,
well informed people find it difficult to get money from the bank.
Cash transfer is very new to the rural masses and they may end up in
confusion.disbursement by a supervisor of the District supply
office appointed by the government will become necessary if the
system is to be effective. Even a trial at Kotkasim village in Alwa
district Rajasthan a year ago was not a success. The better method
should be reimburse the subsidy portion by cash at the PDS shop
itself. leaving it to the consumer to get it through bank may not
give the desired result at least during the initial period. Such a
major scheme should be properly planned and publicly educated before
introducing it. Only then the scheme will achieve the desired goal.

from:  E.Sivasankaran
Posted on: Dec 6, 2012 at 22:41 IST

When was the last time any political party went into elections with out promises and "gifts" to poor people. All these vote-pulling vows have not been uncommon to common man. That is why I couldn't help ignoring political gains. Over the time, I had to teach myslef to look into pros and cons of scheme.

In 90s when we were opening economy in the name of liberalizatiion, there was an outcry in the country about protection of domestic industries. Now we claim ourselves fastest growing country.

There will be definitely strong inertia in any scheme implementation and they have to grow with deformities. But I am envisioning smooth administration in near future. Given our huge population and limited infrastructure, e-governance is only solution for country crippling with bad governance.

from:  Sai
Posted on: Dec 6, 2012 at 18:27 IST

So, the UPA-2 believes they can bribe their way to victory. We have seen political parties distributing "covers" to the voters around election time.This "unconditional" cash transfer s just an extension of that. The Central Government will fail to tell the people it is taxpayer's money that is being distributed, but rather it is their party which is doling out the cash

from:  hari
Posted on: Dec 6, 2012 at 17:58 IST

The article is only nit-picking on some negative assumptions. All these negatives can easily be addressed. Saying that they have not been addressed is premature akin to putting the cart before the horse. Comparison to Brazil is unwarranted, as the entire article is woven around Brazil v/s India, whereas the cash transfer scheme has not been announced on the Brazil model. The cash transfer is a game changer that will kill many birds with one stone. Political rivals of the Govt are worried about the benefits it will bring to the people and thereby the Govt, which is why they are doing all they can to oppose it. In the era of connectivity, opening bank accounts, location, migration, etc. are issues than can be easily handled especially as the Govt is contemplating mobile mini-ATMs for remote areas.

from:  Deepak
Posted on: Dec 6, 2012 at 17:30 IST

The main drawback seen from pilot project of Kotkasim is the lack of facilities provided by the banks , amount of time wasted in commutation and long queues in bank alone . If cash transfer is implemented for a larger section of people , this will be a big hindrance and lots of private banks should be drawn into fray for smooth sailing of scheme !

from:  anand
Posted on: Dec 6, 2012 at 16:56 IST

Very well written article.Copying a model from the south America will
not work in India.
We had such an experience in Pune when the CWG fame Kalmadi copied the
BRTS from Bogota to Pune and the BRTS is an utter failure in our
city,More than 100 people have died on the roads and still dying.The
moral is that s system which works in a small country need not work in
our vast country with a different culture and huge population

from:  P N V Krishnan
Posted on: Dec 6, 2012 at 16:53 IST

This article is a good beginning at a time when there is little
critical scrutiny of cash transfer scheme. I have a few objections of
my own.
First cash transfer will save Government a lot of money compared to
ration shops. But will it save that much money to the overall economy?
When Government gives subsidized food grains etc. to poor people it
has to also physically provide such articles to the shop,pay
administrative staff and like. That cost will now drop off
Government's account. But private players will have to bear that
burden in the form of increased supply to their shops or altogether
more shops/warehouses in new areas.And that will reflect in higher
prices. Then this Government does not seem to have a built in
inflation indexed cash transfer system in place.What will happen to
inflation anyway when large amounts of goods get freed up in the open
market? Then what is the guarantee money will not end up in non
'social' expenditure by poor families? Why no conditional transfer?

from:  Nitin Agarwal
Posted on: Dec 6, 2012 at 13:56 IST

Brilliantly written article! A good dissection of the entire issue.

from:  Aditya
Posted on: Dec 6, 2012 at 12:59 IST

Sociologist Dipankar Gupta demystifies claims of the Congress Party that the “Money Transfer Scheme” is going to be a boon for the exploited- poor folks in India due to already prevailing structural deformities as an inherent element in our democracy and economic system. He has fantastically shown how the “the Gift” meant for the 2014 election is stuffed with empty promises like that of all the previous election –based offers and policies such as MNERGA. The Congress has fixed the FDI for the profit-hunting American and Indian businessmen and has started throwing money Schemes on the face of the labouring mass that have only energyless bodies to be sold for daily wages. So far, scrutiny of political system and policies, done by scholars, has been a reassessment of tricky political behaviour and total looted wealth rather than an attempt to give a theoretical exploration for a system change. I wish Mr. Dipankar had touched upon aspect of an emerging alternative political structure for “Aam Aadmi” in India.

from:  A.Kannan
Posted on: Dec 6, 2012 at 11:35 IST

I suspect the timing of the Government's move to change over from PDS to cash transfer especially when Walmart & Co. is around the corner to tap the market. If Walmart & Co. comes to India cash transfered by the authorities perhaps may end up with it thereby indirectly subsidising the corporate houses.

from:  Arun sivagurunathan
Posted on: Dec 6, 2012 at 09:27 IST

A mammoth scheme unwittingly prepareed by a famous IT expert which will be used by the powers to seek election votes. Remember in TN politicians used the age old system of 'arti' to put cash in the arti plate quoting custom. A brazen act of bribery. This has potential of being grossly misused by the political powers to get them voted again and again and sit in power for ever. People should watch out this drama carefully

from:  s.subramanyan
Posted on: Dec 6, 2012 at 09:16 IST

If its a political article then its cribbing. Talking vaguely and about points that can be overcome. If the learned Professor is against money transfer then he up against an idea whose day has come. Long ago in 1980s the company where I was working (MNC) carried out assignment where it was found that a regular stores requisition paper cost Rs 600 to the company. By switching over to computer this cost was reduced.

from:  C. Nandkishore
Posted on: Dec 6, 2012 at 08:11 IST

Some excellent suggestions on how the cash transfers should be made conditional and mobile. One small suggestion -- please drop the cynical "Sainath" tone ... there can only be one Sainath!

from:  Raju Rajan
Posted on: Dec 6, 2012 at 05:48 IST

The recent US election was also about exactly this.

from:  Radco
Posted on: Dec 6, 2012 at 03:54 IST

"direct cash transfer" scheme is good, it will certainly benefit if
implemented successfully, but its again a million dollar question.
the intention of government behind this scheme is to reap benefit in
coming election & nothing more. no body is bothered about development
of people in real sense, all these subsidies are making skilled hands
a handicap.
there are "n" number of other things associated with this scheme like
financial inclusion (it self questionable under current economic
condition), UID etc.
a part from this there is a large population who can not afford
things at market price specially those daily wages earning one. this
will lead to another kind of new loop pole.

from:  Pradeept Kumar
Posted on: Dec 6, 2012 at 01:26 IST
Show all comments
This article is closed for comments.
Please Email the Editor



Recent Article in Lead

For a renaissance in Indian S&T

The apathy of successive Central governments towards science and technology continues in numerous ways. The premier national scientific agencies have been made to languish, and no effort has been made either to formulate a national S&T policy »