Direct cash transfers are meant to plug leakages and ensure that the needy are adequately empowered to avail themselves of the benefits due to them (“Cashing in on schemes for poor,” Nov. 29). That they may use the money elsewhere, which would be a new form of leakage, is another thing. The government cannot be responsible for that. At best, it can educate people on how to use the cash. By and large, the spending has to be left to people’s wisdom. As for the other concern — lack of financial literacy among villagers — once they start interacting with the system, they will learn.
There may be some shortcomings in the direct cash transfer system but these can be corrected as operational experience is gained. We should spend more time and energy on suggesting ways to make the scheme serve the poor better rather than sit in judgment of its effectiveness.
Inflation is bound to be present in a growing economy like India, and the multiplier effect is unavoidable. The spirit of the proposed direct cash transfer scheme needs be viewed in a broader perspective of empowering citizens, especially the rural poor. Beneficiaries must take equal responsibility in spending the money rationally; they cannot be guided forever. This is a good opportunity to spread financial literacy and financial management, which economists say is important for establishing an inclusive society.
I do not agree that direct cash transfers will reduce the effectiveness of social welfare schemes. Under the present system, only 40 per cent of the intended subsidy reaches the poor; the rest is leaked, embezzled, and diverted. For example, a large percentage of kerosene is diverted for adulterating petrol and diesel, which increases pollution.
Direct cash transfers will provide economic independence to households as they can use the money for other essential activities like agriculture. They can further accelerate the goal of financial inclusion as they will mandate the opening of bank accounts by the beneficiaries.
P. Sudhakar Naik,
While the shortcomings and leakages mentioned in the article are plausible, one can identify small holes only after one blows air into a balloon. We cannot stall a process while we wait for perfect conditions.
After reaping rich dividends from NREGA in the 2009 general elections, it was expected of the Congress to come up with something more effective for vote transfer in 2014. A cash transfer scheme requires careful scrutiny of all provisions and effective checks of leakages, especially in a country where there is large-scale poverty, illiteracy, corruption and political manipulation. The government must take a leaf out of the most successful cash transfer scheme in the world, Brazil’s Bolsa Familia, which has many provisions like transfer through government owned banks and public enlisting of beneficiaries.
What is worrying is the haste with which the UPA government is pushing the scheme without adequately addressing serious concerns raised by civil society organisations. In a highly patriarchal society like ours, the misuse of the cash by male heads of the family is a distinct possibility and needs to be addressed. Without an effective and transparent mechanism for selecting the beneficiaries, there is every chance of manipulation by the party in power.
When the government gives a subsidy, the beneficiaries realise they are being helped. They know it is their right to be protected and secured. The price of the subsidised commodities is lower than the market price. The poor, therefore, can buy them if they spend a little. But when the beneficiaries are given cash in place of subsidies, some may spend it on other needs.
A good example is the U.P. government’s Kanya Vidyadhan Yojna. The government gives a good amount of cash to girls who pass the senior secondary examination for higher education but in most cases, it is spent on other things. The problems in wage payment under MGNREGA and the basic problems in Aadhar cards may prove the biggest hurdle in the UPA government’s dream of providing a helping hand to the poor and the needy.
Any number of cash transfer schemes will be rendered futile unless the purchasing power of the poor is increased. The UPA government’s scheme has been initiated with an eye on the 2014 elections. The need of the hour is to revamp the public distribution system, increase the expenditure on infrastructure development and consolidate MGNREGA.