It is heartening to learn about the success of pilot schemes in Madhya Pradesh that provide a fixed income to families in villages (“ >Cash transfers can work better than subsidies ,” Dec.6). If this has also led to more families opening bank accounts, then it is the icing on the cake. We should probably extend these schemes to more areas to find out whether they ensure the same results everywhere. For example, in many families this money is misused by men for alcohol and drugs. It is a fact that women and other members have no control over the money received. Many families prefer to get foodgrain though the PDS as it guarantees proper food availability. It may be a great idea to provide a basic income, but it is equally imperative to ensure that the money is not being lost or misused.
Tania Bhattacharya,
Bengaluru
The article has shed light on some proven positive outcomes of cash transfers when compared to subsidies. Public policies in India are formulated based on prejudices and assumptions rather than on empirical analysis and research. Providing financial freedom to the poor through cash transfers would empower them to use the money to meet their unique needs. Cash transfers, along with financial inclusion, would allow the poor to have access to cheaper credit and the best banking products. Increasing banking activity can induce the flow of more money into the market, facilitating more economic activity. It will also strengthen the “Make in India” concept in rural India and improve the financial capacity of farmer- communities in general. Unnecessary subsidies have affected India’s fiscal discipline. Providing a basic income to the rural poor would enable them to send their children to school rather than to work.
Balaji Akiri,
Hyderabad
The article’s basic postulate that “[a]ll subsidies are inefficient and distortionary” is patently false. It is a universally recognised principle of standard economic theory that in conditions involving externalities, reliance on market prices leads to suboptimal resource allocation. In situations involving externalities, subsidies (and taxes), rather than being distortionary help reach relatively better resource allocation.
Another error is that it does not recognise that cash transfers and subsidies have different roles and objectives. Subsidies, that is providing goods and services at a lower price than cost, are meant to nudge consumer behaviour in a particular direction. Untied cash transfers of the kind that is part of the pilot project reported, can be no substitute for subsidised provision of specific goods and services. Advocacy of cash transfers in lieu of subsidies is part of the primacy of market discourse. But the need for cash transfers itself indicates the inadequacies of the market. If markets were as good as a reliance on a cash transfers policy presumes, then there would be no need for cash transfers. The Guardian report, “Cuba’s global medical record shames the U.S. blockade” (Dec. 6), clearly underlines the need for providing subsidised goods and services.
Rajinder Chaudhary,
Rohtak, Haryana
The fundamental problem with cash transfers lies in identifying the beneficiaries in a family. In India where the privilege is often accorded to the male child, the scheme will ultimately end up being discriminatory against the female child. The second problem is that it may result in people saving their money in chit funds at exorbitant interest rates, and which might result in their losing all the money. If the government is so keen to improve the flow of cash in money-deficit village economies, it must take sincere steps to introduce opportunities for employment-related activities at the village level.
Rithik Sandron V.C.,
New Delhi
